Pin Me

Does Outsourcing Create Acceptable and Manageable Risks?

written by: Ronda Bowen • edited by: Marlene Gundlach • updated: 4/7/2013

As outsourcing becomes more commonplace, the benefits and risks of this strategy are being more widely debated. Is outsourcing a viable option for your project management needs?

  • slide 1 of 3

    When Companies Seek Economic Solutions...

    With many layoffs looming on the horizon, even the larger corporations cannot afford to maintain full project management staffs. Outsourcing is often the solution for companies when it comes to various management needs - especially when those needs involve new company software.

    Just what is outsourcing? To outsource means that your company is soliciting the services of a third party company. Many consultation companies and freelancers exist to meet company outsourcing needs. Sometimes companies outsource to other companies. For example, a bookstore may outsource to a software engineering company when it requires an upgrade on its inventory system.

  • slide 2 of 3

    When Does It Occur?

    Outsourcing might occur for many reasons. The most common reason is cost. It is less expensive to outsource project management needs than it is to hire on a new crew to meet demand. This is because the company does not have to pay benefits, taxes, etc. on the employees of the outsource company.

    A second reason outsourcing might occur is efficiency. In the example above, the reason the bookstore does not create its own software is because it wouldn't be efficient. Employees of the bookstore most likely are not trained in software engineering. It is, then, much more efficient to hire a specialist to take over software development and other IT tasks.

    A third reason outsourcing might occur is that the project is huge. While your company may have a project management department, it is possible that it is undertaking an enormous project, and rather than hiring more employees, it is more efficient to outsource. This prevents problems such as resource overallocation (especially in cases where it is more expensive to hire on more team members than to outsource), scope creep, and priority confusion. By outsourcing large projects, everyday operations are not compromised.

  • slide 3 of 3

    Should You Outsource?

    While outsourcing can have many benefits for a company, there are many criticisms directed at outsourcing project management needs. One of the most compelling of these criticisms involves the question of social responsibility. Many companies take their outsourcing needs oversees (presumably for less expensive labor) even when there are many highly qualified individuals and companies in the United States. This creates a dilemma on the part of company managers: Do they save money or do they do the socially responsible thing? Other criticisms involve questions of service quality and the consultancy's knowledge of the company requiring assistance. Because the consultants are not employed by the company, they may not be familiar with some of the intricacies involved in the software or IT needs. This can create a problem, especially when outsourcing for IT project management and resource planning software.

    The concerns with social responsibility are easy enough to alleviate when companies hire locally. This also quenches the question of company knowledge. A good consulting firm will do its research. If its local, this makes it easier for software engineers and IT professionals to shadow the outsourcing company to best meet its project management and resource planning software needs. It also makes it so that companies can check on references for the consulting company.

    Should companies outsource? Sometimes outsourcing is necessary. It saves time, money, and frustration. When companies outsource, they should do their research on the consulting company and make attempts to be socially responsible. For companies requiring new software and other IT needs, outsourcing can be the most pragmatic option available.

    Learn more about the history of outsourcing in this Bright Hub PM article.

    For tips on handling offsite team members read Handling Offsite Team Members With the Right Project Management Software.

privacy policy