Lessons from India Inc.

Once a sleepy pensioners' paradise, this city today is choked with traffic. Much of the greenery that gave Bangalore the nickname "Garden City" has been hacked away to make room for office towers, and people on the street cover their mouths and noses against the pollution. Telephones, water and electricity remain unreliable, and the roads and airports are decrepit, by Western standards.

But against the chaos of much of downtown Bangalore stands a shining symbol of India's aspiration to become a software superpower. The headquarters of Infosys Technologies Ltd., set on a 29-acre campus on the city's outskirts, is a group of gleaming multistory buildings containing development and test centers, classrooms, dormitories, an auditorium with a 40-screen video wall, sports facilities and two huge food courts that serve traditional southern Indian food and hot Domino's pizzas that are delivered to employees' desktops.

Founded in 1981 by six engineers armed with just US$250 in loans from their wives, 8,900-employee Infosys in the first three quarters of last year earned a handsome $93 million on revenue of $293 million. The company [Nasdaq: INFY], today has a market capitalization of about $10 billion - more than that of Computer Sciences Corp. and Sapient Corp. combined.

Infosys attributes much of its success to rigorous quality control. Indeed, software developers in India have made quality something of an obsession. Most developers here pursue and win the International Standards Organization (ISO) 9000 certification for excellence and then go on to climb the Capability Maturity Model (CMM) ladder. CMM is a product of the Software Engineering Institute (SEI), run by Carnegie Mellon University in Pittsburgh. It describes the practices that make for effective software development, and it lays out a five-level progression from ad hoc, chaotic processes to mature, disciplined approaches.

Of the 42 organizations worldwide that have reached Level 5 on the CMM scale, 25 are based in India, according to the SEI.

Relatively few software shops in the US seem prepared to invest the considerable time and effort needed to reach those lofty levels, but there's much they could learn from Indian developers, such as how to improve software quality by measuring and analyzing defects, rework costs and estimation accuracy. And software quality experts say the payoff isn't just in less-buggy software but in big productivity gains as well.

A high CMM rating is a "badge of honor" for software professionals and software companies in India, says Satish Bangalore, managing director of Phoenix Global Solutions India Pvt. in Bangalore. "It's almost shameful for them to admit they are a Level 2 company or that they didn't get ISO 9000 certification on the first or second attempt," he says.

Phoenix Global Solutions was set up in 1996 by Phoenix Home Life Mutual Insurance Co. to take on legacy systems maintenance and Y2k remediation. Phoenix wanted to have 30 percent of its total IT staff in India, a goal it has nearly achieved.

Low labor costs and an abundance of well-qualified English-speaking IT workers were the main reasons Phoenix turned to India. Quality, stemming from the CMM disciplines, was a byproduct, says Bangalore, who is also chief technology officer at the US-based parent company. "To make this global team concept work, there is no other option but to make it process-driven rather than people-driven," he says. "We had to follow good practices for documentation, communications, signoffs, revisions - all these needed to happen if this model was going to work."

For its part, Transportation.com, an online transportation management firm, has been outsourcing most of its core application development to Infosys for the past year and has found the quality of work to be outstanding, says Chief Information Officer (CIO) Dan Bentzinger. "I can't think of a better solution [than Infosys], from the standpoint of cost, quality, scalability and guaranteed delivery, in terms of hitting deadlines," he says.

Software developers in India have seized upon the quality religion in much the same way the Japanese embraced the quality concepts of W. Edwards Deming in the 1950s and 1960s. Attention to quality in Japanese manufacturing cost US automakers a rapid loss of market share until Detroit belatedly got on the quality bandwagon about 20 years ago, and many experts say US automakers are still playing catch-up.

Today, American software quality guru Watts Humphrey is known in India as "the Deming of software," and a year ago, the Watts Humphrey Software Quality Institute in Chennai, India, was dedicated in his honor. He created the CMM at the SEI, where he's now a research scientist, in 1987, but he may be better known today in India than in the US.

CMM isn't the only quality game in town for many Indian developers. Infosys has embraced ISO, CMM, the Six Sigma discipline pioneered by Motorola Inc. and the Malcolm Baldrige National Quality Award framework for tracking software quality.

As a result, Infosys - whose clients include Cisco Systems Inc. and Nortel Networks Inc. - today has well-defined and repeatable processes for measuring quality. It measures and manages such things as in-process defects, rework costs, defects delivered to customers, cost overruns, schedule slippage and estimation accuracy, says Nandan M. Nilekani, managing director and chief operating officer at Infosys.

Such processes are only part of the positive changes being driven by quality standards, Nilekani says.

The Baldrige framework requires a company to take a more holistic approach to systems, business results, human resources practices and leadership qualities, he says. One example: The Baldrige model requires firms to identify leaders, groom them and draw career plans for them, Nilekani says. As a result, Infosys has just finished setting up a $7.3 million leadership institute on a 100-acre campus near Bangalore dedicated solely to that function.

Executives like Nilekani say they believe this near-fanatical attention to quality has been key to India's recent success in software development. India's software lobby, the National Association of Software and Service Companies in New Delhi, estimates that annual revenue for India's software industry will grow from $5.7 billion this year to $87 billion by 2008.

Falling Barriers

When US firms started sending programming offshore about 10 years ago, it was mostly low-level work such as maintenance of legacy applications, followed by code repair for the Y2k rollover. But as Indian firms began to prove themselves, US companies started sending over higher-level work such as the development of e-commerce applications.

"The barriers are coming down as people get more comfortable and the [Indian] teams get legitimized," says Bangalore. "We may lose the distinction between the offshore team and the on-site team, and there may be a constant flow of people back and forth."

US companies will begin to address quality issues when they start losing revenue and market share to high-quality competition from India and elsewhere, Humphrey predicts. "Then you'll see a reaction, just as the automobile industry reacted when Toyota got their business," he says. "Until we started making buying decisions based on quality, the auto industry did not respond to the quality movement."

But many US software developers have already begun to respond, says Kaushik Bhaumik, an associate principal at McKinsey & Co. in Palo Alto, California. "There has been broad recognition in the US now that quality does matter," he says. "I'd expect a lot of US firms to start playing catch-up. And as software matures, we'll start seeing quality as a basis for competition, rather than just product functionality."

For example, auto parts giant Visteon Corp., which in 1999 established Visteon Software Operations in Chennai, launched its CMM efforts partly in response to a software glitch that forced the company to spend tens of millions of dollars on an odometer recall. "Management wanted to know what we could do so that we will never have another software defect," says David L. Avery, director of the Indian facility, which is now at CMM Level 5. "Anything that we did that cost less than the recall was OK."

US software developers are often accused of racing a product to market as quickly and cheaply as possible, and quality be damned. But Girish Seshagiri, chief executive officer (CEO) of Advanced Information Services Inc., a software developer in Peoria, Ill., says the attitude that quality isn't affordable is fundamentally flawed. "Ultimately, productivity is the issue," he says. "If you address the quality issue, it makes a significant impact in terms of cost reduction and reduction in cycle times."

It's this adoption of quality practices early in the development cycle that distinguishes Indian developers, says Bhaumik. "Not only have they been able to reduce the number of bugs per thousand lines of code and increase the percentage of first-pass user acceptance testing, they are able to do it consistently from project to project."

In a recent study, McKinsey found that Indian firms ranked at CMM Level 5 generated 96 percent quality improvements and 75 percent productivity gains, compared with those organizations at CMM Level 2, where US firms are typically ranked.

Bhaumik says Indian developers don't employ any special coding tools or techniques beyond what's in use in the US But they're meticulous about preparing documentation, planning for alpha and beta releases, establishing user acceptance procedures, regression testing procedures and the collecting metrics during development. "It's all the processes surrounding code development where they have really gone ahead of everyone else," Bhaumik says.

Citicorp Overseas Software Ltd. in Chennai uses a project management system that documents resource requirements, schedules, budgets, review and tracking mechanisms, risk analysis methods and contingency plans, according to Rama Sivaraman, a consultant at the company, which is a subsidiary of Citibank Overseas Investment Corp. In-project processes include both qualitative and quantitative process-tracking mechanisms for looking at things such as code size, number of modules completed, number of defects found and tests completed, she says.

Implementing quality measures such as ISO and CMM can also help companies move from being heavily people-dependent to more process-reliant, says Ashutosh Gupta, CEO of Deutsche Software (India) Ltd., a Bangalore-based subsidiary of Frankfurt-based Deutsche Bank AG.

By consistently documenting every activity in the development cycle and having processes for properly handing over project tasks when an individual leaves, much of the disruption caused by employee attrition is minimized, Gupta says.

"There is this myth that software development is a creative effort that relies heavily on individual effort," says Gupta from his air-conditioned office high above the din of traffic-clogged Mahatma Gandhi Road. "It is not. It is just very labor-intensive, mechanical work once the initial project definition and specification stage is past."

Sidebar: Quality at any cost?

There are several well-defined road maps to better software quality, such as the Capability Maturity Model (CMM) for software. But it's expensive to substantially improve existing software development processes, and sometimes US managers believe the required investment just isn't worth it.

"Pragmatic executives are often reluctant to put up an investment that will take a year or two to pull off, and sometimes three or four years," says software quality expert Watts Humphrey.

Some US companies have found it easier to make that investment in India rather than in the US, at least initially. Motorola set up a development center in India in 1993 when it found it hard to substantially improve its US software practices, says Michael Cusumano, who was a consultant to Motorola at the time.

"The CMM demands lots of documentation and traceability procedures, very intensive quality assurance procedures and process support people, so there's a lot of resistance from managers," he says. "But setting up a facility from scratch and introducing the right practices from the very beginning is a good way to get a software development organization to a very high level."

A few years later, Motorola imported those high-quality practices back to its US development centers, but it was slow going and required tailoring the CMM for smaller teams, says Cusumano, now a professor of management at MIT's Sloan School of Management in Cambridge, Mass.

Implementing stringent quality disciplines such as CMM isn't easy to do in large, well-established IT organizations, says Satish Bangalore, chief technology officer at Phoenix Home Life Mutual Insurance. "When you are talking of an IT organization that is 30 years old, you are talking of an organization that is carrying a lot of baggage," he says. "It's hard to instill new discipline unless there is a very strong survival necessity."

CMM principles originated at IBM for use in developing operating systems and complex applications for its Federal Systems Division, Cusumano says. "The CMM is really designed for large, bureaucratic types of industrial organizations," he says. "In a lot of software markets, time to market and process flexibility are more important than quality."

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