Project Management Institute

Don't let the project management outsourcing intimidate you

Don't Let Project Management Outsourcing Intimidate You

Getting products to market on time with operational efficiency can be an insurmountable task with a “lean-and-mean” work force. So why fear outsourcing?

BY DEBORAH BIGELOW, PMP, CONTRIBUTING EDITOR

Doing more with less has cost us. Interestingly, though, if we look at the comprehensive picture, we can see that outsourcing project management capabilities can make good financial sense. For instance, if a project is late by 10 percent of its original delivery time, it can lose 30 percent of its potential profit, according to Developing Products in Half the Time [Van Nostrand Rein-hold:1995] by Preston Smith and Donald Reinersten. A study by McKinsey and Co. shows that technology products lose 33 percent 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!

Those responsible for managing their corporation's critical projects understand the pressure to get results with limited staff, smaller budgets and fewer resources. They are beginning— and I do emphasize just beginning—to look at outsourcing their project management function to a team of established experts. Staff augmentation is another alternative.

Even bringing up the subject of outsourcing can be intimidating to those in the trenches. There is an underlying threat that “outsourcing could eliminate my job.” But based on the statistics, that would be an unlikely result. And to that technical group, who has been thrown into the “accidental project manager” role, outsourcing can provide an extremely valuable knowledge transfer that will certainly enhance existing staff's understanding of project management and, ultimately, performance.

To build the level of competency required to manage projects with the skill and operational efficiency necessary, a minimum of five to seven years of corporate investment is required.

Those responsible for managing their corporation's critical projects understand the pressure to get results with limited staff, smaller budgets and fewer resources.

This investment takes time and money, and in the interim, the corporation loses potential profit through missed delivery dates and failed projects.

Outsourcing Options

There are two basic project management outsourcing options to consider, each with its own advantages:

1. Outsource the entire project management function. With this option, the project management partner provides the methodology and software, along with a team of trained skilled project managers and planners, and controls personnel to plan, manage and complete all projects in a timely and cost effective manner. Some advantages include:

  • Project management best practices are immediately available
  • Projects are led and managed by an expert team
  • No up-front investments and recruiting costs are required
  • Team can mentor staff
  • Personnel changes are more flexible to accommodate changing requirements within the project.

2. Use both internal and external resources to manage projects (staff augmentation). With this option, the outsourcing partner supplies a staff of professional project managers and project control personnel on an “as-needed” basis. This helps complement “gaps” with resourcing issues when multiple projects are involved. Some advantages of this option are:

  • Experts are on-hand to manage the more complex, unique projects
  • Internal staff has access to mentoring
  • It establishes a “pay-as-you-need” model.

Currently, 22.5 percent of companies outsource project management, while another 15.5 percent of companies are considering it, according to The Center for Business Practices’ “State of the Project Management Industry” research report. The trend is gaining widespread acceptance. Embrace it! If you are working in an organization where you are understaffed and lack the time, resources and expertise to effectively manage your critical projects, then outsourcing may very well be the answer to your problems. You just need to establish upfront what your needs, challenges and resource limitations are. PM

Deborah Bigelow, PMP, is executive vice president of PM Solutions Inc., a Havertown, Pa., USA-based project management consulting company. She was executive director of the Project Management Institute from 1992 through 1996.

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PM NETWORK | MAY 2003 | www.pmi.org

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