Evaluating whether or not your company should outsource project-management services can be challenging. Before making this potentially risky leap, you have to assess if this is a good move for your business while keeping in mind that what works for your business today may not work in the future. We’re discussing whether outsourcing your project management is the right choice, the benefits of outsourcing and the pitfalls.
There can be many reasons and benefits of outsourcing your project management services and equally as many pitfalls. There aren’t any one-size-fits-all solutions based on your industry, type, or size of business. Just as you would with different project management methodologies, consider the risks and rewards carefully and take the time to thoroughly evaluate why outsourcing project management may or may not be a good move for your organization.
Reasons for Outsourcing
Low staffing levels
Depending on the size of your business, you may not have sufficient staff in place to set up and support a PMO. Many businesses simply do not have adequate staffing levels to dedicate one or more employees to solely focus on projects; often, existing resources may already be overextended and only able to focus efforts on daily operational duties.
Shortage of highly experienced staff
Whether you have a small, midmarket, or large company, your internal staff may not have the specific project management experience or training you need to effectively take a project from inception to closeout. In fact, the nature of the project may necessitate very specialized expertise.
If you’re a home-building contractor, for example, you might require engineering project-management skills that are different from software developers tasked with implementing a new inventory management system for your business. In this case, it may make sense to seek external vendors with the appropriate technical project-management expertise to assist with your unique projects.
Cash-flow constraints
This can be an ongoing concern for businesses regardless of type or size. As budgets shrink and competition grows, businesses often struggle to find the capital to fund projects. Finding additional financial resources to hire specialized staff like project managers can be difficult, especially when those resources are already earmarked to support operations. In this case, it may make sense to find vendors that offer project-management services on a per-project basis.
Business-model decisions
You may choose to outsource project management functions as a result of your business model. If your projects are of the one-off or ad-hoc variety, then hiring internal project-management staff may not make sense. It may be less cost-effective and more of an administrative burden to hire, train, and retain a full-time employee (FTE).
What are some of the benefits of outsourcing project management?
A key benefit of outsourcing project management is a lower cost structure. All project-management vendors work differently and offer different pricing structures depending on their level of services, their experience, and their business model and overhead, as well as consideration for their target markets. It may take some up-front work to solidify details and obtain quotes from these vendors prior to determining if any given vendor is a cost-effective option for your business. And don’t forget to factor in the longer-term factors as well (such as the cost of maintaining FTE PM roles in-house).
A higher level of experience and competence
Project management is a highly specialized area of knowledge and skill that requires significant attention to detail. It’s also about the ability to see the broader scope in order to ensure strategic business alignment. In addition, people with the ability to effectively manage multiple resources, juggle hectic schedules, deal with difficult situations, and keep within scope are in high demand, yet they are hard to find. Stronger experience and competence is a top benefit of outsourcing project management.
The upside to being able to find people with these skills is their ability to provide high-quality project management, which enables businesses to execute projects successfully while it allows your internal staff and management to focus on what they do best. If these skills are not available internally, then outsourcing to an experienced project-management vendor may be the best option when compared to the cost of hiring a less experienced internal project manager.
Objectivity
External project managers often bring a level of objectivity that may not always be present with internal staff for various reasons. This objectivity can be of great value when it comes to the actual project outcomes and deliverables and ensuring that all business requirements are met.
Clarity of focus
When properly executed and managed, projects facilitated by an experienced outsourced PM can allow opportunities for businesses to achieve clearly defined expectations with a single-minded focus and less internal friction. This, of course, assumes that the right amount of senior-management support is in place.
Relationships and buy-in
When it comes to buy-in from internal stakeholders, outsourcing may be an obstacle. At times, when a business chooses to outsource projects, the external PM can run into issues with a company’s internal staff members or management, as they can, consciously or unconsciously, be uncooperative or less trusting. This can make the successful execution of a project more challenging and may possibly position a project for failure. This does not mean that outsourcing will not work; it means there may be additional work required to gain the trust and buy-in from key stakeholders.
Lack of awareness of business objectives and operations
Let’s face it. Institutional knowledge can sometimes move mountains. When the appropriate and specific project-management expertise exists within an organization, it allows for the potential to more easily execute and manage projects successfully due to existing business and operations knowledge. As a result, internal project managers (who have the required skills, of course) may have an advantage over an external project manager.
Exposure of sensitive company information
The risk of a potential data breach can exist with both internal employees and also with external vendors as they gain access to sensitive information. This risk can be mitigated through various means with external vendors. It is critical that your business clearly and completely defines its policies and processes and communicates and implements measures to address these security issues.
Reliability and accountability
When outsourcing project management, ensuring that the outsourced vendor or PM is fully committed to all aspects of the project is key. Outsourced PMs are not internal stakeholders, and they are not impacted by the business outcomes of the project; therefore, it is critical to ensure their reliability. Clearly, defining and setting expectations and goals are critical to the successful completion of any project. You may even want to consider linking pay to performance, as well as addressing professional conduct, ethical behavior, time commitments, scope, and other factors into any agreement.
Also, consider your company culture when making the decision to outsource project management. Does your organization outsource any other critical roles or functions? Is there already a healthy balance of on-site and off-site employees who are used to working in virtual teams? Take a close look at your internal company culture to gauge if employees will be receptive to working with an external PMO.
When thinking about whether to outsource project management services, always weigh your reasons and the benefits of outsourcing carefully and do your due diligence with vendor selection.
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