Evaluating and Measuring the Success of Offshore Teams: Metrics and KPIs for the C-Level

Having delivered hundreds of projects over more than a decade, we at Vodworks have developed a profound understanding of all the intricacies associated with C-level leadership’s expectations for offshore teams.

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Source: https://www.mckinsey.com/capabilities/operations/our-insights/project-delivery-hubs-analytics-for-better-megaproject-outcomes

McKinsey lists outlining KPIs as the initial step in delivering construction megaprojects, the core principles of which can be applied to software engineering as well. In this blog, we share a list of metrics—both qualitative and quantitative—for managing offshore teams effectively.

Strategic KPIs for Offshore Collaboration

First things first, you need to ensure that the work of an outsourced development team aligns with the overarching goals and innovation priorities at your firm. Setting up an assessment framework in this area from the outset allows you to obtain ongoing insight into the ‘bigger-picture’ impact of your outsourcing partnership.

Alignment with Business Goals ensures that the offshore dedicated team’s work is in sync with the strategic objectives of your company. This metric involves evaluating the relevance and contribution of the outsourced projects against the overall business goals (e.g., what portion of Q1 revenue is attributed to a new product that has been developed by an offshore team?). A high alignment score indicates that the offshore team’s efforts are directly supporting the company’s strategic direction.

Contribution to Innovation assesses how much the offshore team contributes to the innovation and competitiveness of your organization. Here, you need to evaluate the creativity, problem-solving capabilities, and introduction of novel ideas by the offshore team (think of, for example, embracing a technology that you first saw an offshore team use and then decided to integrate into your company’s operations as a C-level management representative). In general, a positive Contribution to Innovation reflects the offshore team’s role in driving meaningful change within the organization.

Impactful Metrics for Executive Decision-Making: Project Timelines and Milestones

Next, you have to figure out how you’ll be monitoring project timelines and milestones.

On-Time Delivery clearly indicates the project’s adherence to planned timelines; the higher the rate, the more effective the project management and the timelier the execution.

On-Time Delivery (OTD) = (Number of On-Time Deliverables / Total Number of Deliverables) * 100

In tandem with this, Schedule Variance measures the difference between planned and actual project timelines.

Schedule Variance (SV) = Earned Value (EV) - Planned Value (PV),

where EV is the value of the work that has been completed and verified, and PV is the value of the work that was planned to be completed by a given point in time. A positive variance suggests that the project is progressing faster than planned, whereas a negative variance implies the possibility of delays. Tracking Schedule Variance enables you to make proactive adjustments to project plans and resource allocation, ensuring better alignment with organizational objectives.

Milestone Achievement is another crucial metric focused on the successful completion of key project milestones. This qualitative assessment involves evaluating whether milestones are achieved according to predefined criteria, such as a roadmap. Successfully achieving milestones indicates effective project management, stakeholder collaboration, and progress towards project goals.

Critical Metrics for C-Suite Oversight: Cost Management

But none of the above matters if you end up in the red. To help C-level leadership avoid that, Budget Variance shows how well your project performs financially.

Budget Variance = Baseline Project Costs - Actual Project Costs

A positive variance signifies that the project is operating with costs within the budget, whereas a negative variance signals potential overruns and prompts timely corrective actions.

Cost per Deliverable is another critical metric that helps you assess the efficiency of resource allocation and project execution.

Cost per Deliverable = Total Project Cost / Number of Deliverables

Monitoring Cost per Deliverable ensures that the project team delivers value cost-effectively, contributing to overall financial sustainability.

To assess the financial gains relative to the investment in outsourcing, you have to calculate Return on Investment (ROI):

ROI = ((Net Profit from Investment - Cost of Investment) / Cost of Investment) * 100

A positive ROI indicates that the dedicated offshore team investment is yielding positive returns, while a negative ROI signals potential financial inefficiencies. As a C-level business leader, you must regularly evaluate ROI to make informed decisions regarding the viability of the outsourcing partnership.

Driving Success: Evaluating Offshore Team Contributions with Quality of Deliverables

Evaluating the quality of deliverables in a software development project involves a multifaceted approach.

Defect Density provides a quantitative insight into the quality of the code produced:

Defect Density = Number of Defects / Size of the Unit of Work

A lower Defect Density (per, for example, 1,000 lines of code) signifies a higher standard of code quality, indicating a reduced likelihood of post-release issues.

Complementing this, Code Review Effectiveness gauges how well the offshore software development team addresses issues identified during the code review process:

Code Review Effectiveness = (Number of Issues Successfully Addressed / Total Number of Issues Identified) * 100

A higher Code Review Effectiveness percentage not only reflects efficient collaboration among team members but also signifies a commitment to continuous improvement in coding practices.

We’ve already talked about deliverables above, but what about their reliability? That’s where Testing Coverage comes into play.

Testing Coverage = (Lines of Code Covered by Tests / Total Lines of Code) * 100

A higher Testing Coverage indicates a more comprehensive code evaluation, reducing the probability of undetected issues.

Effective KPIs for Cross-Border Team Evaluation: Communication and Collaboration

Throughout the entire offshore partnership, C-level leadership also needs to have visibility into the health of team interactions.

Response Time measures the duration of processing queries or problems raised by either the in-house or offshore dedicated development team. This metric directly impacts the efficiency of problem resolution and decision-making. A shorter response time is indicative of a more responsive and agile collaboration, contributing to a streamlined workflow and reduced project bottlenecks.

Collaboration Satisfaction involves surveys or feedback mechanisms to gauge how well the in-house teams are working with offshore development teams. Regular assessments through surveys or feedback sessions help you identify strengths and areas for improvement in the collaboration process. High collaboration satisfaction scores indicate a positive working relationship and effective teamwork, while low scores may mandate targeted interventions to enhance collaboration.

C-Level Insights into Offshore Team Productivity

Velocity, commonly used in Agile development, measures the team’s efficiency in delivering increments of value:

Velocity = Total Story Points or Tasks Completed / Time Period

Consistent or improving velocity indicates a stable and productive team.

Resource Utilization assesses how efficiently resources are being used in terms of both time and skills, factoring in workload distribution and skill alignment with tasks:

Resource Utilization = (Actual Work Hours Spent / Available Work Hours) * 100

Higher utilization percentages suggest the effective use of team resources.

Task Completion Rate provides a measure of project timelines:

Task Completion Rate = (Number of Completed Tasks / Total Number of Tasks) * 100

The higher the completion rate, the more efficient the task management and adherence to project schedules.

Risk and Issue Management

Regardless of how skilled and experienced your offshore development team is and how well-documented all processes are, there’s always room for risks. Your main goal as a C-level management member is to forecast for those risks in advance and have a contingency plan in place.

The Number of Critical Issues measures the severity and frequency of critical issues that could potentially impact the project. To make the most of this metric, you need to track and categorize issues based on their severity, ultimately prioritizing timely resolution and risk mitigation efforts.

Risk Mitigation Effectiveness assesses how well implemented risk management strategies are playing out. This metric involves evaluating the success of risk mitigation plans and the team’s ability to proactively address potential challenges (think of running cybersecurity drills). An effective risk mitigation strategy implementation translates into minimized adverse effects of identified risks on project outcomes.

Last but not least, Issue Resolution Time measures the time taken to resolve issues raised during the project. The shorter it is, the more proactive and agile the approach to problem-solving, which helps you prevent potential bottlenecks in the project timeline.

Code Maintainability

Another thing you need to secure when partnering with an offshore team is the long-term viability of a software project.

Code Readability assesses the clarity and readability of the code produced by the offshore team. To perform this type of assessment, look at coding standards, naming conventions, and overall code organization. High Code Readability ensures that the code is easily understood, reducing the likelihood of errors and facilitating future modifications.

Technical Debt is a metaphorical concept representing the cost of additional work required to fix issues or inefficiencies introduced during the development process. A proactive approach to managing and repaying technical debt is essential for tech C-level leadership as it helps maintain a sustainable and efficient codebase.

Scalability and Capacity Planning

Scalability and capacity planning are crucial considerations for an outsourced development team to meet evolving project requirements and market conditions.

In a nutshell, a Scalability Assessment evaluates the offshore team’s ability to scale up or down and responsiveness to changes in project scope or demands. A high Scalability Assessment score indicates a team that can easily adjust its size or capabilities to accommodate varying workloads, promoting flexibility and efficiency and avoiding overallocation or underutilization of resources.

Key Performance Indicators in Global Team Management (Vendors)

Effectively managing an offshore development team is critical for the success of a project.

Contractual Compliance ensures that the offshore team is adhering to the terms and conditions outlined in the contract, including project deliverables, timelines, and other specified terms. Regular assessments help ensure that the outsourcing arrangement aligns with the agreed-upon terms (SLAs), mitigating risks and promoting accountability.

Vendor Relationship Management evaluates the overall relationship between your company and the outsourcing vendor. You may employ surveys or other feedback mechanisms to gauge the satisfaction of both parties, forging a lasting positive working relationship.

Legal and Compliance

Adhering to legal and compliance standards is a must if you don’t want to suffer fines and penalties as well as reputational damage.

Legal Compliance ensures that the offshore team follows legal and regulatory standards relevant to the project. To enforce it, verify if the dedicated offshore development team is operating within the boundaries of applicable laws and regulations. That way, you can mitigate risks and validate the overall integrity of the outsourcing arrangement.

Intellectual Property (IP) Protection assesses the measures in place to protect intellectual property rights during development to prevent unauthorized use or disclosure of intellectual property. It is instrumental in safeguarding proprietary information and innovations developed for you.

Enhancing Leadership Visibility through ESG Metrics

As environmental and social responsibility are becoming increasingly important considerations in the global tech sector, C-level executives in companies everywhere need to pay close attention.

Sustainability Practices assess the offshore team’s commitment to environmentally sustainable practices. Think of evaluating the team’s efforts when it comes to minimizing environmental impact, promoting energy efficiency, and adopting eco-friendly practices. A positive assessment reflects the offshore team’s alignment with sustainability goals adopted in your organization.

Social Responsibility evaluates the offshore team’s efforts in the area of social responsibility, including diversity and inclusion initiatives. Do you support local communities and promote ethical business practices as part of your partnership?

Knowledge Transfer and Documentation

If there is a need to end the partnership and switch to a leading offshore team like Vodworks—which may happen, especially given the economic turbulence we live in—you should ensure that the transition is smooth and that critical knowledge is transferred during the handover and retained in the aftermath.

Knowledge Transfer Effectiveness assesses how well knowledge is transferred from the offshore team and involves evaluating the understanding, skill acquisition, and application of knowledge. A higher Knowledge Transfer Effectiveness indicates a successful transfer of expertise and promotes a shared understanding of project goals and requirements. Remember: this process needs to be thoroughly documented and revisited on a regular basis.

Documentation Quality measures the completeness and accuracy of documentation provided by the offshore team. The metric is qualitative and demonstrates the thoroughness, clarity, and reliability of project documentation, including technical specifications, code documentation, and other relevant materials. High documentation quality ensures project information is accessible, understandable, and reliable for all team members—non-tech C-level strategy executives included.