Been there, done that, got a picture, part 2.

Been there, done that, got a picture, part 2.

Myth:  “Outsourcing arrangements can be managed as business as usual.”  This is a myth that is common among rookie organizations that have avoided reading the literature or gotten lucky on one or two small projects.  While it must seem like a truism, outsourcing models can not be addressed as if it were business as usual. Change is expensive and risky.  Managing all sourcing options in the same manner will in the long run yield the same results as you have today.  The fact that most (if not all) outsourcing agreements are based on a contract makes this kind of work different.  The concept of how the internal IT department manages outsourced work shifts from a line management model to a more disengaged model.  Users trained to partially specify requirements, then ask for changes, will need to learn that changes cost real money.  I have seen more Agile models applied to outsourced projects.  These methods hold great promise when applied to relationships of differing levels of discipline (typically the organization sourcing the work is lower while the outsourcer has a higher level of discipline).   The use of high-touch components of methods such as eXtreme coupled with high documentation methods to facilitate communication across groups have been found to be useful in building bridges between different organizations.  Using these modified approaches makes sense if cost is not the primary driver of the relationship.

A corollary to managing outsourcing as business as usual is that all outsourcing options can be managed in a similar manner.  If there were no process differences between sourcing options, the decision process would be moot (or at least very different than it is today).  Process differences require different management tactics.  The difference in communication methods in offshore models and staff acquisition models are significant.  Process differences require different management methods to produce the cost, quality or productivity differentials we expect.

Myth:  “We have used staff augmentation models before.  How different could outsourcing be?”  This myth is another variant of the business as usual myth.  Internal line managers managing personnel in the staff augmentation or bodyshop models, trying to apply line management techniques to outsourcing models, significantly reduces efficiency and effectiveness.  Acceptance of this myth causes organizations to try to over-manage their outsourcer.  The over-management is reflected in two typical scenarios: In the first scenario organizations create voluminous contracts that seek to specify (in detail) how outsourcer is to do their work.  This causes the project to lose the effectiveness and efficiency expected (if you were that good at doing and managing these types of project why did you outsource it?).  The second scenario is when the firm outsourcing the work directly tries to manage the outsourcer’s personnel.  Thankfully, this scenario is becoming rarer.  It isn’t even worth making this mistake to learn from it.

Myth:  “Our outsourcer is good at managing projects; we will let them handle it.”  This is a final variant of the business as usual myth.  Adherents to the “hands off” approach typically use the same method for internal projects.  They view the outsourcer as an extension of their own staff.  The approach is similar to the classic cartoon where a blackboard is filled with equations that lead to a box titled “a miracle occurs” before emerging in an outcome.  Sourcing arrangements cannot be approached in a hands-off manner.  Contractual relationship must define how to manage the sourced projects.  Management must include all parties to be effective.  The organization that has placed the sourced work must intimately know the status of the project in their portfolio regardless of who is managing the project.

Myth:  “One for all and all for one”.  In the ‘60s, there was a saying “different strokes for different folks.” A different source for different needs.  A package for a base, outsourcing for core functionality enhancements and support and a business team.  Complex scenarios are required to make the IT department of the 21st century run.  In the end, remember that “one size fits one” does not work in all scenarios.

Myth:  “All or nothing.”  Nothing should or could be further from the truth.  Multiple partial sourcing (mps) is an effective means of addressing todays varied IT needs.  MPS is not the lowest cost option; it requires aggressive management, nimble contracting and excellent internal project management.  Large projects or programs are assembled (much like Lego or objects) can often require multiple-sourcing scenarios.  Project management must combine the best of the hands-on approaches with the controls typically viewed as rigid or bureaucratic to keep all projects pointed into the wind.  All or nothing/one-size-fits-all scenarios reduce the effectiveness of the outsourcing options.

Myth:  “I can hire one firm and get rid of all of my IT headaches.” There are large outsourcing firms that can offer across-the-board solutions and leverage multiple sourcing models.  The allure of one-stop shopping is very strong for some.  Replace a whole cog with a whole cog.  Frankly, in a few cases this might be a good answer; however, in the majority of cases it is an overreaction that trades one set of problems for another.  Depending on how much work gets redirected, it may leave you with the inability to deal with work that must be closely held.  In most organizations, IT is a repository of project management skills. Getting rid of everyone in IT will impact the ability to monitor projects or act as technical interfaces with your clients.  While the large sourcing firms can offer a dizzying array of services, it is rarely circumspect to outsource your whole IT department or place all of your work in one organizational basket that you do not control.

Myth: “External sourcing is equally applicable to all type of projects.” There is an old adage: “If the only tool one has is a hammer, everything looks like a nail.” If you have no residual IT organization, go to the next myth: “This ain’t gonna help.”

Some type of projects make more sense to source internally:

  1. Exploratory projects where the requirements or solutions might be unknown.
  2. Projects developing or building on proprietary knowledge. While it is highly unlikely you can not control all knowledge leaks, why tempt fate by adding more potential leaks.
  3. Projects developing core but non-proprietary work.

This final point continues to be controversial. There is a ongoing discussion within the industry that suggests that core work can and should be outsourced if it is built on non-proprietary knowledge. The passing of control for the support of core work can lead to a feeling of loss of control.

Myth:  “One-time projects cannot be outsourced.”  Recently, the subject whether it made sense to outsource one-time projects reared its ugly head.  Can anything really can be one-time unless liquidation occurs in the days after implementation. The working definition I have settled on is that all functionality is new and it will never be enhanced or maintained.  The questions to ask when determining whether you should outsource include:

  • Whether your organization has the expertise required?
  • Do you need to build the expertise for the future?
  • Will the project use strategic or create strategic knowledge?

The number of times you are going to do a specific project does not rise to the same importance level as these questions.  The goal is to determine whether you need to do the project for strategic reasons.

The other “‘one-project” type is the “one-off” (like something done before).  This project type yields to the same logic.  It is critical that you develop a strategy based on the infrastructure and knowledge capital needs of the organization to filter which project should be considered for outsourcing.  A strategic filter will ensure that sourcing decisions are goal driven rather scenario driven.

Myth:  “External sourcing options are fire and forget.” Why would not knowing the intimate status of internal projects be acceptable (arguably it might actually be considered project management malpractice) and is it okay not to know the same level of detail about projects done externally?  This myth seems to go hand in hand with “they are more mature, therefore know better.” Thankfully, I see this phenomenon happening less often, perhaps because people typically don’t let it happen twice.  Unwatched projects wander.  Wandering projects have all sorts of problems such as scope creep.  Capers Jones has been quoted as saying that projects with over 5% scope creep per month end up in cancellation or litigation 90% of the time.  The expediency of communication and monitoring is a simple cure for all but a systemic case of project wandering.