Agile Outsourcing Increases the Efficiency of IT Projects
Rising competitive pressures, a reduced product lifecycle and technology-driven changes in business processes have significantly limited the ability to explicitly specify the scope and objectives of IT projects. This makes the classic transactional approach, in which the customer and the service provider sign a contract for the delivery of a particular service (usually software or outsourcing services), usually at a fixed price, anachronistic and therefore increasingly difficult to apply. The initial detailed project assumptions in the contract at the beginning of cooperation will probably be outdated after just a few months of development work.
Agile outsourcing solves the problems of recruiting IT professionals
Agile management helps to rise to the challenges of the market – short sprints and iterations, which end up with the provision of a functioning part of the software and checking that it is done in line with the customer’s expectations, lessening the risks inherent in project development. With the Agile approach, changes in the project are programmed into the service delivery process, in order that they do not disrupt workflow, which is a common problem with traditional waterfall approaches.
Agile methods break down barriers in the form of differences in corporate culture, making collaboration between organizations much easier and more effective. “Agile is to IT outsourcing services what English is to the business world – it’s a community of organizations that blurs the boundaries between companies regardless of their geographical location: we all speak the same language, we use the same concepts, we work the same way, we know the same rules. The concepts of sprints, daily meetings, and scrum masters mean the same everywhere. An outsourced worker does not land at a new client’s premises like an alien from another planet. With Agile, everywhere feels like home” – says Piotr Zyguła, CEO of JCommerce. “The Agile approach in software development processes allows us to easily become part of the customer’s organization.”
Agile IT outsourcing also enables service scalability – the customer can be flexible in customizing the number of employees to match the skills they need at that particular point in time. This is a significant change, because under the classic approach, the time it takes to bring a new IT specialist on board (from the time when the need to find someone is noted, through the recruitment and onboarding processes, to the point when the new employee becomes a productive staff member) is very long, and in the face of the shortage of programmers on the market, is further encumbered by the risk of failure.
IT outsourcing ensures cost flexibility, which has traditionally been one of the most commonly advanced arguments in its favor. At present, the issue of cost is raised more and more by big business executives; IT outsourcing is increasingly seen as a way to provide organizations with innovative technologies and solutions that are emerging from among startup environments, as well as individual enthusiasts of modern technology.
Outsourcing in the Agile model
People and interactions over processes and tools. Agile outsourcing strongly emphasizes the role of transparent communication, because cooperation in this model requires a lot of trust on both sides. Employees sent to the client by the outsourcer expect a degree of independence, respect for their ideas and participation in decision-making. The customer expects professional service, results and the fulfillment of their business needs. These expectations complement one another, but only open and efficient communication can ensure that they stay aligned during the project.
Results over bureaucracy. The goal of outsourcing services is to provide specific business benefits. Creating reliable documentation is of course important from the point of view of the project; however, it will never be more important than delivering working solutions, fixing problems which may emerge, or tailoring the project to the changing needs of the client.
Cooperation is more important than a detailed contract. Instead of creating a contract based on a list of specific requirements, it is worth asking the outsourcing partner for a proposal for how to deliver a particular service, and then negotiating the terms based on that. This is an excellent starting point for creating an outsourcing contract that should not be treated as a rigid plan for the implementation of the project. A good outsourcing contract will maintain flexibility while also safeguarding the fundamental interests of both parties.
ING Bank (ING Bank Śląski) owes its performance to Agile outsourcing
ING Bank Śląski has a great deal of experience in IT outsourcing in the Agile model, building the entire organizational structure and methodology of working on Agile principles.
“Collaboration in the Agile model should primarily guarantee open communication and enable the application of Agile approaches in practice. Openness, commitment and having the courage to communicate are key qualities in achieving success. Transparency is also important, as is the willingness to understand that what was important at the beginning of cooperation or at a particular moment in time can change – just like the measures of success. It is therefore important to maintain an Agile ‘inspect & adapt’ approach” – says Seweryn Papierz, Senior Agile Coach in the Agile Transformation Support Team at ING Bank Śląski.
Responding to changes is more important than implementing plans. In the case of the Agile model, both parties to the outsourcing contract should be aware that the goal is to achieve tangible benefits and fulfill customer needs, which are dynamically changing in today’s world. Such cooperation cannot be implemented on the basis of calculations adopted at the beginning of cooperation; reaping the benefits of a flexible model of cooperation with the outsourcing partner requires a flexible approach from the client’s side.
Agile outsourcing – where to start
The largest beneficiaries of IT outsourcing in the Agile model will be organizations that already operate according to these principles. In such companies, the use of outsourcing services is an extension of operational strategy.
For organizations with no Agile experience, it is worth considering a simplified approach – otherwise the Agile management model may encounter resistance from employees.
The best option in this situation may be Talent Leasing (i.e. outsourcing in the team extension model), meaning hiring an employee who already has experience in Agile methodology. This person will complement the existing team of IT specialists and allow them to gradually adapt to the new organizational culture. The number of outsourced workers can later be adjusted to the needs of the client. The result will be the transfer of knowledge, experience and the ability to operate according to Agile principles, as well as the gradual preparation of employees for cooperation on projects with employees of external companies.
IT Service Provider – Trusted Technology Partner
Sales representatives, account managers, project managers and implementation specialists, as well as programmers themselves – in other words, the entire team responsible for the fulfillment of the contract with the customer – have been arduously working on changing the image of the service provider and building essential trust. What is such work based on? Firstly, the development of effective communication methods between the parties involved. The market has evolved over time, the terms of cooperation have stabilized, business relationships have changed, and more and more often, the client has a desire to strengthen cooperation, which can bring greater operational effectiveness as well as measurable benefits for both parties, not least in financial terms. However, certain conditions must be fulfilled.
Most of them are related to the broadly understood quality of cooperation that the service provider must offer to gain the trust of the customer and deserve to be called a professional partner. I will focus on a few selected factors only.
Ethics and loyalty in business
The principles of fair play, meaning how the parties treat each other, how they fulfill promises made in business meetings and negotiations, and how they talk about each other after cooperation has been completed, can all be called business ethics in general. These are by definition unspoken rules, because no contract is able to ensure loyalty, but without them, business cooperation cannot meet the expectations of both parties.
Expertise / technological competence
Technological competence, or the so-called technological stack offered by the service provider, and therefore the scope and level of expertise in the technology delivered, is extremely important from the perspective of trust in business. The technology partner needs to have specific skills, by which I don’t mean image, but the objective professionalism that allows for fairness in cooperation. Both competence in terms of the technology used in the project and knowledge and design experience beyond the scope of the contract are important here, as they help to rise to unexpected challenges that may arise in the project.
Maturity of the services rendered
The business maturity of a technology partner is manifested in experience, the ability to anticipate, and the awareness that the work done for the client is really an investment in the future and development of his own business. In this case, I chose the three most important areas to focus on: involvement, planning and timeliness. Of course, you can create a long list of qualities that show the maturity of your business partner, but these are undoubtedly key in building trust. Involvement is expressed in an active approach to the project undertaken jointly with the client. There is no question of passively waiting for allocated tasks. For example, in the team-extension model of collaboration, the members of the service provider’s team will not only carry out the tasks assigned to them, but also demonstrate their activity in more complex issues such as planning the architecture of the target solution, creative problem solving, or offering best-of-breed tools.
Correct planning and punctuality are very important, if not the most important, factors, and most often depend on whether trust is built between both parties. For this reason, an estimation is created on the contractor’s side pertaining to the time required for development and other necessary work. On this basis, a timetable is established. The partner’s business maturity can be seen in estimates of time-consumption that are realistic and not just created to offer a better deal. An experienced technology partner knows how much time it will take to complete the project, so estimates will not be artificially underestimated or inflated (which is likely to be the case with an inexperienced supplier who fights for a price at all costs or fails to adequately estimate the time needed and bumps up the estimation as a result). Experience and maturity allow for the creation of a plan for which the supplier will be able to take responsibility, and deliver the product on time.
The client and design challenges
We must not forget the client in all this, as in the end, cooperation has an effect on both parties. Without a suitable approach on the client side, a true partnership in cooperation is obviously not entirely possible. The customer should have the flexibility, commitment and good will to cooperate with the other party. Aspects of a project where significant customer flexibility can be significant are:
- the start date of the project, if more advanced preparation is required or if it is better to wait for a specialist with the requisite skills who may not be available immediately,
- the tools and technologies used, if the technology partner presents substantive arguments in favor of changing them;
- the work mode, for example, work done remotely by the service provider’s team,
- service hours if the standard work hours for the customer are different from those proposed by the service provider (a frequent phenomenon in the case of international co-operation),
even if at the beginning such changes were not assumed.
In addition, over the course of the contract, the parties may encounter various potential challenges which they must face in order to continue the project smoothly. I will refer here to examples in terms of body leasing / team leasing cooperation:
- the need to undertake proper onboarding processes,
- challenges in communication,
- the willingness of the person working on the project on the service provider’s side to change the project,
- the likelihood that the person responsible for the project on the service provider’s side may change job.
The client may not have a direct influence on some of these situations, and, if understanding and engagement are demonstrated, it is proof that he or she is willing to engage in a partnership with the service provider.
Win – win
If each party understands that a win-win situation is possible in the outsourcing relationship, and apart from short-term business goals, other values such as loyalty or partnership count, then we may expect that cooperation can be truly long-lasting and fruitful. In such cases, the benefits are evenly distributed, so that both parties are committed to growing them and to the continuation of cooperation for as long as possible. And isn’t that what it’s all about?
Reduce Uncertainty in Business
A safe haven seems to be the idea of a network economy in which companies coexist on the basis of partnerships and mutually interchangeable services. Instead of competing, there would be a gentlemen’s agreement in which each party develops in its specialist field. And specialization is the way to gain unique value, differentiate yourself from others, and also maximize profits and stability in today’s uncertain environment. In a network economy where companies constitute a network of connected vessels, the risk is scattered. But such a model requires one of the most scarce resources – trust.
How to build competitive advantage?
From the point of view of survival on the market, the most important element of the company is its competitive advantage, which is what distinguishes it from other companies in the same industry. Traditionally, it can simply be price, but also prestige, i.e. consumer brand recognition, the high quality of products or services, experience in the industry, or knowledge. A common feature of these elements is their uniqueness, the internal characteristics of a particular organization that enable them to offer products and services of a certain value to the customer, leaving competitors behind. Features such as the ability to offer a lower price than others, but still earn a profit, or to build a reputable brand, are very difficult to copy. And it is on precisely these characteristics that organizational strategy should be based. Consequently, the greatest effort should be invested in developing these unique qualities. If a company “spreads itself too thin” it will be at the expense of investing in key activities.
The solution is the network economy, i.e. an ecosystem of many companies which focus on the development of their unique characteristics, and work together in other areas to develop mutual benefits. What are these benefits?
- reduction of uncertainty – resulting from the sharing and spread of risk. The network of dependency ensures cooperative behavior, rather than competitive;
- access to scarce resources and skills – especially important in knowledge-based industries; companies no longer have to compete with each other for specialists, competences become a service;
- new development opportunities and access to knowledge – thanks to access to the business partner’s knowledge and experience, the company gains a broader view of its situation and the ability to utilize solutions that it would not have considered if left to its own devices;
- increased flexibility – web services are implemented as and when necessary, on demand, without wasting time, which arises in the traditional model due to the need to obtain appropriate resources independently
IT is a highly specific industry. On the one hand, every company, regardless of its area of activity, is forced to use widely understood IT technology. On the other hand, competence in this area is relatively difficult to access. This means that a business may invest in a digital transformation of business strategy, but investment in the development of their own IT team does not often go in step with the abovementioned focus on what the company really does, i.e. its specialization. Should a furniture manufacturer, for example, begin to build extensive IT structures, and hire teams of developers and administrators? The problems in this case are the costs of infrastructure, the high costs of salaries and training required in this industry to keep up to date in the dynamically changing market, and the need for specialized knowledge such as a management team.
No wonder, then, that most companies are looking for a business partner who is in a position to take IT projects on. Companies offering IT services, such as those which specialize in IT technologies, employ professionals who have essential, often niche competencies, and with design, business and industry expertise. Business partnerships can be highly fruitful in this case – as in the previous example of the furniture company working with an IT service provider, which can therefore focus on the most important aspects of business, such as product design, production, marketing, or sales. It draws on the benefits of cutting-edge technology such as optimization of the production process, automation, data analysis, and adapting the product to the client’s needs (e.g. so-called mass customization). The IT partner thus acquires specific design and technology expertise from the client’s industry, thereby gaining an advantage in the market.
IT services which are worth utilizing:
– talent leasing and team leasing – talent leasing, which enables the recruitment of a specialist, especially in situations when such skills are difficult to come by on the labor market, or a whole team of specialists selected for the optimum implementation of a particular IT project.
– IT consulting – due to the fact that information technology is so deeply ingrained in all aspects of the company’s operations, IT services are becoming more and more popular, meaning that companies can obtain information on technology and business opportunities in their area or industry.
– IT Transformation – IT has the potential to introduce revolutionary changes in any company, no matter what kind – whether it be product manufacturing, service providers, commercial firms, financial companies, health care facilities, and so on. Technological transformation should, however, be carried out in a well-thought-out, orderly manner with clearly defined objectives. IT Transformation is an end-to-end service in which a technology partner carries out an in-depth analysis of a company’s processes, presents a plan for their digitization and optimization, and then follows the digital transformation plan of the company step by step.
IT outsourcing Helps Companies Solve their Recruitment Issues
I have prepared a list of the most important benefits of outsourcing, but also – to balance the arguments – a list of risks and threats that we must consider when deciding on such a service. So before I go on to present the benefits that the knowledge and skills of our specialists provide our customers with, let’s pause for a moment to analyze any potential threats. During the process of preparing your own company to use an IT outsourcing service provider, you should consider the risks that may arise during such cooperation. Below is a list of some of the most commonly encountered threats along with possible ways to mitigate them, on both the provider and customer side.
Possible risks that you may want to consider, whether by yourself or together with your chosen provider, may include failure to accept and support part of line management and staff in the assignment of tasks to an outside worker, as well as communication issues or the possibility of knowledge loss. If we are aware of these threats and openly discuss them with the provider, it can go a long way to minimizing or even eliminating them. It is essential, however, to prepare mutual trust, knowledge and planning, as well as continuous monitoring of the effectiveness of outsourced activities.
Get your company ready for outsourcing
Outsourcing on a certain scale, such as when we involve the entire external development team, can become a strategic process which deeply rebuilds the structure of the company and influences the functioning of its processes. For this reason, the decision to delegate certain tasks to the outsourced team must be preceded by sufficient preparation, which consists of the following steps:
- an analysis of the needs and situations requiring the involvement of an external specialist;
- planning cooperation with the provider, requiring the designation of decision-makers who will be responsible for operational contact with the provider, as well as the preparation of appropriate internal communication which will prevent any conflict or misunderstanding of the role of the external specialist;
- planning the process of selecting the right provider;
- planning the introduction process for an external employee or team;
- monitoring the effectiveness of the service and accomplishing the entrusted tasks.
Benefits of outsourcing
So if the service provider is able to guarantee from their side that the risks are minimized and the potential consequences are mitigated, and the client plans the process of introducing outsourcing services adequately, the enterprise will begin to benefit relatively quickly from the involvement of an external specialist or team. A carefully considered and structured process of partnering with the provider and the subsequent deployment of an outsourcer to our project will free up our internal resources or allow our employees to move to other jobs. In addition, the outsourcing model will allow you to experience the following benefits in the short term:
- no recruitment costs – the outsourcing company bears the cost of acquiring an employee in exchange for a later opportunity to make a consistent profit from outsourcing;
- swift access to the required specialists, due to the outsourcing company’s resources and established candidate database;
- contract flexibility – immediate response to the increasing or decreasing need for employees;
- matching the competences to the needs of the project and the possibility of substantive support in the project from the service provider’s side in case of unforeseen situations;
- outsourcing does not increase the fixed costs of your business;
- the invoice received from the outsourcing company can be counted as a project cost;
- no costs associated with vacation and medical leave;
- the possibility of exchanging an employee whose work is unsatisfactory with a notice period agreed with the provider;
- savings in terms of the cost and time spent on searching for and selecting candidates;
- reduction in the risk of selecting an unsuitable candidate;
- no HR and payroll costs.
To outsource, or not to outsource? That is the question…
At this point, it is worth considering when to use outsourced IT staff. Here is a list of these situations:
- a large number of applications are sent to the company, but the effectiveness of the recruitment process is low;
- candidates withdraw from the interview process at an early stage of recruitment;
- we do not have an appropriately recognizable brand as an employer hiring IT specialists;
- we observe constant staff turnover and people frequently leaving a job during the course of the project;
- we need to complete the project in a timely manner and / or to start work on the project within a short timeframe (e.g. up to a week);
- we do not have a sufficient number of tasks to entrust to IT professionals to ensure effective working hours, or our projects are somewhat seasonal in character;
- we would like to build a new team or department in a relatively short space of time.
The outsourcing company will be better than us in terms of carrying out certain recruitment tasks, due to – among other things – consistent and intensive presence on the candidate market, and the brand recognition of the employer. They also provide timely and flexible access to professional resources whenever it is deemed necessary, and not only when suitable professionals can be provided. IT outsourcing is primarily a choice of operational strategy that enables the company to quickly adapt to the business environment, internal requirements and customer expectations.
IT Outsourcing Agreements Under the Magnifying Glass
Let’s take a look at non-disclosure or data protection agreements, which is the most common agreement that we use here at JCommerce. It’s something that starts with cooperation really, and makes the trust between both parties just a little bit stronger.
This type of agreement specifies who is who in the business relationship – just explaining which companies are the signatories, where they’re registered, their official ID numbers and so on. It is important that the person who signs the agreement on behalf of the company, for example the CEO, should be listed as such on official documentation or should have the official acceptance of the board of directors to sign such documents. Don’t be afraid to hand over company information if the Contractor asks you for that as well. From their perspective, they would just like to be sure that they’re signing the right contract with the right person as well. I think this is just a normal part of doing business.
Another very important point to include in the NDA relates to definitions. Remember that you may understand something very differently than someone else from another company. To avoid misunderstandings or miscommunication, it is important to put definitions at the very beginning. Remember to define what is “affiliate”, “confidential information”, “disclosing party”, “permitted recipients”, and “receiving party”. Write these definitions in a clear way so everybody can understand them, not just lawyers or the like. The language should be simple, and definitions as short as it is possible.
As you can see, “confidentiality” is another very important element for the NDA to keep information private. The parties agree not to disclose any information they both sign at the NDA. Moreover, the parties can’t make copies of those Confidential Information. You should also consider whether you need extra 1:1 NDAs with the engineers or directly with the team that provides services for you. This is very common practice, because when you work with sensitive data your partners would like to rest assured that all information is protected.
Standard framework outsourcing agreement
At this level of the agreement we should specify further important details and definitions that define our business relationship and co-operation. And one more time, you should write those definitions in understandable way. At that point, when established with the Contractor, you can describe “business days” and “the worksheet”. Also, you should define the specification of IT services, the period of ordered consultation days and a person responsible for the implementation of the Agreement.
As you probably expect, it is just the beginning before your IT outsourcing agreement will be fully ready. Let’s take a closer look at the following parts of the contract like subject matter and obligations in an agreement – including the terms of payment, the force majeure clause or copyrights.
Subject matter and obligations
The subject matter of the agreement is the provision of outsourcing services by the Contractor for the Ordering Party, consisting in analytical, design, testing, programming, system maintenance and other which relate specifically to the area of software development and Information Technologies.
The services commissioned are based on Time and Material model, in which the Ordering Party agrees to pay the Contractor based upon the time spent by the Contractor’s Consultants and to perform the work. The services covered by such agreement shall be provided by seconded Contractor’s Consultants. A list of the team, their roles, order’s start and end dates, hourly rates and any other project or profile specific information, like e.g. communication methods, you should include at a separate written Order. Also you should include in the Order the purpose of the service order and scope of work, all schedules, living expenses (flight tickets, accommodation) and contacts. Of course, there is more aspects that you should consider, but those should be good at first.
It isn’t a secret that both parties have obligations to each other. The Contractor undertakes to carry out the work connected with the implementation of the provisions of the agreement and Orders. From the other hand, the Ordering Party is obligated to assign tasks and set timelines for completion of work to the Consultants according to the IT services identified in the Order. Furthermore, on your side is to ensure that Consultants have the possibility to work by providing them the access to worksite when necessary, and if needed secure access to devices, equipment and so on. I know that all of those information are logical, but it is good to have them written.
Nobody likes to talk about money, but when it comes to the agreement, don’t hesitate to do it. Focus on the formal issues like:
– how to calculate the total remuneration for all the seconded Contractor’s employees,
– where outsourced employees report the working hours,
– what’s the procedure when the developers have overtime work during business days or at the weekend.
Last but not least, every IT outsourcing agreement have two clauses, Non-performance of obligations and Force majeure event. Like I said at the beginning, agreements are for the bad times because we can’t predict the future, for e.g. war, natural catastrophes, explosion etc. Therefore, the Parties shall be free from any liability for total or partial non-performance or undue performance of the obligations specified in the contents of the agreement in cases caused by Force Majeure. In the end of the agreement you should include the Copyrights, IP Rights, Law and final provisions.
I hope that you realize now how value can be every piece of document at the agreement. Don’t prepare the agreement in rush, because every element is relevant for both sides. Do you recall my question from the beginning of this article? It was: do we really need written agreements? If you ask me, we don’t exactly need them, but nevertheless it is good to have them just in case. In other words, agreements are written not for the good times but for the bad times. Especially in the IT world.
The Industry 4.0 – New Generation of Smart Factories
The contemporary equivalent to Detroit in the 1990s is the economy of Germany, which is still based on industrial production, despite the digital revolution. Here, however, the similarities end as, unlike their American counterparts, the German economy is in a very good state, with no sign of any change in the near future. No wonder, because it was here that the idea of Industry 4.0, the fourth industrial revolution, was born. It may sound somewhat bombastic, but it is worth taking a closer look at specific projects and solutions, as these are what make the German economy one of the most competitive in the world, notwithstanding the growing demographic problems associated with an aging population and ever fewer people of working age.
The Fourth Industrial Revolution
In brief, the first industrial revolution was based on mechanical production driven by the steam engine; the next revolution was mass production and electrification; while the third was the introduction of integrated circuits that allow automation into factories. As mentioned above, Detroit is the symbol of the exhaustion of the economic model created by these phases of evolution in industry. In the case of the fourth revolution, the driving force is the network, but in a much wider sense than the Internet itself:
- social networks, signifying the development of the network economy, based on a network of partnerships between companies, co-operation, and business networks,
- the Internet of Things – a key element of so-called smart factories, that operate based on a network of interconnected production machines equipped with sensors, readers and recorders that collect data and regulate the production process,
- the Internet of services – on the one hand, this means cloud services; on the other hand, the specialization and outsourcing of services, using a partner network, which is also possible thanks to the use of modern communication technologies, enabling work to be done remotely,
- the Internet of data – the use of both one’s own and external data as a resource to ensure the competitiveness of your enterprise. It also includes phenomena such as mass customization, or mass production including parameters identified by specific customers, as well as fog computing, the transient state between the local server and the cloud, and completely new ways of communicating – both within the company and with customers and business partners.
The Fourth Industrial Revolution has the potential to address some of the most pressing contemporary issues facing industry, and more generally the economy as a whole, such as innovation and productivity problems, demographic problems, and the necessity of developing industries that are ecologically sound, economically efficient, highly innovative, and bring more added value than the service sector, but are also less susceptible to economic crises (reindustrialization).
Paradoxically, Industry 4.0 is also a response to social unrest in highly developed countries caused by relocating production to countries where manufacturing is cheaper. It turns out that this phenomenon, which is typical of globalization, is losing steam. While in the United States this is simply Donald Trump’s unfulfilled campaign promise, many of today’s leading German companies, such as Adidas and Stihl, are bringing production back to Europe. But what has brought this on?
Offshoring production is becoming less and less profitable (due to rising labor costs in Asia, which is also the result of globalization), and does not ensure swift order fulfilment, which is especially important in industries such as fashion. The ever shorter fashion cycles (the days of having two seasons, spring-summer and autumn-winter, are already a thing of the past, as we now have at least eight seasons), as well as mass customization (Adidas has long been offering customers the chance to customize their own shoes online), mean that production is obliged to move closer to the customer. But production is usually much more expensive there. So robotics is the solution, and the German and Swiss markets are leading the way.
Bystronic and smart factory solutions
For many readers, the theory of the fourth industrial revolution may sound naive, like another idealistic economic stimulus project, full of murky definitions and unclear guidelines. Therefore, it is worth giving an example of how it can work in practice. To do this, I will use the example of the Swiss company Bystronic, with whom I have the opportunity to cooperate in person.
Bystronic offers advanced systems and services for industrial processing, including the cutting of various materials by means of laser and water jet, as well as sheet bending (for the automotive and shipbuilding industries). The equipment produced and used by the company requires specialized software that ensures the highly precise processing of materials. To that end, the company decided to establish a partnership with JCommerce, entrusting them with software development.
“The demand by many users for automation and digital process solutions is increasing. This trend is being intensified by impulses from the field of Industry 4.0, which are changing also the world of sheet metal processing. Software plays a key role in this transformation. Software solutions support users in the planning, interlinking, monitoring, and optimizing of all their processes. In cooperation JCommerce and Bystronic are working on new software solutions, in order to support customers within a world of automated and networked manufacturing”, Bystronic says.
JCommerce specialists are currently implementing software projects to support Bystronic by developing new solutions in the field of Industry 4.0.
Clearly, the strategy of Bystronic is the idea of Industry 4.0 in practice, meaning that the company is aware of the potential of information that can be obtained using industrial machines, connected to a common data processing system, in the IoT model. It also takes advantage of the opportunities that a network of trusted business partners brings, carrying out tasks more effectively thanks to its specialized nature. Bystronic remains a company in the industrial sector, it is still a factory above all – although a smart version – because it utilizes advanced IT technologies to a great extent.
Technological Debt – Everything You Need to Know
This debt, even subconsciously, gives us a sense of comfort, as it allows us to indefinitely postpone hard decisions, effort, or even admitting a mistake. And this is life on credit, which Billy Gibbons warned of when he sang: “It’s too easy, it’s too easy to feel good,” lyrics which in this case are found in a bitter song about the consequences of postponing things until a later date.
Get to know your enemy
Technological debt means additional work that must be done in order to accomplish a task, due to past neglect within the project. This phenomenon often occurs in IT projects when negligence in terms of the work done means that there is a time-based debt which should be devoted to getting the project up to the expected state. In the earlier example of the IT Director, facing the challenge of implementation of new tools, paying off the debt will be based on the fact that integration with obsolete and poorly-documented infrastructure, which may have been used for years, is likely to be a long and painful process. In addition to the implementation process, a lot of work will have to be undertaken to adapt the entire system and repair unsolved problems which have built up over the years.
Debt is also used to refer to problems that arise in sloppily written code. Personally, I am inclined to say that the problems themselves are not Technological debt, but more interest on the debt incurred. We incur debt while doing any activity that contributes to the delivery of any code which is not quite up to expectations, not only in terms of the tasks to be undertaken, but also performance, readability, maintainability, and how it can be developed in the future. There may be many reasons for this state of affairs.
The sources of technological debt
To face up to a challenge which puts us in Technological debt, we must take a look at the causes, among which the following phenomena can most often be found:
- lack of employee involvement in the tasks to be undertaken;
- insufficient coverage of functionality in terms of testing;
- lack of automatic testing;
- outdated tools / technologies used in the project;
- lack of experience of the team;
- time pressure;
- lack of documentation / low quality of documentation.
This list is not complete, of course, and some aspects may be closely linked to each other. Programmers can write low quality code for many reasons: because of a lack of motivation, knowledge or experience, or because of time pressure or lack of proper tools. The programmer is often only an indirect cause of the debt, as management is the responsibility of the project manager who makes decisions regarding time, tools, technology, and how they are allocated – without outside input. Sometimes it is difficult to identify the causes of the debt. Small errors in a project or strategic decisions – such as the need to provide a solution in a very short time – can lead to the creation of such debt. The origins of the phenomenon in each project can vary and are very complicated, but it does not change the fact that, regardless of its origin, Technological debt must be managed effectively.
Debt’s not always that bad
It would be a mistake to unambiguously define Technological debt as something that should always be avoided at all costs. Just as a loan may allow the company to spread its wings, Technological debt incurred reasonably can be helpful in many cases.
Technological debt may be divided into three types, which clearly show that not all debts are created equal:
- Naive debt – resulting from negligence, bad practices, and immaturity in business.
- Unavoidable debt – debt which we are not able to predict. Good decisions taken today may be a cause of debt in the future.
- Strategic technological debt – debt is incurred consciously, when the benefits incurred are greater than the consequences.
It may turn out that the incurrence of debt brings with it very tangible benefits, especially in such situations as when the project hangs in the balance, and providing a sufficient batch of a program becomes “to be or not to be” for the project. The decision to incur such debt could even save the whole project (and sometimes the entire company). One should, however, take extreme care when making this type of decision, because poor management of the resulting debt can lead to disaster.
Am I in debt?
If we are aware of our debts, we are able to pay them off regularly – the debt itself is not a problem if it doesn’t harm ongoing operations. Ignorance in this case is absolutely not bliss, because we do not expect the impact, nor do we know when it will occur. Fortunately, in IT projects, symptoms that indicate the existence of the Technological debt appear quite quickly and are visible to the naked eye.
Here are a few diagnostic questions:
- Does the programming solution work slower and slower?
- Is there partial or total downtime in the operation of the system?
- Are the same errors repeating themselves?
- Is the time taken to implement new solutions constantly increasing?
- Does the application work slowly?
- Are your programmers reluctant to work on the project?
- Did you push your team to implement new functionalities quicker than planned?
- Are there instances of errors which are difficult to recreate or solve?
Even if the answer to all questions is no, you should not feel overly safe. Some experts are of the opinion that Technological debt is a permanent element of the possession or development of software and IT infrastructure.
So let’s assume that Technological debt occurs in every IT project in some form. This means that the effective management of the debt is very important. In other words, it is not enough to merely control and neutralize the effects – much more important is a methodical approach to the quality of the application, and preventing the occurrence of debt where we don’t want to incur it.
How to manage debt?
You need to manage debt and fight it on all fronts. The following are of crucial importance:
- Building awareness of the importance of quality within the company. Quality itself must be seen as a value which we should care about. Without this, it’s difficult to manage debt, because we can’t do much without the proper approach from employees. Their involvement is key.
- Controlling processes. Constant feedback about what’s going on in the project helps us to react quickly when issues arise.
- Quality assurance. Caring about the quality of software, getting it checked by specialists, not just in terms of testing, but including all aspects of quality.
- Tests. The quicker testing begins, the sooner problems can be found. Tests at the level of documentation and unit testing eliminate debt very quickly.
- The application of best practices, such as:
- adherence to rules for naming functions, procedures, etc.;
- the application of coding style, involving the introduction of appropriate indentation;
- the creation of technical documentation;
- the prevention of basic mistakes, e.g. table overflow, problems with the initialization of variables etc.;
- management of versions/backups;
- refactoring – the improvement of the code in order to obtain better readability and easier maintenance, future development;
- algorithmics: simplifying functions;
- pair programming – to create better quality code;
- code review: reflecting on those solutions used, and the removal of visible errors.
- Training employees.
- Promotion of unit testing. As a basic tool, including TDD as a standard tool of creating software for programmers.
Just as before, unfortunately, this list is incomplete, as debt can have very different sources, often specific to a particular company, or even a project. A company should therefore develop its own technique of debt management – most importantly, it should not ignore debt until it’s too late – until disaster strikes and the bailiffs knock on the door.
Why ERP and BI Systems Come in Handy for Startups?
It seems that the answer is no. Startups are ventures which are burdened with considerable risk, so their origins are normally associated with minimal financial outlay, and investment in areas that are not crucial to the running of the business is usually postponed for later. The creators of startups forget, however, that apart from the idea itself, strategy is most important from the perspective of success. So if a startup is not designed for success from the outset, there is a risk that it will never come to pass.
Advantages of the implementation of IT systems
The implementation of ERP and BI systems gives you the opportunity to organize business processes – both in the case of developed organizations and those in the initial stages of development. In the latter case, an additional advantage is that there is no need for reorganization. An entrepreneur can organize his business enterprise around the selected tool, without losing sight of any relevant elements. It is worth remembering that such systems were created to optimize the operation of enterprises, so they are supported not only by technology, but also by decades of experience in business management.
An important step in the implementation of any system is the pre-implementation analysis stage. The Implementation Partner is able to locate the weak points of the organization, as well as indicate the place where the system will achieve the best results. In the case of a startup, the analysis phase can turn out to be groundbreaking for the entire business, and innovative ideas can lead to equally innovative technological solutions that will ensure effective implementation and success.
It is also a good idea to take the implementation of appropriate IT systems into consideration even at the stage of business plan creation. For potential investors, it is a clear signal that the start-up is built on firm foundations, and not just good intentions. In other words – the project gains credibility in their eyes.
It is also worth taking into account the fact that the ERP system gives the company a comprehensive solution that eliminates the need to implement specialized systems, some of which are required by law, as in the case of accounting software. This means reducing the cost of implementation and licensing. A BI system, on the other hand, allows users to control the effects of the company’s operations and enables a rapid response to the rapidly changing external circumstances.
Costs of implementation
The implementation of IT systems may involve considerable costs – especially in the case of highly developed organizations with complex business processes. However, in the case of start-ups, costs need not be so large. First of all, the design of system functionality in parallel with the organization of the company itself can help to reduce implementation costs. Secondly, users can easily select tools whose price will be within the realms of budgetary constraints.
What to choose?
ERP systems facilitate modular design, which means that they consist of functionalities serving different areas of the company. These modules are fully integrated (i.e. the data from each module is available in one place), but do not all have to be implemented immediately. At the beginning, you can successfully focus on the key functionalities, while others may be implemented later, or you can also leave them out completely.
ERP solutions available in the cloud are also a good option for start-up owners, as they are very flexible in terms of costs. They allow you to adjust the price to specific requirements, as well as facilitating full scalability in case those needs change.
Even completely free tools can be used for business intelligence, as such tools will handle basic analytical tasks even at the early stages of the company’s operations – they are primarily self-service applications and the like. Another advantage of tools of this type is that they allow for the evaluation of the benefits of data analysis within the company, before the implementation of a more advanced system.
It is also worth remembering that most companies already operate basic tools which make use of analytics – we are talking, of course, of the ubiquitous Excel, as well as SQL Server, which has built-in analytical functions for the fully licensed versions at least. It’s also a good idea to check if the selected ERP system provides such functionality.
As we can see, the range of possibilities in terms of the selection of tools is broad and does not require companies to immediately invest large sums in complex tools. Of course, in the case of a brand-new, startup adventure with business, such a choice will not be easy for entrepreneurs. So it’s worth taking up the option of a consultation to help you make the right strategic decisions. Such assistance can mean turning to organizations that support businesses, such as a platform for startups, or to a professional company which deals with the implementation of IT systems. This initial consultation is generally free of charge.
Fintech – Financial Technology Changing the Banking Sector!
The world of startups and the sharing economy
The era of classical globalization of the 1990s was a matter of concern for its opponents due to the growing dominance of international corporations. The Internet and digital technology have done much to change this situation. Today, every company can have worldwide reach. Corporations must therefore compete not only among themselves but also with startup unicorns (tech startups which have reached a value of at least $1 billion) and a huge number of small, local projects, which take their clients and profits.
But the problems don’t end there. Thanks to universal access to the Internet, many services which were previously monopolized by large institutions with vast resources can now be successfully provided by the community of users. Crowdfunding makes it possible to raise funds for any selected project, where funds are provided by those who are interested in the project. So young entrepreneurs, who are potential clients of banks (though often with poor credit ratings), are able to access alternative sources of financing for their projects.
Thanks to digital technology, we are also better equipped to cope with common threats posed by on-line services. The risks associated with loans given out based on the social lending model can be successfully solved with the help of the mechanism traditionally used for sharing files on P2P networks. In practice, one borrower receives funds provided by many lenders, so that financial risk – even in cases in which the recovery of funds is problematic – is spread out and thus relatively low. In addition, intermediary services may use different kinds of security, allowing for the verification and identification of potential cheats and assisting in risk estimation based on data from public sources (such as a register of debtors).
What does this mean for financial markets? Using fintech applications, it is not only possible to obtain funding, but also to exchange currency (not to mention the possibility of allocating funds and conducting transactions using digital currency) and to invest. And all this outside the traditional business circulation – and often without the tax burden as well.
The digital revolution is not only a question of new tools. It is also a huge change in the business operations of traditional companies and institutions, which need to come to terms with a completely new model of services and competition from players to whom regulations or tax do not apply. The Americans have calculated that for each car rented according to the C2C model, as many as 13 fewer new cars are sold, meaning less profit for producers and salesmen, subsequent job losses in the automotive industry and lower tax revenues. Banks are also affected by such issues. In the era of universal online banking and aggressive competition, supported by modern technology, it is already apparent that operating a traditional network of branches is no longer the way forward. And that also means a reduction in the workforce.
Polish banks are a global leader in innovation
It is also clear, however, that banks have no intention of giving up so easily. While the digitization of the Polish economy is progressing rather reluctantly, and is more associated with spectacular failures such as unsuccessful attempts to computerize public institutions or the failure of systems which support the counting of votes in local elections, the situation in terms of the banking industry is quite the opposite. Polish banks are perceived worldwide as role models when it comes to the use of technology and innovative solutions. Not only that, but such innovative solutions are created in Poland and are tested in Poland on millions of customers, and later transferred to foreign markets.
We asked Tomasz Chmielewski, a manager in the Next Generation of Banking program at ING Bank Śląski, about digitalization and his vision for the future of banking.
JCommerce SA: As a manager in the Next Generation of Banking program, you work on innovative solutions for the banking industry. What exactly is worked on in such projects?
Tomasz Chmielewski: In our program, we build a new generation of banking – as the name says. This means not only creating web and mobile applications using new technology, but also a change of approach to creating such solutions. The ‘My ING’ system was created and is being developed in cooperation with business processes, IT and User Experience specialists. Functionality, the way it is used and the visual elements of the front layer of the application at the design stage are the result of broad consultation with selected groups of customers. Hundreds of hours of research have assured us that the end result of our work is customer-friendly, understandable and intuitive.
The development of this kind of application also requires the creation of many new modules in the banking system and the modification of existing ones. This allows us to take advantage of new technologies and optimize processes, so that the means of communication with the customer, the data communicated to him and the presentation of it, were specifically adapted to his needs and were universal across all channels of communication with the bank.
Mobile applications for electronic banking are highly popular in Poland, and as for electronic payments, contactless payments, and payments by smartphone, Poles use these solutions readily and often, eclipsing even those from Western societies. But tough competition means that “gadgets” alone won’t attract customers. What is the strategy of digitization of the banks and what can a big bank base its competitive advantage on, in terms of technology?
Tomasz Chmielewski: In the case of ING Bank Śląski we have been heading towards full digitization for years now. We are not just a bank with traditional branches, but one that is seen as modern and innovative. Our web and mobile applications have long been among the most popular on the Polish market.
We are open to all kinds of cutting-edge developments, both in customer service processes, the choice of IT technology, and in work methodology. We work with many suppliers, not just buying ready-made solutions, but above all co-creating them, combining workgroups comprised of specialists from the banking and IT sectors. Our priority is long-term cooperation, because only then can partners get to know the specifics of the business and respond effectively to the current challenges. Here I also have JCommerce in mind, as their specialists have been participating in the development of our solutions for over 8 years now.
In the first phase of creating solutions, we use models and prototypes of solutions. Just like ‘fintechs’, we are not afraid to introduce new technologies and implement functionalities which we have not previously used, keeping in mind the quality and security of our applications. We learn by building our products on strong foundations, but develop them iteratively, placing great emphasis on the repeatability of the production process, which allows for conclusions to be drawn in retrospect and thus continuous optimization.
We also take advantage of the fact that we are part of the ING Group. That means we can use solutions developed in other countries in which the group operates, and share our own. Such cooperation is not only the invaluable exchange of knowledge and experience, but also reduces costs due to the sharing of certain modules, data processing engines, or even entire applications.
Big data, data analysis and reporting, and data mining are hot topics right now. How are they used in the banking industry?
Tomasz Chmielewski: By creating a database of customer activity and analyzing the way they navigate – for example on a web application – we can draw conclusions and optimize our processes. This enables the preparation of personalized offers for customers, the development of a more transparent service model, and finally more effective advice for our customers.
It’s a vast amount of knowledge which we are still learning to make optimal use of. The reporting of these data sets online, in place of monthly summaries which are often received late, allows for a faster response to change and means that we can be highly proactive in our activities.
At the same time, the more we know about the client, the more we can support him. The ‘My ING’ application gives users a new perspective on their products and the expenses which they generate. They can be analyzed both in a daily, monthly or annual summary, and according to category. In turn, the newly introduced Financial Trainer solution plays the role of a friendly adviser. There would be no such solutions without the possibility to obtain large amounts of data and use it skillfully.
Electronic banking is also unfortunately the dream target of cybercriminals. How are banks coping with the threat?
The fight against cybercrime is nothing new in banking. Since the inception of web applications, security is unquestionably a key aspect taken into account in the process of creation. While hackers are creating new tools that allow them to attack banking systems or customers’ computers, we cooperate with specialized suppliers to run tools and systems to counter such threats. Banks and other organizations cooperate with each other in detecting this type of hazard and trying to prevent it.
When creating an online banking application and mobile apps, we take care of safety at every stage of production. Tools are used to control the code which has been created in terms of its accuracy and lack of susceptibility to various kinds of attacks. The application is subjected to a variety of tests, using both automated tools and manual activities undertaken by IT security experts.
Another element of the fight against cybercrime is the continuous analysis of customer activities, which aims to capture abnormal behavior, or gives rise to the suspicion of fraud. Online monitoring can prevent the vast majority of adverse events and makes customers feel secure.
The education and awareness of clients as to the risks that they may encounter when using the Internet is another important aspect. For example, in cases of data phishing, as vital as effective safeguards and tools are, the responsible and proper behavior of users is just as important.
Along with the increasing use of Internet technology in our daily lives, we will modernize the mechanisms to counter attacks and fraud, so that the applications that we provide to users are both user-friendly and secure.
Digitalization is a huge challenge, but is also a great opportunity for both innovative fintech initiatives and for banks, if they are able to take advantage of it. So who does the future belong to? Fintech startups certainly have the potential to revolutionize the market, but the advantage of large financial corporations is the economies of scale – both in terms of access to resources, and constantly refined technology.
We will most probably see a synergy effect, because startups are still in need of funding, and banks have the means to benefit from new technologies, and so can afford to take over these more promising fintech companies. The digital banking revolution can currently be observed, so it is probably just the start of a very interesting story in which AI computers are the heroes, and it’s a real opportunity to shake up the market – and not only in terms of financial services.
Customer Communication Management (CCM) – What is It?
The image of CCM has changed in the modern era. Electronic channels of communication are now hugely important, as many companies have moved away from snail mail as the main channel of communication with customers. Depending on the organization, between 50% and 95% of documents nowadays are delivered electronically. The primary reason for this change was, of course, massive savings on postage. For many companies electronic communication means cheap communication. Apart from cost optimization, on the other side of the coin is the matter of increasing revenues, here marketing is playing an important role. Well, in terms of correspondence we talk about direct contact with the customer, and modern marketing must support this area, just as with other areas in which the client comes into contact with the brand. Traditional correspondence may be of great importance in such cases.
All contact with clients is part of the marketing campaign
The marketing paradigm has changed. The existing perception of the customer through the sales funnel (AIDA) is a thing of the past. We have to recognize the importance of customer loyalty and the needs and potential of the client as a prosumer. This means that contact with the customer must be carefully planned so as to support its involvement at every stage of its relationship with the brand. But this is easy to say, harder to do. Customers are inundated with an avalanche of information and avoid ads, or are merely indifferent. It is increasingly difficult to get their attention. What tools we should use to build engagement?
Crossmedia, multichannel, omnichannel
Modern CCM no longer focuses only on the end result: an invoice, a statement, a policy, a ticket. Such a document, from a marketing point of view, is a very valuable communication channel, which can be used to present additional offers (cross-selling / up-selling). On the other hand, there is no reason that the customer should be deprived of all the benefits offered by modern data management systems, such as personalized messages, based on demographic data or the transaction history of a customer. In CCM systems such capabilities have been detected, that in reality have always been there, and so data, enabling deep customization and easy handling of multiple channels.
Use each piece of information
If we want to arouse the interest of the recipient, we should get the message across in a way that he will respond to, by adapting the content, phrases, and graphics. Messages should take into account factors such as the interest of the client, the previous activity, the value for the company, and the relationship with the customer. In its simplest form we apply customer segmentation. Such a process should not be strictly limited to rigid divisions of a base – each campaign can have a different target group. Immediately, it will recognize a segment and match the campaign, which leads to the creation of individualized and engaging documents. We can successfully use the data collected through CRM or ERP. But are systems used in the organization the only source of information? Of course not. We can also draw from public statistical data, we can even use the weather – it all depends on the creativity of marketers. For example, if in a particular city a billboard and in-store campaign is launched, we can standardize the rest of the communication addressed to clients in this area, which will bring about a synergy effect. CCM allows us to use the extensive logic of creating documents. Due to personalization we will gain a response rate anywhere from 2 to 10 times better, depending on the industry.
Be where your client is
CCM systems provide the ability to support multiple communication channels: SMS, email, post, social networking, and customer portals. Data is processed in packages, on-demand or interactively. We send messages in the way that the client prefers to receive them. If we base our actions on previous dealings with the client and have studied his reaction, it may even turn out to be unnecessary to send him a request to complete a survey regarding his preferences. Let’s learn about customer preferences ourselves. Let’s accumulate information which will allow us to adopt a more customer-friendly approach. Choosing the optimal communication channel not only increases the response rate, but at the same time increases the cost-effectiveness of communication.
A marketing campaign is a series of interactions
An engaging campaign should have several stages. A single display is not enough, but on the other hand you can not overdo the intensity. The campaign should be planned, its course carefully charted, adjusted during its period of operation, and with a mix of different channels of communication. Process automation supported by the CCM allows for the simultaneous operation and control of complex processes across multiple campaigns. In fact, CCM systems are primarily efficient systems of mass information processing.
CCM within the organisation
A CCM system is a tool that is best suited to a large, dynamic organization. Other systems in use within the company should be integrated to maximised the potential of the data which is processed. This approach lets you correlate information sent to the client, independently from various departments. The structuring of all channels facilitates a greater level of control over the content of communication and any changes to it.
We achieve another significant advantage with the implementation of CCM – namely, we get the opportunity to build a consistent brand image. A consistent form, the properly used label, the appropriate vocabulary. Even if we give business users the freedom to create content in documents, the key elements for us related to the visual identification of a firm remain uneditable.
The effects of CCM systems are not only found in letters sent by post, but also smartphones and interfaces of customer service portals. The connecting and the processing of data collected and presented in different places are growing in importance. Customers are no longer anonymous, as companies allow each one to feel special. So a valued customer, if he considers the product to be valuable, will pass on his recommendation and thus will be an ambassador for the brand.