Outsourcing

One of the options open to project managers is to outsource either (a) part or (b) the entire project to an external contractor. There are a number of reasons why this might look like an attractive option. The decision to outsource to a third party or contractor stems from the realization that the skills and knowledge to achieve a successful outcome do not, and should not, reside in the client's capabilities.

It is important to recognize that outsourcing does not reduce risk unless the outsource requirements are clear to both the client and the contractor. The contractor, on one hand, must provide the necessary skills to manage such outsourcing contracts. The client, on the other hand, must decide if its information technology activities are not core competencies. The client must also decide if it is seeking to lower its long-term capital investment, thereby moving unwanted technical risks and management problems onto a contractor who has the capacity to deal with them.

Even today, countries such as China, India, and the Philippines possess impressive ultramodern IT infrastructures, skills, and resources to tackle IT projects, completely offshore. Table 4.9 identifies some of the factors affecting outsourcing.

Table 4.9: Outsourcing IT to contractors

Benefits of Outsourcing

Disadvantages of Outsourcing

Lower cost—cheaper to develop or maintain

Legal disputes Contractual abuse

Faster development—reduced time to market

Additional administration due to travel, meetings

Skilled and certified IT resources

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Risk managed by outsource contractor

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Understanding Outsourcing

Understanding Outsourcing

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