Documente Academic
Documente Profesional
Documente Cultură
By
Evan Pathiratne
Course: Lectures:
TABLE OF CONTENTS
EXECUTIVE SUMMARY
The software development business has had a growing interest in the south Asian region in recent times. This trend was initially started by the Indians, but now most of the other countries have jumped into the same bandwagon. Youth is attracted to such fields due to the economic benefits gained form it similar to call center/BPO jobs. The ease of starting up a software development company has made smalltime entrepreneurs in Sri Lanka to achieve major success in the last decade. Example Kris Canekeratne and his wife who started a 5 man software development team in his house, within 15 years has built a 2,000+ man strong valued at over $400 million NASDAQ listed software development company named Virtusa. According to Lanka Business Report (2011) It is believed if Virtusa was listed in in the Colombo stock exchange it would be among the top 10 companies in Sri Lanka and be within the ranks of Cargills Ceylon when comparing the annual turnover. The aim of this project is to look into the good and bad practices of a small software development company and see how it can improve on its current state. The practices adopted in the software development company hearwith mentioned may be considered as common to any small to medium sized software Development Company that is currently operating in Sri Lanka.
CHAPTER 1 -INTRODUCTION
To keep the confidentiality of the company in perspective the company hereafter studied will be referred to as Alpha.
(Itjobswatch,2012)
The normal salary ranges of a software developer in the EU region ranges from GBP 35,000-80,000 per year.
(Itjobswatch,2012)
This provides a great proposition to low operating cost countries like Sri Lanka, India, China, Vietnam and other European countries like Ukraine to outsource software development resources at around sometimes half or even third of the cost. There has been a growing trend in such countries where there are so many of these outsourcing companies have been started. The competitive rivalry for onboarding clients is high, where the software development companies are striving to balance quality and cost efficiencies to win the best projects for their respective companies.
2.1 PLANNING
2.1.1 ORGANIZATIONAL PLANNING & GOAL SETTING
A good starting point to understand the nature of a business strategy is to understand that it involves more than operational effectiveness or being resource efficient. In a hyper competitive industry where most entities are looking into cost advantages an organization can stand out on its own if it possesses a unique strategy. It all begins at organizational planning and goal setting. Below figure shows the levels of goals and plans in a modern organization. This model can be applied to assess the organizational planning framework currently in Alpha.
Source "Understanding Management", 5th Edition by Richard L. Daft and Dorothy Marcic
The process of planning is initiated with a formal vision and mission that defines the basic purpose of the organization, which is intended for internal and external audiences.
Evaluation of the Mission Statement of ALPHA Alpha mission statement clearly defines the organizations reason for existence. It embodies the organizations values and aspirations. This clearly defined mission will be the solid baseline when constructing all subsequent goals and plans at strategic, tactical and operations levels. Because Alpha mission statement is clearly defined it eliminates the threat of organizational goals and plans being developed in ad hoc manner which may not take the organization in the correct path it intends to travel.
Business-Level Strategy
How do we compete within each of the businesses we have chosen?
Functional-Level Strategy
How can each function best support each of our businesses? How do we get the various functions working together smoothly?
Strengths S
1. 2. Working experience with a respected client base in UK. As a software development company possessing ISO 9001:2008 certification.
Weakness W
1. Dependency on senior developers for most of the projects. Because of such work projects gets staggered and takes time to complete. 2. Less effective knowledge transfer operation in from senior developers to new recruits. 3. Staff resistance to move into faster development software causing long development cycles. 4. Developers competencies in new more efficient software development languages are limited.
Opportunities O
1. 2.
Threats T
1. Comparability lower cost offering in China and India for the software development resources. Locally also many competing firms are offering the same services at lower costs. Difficulty to attract the best resources to the company because Alpha is not been perceived as the best or one of the best software development companies.
3.
Growing demand for offshore vendors from countries in Europe. Sri Lanka has been perceived by some clients to be focused on more on quality than its Indian counterparts. The economic downturns in Europe recent time has made countries in the region focus their attention on outsourcing.
2. 3.
Evaluation of SWOT of ALPHA Looking at it from an organization perspective there are opportunities to improve customer reach based on the fact that the quality of the offering is up to global standard. But the problem Alpha is facing is it is not focusing their effort on improving the technical competencies of the resources. If this is set in place Alpha might be viewed as a software development firm that is really innovative and may attract the best people from the industry to work for them.
Looking at the findings from above at a high level it comes as Sri Lanka in recent times is a very good destination for outsourcing. And this means there is a lot of potential from outside firms, but also it will mean that there is a threat that there will also be a lot of competing firms with the same offer.
10
Source : Strategic Management: Competitiveness and Globalization: Concepts, Ninth Edition Michael A. Hitt, Duane Ireland, and Robert E. Hoskisson,2011
Evaluation This is high because the investment involved in forming a software development company is low, even after they graduate from their universities. And provide a service at a very low cost. But the differentiation among these companies will be decided by who can find the best fit prospects for them the fastest. This is low. The suppliers are the actual software developers. Because there is a lot of software development focused graduates (B.Sc in IT) being formed by Universities (even though this is below the demand) the actual salary rates the graduates can bargain for are less. But after the developers spend a certain time in a company and gather a unique set of skills their bargaining power increases rapidly. Buyers are the clients from overseas. This is also high .Mainly due to the reason that there are a lot of companies they can choose from. They can bargain for the best quality at the cheapest price.
11
Threat of Substitutes
A substitute can be if the actual software development is done in-house instead of outsourcing. At this point in time it can be reasonably assumed that this threat is low because of the current economic recession conditions prevailing in Europe. Also because of the difference in time zones it would mean that an outsourcing destination will allow 24/7 service operations, something that couldnt be provided at a cheap cost for a in-house development team. This is high as explained in earlier under 1.2.2 local scenario.
12
2.2 ORGANIZING
2.2.1 ORGANIZATION CHART
Below provides a visual representation of an organizations structure.
The team consists of our Director, CEO, Business Development Manager, Project Managers, Software Developers (segmented based on their seniority into different designations) and QA engineers. Currently the HR, Administration and Accounts role is represented by a single person. And such role is not represented in the official organizational chart. Alpha currently employs around 60 staff members, which includes around 50 operational level employees and 5 project managers.
13
2.2.2 Chain of command A Chain of command can be considered as an unbroken line of authority that links all individuals in the organization and specifies who reports to whom. At Alpha the main departments can be identified as below.
At Alpha under software development all the software developers and QA staff reports to the Project Manager and Head of technology. It is not clear as to who reports to who because depending on the type of project, the developers set of skills and the availability of a software developer he/she shall be assigned to a team and that team will have an appointed project manager. There are several key aspects that are addresses under organizing, they are stated below. 1. 2. 3. 4. Authority Responsibility Accountability Delegation
14
According to Richard L. Daft and Dorothy Marcic the following can be explained as,
Evaluation of above aspects in ALPHA When a CEO assigns a Project manager for a certain project work the project manager is accountable for the final project timely delivery. He is responsible for recruiting the right skilled developers for the project and delegating the work according to the skill set. A project manager has the complete authority to do such actions. The Head of Technology role is similar to a Project Manager. Hence all what applies to a Project Manager applies to him. The Software developer is accountable to develop the software bug free, and is responsible for the project on set deadlines by the Project manager. He /She have no authority given to take decisions independently, and no power of delegation. The Business Development manager (BDM) is accountable for all the revenue that is coming into Alpha. He is responsible for keeping up with the sales targets assigned by the CEO. He is authorized to sell services at a given price (which is higher than the price given by the CEO). BDM has no direct reports hence there is no one to delegate work to. The HR/Accounts/Admin executive is the single person responsible for all three of the departmental functions that are represented. She directly reports to the CEO. In a case such as this she is accountable and responsible for many organizational functions. This has created several ungainly situations at Alpha in the recent months.
15
2.2.3 Centralization & Decentralization The amount of centralization or decentralization should fit the firms strategy. For example, Johnson & Johnson gives almost complete authority to its 180 operating companies to develop and market their own products. Decentralization fits the corporate strategy of empowerment that gets each division close to customers so it can speedily adapt to its needs. Taking the opposite approach, Larry Ellison at Oracle is using technology to centralize operations, cut costs, and get everyone focused. Daft R.L. and Marcic D (2006) In centralization focused company the location of decision authority is more near to the senior management levels while in decentralization it is near to the lower organizational levels. At Alpha the operations level staff has no authority rights. And the tactical level staff only has authority over the decisions he/she can make over the projects that has been assigned. The authority rights are limited to the scope of the project. The power is focused to the top. A software developer has no means of communicating any ideas or thoughts directly to the top management. Alpha has a Centralized management structure. The aspects under departmentalization and how it can be used to improve the organizing aspects in Alpha will be discussed under the next chapter.
2.2.4 Organizational Relationships in Alpha Even though there is an HR executive, the function and role of HR management is not practiced formally at Alpha. There is no free and accessible culture where the staff has opportunity to share and present grievances to the top management. The software developers cannot bond with a certain set of developers or a single project manager because the project they get put on differs from time to time. So for a given year they might have been put on several different teams with 1-2 different project managers. My personal opinion is that the tactical level manager (Project manager, Business Development Manager and Head of Technology) has no power to influence the strategic decisions made by the CEO or the Director. The Director visits the office less than 5 times a month, and does not have a direct relationship with any software developer.
16
2.4 LEADING
2. 1 Leadership in a Technology Company Leadership involves motivating a group of people to act towards achieving defined goals. This concept differs to a standard perception of a manager as described by Richard L. Daft and Dorothy Marcic in the diagram below. A manager is more task oriented a leader thinks more in a high level perspective.
Source "Understanding Management", 5th Edition by Richard L. Daft and Dorothy Marcic
Especially in technology oriented companies leadership is really important factor. When considering tech companies like Apple leadership of Steve Jobs was one of the major factors that lead to its success. According to CNN Money he is the CEO of the decade because he revived Apple and remade an entire industry, defying the worst economic conditions since the Great Depression and his own serious health problems. A local example in the ICT industry can be Dr. Hans Wijesuriya. He was initially given the task of heading Dialog Telekom when it was at the number 4 position among Sri Lankan Telcos. But as of now he has lead the company to the solid number 1 position and Dialog Axiata as its now know was the first Sri Lankan company to reach USD 1 billion market capitalization. Working in a technology company is demanding for its entire staff, particularly the software developers. They have to work long hours and they have to be flexible to work in different time zones. In an example like Alpha in European time zones. Under all this stress they have to be very precise with their coding standards otherwise the product quality will be affected. Leadership is required to motivate such a resource base, to infuse energy and enthusiasm within the work environment.
A Blueprint for better Management Practices at a Software Development Company
17
2.2 Leadership in ALPHA There are three types of leaders. They are described below. Type of Leader Transactional leaders Explanation of behavior Leaders who clarify subordinates role and task requirements, initiates structure, provides rewards, and displays consideration for subordinates. Suitable role in Alpha Project Managers This is because in a project based deadline oriented work environment in software development efficiency and effectively matters. And leadership styles like this will be very useful. A leader who has the ability to motivate The CEO. subordinates to transcend their expected This is because motivation is an performance essential ingredient in a technology company. For people to strive to become the best a charismatic leader at the top is essential. Leaders distinguished by a special ability to Head of Technology bring about innovation and change. Even though currently at Alpha the above role is similar to a Project manager, ideally the role should display leadership characteristics that will enable Alpha to be among the most innovative companies in Sri Lanka.
Charismatic leader
Transformational leaders
Ideally the above situation may be the best for Alpha. But the already assigned individuals to the above roles may or may not be having such leadership patterns. This is where the CEO should be involved and assign the proper expectations to the middle management. And a separately assigned HR manager should be carefully working with such individuals in achieving the overall company goals. Also to eliminate the issues mentioned under 2.2.4 organizational relationships leaders in different teams (project managers) should get more involved with the software developers. And the CEO should do likewise with his other middle managers. The Business Development Manager and other executives currently dont have any direct reports.
18
2.4 CONTROLLING
Controlling happens after other functions such as planning, organizing and leading have been completed. Controlling is most closely aligned with planning, because planning establishes goals and the methods for achieving them. Controlling in a way investigates whether planning is successful. Consider Enron, which was held up as a model of modern management in the late 1990s but came crashing down a couple of years later.3 There are numerous reasons for Enrons shocking collapse including unethical managers and an arrogant, free-wheeling culturebut it comes down to a lack of control. No one was keeping track to ensure managers stayed within acceptable ethical and financial boundaries. Daft R.L. and Marcic D (2006)
2.4.1 Control Mechanisms at Alpha Even though Alpha doesnt follow globally accepted quality standards TQM or Six Sigma It can be suggested that Alpha currently has some good control measures. Control within Alpha can be divided in to three types as given below. Preventive control A control that takes place prior to the performance of an activity. All employees are given key performance indicators (KRI) and clearly documented job descriptions when they join. This given them a understanding as to what their role is within the company, what should they do and not do. Also there is a documented HR policy where each employee has to sign before joining, which details a disciplinary process-this to a certain degree prevents employees from committing ill behaviors. Project Managers use a software for their project management activities, in which they can closely monitor the time taken by each resource for an assigned task. If a certain resource or task is taking longer than initially planned a project manager can identify that and take remedial action. This is done by Business Development Manager through quarterly customer satisfaction surveys. Though these valuable insights can be gained on how to serve the customers better, and find out where Alpha went wrong. Also there are annual performance appraisals where software developers meet with the CEO and assess their strengths and weaknesses in that year. 19
Concurrent control A type of control that monitors activities while they are carried out.
Organizational Characteristics of Porters Competitive Strategies Source Understanding Management, 5th Edition Richard L. Daft and Dorothy Marcic,2006
20
There will be great potential for Alpha if approached a differentiation strategy. This would mean that the product cost is comparably higher than the competition. But the tradeoff is that Alpha will be distinguished from the other firms. And Alpha can afford to pay more and keep its best employees by using the different higher rates that will be charged from converted prospects.
Source Understanding Management, 5th Edition Richard L. Daft and Dorothy Marcic,2006
A tech company such as Alpha has to be at the edge of technology use for it to remain competitive, so the above matter should be considered seriously.
21
Managers will have access to formal rewards, such as pay increases or promotions. They have at their disposal such rewards as praise, attention, and recognition. Managers can use rewards to influence a software developers behavior.
1.8 DECENTRALIZATION
It was identified that projects take longer times to complete; a major reason is that there is a longer time the project manager has to wait to get approvals from the CEO. It is recommended to have a decentralized management power structure where the middle management is given a certain degree of autonomy over their decisions and work practices. The Business Development manager is given power to quote a fee higher that the price appointment by CEO, this empowers the BDM to sell at a higher rate instead of just selling at the price the CEO suggested. Similarly the CEO should give solid goals and targets that he wants to see from project managers, allowing them to be flexible in how they can achieve it. This will empower the project manager to think and work on their own and provide a better output to Alpha.
22
23
REFERENCES
1. Daft R.L. and Marcic D (2006) Understanding Management, 5th Edition 2. Andrew J. Dubrin (2012), Essentials of Management, Ninth Edition 3. Hitt M.A, Duane Ireland D, and Hoskisson R.E ,(2011), Strategic Management: Competitiveness and Globalization: Concepts, Ninth Edition. 4. UK IT Job salaries http://www.itjobswatch.co.uk/jobs/uk/software%20developer.do 5. Steve Jobs: CEO of the Decade http://money.cnn.com/magazines/fortune/steve_jobs/2009/ 6. Steve Jobs: A Perfect CEO An interview with Steven Levy in Harvard Business Review accessed from http://blogs.hbr.org/ideacast/2011/10/steve-jobs-a-perfect-ceo.html
7. Interview with Hans Wijayasuriya, Group CEO, Dialog Telekom (Sri Lanka) taken from http://www.youtube.com/watch?v=oAUa7Bhc3OY AIC 2010: Hans Wijayasuriya, Group CEO, Dialog Telekom (Sri Lanka) 8. Lanka Business Report Magazine, (2011 March issue ) Virtusa Challenging the Iconoclast pp 25-33
24