Turbocharging Software Outsourcing: An exclusive interview with Jeff Sutherland
“Scrum Changes the Economics of Outsourcing” An exclusive interview with Jeff Sutherland
Jan 14, 2013
Having burst onto the global scene just a decade or so ago, Agile has now conquered the software development world. Analysts at Gartner observe that about 80 percent of IT organizations are now utilizing some Agile development methodology, and they predict that in another 2–3 years, it is quite possible that we will see 80% of all software development projects using Agile.
Jeff Sutherland, the co-inventor of Scrum, the most widely used Agile methodology, is the founder and CEO of Scrum, Inc., a company dedicated to providing Scrum training for individuals, teams, business units and whole companies. Jeff’s team works with people at every level of an organization, from production and development teams, to research scientists and managers, to directors and C-level management.
Last year Scrum, Inc. launched a new service, the Scrum Capability Assessment. It is a rapid, tailored and minimally disruptive process that examines Scrum practices in an organization from top to bottom and assesses the agile capabilities of the teams actually doing the work. The results reveal both the areas of strength and the opportunities for improvement in an organization’s Scrum processes. The assessment results in a "ScrumScore" for the organization, which is analyzed to produce a prioritized list of improvements, including suggestions to address them and an estimate of the incremental business value that can be achieved.
One of the first companies to undergo such an assessment was St. Petersburg-based First Line Software. As the result of the assessment, in October 2012 First Line became (and still remains at the time of writing) the first organization in the world to be awarded an official Scrum Capability Rating. Software Russia spoke with Jeff Sutherland about this new initiative and its applicability and value to software outsourcing providers.
How did it come about that a Russian software company was the first in the world to receive a Scrum Capability Assessment? And why was it First Line Software?
On one level, it is just a coincidence of timing that the first company to receive a Scrum Capability Rating was in Russia, and on another it is very significant. The assessment is designed to be the global standard on how well teams and companies execute Scrum principles, and several other companies had actually been evaluated using the Scrum Capability Assessment before we looked at FirstLine Software. However, FirstLine was the first evaluated company to earn a Scrum Capability Rating for the high quality of their Scrum implementation. This is the real milestone.
We have known and worked with Nick and the FirstLine team for a number of years, and so we know that they execute Scrum well… and so do they. When they approached us about how they could demonstrate their strong capabilities to the outside world, it was just after we had developed the initial Capability Assessment, and we knew that there would be an external "credential" element to the assessment process. We suggested that they would be a good candidate for the evaluation and, to their credit, they were forward-looking enough to try a new process. It surprised no one that after a thorough assessment the FirstLine team had demonstrated a high-quality Scrum.
At the same time, FirstLine is a leader in a growing Russian software industry that can compete with software companies anywhere else in the world. The Russian industry seems particularly strong in access to talented development teams, the discipline needed to implement agile methods well, and the ability to focus on maximizing the collective good over individual goals.
So you see, the first rated company could have been anywhere in the world… but it should be a matter of pride that it was in Russia.
What are the general trends you see in the Russian software industry as compared to other countries?
Unfortunately, I don’t follow the Russian software industry closely enough to provide a very insightful answer here… other than to say that truly good Scrum is hard to find anywhere, so the fact that there is at least one example of great Scrum speaks well for trends in Russia.
What’s your opinion about using Scrum in the context of outsourcing? How does it work?
Scrum fundamentally changes the economics of outsourcing. In a traditional waterfall development process, outsourcing is an attractive option just because labor rates can be significantly less in some countries rather than others. The outsourced development team creates business value by accomplishing the same amount of work as the internal team, but for less cost. However, an internal development team that is running Scrum well can produce more than four times as much product, so unless the lower-cost outsourcing team is only one-quarter as costly this erases the traditional advantage of outsourcing. In addition, internal teams running Scrum are interacting with end users more closely to develop better products.
To remain competitive, outsourcing companies must also implement Scrum so that they can produce as efficiently and at the same quality as increasingly agile internal groups.
In implementing Scrum, outsourcing companies have two additional challenges not faced by internal development groups:
I think Russia is a fantastic outsourcing destination, particularly for companies in Western Europe. As I mentioned earlier, it has access to skilled developers with the discipline and cultural norms to work well in a Scrum environment, yet labor costs are lower than in Western Europe and the US. Well run Scrum needs more frequent live or face-to-face communication than traditional methods, which makes outsourcing across multiple time zones challenging. Because of this, Russia’s geographic and cultural proximity to Europe should make it a very attractive agile outsourcing destination compared to traditional outsourcing locations like India and China.
Could you share a recent consulting story or case of the successful implementation of Scrum in an outsourcing business?
I’m afraid I don’t have a great recent story specific to the outsourcing business, other than what the Assessment team has told me about the FirstLine experience. More of my recent experience has been with internal groups or non-software implementations. Both Xebia and Prowareness have documented case studies of their Scrum experience as outsourcers, but these case studies are getting a little dated at this point.
When companies start using Scrum, what are the most common mistakes they make? What happens when they think that they are already using Scrum, but in reality are doing something else? (And how does your assessment service identify and help them to avoid these pitfalls?)
When most companies first start using Scrum, they often only implement the parts of the framework that are "easy," and leave out ones that would require more of a change to the way they work. They don’t fully understand the self-supporting nature of the Scrum framework, and since they are new to Scrum they don’t realize that they aren’t getting the full benefit it can provide. At this level, the assessment identifies the missing pieces that need to be put in place to achieve Scrum’s benefit.
As companies gain more experience with Scrum, they usually have all of the key elements in place and even start adapting them in thoughtful ways to reflect the specific needs of the company’s process; sometimes this is done well, and sometimes it is not. Often, companies at this stage of development are missing out on continuous improvement opportunities because they aren’t using their daily standup and retrospective meetings as effectively as they could. The Capability Assessment is quick to identify this, as well as which steps to take to turbo-charge the retrospective and keep velocity increasing steadily.
More experienced companies have often worked out their continuous improvement process. The next limitation they typically run into is how to set up the Product Ownership function and process to maximize business value creation. This is an advanced challenge, but if it is addressed it can unlock enormous profits for the team and the company. Solving this challenge requires looking outside the Scrum team itself, which is why the Assessment considers the broader organization.
Do you plan to assess other companies in Russia?
We certainly do! There are a number of high quality companies that would benefit from the Scrum Capability Assessment, either because it can help them improve their Scrum in the most direct way possible, or because they execute Scrum well and could use a way to signal this to the market. In both cases, we see the assessment as a way to support the strong growth in the Russian software industry. We would be happy to speak with any companies that would like to understand how their Scrum implementation is working.
Jeff Sutherland, the co-inventor of Scrum, the most widely used Agile methodology, is the founder and CEO of Scrum, Inc., a company dedicated to providing Scrum training for individuals, teams, business units and whole companies. Jeff’s team works with people at every level of an organization, from production and development teams, to research scientists and managers, to directors and C-level management.
Last year Scrum, Inc. launched a new service, the Scrum Capability Assessment. It is a rapid, tailored and minimally disruptive process that examines Scrum practices in an organization from top to bottom and assesses the agile capabilities of the teams actually doing the work. The results reveal both the areas of strength and the opportunities for improvement in an organization’s Scrum processes. The assessment results in a "ScrumScore" for the organization, which is analyzed to produce a prioritized list of improvements, including suggestions to address them and an estimate of the incremental business value that can be achieved.
One of the first companies to undergo such an assessment was St. Petersburg-based First Line Software. As the result of the assessment, in October 2012 First Line became (and still remains at the time of writing) the first organization in the world to be awarded an official Scrum Capability Rating. Software Russia spoke with Jeff Sutherland about this new initiative and its applicability and value to software outsourcing providers.
How did it come about that a Russian software company was the first in the world to receive a Scrum Capability Assessment? And why was it First Line Software?
On one level, it is just a coincidence of timing that the first company to receive a Scrum Capability Rating was in Russia, and on another it is very significant. The assessment is designed to be the global standard on how well teams and companies execute Scrum principles, and several other companies had actually been evaluated using the Scrum Capability Assessment before we looked at FirstLine Software. However, FirstLine was the first evaluated company to earn a Scrum Capability Rating for the high quality of their Scrum implementation. This is the real milestone.
We have known and worked with Nick and the FirstLine team for a number of years, and so we know that they execute Scrum well… and so do they. When they approached us about how they could demonstrate their strong capabilities to the outside world, it was just after we had developed the initial Capability Assessment, and we knew that there would be an external "credential" element to the assessment process. We suggested that they would be a good candidate for the evaluation and, to their credit, they were forward-looking enough to try a new process. It surprised no one that after a thorough assessment the FirstLine team had demonstrated a high-quality Scrum.
At the same time, FirstLine is a leader in a growing Russian software industry that can compete with software companies anywhere else in the world. The Russian industry seems particularly strong in access to talented development teams, the discipline needed to implement agile methods well, and the ability to focus on maximizing the collective good over individual goals.
So you see, the first rated company could have been anywhere in the world… but it should be a matter of pride that it was in Russia.
What are the general trends you see in the Russian software industry as compared to other countries?
Unfortunately, I don’t follow the Russian software industry closely enough to provide a very insightful answer here… other than to say that truly good Scrum is hard to find anywhere, so the fact that there is at least one example of great Scrum speaks well for trends in Russia.
What’s your opinion about using Scrum in the context of outsourcing? How does it work?
Scrum fundamentally changes the economics of outsourcing. In a traditional waterfall development process, outsourcing is an attractive option just because labor rates can be significantly less in some countries rather than others. The outsourced development team creates business value by accomplishing the same amount of work as the internal team, but for less cost. However, an internal development team that is running Scrum well can produce more than four times as much product, so unless the lower-cost outsourcing team is only one-quarter as costly this erases the traditional advantage of outsourcing. In addition, internal teams running Scrum are interacting with end users more closely to develop better products.
To remain competitive, outsourcing companies must also implement Scrum so that they can produce as efficiently and at the same quality as increasingly agile internal groups.
In implementing Scrum, outsourcing companies have two additional challenges not faced by internal development groups:
- They need to work even harder on their Product Owner function, because they must understand the needs and wants of their direct customers AND their customer’s customers; even though as a separate company they have less access to the customer’s information than an internal group would. The best way we have seen for companies to overcome this hurdle is to have the official Product Owner be in the customer organization so they have easy access to information, but designate a "proxy Product Owner" on the outsourcer’s team to ensure the Team gets the information it needs
- Switching regularly between widely varying projects for different clients can make it harder to keep teams stable over time, which makes it difficult to continuously improve velocity. This is challenging, particularly when clients want the ability to pick the individual developers on their support team. However, it is worth fighting to keep teams stable because of the long-term productivity enhancement it enables
I think Russia is a fantastic outsourcing destination, particularly for companies in Western Europe. As I mentioned earlier, it has access to skilled developers with the discipline and cultural norms to work well in a Scrum environment, yet labor costs are lower than in Western Europe and the US. Well run Scrum needs more frequent live or face-to-face communication than traditional methods, which makes outsourcing across multiple time zones challenging. Because of this, Russia’s geographic and cultural proximity to Europe should make it a very attractive agile outsourcing destination compared to traditional outsourcing locations like India and China.
Could you share a recent consulting story or case of the successful implementation of Scrum in an outsourcing business?
I’m afraid I don’t have a great recent story specific to the outsourcing business, other than what the Assessment team has told me about the FirstLine experience. More of my recent experience has been with internal groups or non-software implementations. Both Xebia and Prowareness have documented case studies of their Scrum experience as outsourcers, but these case studies are getting a little dated at this point.
When companies start using Scrum, what are the most common mistakes they make? What happens when they think that they are already using Scrum, but in reality are doing something else? (And how does your assessment service identify and help them to avoid these pitfalls?)
When most companies first start using Scrum, they often only implement the parts of the framework that are "easy," and leave out ones that would require more of a change to the way they work. They don’t fully understand the self-supporting nature of the Scrum framework, and since they are new to Scrum they don’t realize that they aren’t getting the full benefit it can provide. At this level, the assessment identifies the missing pieces that need to be put in place to achieve Scrum’s benefit.
As companies gain more experience with Scrum, they usually have all of the key elements in place and even start adapting them in thoughtful ways to reflect the specific needs of the company’s process; sometimes this is done well, and sometimes it is not. Often, companies at this stage of development are missing out on continuous improvement opportunities because they aren’t using their daily standup and retrospective meetings as effectively as they could. The Capability Assessment is quick to identify this, as well as which steps to take to turbo-charge the retrospective and keep velocity increasing steadily.
More experienced companies have often worked out their continuous improvement process. The next limitation they typically run into is how to set up the Product Ownership function and process to maximize business value creation. This is an advanced challenge, but if it is addressed it can unlock enormous profits for the team and the company. Solving this challenge requires looking outside the Scrum team itself, which is why the Assessment considers the broader organization.
Do you plan to assess other companies in Russia?
We certainly do! There are a number of high quality companies that would benefit from the Scrum Capability Assessment, either because it can help them improve their Scrum in the most direct way possible, or because they execute Scrum well and could use a way to signal this to the market. In both cases, we see the assessment as a way to support the strong growth in the Russian software industry. We would be happy to speak with any companies that would like to understand how their Scrum implementation is working.