Journey towards excellence : Competing with quality as a differentiator

Following are excerpts from his interview with the Sunday Observer.

In the global IT/BPO landscape of today there are over 100 countries positioning themselves as ‘Outsourcing destinations’ and over 5000 companies which are competing worldwide.

This is a ‘red ocean’ where the competition is intense. The Asian region including China, India and Philippines play a big role as over 50 percent of the companies are located in this region.

Low cost is the driver for the global outsourcing business. The value proposition is around cost arbitrage in the IT/BPO industry. However, early on in this decade we observed that the perception of European customers was that a low cost destination means low quality, unpredictable delivery and low value.

Understanding this fundamental market condition in 2004, Eurocenter embarked on ‘a journey towards excellence’ and re-aligned our business.

We embraced quality as the key differentiator believing that ‘commonality will not create competitiveness’. Hence quality and predictability were the foundation of our business differentiators at the beginning of our journey.

Even though we have added other differentiators (such as technical expertise and niche domain knowledge) over time, ‘Quality and predictability’ still remain the underlining business differentiators in all engagements.

Quality means different things to different people. To us it encompasses six main aspects.

It is about predictability of our delivery capabilities, productivity and quality of our people, reduction of cycle time, compliance to processes and standards, reduction of defects and customer satisfaction.

Eurocenter’s journey towards excellence had several stages. During the first stage (quality culture stage) we developed a ‘culture of quality’ in our organization by inculcating discipline into the workforce and creating a culture with that of a passion for quality, which exceeded customer expectations.

Most importantly we hired the best in the industry and trained the existing to be the best.

In the second stage (institutionalization stage) we implemented a process, a quality management system (QMS). We institutionalized our processes, and built supporting tools and a system to track defects, time and lessons learnt.

In order to institutionalize, a bit of policing was required in order to enforce the process.

Thereafter we put in place a mechanism to constantly review quality at every stage in our software development and delivery process.

The third stage (compliance stage) of our journey was to comply with international standards and best practices.

We obtained ISO 9001:2000 quality certification for our processes and were periodically audited by the external auditors, DNV. Then we embarked on a major revolution to comply with CMMi standards, a journey which took us 18 months. We partnered with QAI who helped us in the process of certification.

The Sri Lankan Government, through the ICTA partly funded this quality certification and we became the first Sri Lankan IT company to be CMMi certified. This was indeed a major step in our journey towards excellence.

Measurements and metrics are critical in our journey towards excellence.

We believe if you cannot measure, you cannot improve. So we monitored metrics such as how many bugs are created per hour, how much of time is spent on rework as opposed to constructive work, classification of defects based on criticality, effort and schedule variance, and pass rate of testing, just to name a few. Based on our measurements we were able to continuously improve our processes. All these measurements are available on a real-time basis through our very own project management and tracking tool, Spider.

We completed the fourth stage of our journey (quantitatively managed stage) where we quantitatively manage our business which means there is no guess work in managing our business. For example today we know that every Eurocenter Programmer will produce a bug (Program error) every eight hours and we also know the associated rework to rectify this bug.

Hence our estimation is based on a scientific quantitative model rather than guess work.

We have built business intelligence systems which gives us the required information to manage our business quantitatively.

Today we are a mature company embarking on the innovation stage.

Finally quality and excellence must deliver business value and benefits.

It must reflect in your return on investment and in your bottom line.

To us at Eurocenter, our journey towards excellence has given us many business benefits such as ‘predictability’. For example our schedule variance for project delivery is a plus or minus 10 percent.

Hence we can go to market and tell our customers we will deliver the product on time, giving a plus or minus 10 percent variance and we can give them the assurance because we have these statistics to back up our claims.

Predictability is one of the most important considerations in this business because if there is no predictability there is no trust in your product or service.

If there are critical defects at customer delivery, it hampers your business and the cost of recovery is higher than the cost of the product. The ideal example, in the recent past is that of Toyota cars sent into the market with critical defects.

This kind of situation ruins your company image. We are proud to say that in the last three years we have not delivered any product with critical defects and we can give a 100 percent guarantee that our solutions are free of critical defects. Thus having no cost of fixing critical defects.

If you are able to ensure the quality of your product or service at a higher level, the customer will be willing to pay a higher price and you are also able to demand a higher price.

This helps you to increase your margins and quality acts as a differentiator. We were able to triple our hourly billing rate after we started our journey towards excellence in 2004.

Our customer satisfaction index is always increasing. The cost of rework has been reduced by 48 percent. Today we can compete with any company while maintaining the quality image, which is important within the market.

At national level too the IT BPO industry needs this focus on quality in order for Sri Lanka to become a vibrant competitor in the global market. As a small nation Sri Lanka cannot be a volume player like India or China, where price is the differentiator but, we can become a value player where quality and innovation is the differentiator.

As a nation with a population of 20 million we need to differentiate by developing value differentiators and building quality products and services.

We can’t reduce prices because we cannot reduce the cost of labour hence we cannot compete with price.

The alternative is to embark on developing quality products and services and to climb up the value chain. The global software outsourcing market is US$ 300 billion and we only deliver US$ 300 million in IT BPO exports.

This journey towards quality excellence should be at national and at industry level, where the view should be to build a quality ecosystem. One or two companies from Sri Lanka cannot say that we are world class quality companies delivering high quality products and services.

It must be remembered that a Sri Lankan company “X” is not competing with another country’s company “Y”.

It is the ecosystems that compete in the world. Therefore building a robust and vibrant quality ecosystem is necessary in order to compete globally.

We should build the country’s image of ‘high quality software from Sri Lanka’.

For that the whole ecosystem should be uplifted and all the companies or the industry as a whole should ensure that products are of high quality.

Everyone should embrace quality. The government has a great role to play in this journey.

The government is extremely supportive. In 2004, the government provided grants through ICT agencies for 41 software companies to achieve quality certification. Of them 34 companies have been successful.

Fifty percent of our software companies will have quality certification.

While we recognize the importance of quality it may no longer be the key differentiator although it was, at a certain time. Quality is a prerequisite to compete in the global markets.

It should be used as a foundation to build niche expertise required if Sri Lanka wants to stand out in the global Software/BPO industry.