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Outsourcing Project Management: Strategic Factors

Organizations should consider the strategic factors of outsourcing project management to answer the question: should we hire a new project manager or should we outsource to an external expert? This is being done during performing the make-or-buy analysis.

(This article is part 5 of a set of articles about project management outsourcing) 

Strategy

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But first, what is a make-or-buy analysis? Here’s what PMBOK® Guide says (taken from 12.1.2.1 Plan Procurements: Tools and Techniques: Make-or-Buy Analysis)

A make-or-buy analysis is a general management technique used to determine whether particular work can best be accomplished by the project team or must bepurchased from outside sources.

Later on, PMBOK Guide briefly discusses the cost considerations (such as direct and indirect costs of each option), which is a valid point in our case too, and we will discuss this in an upcoming article. But cost is only one small part of the equation, as there is a whole bunch of strategic and operational factors that need to be evaluated as well.

In previous articles we have already discussed the advantages, disadvantages and some challenges of outsourcing project management. Now let’s have a look at the strategic factors of outsourcing which can influence the organization’s decision.

These factors are related to the longer-term view of organization’s business, and where the organization wants to be in the not so near future.

If the organization answers “yes” to any of this questions, it is a strong indicator that a project manager should be hired and not outsourced, if at all possible (i.e. if you can find an appropriate person at the affordable employment costs).

  • Is project management critical for your organization’s success?
  • Is project management critical for customer’s perception of your organization?
  • Does project management fit well within the core competencies of the organization?
  • Is project management a competence that your organization needs to develop in order to realize future plans?
  • Is there an extremely limited selection of competent and reliable suppliers on the market?

Projects are becoming the dominant way for organizations to perform their business, either if they use projects to deliver their products or services, or if they use projects to implement changes in their operations. Therefore, most organizations should probably answer “yes” to most of these questions.

Well, the last question really depends on the suppliers that are available on the market, but the trend of project management outsourcing seems to be on the rise, so quality outsourcing providers should be more and more easy to find.

All in all, strategic factors usually strongly support the hiring decision. In the long run, most organizations would be better off to build their internal project management competencies.

However, for a complete view on this matter we need to take into account the operational factors as well. Continue reading about this in the next article: Operational Factors of Outsourcing. 


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