Advantages and disadvantages of outsourcing in IT Project Management - Research Paper Example

Outsourcing in IT Project Management Introduction In most of the businesses today, the sole aim is to operate at optimum levels, where they reduce as many costs as possible and increase revenues to their best. In cost reduction, it is about reducing expenditure, especially expenditure, and ensuring that they use the cheapest products and services as possible. For instance, a company might be in need of a certain service for just but a short period of time. It could also be in need of such a service seasonally and not throughout. It would then be quite expensive and unnecessary to hire a fulltime professional to handle that task for a short period then stay idle for a larger amount of time. In such cases, the company could consider hiring that professional on a contractual kind of a relationship. This is the primary concept lying behind outsourcing. Outsourcing is essentially the act of assigning certain business processes or activities to an external party that can help in handling them. Most of the time, large organizations cannot handle all their processes internally, either because they are too complex, bulky, or seasonal. The more common reason is the temporary nature of some tasks, such that the company is not willing to hire professionals permanently to carry out these activities from within. When the company then outsources the work to the external service provider, they accord them the responsibility of handling that activity all by themselves and maintaining the firm’s interests and assets at the same time. This is an upcoming trend in the world of business, with many organizations taking to it. However, not all that have tried out this method have reported back with very positive things to show for it. That has made it very important for any company to have carried out an adequate study and examination of the third-parties they are giving the task. In addition, it is also of importance to realize that even if it seems to be a good short-cut to take, it has its benefits and its disadvantages at the same time. Often, outsourcing presents a lot of opportunities to an organization, but it is also possible for it to cause trouble if not outsourced to the right person for the job. What then are the likely advantages and disadvantages of outsourcing projects to outside sources in IT Project Management? Advantages of Outsourcing When looking at the advantages of outsourcing, it is a comparison between assigning tasks to an external party, as compared bringing in an expert to work within the company as an employee. First, it helps in bringing cost flexibility to the firm. This is a method that has proved to be very effective in the managing the increase and decrease of costs, relative to the prevailing needs in the firm. The markets keep fluctuating, and, therefore, the producers need to keep adjusting their levels of production from time to time so that they match the market demands; that is, they do not, undersupply or have a surplus of supplies (Hill, n.d.). During times of high demand, the firms want to produce more and, therefore, have to put in more in terms of inputs (labor included). The workload is also more, and thereby there is a need to increase the expertise. That is when a company decides to either offer external experts a contract to execute a certain task and payment to be paid in ransom, or the two can agree to transact in a manner that the company pays the professional on the number of hours worked. With this, the firm is able to control how much they can either pay for the whole project or if it is in terms of hours, to either reduce or increase the number of hours worked. This is a different case from if there was a permanently employed project manager who continues to draw a salary even when they have done little or nothing at all. During such times that the market is highly seasonal and sometimes unpredictable, demand rises and falls any time, thus making organizations to avoid employing new people on a permanent basis. It is such situations that make outsourcing a particularly good strategy. Outsourcing is advantageous in the sense that it brings about a higher level of objectivity in the execution of tasks. Most and nearly all organizations have internal wrangles, especially between departments and employees. This makes the execution of tasks to be done under certain influences such as threats or coercion. But if an outside person is hired to carry out some of these tasks, it is likely that they will work free of the influence of office politics and other influences (Purba & Shah, 2000). They are therefore better people in bringing about more objective and independent views on which strategies best fits the organization. This is due to the fact that apart from the task they are given, they do not have anything to gain or lose, unlike permanent employees whose decisions and recommendations are inclined to some personal interests or otherwise. By mitigating such influences, which are found in all organizations anyway, the organizations are likely to add more value to themselves. At other times, an external expert has a certain degree of authority. People who work together might have lower perceptions against one another, which might make them not take each other seriously. But in the case of an external expert, they are often taken as better specialists, even if it is not always the case (Morabito, n.d.). As such, the employees within an organization are more likely to trust in the suggestions offered by the external experts than would be from a colleague from within the organization. This can be a great approach for issues that have previously not been taken seriously by the firm’s employees. It is also an advantage to the firm that hires outsourced expertise. Mostly these are experts who have worked for several organizations, and they, therefore, have a vast pool of experience (Lacity, Willcocks, & Rottman, 2008). If they brought this into the organization, it would be a great thing bringing in diversity that would most probably solve the issues in the organization. At the same time, their experiences can either give them a good or a bad reputation. That is an advantage as it provides organizations to weigh these providers and negotiate. This is more so because these competitors are always in competition, which is an advantage to the buyers of their services. With a variety of these providers, they strive to work harder and outdo one another by improving their practice. If the organization applies the correct procurement procedures, it stands to benefit. External experts are more exposed to newer technologies and methodologies. These are people who have to maintain a good track record for themselves, which prompts them to invest heavily in their tools of work- technology and methodologies. When firms hire experts who are well equipped with these, they benefit from them without actually having to invest a lot in them. This is in a way a means of reducing the cost levels. Considering the fact that employing project managers is usually an increase in costs that are not in the lower categories. Yet, their demand is still increasing in the market, and that makes them to be quite expensive to hire with all the competition. It is, therefore, rational that if an organization does not intend to employ someone on the long-term, it should outsource their services as their services would be cheaper that way (McFarlan, & Nolan, 1995). When a firm decides to outsource, they are then exposing themselves and giving themselves an allowance of focusing on the key competencies of the agent they want to hire for the task. It could be that it is just a part of the task that the firm does not have the capability of handling to the desired standards. As the firm outsources, it is able to access state-of-the-art proficiencies in terms of technology and flexibility. This can also be away of mitigating chances of making losses due to substandard work that would cost the organization, in the long run, or even orders to restart the whole program afresh. Further, outsourcing entails bringing employees on board, even when they know that it will be just for a short period of time. This is a strategy that is highly advantageous as it seeks to increase the recruitment when the demand is high and reduces them when supply goes low. As such the outsourced personnel does not have a problem if they are laid off after the agreed projects. This creates calm as no workers demonstrate over job instabilities. That way, the company can, therefore, remain their reputations as stable employers as the permanent employees feel that their jobs are secure (McFarlan, & Nolan, 1995).. Disadvantages of Outsourcing Outsourcing expertise from external professionals and service providers has a lot of advantages as above. However, they also have their own share of disadvantages. Unfortunately, when the disadvantages outweigh he advantages, some of the tasks assigned to these experts are so sensitive such that they can mess both the name and the operation of the organization. For this reason, most organizations are cautious of hiring outside professionals to carry out their tasks. First, if an organization decides to hire the services of an external service provider, there is often a weaker bond between the hired project manager and the organization (Lacity, Willcocks, & Rottman, 2008). In most cases, when an organization hires someone from outside, they find them quite easily. It happens that with the same ease that they find them, it is the same way that they can lose them. These people know that that is a sad reality, which makes them not get too much attached to the organization. That in itself causes a weak relationship as compared to one that could have been developed if the firm hired a project manager instead. Secondly, the externally hired expert has very little knowledge about the internal organization culture and processes. This means that for them to work with the organization, they have first to spend some of their time trying to get to the inside of the firm’s culture and understand how its formal and informal systems function. This takes time and resources that would have otherwise been utilized in doing something else if the expertise was coming from the inside (Purba & Shah, 2000). At the same time, the already employed persons may tend to think that the outsourced persons are a threat to their jobs. As such, they are likely to be rebellious as they try to remain relevant and protect their jobs. Others could be merely jealous, which makes it a tricky path to walk, and the outsider is forced to build gradually relationships with the individuals from that group. It is riskier when an organization wants to outsource expertise from the outside especially if it is a long term one. A long term project requires a rather stable person who is capable of taking it through to the end. That in itself is a challenge, especially considering that the hired project manager might have a very weak relationship with the organization (Hill, n.d.). This is also the same manager who is supposed to handle matters arising within and outside but related to the project and, therefore, needs to be in a very close relationship with the employer or organizational management. When this is not forthcoming, the outsourced project manager might decide to ignore those issues, which might be dragged in the office later, causing more problems. Outsourcing might also weaken the competitive advantage of a firm if it lies in project management. This happens almost automatically, even though there are a lot of other factors that come into play. It is only in rare conditions when outsourcing can have an organization overcome competition, especially if project management is their basis of competitiveness. Especially in the day we are living, it is good to have project management practices, but it is certainly insufficient to bank on it entirely. It would, therefore, be prudent if firms took t effort to establish whether project management is their sole competitive advantage or it is a commodity they have to enable them to operate as per the expectations (Morabito, n.d.). Risk management is a big headache for many organizations. Unfortunately, outsourcing brings more reason to worry than many can conceive. Many projects that companies seek to outsource expertise are sensitive ones that they have invested a lot to build (Morabito, n.d.). By hiring an outsider to be the project manager, the organization risks everything knowing too well that that person can be hired on a permanent basis by another organization, including their competitors. By letting them into their systems knowing too well that they might leak the company secrets is just way too much. Conclusion More companies are increasingly relying on information technology (IT) to carry out their daily operations. For example, in business, IT is used to access large market research databases to hunt for customers by using the Internet as their platform. With the rapidly growing technology, the cost of IT maintenance and development has exploded. That is why organization have understandably taken to third parties to assist them in their management. In outsourcing of personnel, the organization benefits from being independent of the functional structure that is sometimes biased. External service providers can make decisions independent of forces within or outside, and in the best interest of the firm since they need to create a good reputation for themselves. They will, therefore, work harder so that they can gain credit and, therefore, have a higher chance of getting another task with the organizations once it comes up. The risks associated with this upcoming trend are fortunately easy to predict and avert before they take effect. References Hill, C. International business. Lacity, M. C., Willcocks, L. P., & Rottman, J. W. (2008). Global outsourcing of back office services: lessons, trends, and enduring challenges. Strategic Outsourcing: An International Journal, 1(1), 13-34. McFarlan, F. W., & Nolan, R. L. (1995). How to manage an IT outsourcing alliance. MIT Sloan Management Review, 36(2), 9. Morabito, V. Trends and challenges in digital business innovation. Purba, S., & Shah, B. (2000). How to manage a successful software project. New York: Wiley. Read More