Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
The Singapore Software Group Case Study
BACKGROUND
The Singapore Software Group (SSG) was a medium-size company that had undergone significant growth over the past 20 years. Initially, the company pro-vided software services just to the Pacific Rim countries. Now it serviced all of Asia and had contracts and partnerships with companies in Europe, South Amer-ica, and North America.
SSG’s strengths were in software development, database management, and management information systems. SSG created an excellent niche for itself and maintained a low-risk strategy whereby growth was funded out of cash flow rather than through bank borrowing. The low-risk strategy forced SSG to focus on providing the same type of high-quality deliverables to its existing and new clients rather than expanding into other software development markets with other products and services. Although SSG had a reputation for quality products and services, excellence in customer support, and competitive pricing, the software landscape was changing.
SSG had seen a 400 percent increase in the number of small companies enter-ing the marketplace over the past several years and competing with it in its core lines of business. Its client base was under attack by other Southeast Asian coun-tries that had lower salary structures and lower costs of living, thus allowing these new companies to put pressure on SSG’s profit margins.
Under the direction of senior management, SSG performed a SWOT (strengths, weaknesses, opportunities, and threats) analysis. SSG’s strengths were
quite clear: highly talented and dedicated personnel, a fairly young labor force, and significant knowledge related to its existing products and services. Its internal weaknesses were also quite apparent; although SSG provided training and educa-tional opportunities to its workforce, the opportunities were limited to educational programs that would directly support existing products and services only; for the business to expand, significant expenses would be incurred for retraining its labor force or workers with new talents would need to be hired; and last, the time neces-sary to expand the business may be too long to take advantage of an opportunity.
The threats to SSG were real. The company did not know if it could maintain its current growth rate. SSG had already seen signs that its growth rate might be deteriorating since many of its critical clients were seeking out competitors that possessed skills that SSG did not have. There was no question that the opportu-nities for growth existed if SSG could expand its skills in a timely manner and penetrate new fields. The questions, of course, were What new skills do we need? and What new products can we offer? There were opportunities for joint ventures and partnerships, but SSG preferred to remain independent and often had a go-it-alone mentality.
NEED FOR GROWTH
In a bold move, SSG began training its workforce in the type of software develop-ment necessary to support the iPhone, iPad, and other screen-interfacing software packages. Although SSG had some limited experience in this area, software to support touch screens was seen as the future. This included software to support games, telecommunications, photography, and videotaping.
SSG realized that training alone would not be sufficient. Time was a real serious constraint for the plans for continued growth. It would be necessary to hire additional staff with expertise in computer engineering rather than just com-puter programming. SSG was fortunate to be able to attract highly talented peo-ple with the expertise needed to compete in this area. Some of the new hires even came from SSG’s competitors who were looking at opportunities to enter this marketplace.
It took almost a year and significant expense to build the in-house skills that SSG desperately needed for future growth. With some in-house experimental work, SSG was able to eliminate many of the software bugs that plagued the first-generation touch-screen products and even exceeded performance in some cases. But all this was just part of educational development and limited R&D. What was needed now were contracts.
REQUEST FOR PROPOSAL FROM TAIWAN TECHNOLOGIES
Taiwan Technologies (TT) was one of SSG’s most important clients. SSG was on TT’s preferred supplier list and was awarded more contracts from TT than from
any other client. Many of the contracts were awarded on points, including past performance, rather than simply being the lowest bidder.
was in the process of designing new products to enter the smartphone marketplace and compete with other smartphone suppliers. TT’s major strengths were in redesigning someone else’s products and improving the performance and quality. Without having to recover vast R&D costs that others were incurring, TT was able to become a low-cost supplier. TT’s strengths were manufacturing-driven, and it possessed very limited capability in software development.
SSG was one of five companies invited to bid on creating the software. The problem was that TT’s design efforts were still in progress and SSG’s efforts
would be done in parallel with TT’s work. TT’s specifications were only partially
complete. The final designs would not be known until perhaps six months into the project.
To complicate matters further, TT was requiring that the contract be a firm-fixed-price effort. Usually, parallel development work is done with cost- reimbursable contracts. With a firm-fixed-price contract, SSG could be exposed to significant risks, especially if downstream scope changes resulted in rework. The risks could be partially mitigated through a formalized change control pro-cess. Since the number and magnitude of the downstream scope changes were unknown, having the project manager on board the project on a full-time basis was critical.
PROPOSAL KICKOFF MEETING
SSG’s senior management made an immediate decision that SSG would be bid-ding on this contract. In attendance at the bidding kickoff meeting were senior representatives from all of the groups that would be supplying support for the project. Also in attendance was the chief executive officer (CEO), who announced that Jim Kirby would be the project manager and would be assigned full time for the duration of the project. The project manager would be expected to work 2,000 hours of direct labor.
Frank Ling (Business Analyst): “As the business analyst, it is my responsibil-ity to make sure that we have the right business case for this project. The follow-ing information in the business case is critical for project planning:
The market demand for the TT products could be millions of units a year.
Downstream product upgrades will provide SSG with a long-term cash flow stream.
SSG views this project as an essential component of our strategic plan.
The project may require some technological breakthroughs and, as yet, we are unsure what these breakthroughs might be. However, we feel confident that we can do it in a timely manner.
Even though we have people trained in this technology, this is a com-pletely new type of project for SSG. We know there are risks.
Corporate legal says that TT’s product requirements thus far pose no legal headaches for SSG.
“We expect that the business case may change until such time as TT finalizes its product description and requirements. In this regard, I will be working closely with Jim Kirby on the impact that the changes will have on the business case and the project. Parallel development projects are always difficult.
“SSG’s interest in winning this bid is of the utmost importance, but we do not want to win it at a price that is so low that we are losing money. We need to know as soon as possible what the realistic cost is to meet their requirements. The suc-cessful completion of this contract will ‘open doors’ for us elsewhere.”
Kathryn James (VP, Human Resources): “According to the RFP, the go-ahead date is July 1, 2011, and a completion date of June 30, 2012. At SSG, we typi-cally evaluate people for promotion in the first two weeks of December, and the promotions go into effect the beginning of January. We also provide cost-of-living adjustments and salary increases the first week of January as well. We expect that the average cost-of-living and salary adjustment to be 6 percent beginning January 1. For those who receive promotions, they will receive an additional 10 percent salary increase on average.
“There are other facts that must be considered since the program is a year in length. Last year, the average person in the company had:
Three weeks of paid vacation
10 paid holidays
4 days of paid sick leave
5 days of training paid by corporate
2 days of jury duty
“These costs are paid out of corporate overhead and are not part of direct labor. I am also providing you with the salary structure for the departments that are expected to provide support for the project. (See Table I.) If overtime is required, and I assume it will be, all workers will be paid at time and a half, regardless of pay grade.
“The overhead rates for each of the departments are also included in Table I. However, on overtime, the overhead rates are only 50 percent of the overhead rates on regular time.”
Paul Creighton (Chief Financial Officer): “Kathryn has provided you with the overhead rates for our departments. We expect these overhead rates to remain the same for the duration of the project. Also, our corporate general and admin-istrative costs (G&A) will remain fixed at 8 percent. The G&A cost are included in all of our contracts and are a necessity to support corporate headquarters. This
Table I Salary information for 2011
Pay 2011 Median
Department Grade Hourly Salary, $ Overhead, %Project Manager 9 56 100
Systems Programmer 5 38 150
Systems Programmer 6 41 150
Systems Programmer 7 45 150
Systems Programmer 8 49 150
Software Programmer 5 38 150
Software Programmer 6 41 150
Software Programmer 7 45 150
Software Programmer 8 49 150
Software Engineer 6 41 150
Software Engineer 7 45 150
Software Engineer 8 49 150
Software Engineer 9 55 150
Manufacturing Engineer 6 41 250
Manufacturing Engineer 7 45 250
Manufacturing Engineer 8 49 250
Manufacturing Engineer 9 55 250contract is a firm-fixed-price effort, which you all know provides significant risk to the seller. To mitigate some of our possible risk, I want a 15 percent profit margin included in the contract. In the past, the contract profit margins on TT contracts ranged from 10 percent to 15 percent. The higher end of the range was always on the firm-fixed-price contracts.
“I know this is the first time we have worked on a contract like this and that there are risks. I am not opposed to adding in a management reserve as protec-tion. But before you go overboard in adding in a large management reserve, just remember that we want to win the contract.”
Ellen Pang (VP, Computer Technologies): “I consider this project to be at the top of the priority list for SSG. Therefore, we will assign the appropriate resources with the necessary skill levels to get the job done. I will assign five people full time for the duration of the project; one from systems programming, three from software programming, and one from software engineering. I believe that each employee will be required to work at least 2,000 hours of direct labor on this pro-ject, with the hours broken down equally each month.
“I am not sure right now which employees I will assign because the go-ahead date is a few months away. But I will keep my promise that there will be five
workers and that they will be committed full time with no responsibilities on other projects. In addition, I am hiring a consultant with expertise in this type of project. The cost for the consultant for the duration of the project will be $75,000.”
Eric Tong (VP, Manufacturing): “I’m sure you all know from newspapers and TV news broadcasts about the problems smartphone manufacturers were having with the casing and cover. To avoid having the same problems and alienating TT, I will be assigning one of my manufacturing engineers who is an expert in value engineering and quality. I expect him to be assigned for roughly 600 hours begin-ning some time after January, 2012.
“The RFP requires that we experiment with various size touch screens to see if the software is affected by the screen size and screen thickness. This could be part of the problem that other suppliers were having. This experimental work is also included as part of the manufacturing engineer’s job.”
“I estimate that we will need about $6,000 in material costs. We should prob-ably include a scrap factor as well, but I am unsure right now how much of a scrap factor is reasonable.”
Bruce Clay (Proposal Manager): “TT wants the proposal in their hands within 30 days. I think that’s enough time to make our estimates. Here is a copy of a small proposal we did for TT a couple of years ago. (See Table II.) It should give you an idea how we price out our projects for competitive bidding.
“Together with your individual estimates, I also need a listing of all of the assumptions you made in arriving at your estimate(s). This is critical information for risk management and decisions on scope changes.”
Table II Typical project pricing summary
Direct Labor Overhead
Dept. Hours Rate Dollars % Dollars Total
Eng. 1000 $42.00 $42,000 110 $46,200 $88,200
Manu. 500 $35.00 $17,500 200 $35,000 $52,500
Total Labor $140,700
Other: Subcontracts $10,000
Consultants $ 2,000 $12,000Total Labor and material: $152,700
Corporate G & A: 10% $ 15,270
$167,970
Profit: 15% $ 25,196$193,166
RUBRIC
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