Magazine Article | October 1, 2018

Centers Of Excellence: Another Way Of Doing Business In Software Outsourcing

Source: Software Executive magazine

By Sergey Kizyan

A CoE can become a self-sufficient line of business, a way to move ahead in the market, and a valuable tool to allow employees to develop new skills and competencies.

Running a software business in 2018 is not a trivial task. Today, the software development outsourcing market is super competitive, and it keeps growing, as do the top companies in the industry. Industry analysts continuously point out that companies are going out of business or facing major business issues. Why does it happen?

A long with day-to-day challenges related to employee management and keeping your technology stack updated, companies deal with large-scale challenges. Globally, these fall into two major categories: customers and people.

CUSTOMER CHALLENGES

The ideal scenario for a software outsourcing company is to have several long-term and team-based projects with large-scale companies. These projects have good margins and grow steadily every year. It gives you time to find new employees; however, the reality is different.

Usually, sales teams bring in short-term projects with exotic technologies, low rates, and fixed prices that are fully managed by the customer. Companies prioritize “outstaffing” rather than outsourcing. A long-term project becomes a dream. Winning business requires both expertise and a strong sales department.

Finding an ideal customer is challenging, but that doesn’t mean they don’t exist. If a company does not have a distinct advantage like Centers of Excellence (CoEs), the chances of winning business are slim. A CoE can connect sales and engineering departments to create a new line of business (LOB) for a software company.

PEOPLE CHALLENGES

Let’s say you won a signed contract for 10 engineers, half of whom already work for your company and can immediately start new activities. The team core already exists. You have a tech leader and need to hire five more engineers. Everything looks good, but here comes a challenge. Unexpectedly, the potential tech lead leaves the company, and a senior developer follows him. Instead of 10 engineers, you now have three, and no one to lead the project. By the time the project is completed, you’re left with very little profit and complaints from both sides.

Employees are essential to the success of a software outsourcing business. The example above proves that it is almost impossible to start a new project without having the core of the team already working for your company. On the other hand, you cannot have only billable engineers for each potential project.

No matter how much money you have, it is hard to hire 10 senior engineers in one month. Many factors are essential for hiring/retaining an engineer: an interesting project involving the latest technologies, acknowledgment from the company, a good team, a strong manager, benefits, culture, etc. All of these factors are important, and most software development companies realize that.

For a software engineer, it is also extremely important to be familiar with the latest trends and to work with new technologies. That is why Centers of Excellence matter from the engineering perspective. CoEs provide engineers with an opportunity to participate in the latest technological activities and learn new things every day.

CENTERS OF EXCELLENCE

The concept of Centers of Excellence mapped to outsourcing software development was proposed by Boris Kontsevoi, the president and CEO of Intetics Inc. We are still working on building our CoEs inside the company.

Mr. Kontsevoi adapted Wikipedia’s definition of a CoE specifically for Intetics: “A team that provides leadership, best practices, research, support and training for a certain focus area. The focus area might be a technology (e.g. Cloud), a business concept (e.g. BPM/RPA/digital transformation), a skill (e.g. customer service) or a broad area of study (e.g. software quality management). A center of excellence may also be aimed at revitalizing stalled initiatives (e.g. SAP, ERP/odoo).”

The definition says that a CoE is, first of all, a group of people — a team. We don’t think a CoE should have one leader. It can be one person, but we prefer to have a leadership team that drives the CoE and performs all of the relevant tasks.

Developing the CoE within Intetics made us realize that a CoE is a business direction and business concept, not just technological expertise grouped in some way. If a group of several Java developers learns the newest Java frameworks, it is not a Java CoE. It can be like this, and you can decide to have such a CoE, but this is way too general. To us, a CoE is more precise and business-oriented.

For example, you might have several people who learn specific Java frameworks that presents an opportunity to develop enterprise solutions for call centers. If many call centers are looking for these solutions, in this case, the company has a CoE. Having this group of Java developers with frameworks for call centers helps sell the unique experience to a specific audience. A good CoE should have:

  • Detailed information and knowledge about the area it covers
  • Information about standards and best practices in the industry
  • An R&D team (real examples are preferable but not a must; the portfolio will grow itself)
  • A certification process, training courses, and services
  • Participation in events and conferences
  • Publications (desirable but not a must)
  • Change management in the implementation process
  • The ability to choose the best components, technologies, and appropriate vendor management
  • A desired outcome (marketing offers and business cases)

The last item is the most important one for the transformation of a CoE into an LOB. The idea is that CoE works as the company’s unique selling point. It is the comprehensive expertise offered to potential customers. A CoE is an active way of doing business differently from just waiting on incoming customer requests. With a CoE, the company has unique experience and proactively uses it to reach customers that are not currently thinking about new projects.

There is no one way to create a CoE that suits every company. You need answers to questions such as: Who will manage the CoE? How many people will be involved? What will the CoE budget be?

BENEFITS FOR SOFTWARE COMPANIES:

  • Top technical specialists’ involvement. Having a CoE with experienced employees involved guarantees engineers are doing something interesting and are using the latest technologies.
  • Strategic planning done by the whole company. It is hard to predict which technology will blow up in the near future. Your engineering staff or CTO alone cannot know every technology. With CoEs, you do not need to worry about this. Let your best minds select the direction for a CoE and make the strategic decision.
  • New lines of business. Every new CoE is a new LOB for your company and sales department. With this expertise, you can easily prove experience in a certain domain. CoE members and salespeople can map out how to showcase the expertise.
  • Available employees. In case the CoE doesn’t require delving deep into the research, you can use your employee bench in the CoE in order to make proactive resource distributions.
  • Top talent attraction. Having a CoE in a specific domain can attract new hires. It motivates them to learn more about the company.
  • Sales support. Salespeople supported by a CoE have the experience, publications, portfolio, and knowledge to win deals. All of that creates a better company image, a stronger brand awareness, and an advantage over the competition.

SERGEY KIZYAN is the CTO at Intetics Inc., a software development company based in Naples, FL. He has 13+ years of experience in the industry and holds a master’s degree in computer science from the Vinnytsia National Technical University. He is an ardent advocate of tech innovations and has grown from a junior software engineer to a CTO.