To outsource or not to outsource:That is the question

As the IT industry grows up and more and more skills are concentrated on the supplier side, the issue of whether to source...

As the IT industry grows up and more and more skills are concentrated on the supplier side, the issue of whether to source project management is a matter the users will have to resolve.

Project management might better be understood and executed if it were called risk management. The decision whether to keep the project management of a major installation in-house or to outsource to a third party should really be dictated by where you want to load the risk.

In the experience of David Biondini, director of business development at systems integrator Logica, if a contractor is charged with the installation of hardware and software of a system, it makes sense for them to own the programme management role too.

"If, in this scenario, the project management were on the client side, they would be one step away from the project and wouldn't have the necessary visibility," he maintains.

Calling in a third party
Another model for project management is a shadowing role where a third-party specialist advises the in-house project manager. For Ray de Winter, principal consultant with Cornwell Associates, this has been a typical role and a very effective way of cutting through the internal politics that can, all too often, sabotage a project.

"In a big organisation, quite often you need someone in-house to manage the in-house politics - it's the only way to get through. The only way to get a project off the ground is the to promote the perception that someone in-house owns it," says de Winter.

Such a partnership would work with the in-house person presenting the face of the project and receiving advice behind the scenes from the contractor. And, when a project changes business processes and the way that people would have to behave, it becomes even more crucial to sell the project from inside, says de Winter.

Watch out for conflicts of values
He even suggests that to outsource the project management slice in its entirety is risky, pointing out that outsiders have a different set of objectives to the company.

While it's possible to manipulate a contract through incentives, he points out that there is the inherent danger that contractors will work to incentives, not the greater good of the company.

This conflict of values would emerge most strongly should the business change halfway through a project, which would require a reassessment of the project.

"When a project becomes difficult or contentious, contractors tend to do what they were commissioned to do," he warns.

An opposite point of view contends that outsourcing project management wholesale offers the prospect not only of implementing within time and budget, but of reaping business benefit.

Outsourcing project management that is defined in terms of business benefit would mean rewarding a third party on its ability to deliver value and opens up new vistas of sharing risk - and reward.

"A smart way to measure project management is whether business benefits are delivered within agreed time frames," confirms Tom Abram, chief executive officer of Mantix consultancy and chairman of Eurim's Modernising Government group.

If a deal specifies that a third party is paid on the basis of sharing cost savings and taking a percentage of any accrued benefits, it would be easy for them to rack up payment of £15m in a project which has identified a £50m business benefit.

Perhaps it's hardly surprising that although Mantix has been offering this type of "no win no fee" deal for 15 years, few customers have opted to proceed on this basis. "The problem is that people find it difficult to believe in their own business cases and risks " concludes Abram.

Quality people for a quality project
A more common reason for looking to an outside party is to secure the quality of personnel. The biggest problem identified by Abram in the DIY scenario is that companies do not put their best people in the project or, if they do, they try to stint on their time. This insight is corroborated by Bill Yule, principal consultant with project management specialist Pink Rocadde, corroborates this.

In a previous life when he worked for a major food distribution company, Yule was appointed the project manager of a major roll-out of till software across all company outlets, while being expected to continue his existing roles, which included managing field support teams and some internal systems.

"The project went well because I put in ridiculous hours and pulled a good team together," he recalls. But, he admits, the strain was tremendous. "At one stage, I was as close as I've ever been to thinking it was too much."

A little confidence goes a long way
However, these models are all academic and in real life nothing is that clear cut. Commentators tend to agree that confidence can carry projects a long way and plug the gaps left by methodology or technology shortcoming.

"Both sides need to articulate continually that they are on track," Biondini says. This is particularly important in scenarios where business requirements take a lot of modification - and time- to be transformed into code.

As the IT industry continues to consolidate and more skills are concentrated on the supplier side, the issue of where to source project management is one that users will have to resolve:

"Traditionally, management consultants used to supply the layers of project management between client and vendor. But, increasingly, these consultants are becoming the suppliers of the system," says Abram.

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