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Guideline for Deciding Whether to Outsource Work on a Project


Quick Summary
A step-by-step guideline for deciding whether or not to consider outsourcing (or employing an outside supplier or partner) for part or all of a project.


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What this is

A step-by-step guideline on how to decide whether or not to consider outsourcing (or employing an outside supplier or partner) for part or all of a project. The guideline steps through an objective analysis of the rationales for outsourcing in a given situation, identifying all of the work that would be outsourced, deciding how outside work would be managed, considering criteria for selecting appropriate partners, analyzing the risks of outsourcing in this situation, and considering trade-offs to make the final decision.


Why it's useful

Project work is outsourced because a company doesn't have the time, the available resources, the right skill sets, or the domain expertise to do the work themselves and meet certain important business goals. Unfortunately, outsourcing is often viewed as an "easy win," because "someone else will do all that work." In reality, outsourcing any project work brings its own set of risks and costs, and significant interface issues. So the decision to outsource certain project work should not be made lightly! This guideline emphasizes the importance of first stopping to ask "Should we even consider this?" and provides a methodical process for deciding.


How to use it

  1. Be ready to use these steps as soon as outsourcing is suggested for a project. Some projects are launched with the assumption that work will be outsourced because of known expertise shortfalls, especially when a company is moving into a new technology or market arena. Others may consider outsourcing later, when it becomes clear that the resources to staff this project as desired aren't available, considering other efforts already underway. Even if outsourcing is known to be "a must" for this project, an objective assessment of the rationale, risks, costs, and benefits will help the team set expectations and manage risks appropriately.
  2. Review the process steps in detail to understand the kinds of information you'll need to create.
  3. Identify who should be involved in the analysis. Some rough estimating of potential costs with and without outsourcing is called for; the project manager should be able to do this analysis with assistance from specific functional resources if necessary.
  4. Identify who has to buy into the results. Someone may have already decided that outsourcing this work is the silver bullet that will make this particular project possible. Others may believe it's risky or inappropriate. Whatever the analysis shows, it will have to convince more than just the project manager. Think ahead to who will need to review the analysis and reach a decision, so that their information needs can be taken into account as you do the analysis.
  5. Make a first pass through steps 1 through 5 and fill out as much information as you can. This first pass may raise more questions than it answers! Assess what the information so far tells you about the appropriateness of outsourcing. Identify questions that still need to be answered and analysis gaps to fill, and determine how to get the information.
  6. Review the first draft informally with the decision-makers, to get initial feedback on the case that's being built. Do not wait until you think you have a final pass at the case; one of your stakeholders could think of additional questions or concerns. NOTE: If the decision on outsourcing is political in any way, you might first expose the draft to a subset of the decision-makers in order to privately get their feedback and advice on how to proceed.
  7. Make another pass through steps 1-5 until you believe that there is enough information to make a sound outsourcing decision, then do your own pass at Step 6. Rather than making a decision at this point, you're articulating your own recommendation, which you'll have ready for the decision-makers.
  8. Hold a review meeting to take the group through the options and your recommendations on whether the project work should be outsourced, and if so, the critical criteria for selecting a partner. Document decisions, action items, and open issues. Discuss any communication needed to convey what the group decides or to resolve remaining issues.
  9. If outsourcing is decided upon, make sure the critical selection criteria and management plan information are brought forward into the normal project planning process.

About the Author

Anita Wotiz has held high-level management positions at a variety of companies and has transitioned from large, government research firms to small start-ups. With over 20 years of software engineering experience, she is adept at tailoring best practices to meet a company's needs, regardless of size, and at putting in place practices that will reap the most benefit for the cost. Her most recent position was VP of Engineering at a small enterprise application software company. Her years of experience allowed her to understand what works, and, sometimes just as important, what doesn't work. Anita has successfully applied her expertise in growing engineering organizations, defining ownership roles and responsibilities, and identifying interfaces between organizations for success in companies large and small. She holds a BS in Mathematics and an MS in Computer Science. She is currently the Coordinator of and an instructor for the new UC Santa Cruz Extension Software Engineering Management program.


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