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Outsourcingpublished in Project Management Review December 2001 |
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| As management
buzz-words go, “outsourcing” is a tad overworked. But the idea is as
old as management itself - organisations have always bought non-core
functions from outside suppliers. What
is new is the recognition that outsourcing, whether of routine or
project-specific functions, can improve efficiency and quality, reduce
costs, and give a new responsiveness to most management operations.
Dun & Bradstreet estimated global outsourcing expenditures in excess of $1 trillion at the end of 2000, a trebling over a three year period. The expansion has been driven by the fast growth of new technologies. There isn’t time to build them into the core of an organisation before the state-of-the art moves on. The prospect of economic recession is also fuelling the growth. Finance Directors are ever more reluctant to invest capital on a long payback; an efficient outside supplier will recoup an investment over a much shorter period by working it intensively across several clients. |
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| The most extreme examples of outsourcing are in the horde of tiny audio, film and tv production companies that provide broadcasters and other clients with programmes costing sometimes hundreds of thousands - even millions - to make. These high-risk, high-value projects are often led by a single talented producer with only basic staff - all the specialists skills are bought in. Such ‘virtual businesses’ demonstrate the key to success in all outsourced projects: they sink or swim by the knowledge and authority of the in-house project leader. | IT skills and equipment currently offer great possibilities for outsourcing. A survey done by KPMG in June suggests that many UK firms are close to incompetent in handling their IT investment. One large organisation was running 60 projects a year, with 100 people in each team. It bought new copies of Microsoft Project™ for each individual whenever a new job was started. No outside supplier could countenance such waste. | ||||||||||||
| Many large organisations are
buying expert functions on the open market. For example, insurers have
launched new lines of business with minimal in-house resources. Many
functions, from back-office IT to claims processing come from suppliers,
leaving the core team to concentrate on shaping and growing the business.
Nancy Watkins, a principal in the Seattle-based actuarial firm, Millman, told a
conference in July this year, “The use of outsourcers allows insurers to
access the best and brightest talent and by renting the resources rather
than buying them, they can operate on the leading edge while controlling
expenses”...
I own copyright in this material. The full copy can be made available for inspection to bona fide publishers subject to agreement on a licence fee payable on publication. |
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