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IT outsourcing

How Agile and Kanban methods favor re-insourcing and offshoring and turn traditional IT services companies into transit areas for new market entrants

Frédéric LASNIER
CEO & Chairman (Founding Partner)

After having recently met the President of Syntec (French Federation of Consulting Engineering Firms), I cannot stop thinking about the continuous drop in revenues registered by the traditional IT services companies, also confirmed by a drop in their sales figure. This is particularly surprising in the context of the high pressure exerted by digital innovation at international level. Both software editors and human resources are overbooked in most countries worldwide. Nevertheless, the underlying causes are deeper than they first appear.

I have also noted, among other things, how the generalization of Agile methods can profoundly change the client-provider relationships in software or web development activities. Working closely with
software publishers and web companies in particular, Pentalog has already engaged on this path for several years now.

Whoever has implemented or monitored the Agile projects must have been confronted at least with the following three issues:

the Agile methodology places the individual’s performance at the core of every business. This makes it even more difficult for B players to hide their incompetency under the umbrella of the V-cycle methodology, not to mention the TPAM generalists. Agile comes to put an end to the client’s poorly drafted specifications, incomplete test scenarios or badly executed test validations. In Agile methodology, everyone explains what (s)he has done and shares his/her knowledge. The client and the provider are not 2 separate entities but one team, the embodiment of one single project.

– As such, the Agile methodology barely allows the use of fixed-price contracts for large projects, which decreases the number of opportunities available for the most important IT services companies. However, this doesn’t mean that fixed-price contracts cannot be successfully applied to Agile projects. Pentalog has a bunch of success stories that can confirm this.

– The client’s buyer, the sales responsible of the IT services company and their legal departments can disrupt the Agile collaboration. Lying emphasis on technical skills and team-play, the Agile methodology implies a high level of maturity and thoroughness from the part of all project participants. Having in mind that the alignment and the level of economic performance are not the same for project structures and business interfaces, it might be very difficult for the above-mentioned three parties to find a common ground and avoid starting an elephants fight in a porcelain shop.

In the near future, we will increasingly adopt more Agile methods in our development projects, whereas the Kanban will gradually replace the V-cycle methodology in all TPAM processes. This will consequently lead to a more drastic selection of genuine Agile skills and highly-specialized consultants, to a faster re-insourcing of the client’s responsibility, and, against all odds, to offshoring.

What will be the software and digital production trends in the next years?

4 ideas immediately come to my mind, although they might seem a bit paradoxical:

– continuing the trend of promoting Agile at global level, the only possible method for a global digital transformation of companies and of the society as a whole. All Agile structures will benefit from a win-win situation.

– re-insourcing the companies’ IT systems. Why? Precisely because the need of digital transformation is a highly private and organic issue that cannot be outsourced entirely. The Information System Departments, not long ago sacrificed in favor of the SaaS, will rise from their own ashes to upgrade their company to the new digital standards, also signing the Agile production contract with the providers.

offshoring – price competition will not stop here as re-insourcing doesn’t implicitly mean resorting to offshoring to a lesser degree. On the contrary! Large banks and industry players will open Agile development centers in the offshore environment since part of their main strategy is to gravitate towards those IT services companies eager to offer them (remote) resources on new playfields.

– More often than not, the best outsourcers will survive, namely those who are able:

  • to anticipate their clients’ needs and make their relationship Agile
  • to mix offshore and Agile DNA by recommending their clients Agile ODCs (Offshore Delivery Centers) that enable them to reduce both time to market and offshore development costs at a faster pace, not to mention the increased ROI

All of the above must obviously take place in a continuous software production chain between clients and providers based on the support offered by functional and technical consultants as well as on the international methods … as if one is able to do all that without Agile and Kanban 🙂


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