Outsourcing, how to make it work
I have been studying project management in the last few months; the course is very interesting but works on the assumption that you are a project manager working on projects for your organisation. In my case, that is not true. I work for a consultant (outsourcing) company, meaning that the “projects” I work on is really for the benefit of my client’s organisation and this small distinction makes a big difference in how the project manager handles the project.
Firstly, let’s look at the purpose of a project. For an organisation to finally decide to invest into a project the organisation must see that the success in the project will lead to the success of the organisation; the project also needs to fit strategically within the organisation, the following considerations needs to take place:
- Does the project fit with the organisation’s technology architecture?
- Does the project follow corporate standards, policies and methods?
- Can the project last with the organisation’s business and IT strategic plan?
- Can the project co-exist with existing systems?
- Reducing costs - labour is usually cheaper via outsourcing, also its cheaper, quicker and easier to find the right consultant company that to hire (and then manage) a resource with the correct skills
- Improved business focus – with a portion of the work outsourced, the organisation’s permanent staff can focus on the organisations core competencies
- Access to unique skills – The shortage of IT skills makes it difficult for the organisation to find the required skills directly. Outsourcing makes these skills more easily accessible
- Experience - By outsourcing, the organisation is not only gaining a skillset, but experience, this helps identify risk that the organisation may not be aware of and can greatly contribute to the success of the project
- Has great experience on similar type projects
- Has a tried and tested approach for your project
- Knows the common high risk areas and has a strategy in mitigating it
- Knows the type of stakeholder involvement required for project success
- Is familiar with the outsourced team and knows how to manage them
- Can provide more accurate estimates (cost and time)
- Identify kill points (points in the early part of a project, where it needs to be decided if the project should continue)
- Focus on the return of investment. The outsourced project manager will define the requirements of the project and produce a solution that matches the requirements. The return in investment will be the responsibility of the Project Owner, not the project manager
- Organisation’s “Big Picture” strategy
- Organisational structure, and thus will not know who are the key stakeholders needed for project success
- Organisation’s standards and procedures
- Existing systems and technology infrastructure
There are really 2 approaches.
Organisation provides a project manager that works closely with the outsourced project manager. This approach is great for short term projects. This resource needs to understand the organisations “big picture” strategy, standards, procedures, etc. He also requires sufficient authority in making quick decisions, and by working closely with the outsourced project manager, he will ensure that decisions are made for the benefit the organisation.
This is great if an organisation can place a dedicated resource to this project, but may not work for long term projects. For long term projects, it would be better to establish a strong relationship between the organisation and the outsourced company.
If an organisation forms a 5 year contract (involving many resources) with an outsourced company, that’s a 5 year commitment, the project is no longer seen as a short term project that will benefit the client’s organisation. It is now a long term project that will require significant investing from the outsource company and ultimately benefits the outsourced company as a whole.
With this level of commitment, the outsourced company will understand the organisational structure, organisation objectives, standards and procedures, etc. a lot better, that will assist in delivering successful projects.
Also, as part of the 5 year commitment, organisation should place the more senior outsourced resources in decision making position within the organisation. The outsourced company now has responsibility and authority for a particular organisational business requirement. With this power, comes responsibility, so ROI and kill points are now considered more carefully and impartially.
This type of commitment helps the outsourced company grow, with the steady income flow provided by this contract, the outsourced company can focus on training resources, improving processes and providing a better service. This really is a win-win situation that is rarely practiced because of …
- Loss of control – outsourcing to this level is seen as giving the management and control of a business functional to another company
- Hidden Costs – requirements not defined in the original agreement are subject to change control with can lead to additional costs
- Quality problems – contracts with fixed prices, places a large amount of risk of the outsource company which may force them to reduce their expenses to maintain a profit
- Dependant on stability of outsourced company – if the outsource company goes under, the organisation is left with a huge problem