Time to market, quality, operational efficiency and the bottom line - they are among every CIO's main concerns. How can companies address these issues and stay competitive, especially in an uncertain economy?
Qualities to Look for in Your Outsourcing Partner
A project-management outsourcing provider should possess certain qualities and capabilities. Here are some to consider:
Proven track record of successful project implementations and a list of client references.Existence of a proven project-management methodology that is easy to access, understand, and follow.Will assess and correct any issues or problems that might occur.Core competencies in the nine knowledge areas of the Project Management Body of Knowledge (PMBOK® Guide).Experienced staff with credentials, such as Project Management Professional (PMP®) certifications, a designation awarded by the Project Management Institute (PMI®).Standard processes to measure performance, including scope, schedule, budget, Return on Investment (ROI), and customer satisfaction.Clear fee structure that can be defined in terms of hourly rates and any administrative charges.
One solution is project management.
Time is money. If a project is late for an amount of time equal to 10 percent of its lifecycle, it loses up to 30 percent of its potential profit1. A study by McKinsey and Company shows that technology products lose a third of after-tax profits when they are late to market, but only 4 percent when they are on time, even if they are 50 percent over-budget.
Such costly implications have taught CIOs an important lesson: not to skimp on project management. Studies show companies that successfully manage projects reap significant rewards, including improved efficiency, better time to market, better quality control, improved customer satisfaction, and higher profitability.
However, it takes more than C-level buy-in and commitment to implement a project-management program. Successfully creating or changing the organization's culture to support a modern project-management environment takes time, staff, management support, expertise, and financial resources.
An Alternative: Project Management Outsourcing
In the current economic climate, CIOs have finite resources to dedicate to projects and improving project performance. They are under constant pressure to get results with limited staff, smaller budgets, and fewer resources.
Rather than trying to manage their own projects in-house and risk failure, more and more CIOs are seeing the value of outsourcing the project-management function. The Center for Business Practices' "State of the Project Management Industry" survey reports that 22.5 percent of companies currently outsource project management, while another 15.5 percent are considering it. The trend is continuing to gain widespread acceptance.
The results of outsourcing have been dramatic for some organizations. The Everest Consulting Group reports that outsourcing has helped companies significantly boost productivity, while reducing workforce and overhead. Another study by PricewaterhouseCoopers shows that outsourcing business processes has become a strategic tool used by organizations to improve their shareholder value.
Outsourcing Options: Which is Right for You?
There are two basic project-management outsourcing options to consider. Each has its own advantages and drawbacks.
1. Outsource the entire project-management function.
In this option, the outsourcing partner provides the project-management methodology and trains management in its use. The provider can also supply the project-management software (or access to the software). A fully trained team of skilled project managers, planners, and controls personnel are supplied by the outsourcing partner to plan, manage, and complete all projects in a timely and cost-effective manner.
Advantages include:
Project-management best practices are immediately available.Projects are led and managed by an expert team of personnel.No up-front investments and recruiting costs are required.The project team is on hand to coach and mentor staff.
Disadvantages include:
The organization is highly dependent on the outsourcing partner.Internal staff may be resistant to having an outside team in charge.
2. Use both internal and external resources to manage projects.
In this option, the outsourcing partner supplies a staff of professional project managers and project-control personnel as needed. With this option, the company often uses its own methodology and trains staff accordingly. The outside project team serves as the mentor.
Advantages include:
Experts are on-hand to manage the more complex, unique, or difficult-to-staff projects.Internal staff has access to coaching and mentoring from the outsourcing provider.Company pays only for the outsourcing staff needed.Cultural resistance among inside staff is less likely.
Disadvantages include:
Requires investment in project-management training for staff.May foster a competitive environment between internal staff and external resources.Communication is more complex.
Strategies for a Successful Outsourcing Relationship
The key to getting the most out of an outsourcing relationship is to have a good plan in place beforehand and to stick to it. What are your goals? What role will the outsourcing partner play in helping your organization attain those goals? What performance metrics are in place to let you know that the outsourcing partner is doing a good job?
It is difficult to select an outsourcing service provider without first knowing what your organization is trying to accomplish with a project-management improvement initiative. Here are some steps for creating your project-management plan:
1. Develop a charter that describes the mission, responsibility, and performance criteria for your project-management organization and ideal outsourcing partner.
2. Assess the current project-management environment, and establish objectives within the following areas:
People - Project Manager competency assessments and training;
Process - Project management and Software Development Life Cycle (SDLC) methodology development;
Technology - Software and tools for project scheduling, control, time management, and integration with accounting and human resource systems;
Benchmarking project performance and improvements.
3. Define the future environment. Establish long-term objectives for your project management organization in the same areas as above. Determine the permanent role that an outsourcing partner will play in achieving those objectives.
4. Create a change-management plan to help ease the transition of bringing an outside project team into the organization. Change-management activities are important for overcoming any cultural resistance that you might encounter from your staff.
Structuring The Contract
Structure the contract with your outsourcing partner so that both parties are in agreement on the objectives, expectations, and challenges of the relationship. Institute an appropriate performance-based incentive plan into the contract.
The scope of services must be well-defined. Carefully draft the roles and responsibilities of the service provider and agree to realistic terms and expectations. Schedule ongoing performance reviews to ensure that those needs and expectations are being met.
Communicate openly and frequently with your service provider. Make sure that you have contacts who are always available to address any problems, issues, or questions. Establish a structure where everyone in the organization has direct access to important information.
Don't let valuable knowledge slip away with the service provider. Structure processes so that valuable 'lessons learned' and procedures are documented and maintained in a central location that is easily accessible by all parties. Have the service provider train and educate staff in the project-management model.
If you're understaffed and lack the time, resources, and knowledge to effectively manage your critical projects, then outsourcing may well be a viable solution. By establishing your needs, challenges, and resource limitations upfront, you will be able to find an outsourcing partner that is right for you.
1. Developing Products in Half the Time by Preston Smith and Donald Reinertsen, 1991
Bob Wourms is the Director, Outsourcing Practice for PM Solutions, a management consulting, training, and research firm dedicated to helping organizations improve project performance and profitability. For more information, visit www.pmsolutions.com.