Short answer is No to ISO 9001 (too generic – applies to all manufacturing and not specific to software manufacturing) and Yes to CMMI.

Consider first the motivation for going in for these certifications.

Vendors are motivated by a desire to convince buyers that they have respectable and reliable processes in place to deliver on their promises. Vendors operate in a competitive market and hence need to go for broke else the competition will beat them. This is why every single vendor in India will boast of the latest and greatest in certifications. This is a stamp of approval from an independent assessor (though CMM is a self-assessment really!) without which a vendor will not qualify to do business. This is a minimum entry criteria to the big league (and even the little league now-a-days).

Now consider a captive.

The average captive is an insider and hence by definition, respectable. The average captive does not compete head-to-head with vendors for work. The average captive does not have any pressing need to acquire certifications.

Now comes the interesting part. With sales and marketing pressures out of the way, the above-average captive can do the right thing by acquiring certifications for the real reason they are issued – to achieve capability maturity.

The Capability Maturity Model Integration (CMMI) defines five maturity levels:

• Level 1 – Absence of formal processes
• Level 2 - Presence of management processes
• Level 3 – Presence of engineering processes
• Level 4 – Presence of metrics based management processes
• Level 5 – Presence of continuous improvement processes

There is no question that Level 2 and Level 3 capabilities will benefit any software development organization. Level 4 – well, typically metrics only confirm what managers glean from other means! Level 5 – is so vague (compared to Level 2 & Level 3) that it looks like it was put in place to make up the numbers!

If you are running a captive, here’s one possibility: aim for a CMMI Level 2 certification in the short term so that your management processes are solidified first and go for a Level 3 certification in the medium term.

There is an even better approach which is uniquely suited for Captives – move away from the staged representation of Levels 1 though 5 to a continuous representation using a target profile that best suits your captive’s needs.

What are these two representations? The following extract from CMMI for Development, Version 1.2 illustrates these two representations of the model:

Two Representations of the CMMI Model

As opposed to the well-known staged representation, the continuous representation permits a captive to pick and choose the process areas its wants to focus on and even select the level of maturity it desires to achieve for that process area!

The following Capability Level Profile illustrates this point:

Capability Level Profile

One final word to the wise: Do it right!

The spirit of CMMI requires the “institutionalization” of processes and this is where real maturity lies. In the absence of competitive pressures, captives are uniquely positioned to embark on a quest for true process maturity and not just clear a certification to get a stamp of approval!

While this approach has some easy to see benefits, the reality has been rather disappointing. A 2007 research by Forrester had this to say about captive centers:

The trend of establishing a firm’s own facility — known as a “captive center” — in locations like India, China, or Russia continues to find converts. During the past two years, more than 300 North American and European companies started their own offshore setup to lower the costs of product development or back-office operations. However, the majority of the reasons firms cite for building their own facility versus outsourcing to a third party are flawed. Our research shows that in the majority of cases, it is driven by personal reasons such as an expatriate employee’s urge to go back to India for family reasons. As a result of the lack of management support, spiraling costs, skyrocketing attrition, and a lack of integration, more than 60% of the captive centers in India alone are struggling.

- Shattering the Offshore Captive Center Myth, Sudin Apte, Forrester Research

A year later, the situation seems to have significantly worsened:

Debate still rages regarding the success of offshore captive centers. But many firms that previously believed in the captive approach changed sides in the debate — having a change of heart and scouting for third-party providers and even selling off their captive centers. Several blame a changing offshore reality for the debacle while others claim it was the outcome of changing business and innovation requirements. Yet these changes of heart are not random. In fact, scrutiny exposes a four-stage life cycle through which most captive centers evolve. Firms with captive centers need to find a way to expedite their evolution through the four stages to successfully leverage offshore for their business needs.

- Understanding the Captive Life Cycle, Sudin Apte, Forrester Research

Mr. Apte goes on to explain that most captive start slow, attempt to accelerate and hit roadblocks which result in a gradual lowering of expectations. Continual below-par performance eventually leads to looking for exit routes.

While I agree by and large with Mr. Apte analysis of the situation, I find it hard to accept this life cycle as sacrosanct. In other words, I believe it is possible for captives to break out of this downward spiral from inception towards exit.

In this and following posts, I attempt to break down the Failure Factors that impede a captive center’s growth and propose approaches that convert these failure factors to success factors.

Next