The project component of an outsourcing engagement

Jan Wiswell, PMP, Sr. Project Manager, IBM Learning Services


The Questions

If we define outsourcing as the management and performance of an organization's day-to-day business processes by an external organization, a project as a temporary, unique endeavor with a definite beginning and end and operations as work that is ongoing and repetitive, the questions become:

• Is an outsourcing engagement a project?

• Is an outsourcing engagement an operation?

• Are outsourcing engagements and projects mutually exclusive? Outsourcing provides an organization with the freedom to

focus resources on their core competencies while engaging a third party to perform the tasks that support attaining the goals and objectives of the business but may not be the core competencies. The third party becomes the service provider. The service provider may be an internal organization or external resources and consultants.

The service provider works within the framework of a formal agreement. The objective of the agreement is to define the scope of work, roles and responsibilities of each party and terms and conditions of outsourcing engagement. This agreement specifies a start and end date supporting a perceived justification to call the effort a project. In reality the start and end date specified defines the duration of the contractual agreement. When the end date is reached the service provider may change while the day- to-day business operations continue.

The Outsourcing Engagement

This paper focuses on a model developed and lessons learned during engagements focusing on outsourcing training administration and delivery. The model that has been developed is presented from the perspective of the external service provider. The project manager is a member of the service provider's team.

Outsourcing Engagement Phases

The outsourcing engagement includes four phases: define, design, develop and deliver.

The define, design and develop phases of the engagement fit the definition of a project. Collectively they are a temporary endeavor undertaken to create a unique service. The project scope includes: defining requirements; designing a solution; developing the processes, procedures, tools and application software needed to implement the service. The delivery phase is the service, which becomes the day-to-day business processes. Delivery falls outside the scope and definition of a project. The project manager is engaged for the duration of the contract even through the delivery phase, as new projects are defined during this phase.

Definition Phase

The definition phase provides the foundation for the outsourcing engagement. This phase includes:

• Project initiation, resulting in a formal agreement between the parties:

• Validate the business goals and objectives

• Gather, validate, prioritize and document requirements: business, project, corporate directives

• Define the project scope: identify the project activities and deliverables; define the responsibilities of the participants (formal agreement).

• Project planning, resulting in a documented project plan with a high-level network diagram identifying timelines, major milestones, task dependencies and the projects critical path:

• Define major milestones

• Define tasks/dependencies/schedules

• Define resource requirements/resource allocation

• Develop risk assessment/mitigation plan

• Develop supporting plans.

• Build the project team, resulting in a responsibility assignment matrix:

• Identify required project team skills

• Identify team members (client and service provider)

• Identify roles and responsibilities of each team member.

The agreement created in this phase is critical to a successful relationship between the client and service provider. At a minimum the agreement should include a definition of the:

• Parties to the agreement

Exhibit 1. Outsourcing Model

Outsourcing Model

• Scope of services

• Responsibilities of each party

• Terms of the agreement

• Payment terms

• Termination criteria

• Performance standards

• Deliverables

• Audit criteria

• Compliance with applicable laws

• Audit criteria

• Confidentiality terms

• Ownership of intellectual capital/work product

• Processes for dispute resolution

• Applicable legal requirements such as compliance with applicable laws, indemnification, warranty.

Authorized representatives of each organization must sign the agreement.

Design Phase

This objective of this phase is to design an infrastructure for the delivery and implementation of the service. The service provider applies the skills, knowledge, expertise and resources they bring to the engagement to develop an infrastructure design that integrates the components necessary to meet the client's requirements.

The infrastructure for training administration and delivery includes:

• Design of a training management system, integrating

• System software

• Application software

• Hardware

• Designing processes to manage:

• Training event registration/cancellation

• Scheduling/classroom setup

• Procurement activities

• Measurement/reporting

The deliverable is an infrastructure design focused on meeting the defined requirements, providing compliance with corporate directives and preserving investments in existing infrastructure where possible. The result of this phase is another building block in a solid foundation for the delivery of the service. The output of the design phase includes another level of detail for the project plan, further defining the work breakdown structure, associated work packages and milestones.

Develop Phase

The previously defined infrastructure is created during the development phase. This involves customizing and installing system and application software, acquisition of hardware, writing processes and procedures, creating templates for measurements and reports. This phase includes a pilot, facilitating the testing of all components. Staff is hired and trained and the transition to the implementation of the service starts.

As the transition from the develop phase to the deliver phase is completed the project is closed and implementation starts. During the term of the agreement additional projects are identified. These projects have the same life cycle and follow the same model used for the initial effort.

Challenges/Lessons Learned

The structure of an outsourcing engagement combined with resources and expertise to do the job sound like the perfect way to proceed, the agreement defines the tasks, the excitement builds and then reality sets in.


• Devoting the time and resources required for the define, design and develop phases necessary to build a solid foundation have an impact on the client's staff. They are already working long days and the service provider that came in to “help” is now taking more of their time.

• Resistance from the client team to the “new kid on the block.” The service provider has come from a different culture with different organizational attitudes, ideas and approaches. Melding the two cultures together is a struggle. Learning how to minimize the diversity is key to success.

• The project manager and service provider are the subject matter experts and by nature have a tendency toward control—this is a client/vendor relationship presenting unique challenges.

Lessons Learned

• The project manager must use the agreement to enforce the commitments made during the define phase. There never can be too much detail in this document.

• Proactively deal with potential issues and roadblocks to success. Encourage your client to over communicate what is happening. Remember the staff may feel threatened by your presence.

• The Project Manager is not necessarily the primary decision- maker—yes that is hard to accept and against our nature but we all know—the client is the boss.

The Answers to the Questions

• Is an outsourcing engagement a project?

No—a project is a component of the outsourcing engagement. The project work builds a solid foundation for the service to be provided. The project manager is available for the duration of the contract to address new projects that are identified.

• Is an outsourcing engagement an operation?

No—the operation is a component of the outsourcing engagement. The operation is the service resulting from the project.

• Are outsourcing engagements and projects mutually exclusive?

No—they are dependent on each other, without the project the service being provided will not have an infrastructure leading to successful implementation.

Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA



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