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Outsourcing PMO competencies to managed services can increase efficiency and reduce costs—as long as the organization selects the right vendor.

BY ABID MUSTAFA

In our age of austerity, organizations are constantly seeking new ways to reduce costs and improve efficiency. It's increasingly common for departments across an organization to be gutted and then supplemented by some sort of outsourcing.

Project management offices (PMOs) are not immune to outsourcing. Various PMO competencies can end up being farmed out as part of a managed services deal, in which a vendor takes on the responsibility of delivering all—or aspects of—operations as part of a contractual agreement.

Typically, the organization simply pays a set fee for vendor services as determined in the contract. The vendor then bears the cost for resources, including support personnel, hardware, software licenses and third-party maintenance.

Managed services are most often used by large, complex organizations with PMO hierarchies. An example would be a centralized corporate PMO that interacts with distributed PMOs in the various business domains, which, in turn, interact with program-level PMOs.

In such cases, managed services can increase the organization's chances of success—as long as it adopts the right vendor engagement model.

Selecting the right vendor requires first understanding exactly what the organization needs. For instance, an organization may decide to outsource all its PMO work at the distributed and program level only, but retain the corporate PMO. The corporate PMO is then charged with the responsibility of managing the vendor in accordance with an agreed set of service-level agreements (SLAs) and key performance indicators (KPIs).

Another vendor engagement model can involve outsourcing specific PMO competencies—such as project methodology support or consolidation of risks, assumptions, issues and dependencies—while leaving other competencies, such as project delivery and executive reporting, in-house. The decision to outsource some PMO competencies and keep others in-house is driven by cost, efficiency, intellectual property retention and politics, and differs from organization to organization.

It is always prudent to get the assistance of experts, such as consultants and contract specialists, to help the organization define the business case and interpret requirements for the managed-services contract.

Likewise, once a vendor has been selected, the assistance of legal experts should be sought to protect the company's interest in the managed-services contract. Attention should also be paid to the implementation aspects of SLAs and KPIs to get the best out of the vendor. Once the managed-services contract is in place and the vendor is on board, a contract specialist should be hired to manage the contract.

BACKGROUND CHECK

Finally, keep the end goal of cost savings and improved efficiency in mind. For example, think about the role of offshore outsourcing, and how it would affect the overall goal. Typically, mundane activities such as tracking risks via an automated tool or the preparation of project costing data for executive reports can be transferred to offshore hotspots as a cost-saving measure. But then the issue of quality comes into play. The solution is to plan to offset quality issues by stringently managing the vendor.

Managed services for a PMO is not a new concept, but getting it right can be extremely rewarding for those who dare try. PM

img Abid Mustafa is a director of corporate programs for du Telecom, a telecom operator and PMI Global Executive Council member in the United Arab Emirates. He is the author of In the Age of Turbulence: How to Make Executive PMOs Successful, published in June 2013.
This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK AUGUST 2013 WWW.PMI.ORG

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