Can Centers of Excellence become a separate line of business in software outsourcing?

August 28, 2018 Corporate Blog

By Boris Kontsevoi, President & CEO Intetics Inc.,

Sergey Kizyan, CTO Intetics Inc.

Software outsourcing business is no more a trivial task in 2018. The software development outsourcing market has become super competitive. It keeps growing as well as top industry players. However, industry analysts continuously receive information that numerous companies are falling apart. Why does it happen?

Along with day-to-day issues, companies deal with large-scale challenges. Globally, there are two major ones – customers and people.

Customers Challenge

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 rates and grow steadily every year, which gives time to find new employees on time. However, the reality is different. Companies prioritize outstaffing rather than outsourcing. Therefore, a long-term project becomes a dream for software development companies.

However, this doesn’t mean that an ideal customer doesn’t exist. Usually, they either approach the company they worked with before or follow the reference.
If they cannot a find contractor, the customers announce a tender. In most cases, an average software development company has to compete with big and famous brands. If a company does not have a distinct advantage like Centers of Excellence (CoEs), the chances are indefinite. Moreover, most of the small and middle size companies forget that the main idea of a tender is to come prepared and convince the customer that you are confident enough to address customer queries.

Competing successfully means not only proving the expertise but also having a strong sales department. Sales in software outsourcing are specific. The process goes through two stages.

The first one is about finding an opportunity and convincing the potential customer to continue the discussion with the company. The second stage includes technical research, estimation and design, and demonstration of several existing solutions.

This process goes smoothly when the salesperson understands that the company technical expertise is strong and the team will be dedicated. It is the focus of the Centers of Excellence from the sales perspective. They connect sales and engineering departments and create a new line of business (LOB) for a company.

People challenge

Let’s think you solved the first outsourcing challenge and got a contract. You have signed it for 10 engineers, 5 of them work for your company and can start new activities.

The team core was created. You have a tech leader and need to hire 5 more engineers. Things look good and here comes a challenge. Unexpectedly, the potential tech lead leaves the company, and a senior developer follows him. Instead of 10 engineers, you have 3 and no one to lead the project. I guess, the consequences are familiar. What you are doing next is juggling the employees and finally ending with a project almost without the profit and with complaints from both sides.

Apparently, the employees are one of the keys of the success in outsourcing business. The example proves that it is almost impossible to start a new project in outsourcing without having the core of the team already working for your company. From the other side, you cannot have not 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 a software engineer – an interesting project involving the latest technologies, acknowledgment from the current company, a good team, a good manager, social packages, and programs, etc. All these factors are important, and most of the software development companies realize that.

For a software engineer, it is very important to be familiar with the latest trends and work with new technologies. It is the main focus of Centers of Excellence from the engineering perspective. CoEs provide the engineer with an opportunity to participate in the latest technological activities and learn new things every day.

So, what is a Center of Excellence?


A Center of Excellence

We adapted the concept of Centers of Excellence (CoE) and regard CoE as “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)“.

Developing the CoE within the Intetics company, we came to realize that CoE is a business direction and business concept, not the 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.

It should focus on trendy and developing areas. It can be relevant for your company to create and use the concept of CoE in an existing well known or used area. However, we think that average CoEs will concentrate on new and fast-growing areas.

A good CoE should have:

  • Detailed information and knowledge about the area it covers.
  • Information about standards and best practices in the industry.
  • R&D team. Real examples are preferable but not a must. The portfolio will grow itself.
  • Certification process.
  • Training courses and services.
  • Participation in the events and conferences.
  • Publications, desirable but not a must.
  • Change management in the implementation process.
  • Ability to choose the best components and technologies, appropriate vendor management.
  • Outcome: marketing offer and business cases.

The last item is the most important one for the business and transformation of a CoE to an LOB.

When the company creates a CoE, it should think businesslike. The idea is that CoE works as the company’s unique sailing point. It is the comprehensive expertise offered to potential customers.

CoE is the active way of doing business different from expecting the incoming customer request. With CoE, the company has a unique experience and proactively uses it to reach those customers that do not currently think about any new projects.

There is no ultimate way to create a CoE and suits every company. You need to answer the questions, like Who will manage CoE? How many people will be involved in CoE? Who will be responsible for the specific CoE, all CoEs? What will the CoE budget be?

Benefits that CoEs bring your company:

  • Top technical specialist’s involvement. Having CoE and experienced employees involved in it, guarantees the engineers are doing interesting using the latest technologies chosen by themselves.
  • Strategic planning is done by the whole company. It is hard to predict which technology will blow up in the near future. Your engineering staff or CTO cannot also know all the technologies. With CoEs, you do not need to worry about this. Let your best minds select the direction for CoE and make the strategic decision.
  • New lines of business. Every new CoE is a new LOB for your company and the sales department. Having professionals and expertise, you can easily prove the experience in the certain domain. CoE members and salesperson have the plan of showcasing the experience.
  • Available employees. In case the CoE doesn’t require delving deep into the researches, you can use employee bench in CoE and make proactive resource distribution.
  • The motivation of the candidatesHaving a CoE in a specific domain works as a stimulus for external professionals. It motivates them to learn more about the company and join in to enter the CoE.
  • Sales support. CoE people participate in tenders that are relevant to CoE technology stack. They provide the experience, publications, portfolio, and knowledge to win the deal. All of that creates a better company image, a strong brand awareness, an advantage over the competitors.

Originally the article was published on CIO.com

Image source freepik.com