Outsourcing considerations for the lean agile enterprise

Organizations considering a lean agile transformation at scale need to be prepared to rethink their outsourcing strategy to increase its effectiveness.

Lean thinking and agile methods for software development are built on the simple principle of a fast, flexible flow of value and information, which requires stable teams and a learning culture. Mature lean and agile organizations move away from projects and adopt a lean portfolio management system that is based on lean startup principles to align strategy and execution. They learn fast and pivot to new work without guilt.

Traditional portfolio management is based on projects. Projects have a ramp up period to form the team, an execution period where the team delivers the solution and then a ramp down period where the knowledge is transferred to a run team and the project team is disbanded. Outsourcing, whether to add unique skills or entire teams or programs, has become a mainstay for managing this process. It allows the organization to maintain a lean workforce and flex easily with the ebb and flow of projects. Some of the largest companies in the world are built on providing this flexible workforce to their customers.

The problem with this model is that the bulk of the learning that takes place during the project walks out the door when the project is over. No knowledge transfer can supplement the lessons learned in the heat of the project. Perhaps some members of the project team will be reassigned to a new project within the enterprise, but the collective memory will still be lost. The primary focus is on utilization of people and managing the flexibility projects require, not retention of knowledge.

Different team demands have different workforce considerations

When using a lean portfolio management system, there is no time to ramp up a team. Things happen too quickly when speed to market is the primary focus, not utilization. Existing teams must flex to new work rather than disband, and learn new skills and new technologies. The good news is that good teams want to learn new things, and these new learning demands are consistent with an engaged workforce.

Since lean agile enterprises do not have to flex their human resources in the same way traditional models require, they must rethink their outsourcing strategies. Rather than a workforce ebb and flow based on the size of their workforce (outsourced or permanent), there will be a much smoother curve that aligns more to the state of the economy than a specific backlog of projects.  

This is because even though work comes and goes in the lean agile enterprise, the systems they support do not. A bank will always need lending systems, a manufacturer will always need inventory management systems and so on. These systems will always need to be enhanced, updated and replaced―what changes are the priorities.

So, once you have a more stable workforce model, and the issue no longer is about utilization but about flow, the question becomes: What should we do with our outsourcing strategy?

While each situation will be different, following are three key considerations to help increase your outsourcing effectiveness in a lean agile environment: 

1. Outsource for unique skills and learning. I call this the Sherpa approach. Bringing in a temporary, outside expert to bring teams up to speed on a new technology or skill more quickly. These kinds of skills usually are best caught, not taught. Instead of letting a team bumble their way along, having a guide to lead them can save hundreds of hours and keep them from going astray. 
2. Outsource entire teams or programs. Outsourcing of teams usually means outsourcing of operations as well. Keep in mind here that agile and DevOps often go together. Outsourcing an entire program or a team can allow you to reap the benefit of lower cost structures in offshore locations, as well as gain the benefits of a stable team and retained knowledge. The outsourced team or program in this case would be treated the same as an internal team. Budgeting decisions would be based on the quarterly planning meetings that are used by most scaled lean processes.
3. Make teams smaller before outsourcing. Scrum best practices recommend using teams of 5 to 11 people because this is the size that can effectively collaborate. Before outsourcing, first look to make your teams smaller to increase their productivity. Having a team with a few very capable people has been shown to outperform larger teams, even when there are an equivalent number of capable people. The extra people simply add ballast and slow down the progress. Also, due to basic human nature, the amount of work to complete a task will increase based on the number of people available to do the task. 

If your enterprise is considering or in the process of becoming a lean agile enterprise, CGI’s certified agile practitioners can help―from developing effective strategies to providing agile teams with coaching and support, including tailored programs such as the Scaled Agile Framework® (SAFe®) certification training curriculum. Contact me or visit our Scaled Agile Global Transformation Partner page to learn how this distinction enables us to help the largest, most distributed and complex enterprises around the globe deliver faster value with higher quality.