In-House Versus Outsourcing Approaches - Essay Example

In-House Versus Outsourcing Approaches Introduction According to Kamarazaly (2007, p.4), making an investment on physical infrastructure and the provision of facilities management services ought to be directed towards achieving the strategic goals of an organization which in most cases is that of value creation. Jedd (2004, p. 46) asserts that project executives implementing small scale to mega projects should carry out a consideration of whether to adopt in-house or should outsource services when making project decisions. Jedd (2004, p.46) argues that since huge purchases such as purchase of a new fleet or an overhaul of the information systems require heavy capital investment and do not happen every day and outsourcing a consultant may enhance the outcomes. However, Kamarazaly (2007, p.4) argues that decisions on choosing between outsourcing and in-house should not be based solely on financial evaluation. This paper will carry out a comparison between the two approaches in project implementation and will be guided by the case study of Nxt; an independent provider of early morning, next day business mail. Comparison of In-House and Outsourcing Approaches Nxt is involved in the business of delivering parcels and it consists of two companies with NXT Services specialising in non-secure items while Nxt Secure deals with secure items. Moreover, the organization sub-contracts other courier companies to deliver 75 percent of all items at a fixed charge. Upon delivery, courier companies have to give feedback to Nxt which in turn scans the feedback to the customer to confirm the delivery. Presently, the company is facing several hurdles in it operations which can be rectified innovation and implementation of modern information technology systems. Nxt currently relies on externally sourced PostCode Address File, hand signed documents upon delivery of items and the drivers information to know the exact place that they are. This has led to various problems such as delayed delivery of items, drivers diverting from the route thereby increasing the operational cost and the hand signatures delay the confirmation of delivery. As noted by Zizakovic (2004, p.1), there comes a time when the present process cannot continue for long and the available system starts to show some weakness signals the time for making a decision to build a new system, consequently the organization has to decide whether to build it in-house or outsource. Nxt has come to this point; the organization has a project support office that can lead the way in building a new system or they can source from a third party. Nxt wants to implement a GPS system that will monitor and relay back information on the exact position of the vehicle in real time. The telemetry system allows the sharing of information and will relay to the hub data on stoppage of the vehicles, detect any problems in the route and thereby facilitate making of decisions and also improve the security of the driver when travelling alone. Moreover, the company is also contemplating investing in PDAs which will help customers to electronically sign on receipt of items thereby dealing with the problem of delayed signatures which are used to monitor performance. PDAs if adopted will also help in identifying new markets and save time used in the delivery. Despite the great potential that implementation of these technologies will have in streamlining the operations of Nxt; the organizations faces financial constraints and the fact that it has never been involved in implementation of such a huge project. When making a consideration on whether to outsource a project, Jedd (2004, p.47) explains that the leader should first determine whether the required competency lies with the companies realm. He observes that although the company may have the required competency the time to market may be critical and may necessitate outsourcing of the project. Jedd (2004, p.47) observes that outsourcing the project management is becoming widely used by organizations lacking proficiency in project management. He argues that the initial stage of building the required infrastructure to deal with a project in-house is a difficult issue in all projects. Nxt may experience this problem given that the project support office has not been involved in such major projects. Furthermore, Nxt has been hesitant to implement other projects given the risks involved losing out on the benefits of such projects although their competitors implement the on small scale. Kamarazaly (2007, p. 44) defines outsourcing as a service that is commissioned from an external supply organization which is then tasked with the responsibility of management of the asset. Outsourcing deals with issues where non-core activities can be alienated and given to another organization that delivers the services to the original company. Kamarazaly (2007, p. 44) explains that circumstances in which outsourcing may be a valuable option includes when customers are only concerned with the outcome and not the functions performed, technologies to perform the function are stable and external vendors are competitive. Jedd (2004, p. 48) describes that in-house management of projects can result into many problems. He notes that in a 2003 global poll on 74 project management practitioners, about 25 percent of the respondents cited inconsistent approaches to project management while 20 percent reported difficulties in allocating resources. Jedd (2004, p.48) explains that it is critical that even in outsourced projects, in-house project managers create linkage with the consultant. Jedd (2004, p.47) argues that although in-house project management is the best in project implementation, lack of competence leads to use of consultants. However, he points that training is critical for in-house team can be achieved through coaching and mentoring programs by a consultant. Documentation is also critical in training of the in-house team. Documentation helps in knowledge transfer from the expert to the in-house team for future ventures. Kamarazaly (2007, p. 1) observes that holistic facilities management should incorporate strategic, operational, project management and general services aspects of a project. He argues that outsourcing is viewed as best suited for providing operational, project development and general services. On the other hand, in-house is seen as best suited in the provision of strategic facilities management functions. Conclusion A company should adopt in-house system development when it is sure that it has the required resources to develop what it requires. In addition, Zizakovic (2004, p.5) asserts that in-house approach is appropriate in companies that have direct control of future developments in the industry and can make fast modifications as business environment changes. In-house development of projects poses the challenges of predicting the cost and time required to complete the project. It may also face the problem of lack of resources required to implement the project. Given these challenges some companies adopt outsourcing whose benefits include the fact that outsourced consultants are able to plan, control and schedule the project more accurately as explained by Jedd (2004, p. 47). Consultants also help ensure that best practices are followed and provide the required expertise and resources to implement a project. Moreover they allow the client to concentrate on the core competencies activities. On the other hand, the disadvantages of outsourcing include; it limits development of project management skills in-house and risks of disclosing sensitive information of the company given the nature of some projects. However, outsourcing provides a learning experience for the in-house team in future projects. References Jedd, M 2004, ‘’Outsourcing’’ The Professional Magazine of the Project Management Institute: pp. 46-49. Kamarazaly, M A 2007, ‘’Outsourcing versus In-House Facilities Management: Framework for Value Adding Selection’’. Institute of Technology and Engineering, Massey University Wellington New Zealand. Zizakovic, L 2004, ‘Buy or Build; Corporate Software Dilemma’. Insidus Corporation: pp. 1-8 accessed 3rd February, 2012 < http://www.insidus.com/BuyorBuild.pdf> Read More