When we look at outsourcing projects, we must consider a wide range of factors before we start to weigh up the challenges driving the choice in taking the outsourced route. We should also distinguish between project and process outsourcing. Typically process outsourcing is taken to mean deciding to utilise a specialist supplier to deliver a service within your business that was previously delivered by an internal team. (e.g. IT Managed Services or Helpdesk Services). The motivations behind each type of outsourcing can be different, with Deloitte in their “Global Outsourcing Survey 2020” citing cost reduction in the face of the COVID-19 pandemic as the leading reason for considering process type outsourcing.
From a project perspective, the drivers can be different – such as access to a skilled knowledge pool or specialist expertise not present in the organisation. For the purpose of this article, I will define a project as an undertaking with a definite end date, a degree of unknown and complexity – once the product of the project is delivered, the project is over, the team disbanded and go their separate ways.
When it comes to determining the challenges, there is a phrase I use a lot – for there to be a solution there must be a problem! So, what could be the problem that would motivate a company to outsource an IT project? In my experience there can be many, but these in turn can be distilled down to a common set that I come across the most:
- Skills & Expertise: Whether the project is IT Infrastructure, Software Development or Cloud, if the organisation has limited skill or expertise in the project area, or the project represents an once off undertaking not core to the business, then outsourcing is a typical choice.
- Inability to attract the right skills: Even if you have internal expertise, but need more resources, it can be difficult to find people with the right expertise. In particular for Software Development or Cloud projects, it can be extremely difficult to find, hire and then retain people with the right skills. The “European Commission Report on job shortages / surplus 2020” found that five of the most widespread shortages are software related and the “PwC 2021 CEO Global Survey” 72% of Irish CEO’s cite lack of skills as one of the threats to their organisation’s growth prospects,
- Cost: When considering whether to upskill, hire or retrain a team to deliver a project that is not part of the core operations for the IT organisation, it may be the case that these costs will outweigh the cost associated with bringing in an external supplier. If the outcome will be a core operation that needs ongoing maintenance by specialists, then the business case for outsourcing both project and process needs to be examined.
- Consistency and external assurance: No matter the level of internal confidence in success, if the project involves activities that are not carried out internally on a regular basis (for example a Cloud Migration involving Microservice development), then a risk mitigation strategy can be to bring external expertise comfortable in dealing with the technology challenge. This will ensure consistency in the project deliverable being to best practices while also providing the assurance of an external expert in the subject matter area.
Next up is consideration for how to outsource the project. Project outsourcing can be accomplished in three main ways:
- Full Outsource: In this model you select a supplier who is tasked with delivering a set of requirements against a scope, both from a technical, project management and quality assurance perspective.
- Technical Outsource: Here you retain the ownership for the scope and requirements as well as the project management, opting to instead contract the expertise for delivery.
- Team Augmentation: in this approach, you have internal expertise, just not enough! Here you choose to temporarily expand your team to support the project needs.
The main distinction between the three types is ownership of responsibility. In the first model, you are outsourcing the ownership and responsibility, but should not underestimate having to determine where the lines of demarcation are in that ownership and responsibility. Internal management and governance is still required. A successfully outsourced project will reflect careful attention to managing the outsourced aspects in a collaborative way. The other two models are more about accessing the right level of technical expertise and how best to do this to suit your organisation’s needs.
So, If an organisation has available expertise, and the confidence to execute the project successfully, then there may be no benefits to outsourcing! However, if any of the above points are relevant, and data seems to show skills availability as the biggest challenge, then outsourcing would seem to be the solution to deliver a successful project!