Outtasking: A new trend in project management? Current outcomes of our study

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1 Outtasking: A new trend in project management? Current outcomes of our study Rüdiger Geist / Gerhard Ortner / Iris Schirl / Tibor Stockinger Introduction Competitiveness, customer satisfaction and access to better knowledge and technology are driving factors for organizations to partially outsource their processes. Especially big organizations more and more are tending to also outsource parts of their project management activities. However some project management staff is skeptical. Hence it has to be clarified to which extent such an approach is useful respectively which aspects of project management are outsourceable at all. Fundamentals of outsourcing The basic element of outsourcing is the division of labor, which always includes the aspect of collaboration. i The three fundamental theoretical approaches in conjunction with outsourcing are: 1. Transaction Cost Theory 2. Resource-Based View 3. Competence-Based View The Transaction Cost Theory (TCT) from R.H. Coase pursues the goal to identify the conditions which lead to outsourcing decisions, where typically one of the main factors is cost ii. The cost for shifting (transaction) shouldn t be higher than the cost reduction for the organization iii. The Resource-Based View (RBV) supposes that companies do have advantages in competition which are sustainable iv, where own resources are prerequisites for the creation of these sustainable advantages in competition. Companies should concentrate on their core competences and competence lacks should be filled-up through acquisition of external resources Page 1 of 11

2 The Competence-Based View (CBV), which is based on the RBV view, refers also to external resources as a possible source of generating advantages in competition. v Dimensions of Outsourcing Internal vs. external Outsourcing The internal outsourcing can be differentiated between company-internal and corporate groupinternal outsourcing, where company-internal means outsourcing to a branch within the same legal entity, and corporate group-internal means outsourcing to a subcompany (also called spin-off). On the other hand, external outsourcing means to shift services to a service provider outside the corporate group. This study is concentrated on external outsourcing. Partial or selective outsourcing is defined as outsourcing of a subarea or subtask vi. This can be named also as outtasking. Costs can be lowered while full control over decision-making processes is remaining within the company. Outtasking allows companies furthermore to monitor and control outtasked processes and therefor induce necessary process changes proactively. Our study from 2011 researches if companies expect an added value from outsourcing of project management activities. In the study we are focusing on partial, external outsourcing (outtasking) of project management activities. Current empirical studies To date several studies on outsourcing of processes exist (e.g. PricewaterhouseCoopers 1999), but they are not focused on outsourcing of project management activities. Since only a few information on outsourcing of project management activities could be found, our explorative study was started in early summer 2011, with the goal of collecting and preparing first data. Subsequent six, approximately 30 min expert interviews were accomplished, to deepen, specify and verify the outcomes. Additional expert interviews are going on Page 2 of 11

3 Most important outcomes an overview Outcomes of the survey Project management outsourcing expediency More than half of the experts taking part in the survey assessed the outsourcing potential of the following project management activities as very good : Coaching/Moderation (65%), Tool support (48 %) and Qualification of the team members (47 %). In contrast especially project initiation, project closing and stakeholder communication were rated as suitable to a limited extent for outsourcing. An eye-catching fact with this question is that outsourcing of the whole project management activities in a project was rated quiet ambivalent: 59% supporters ( rather ) are accompanied by 41% ( rather ) deniers. First of all the small and the big, plus international companies are very well disposed towards outsourcing of project management activities. In case of the small companies, maybe resource bottlenecks are the driving force, whereas large companies seems to be triggered by a higher project management maturity and already made past experience in outsourcing of non-pm processes. Framework conditions for outsourcing of PM-activities For useful outsourcing of PM-activities, a reasonable level of project management maturity is needed. The following organizational framework conditions have been rated as very important : defined interfaces between the organizational units (66%), high project culture (47%), and applied transparence (46%). Advantages and disadvantages of outsourcing PM-activities Asking for the reasons respectively advantages for outsourcing in project management, the most prominent answers are (very or rather important): - concentration on core competences (90%), - lack of experience / Utilization of external know-how (87%), - more professional and standardized process management (86%). What is striking here is that cost reduction is not ranked within the most important advantages Page 3 of 11

4 Most frequently mentioned as possible disadvantages were: external dependence (78%), problems with differentiation (claim management) (73%), increased communication effort (70%), loss of know-how (69 %), increased coordination effort (69%) and higher cost (68%). Suitability of certain project types for outsourcing of PM-activities and characteristics of the respective PM-activities Which project types (national vs. international, internal vs. external, commercial vs. non-profit projects, ) are more suitable for outsourcing, is seen very differently. A clear trend cannot be derived from the answers. The view of the respondents is clearer in the area of project types. They see potential for outsourcing of PM-activities in case of organizational projects, construction projects and software projects. Project complexity seems not to be an important factor for the decision. Outcomes of the expert interviews for the outsourcing of PM-activities vii We did not found any serious contradictions between the results of the survey and expert interviews. The experts confirmed our view, that high project management maturity and existing experience with outsourcing in general, does increase the willingness to apply outsourcing of PM-activities. Trends towards outsourcing of PM-activities The experts are observing a clear trend towards outsourcing of PM-activities, although there is no consensus on the meaningfulness. Partially the expert s companies already have concrete experience concerning this matter. They specify, above all, the industrial sector, the construction sector and the environmental / energy sector. Outsourcing as a field of activity with future? The expert s answers diverge depending on their industrial background. They vary from outsourcing as an important strategic approach to classification as niche theme. Organizational conditions for outsourcing PM-Activities The experts all agree concerning the organizational conditions: A high project management maturity degree and a high degree of standardization in the emitting organization are a must Page 4 of 11

5 In addition a clear and streamlined organization of the initiative is required, which particularly clarifies responsibilities and powers. Also a strong top management is deemed to be necessary.another important factor is the qualification of the emitting organization s staff. Outsourcing potential of PM-activities The experts are very much agreed on the outsourceable areas of project management. All activities with administrative and / or repetitive character and project manager exculpatory tasks are candidates. But those candidates are not reduced to unskilled works. The opposite is the case. One of the experts even stated the fear that high qualification on the receiving side might lead to the desire to take over project management responsibility, instead of supportive work. Also in terms of low outsourcing potential the result of the expert interviews is clear. Core competences respectively core project management tasks, aspects like leadership, networking and domestic know-how are not suitable for outsourcing. Risks of outsourcing PM-activities As expected, the mentioned aspects are influenced by the respective industry. In the financial services sector mainly concerns about data security exists, in other sectors legal and contractual aspects are addressed. The aspect of personal continuity is named independent from the industry sector, which is primarily based on existing experiences from software development outsourcing. Barriers against outsourcing of PM-activities The experts named barriers, which can be categorized into four complexes. These are the potential loss of core competences, cost aspects, organizational obstacles and cultural / linguistic differences. Linguistic differences represent a specialty, because they were only named by experts working in an international environment Page 5 of 11

6 Hints in terms of successful outsourcing of PM-activities The answers didn t bring up new, not yet mentioned, aspects. But from our point of view they can be interpreted as highlighted and resulting from personal experience and therefore of special importance. The experts essentially emphasized personal information exchange, clarification of roles and responsibilities and avoidance of unnecessary formalism. Ideas from the IPMA Expert Seminar February 2012 in Zürich In February 2012 the author(s) had the opportunity to present first results to the participants of the IPMA Expert Seminar. Together with this group the outcomes of the Study were discussed and new ideas were developed This resulted in a first simple model, which reflects on this process. QM or other Disciplines Figure 2: OutPM-Modell The A -labeled (= administrative) section covers administrative tasks, the C -labeled (= coordination) section covers coordinative tasks and the M, L -labeled (= management, leadership) section covers leading tasks Page 6 of 11

7 The group of experts concluded, that tasks from the categories A and C are outsourceable and tasks from category M/L are not. The vertical section labeled QM or other disciplines is representative for project management areas like risk management, quality management and so on. In a next step these areas will be further examined, to find out, which single project management activities are belonging to which areas and therefore to find out which activities are outsourceable. Summary The study shows a general interest to expand outsourcing to the area of project management activities. Some positive experiences do already exist in this regard. The reasons for outsourcing of project management activities are various; cost saving is not (always) the primary goal. Main barriers against outtasking are culture and language differences. PM-activities without management or leadership functions are considered suitable for outsourcing. But limiting these activities to administrative tasks only does not seem appropriate. Insufficient project management maturity cannot be eliminated or absorbed by outsourcing Page 7 of 11

8 Annotations i) cf. Gründer, Torsten: Erfolgreiches IT-Management Strategisches Sourcing als Option. In: Gründer Torsten (Hrsg.): IT-Outsourcing in der Praxis. Strategien, Projektmanagement, Wirtschaftlichkeit, Berlin 2011, p. 19. ii) cf. Dibbern, Jens / Winkler, Jessica / Heinzl, Armin: Explaining Variations in Client Extra Costs between Software Projekts Offshored to India: Working Papers in General Management and Information Systems, Mannheim 2007, Working Paper 8/2007, S. 8ff. iii) cf. Niebling, Jürgen: Outsourcing, München 2006, S. 12. iv) cf. Ilten, P.: Outsourcing-Entscheidungen. Eine Bewertung aus multitheoretischer Sicht. In: Fliaster, A. et al. (Hrsg.): Schriften der Wissenschaftlichen Hochschule Lahr, 2010/23, S pdf (Zugriff am ). v) cf. Döpfer, Benedict : Outsourcing von Geschäftsprozessen, Hamburg 2008, S. 16. vi) vii) viii) cf. Oppenauer, Gerald: Outsourcing von Geschäftsprozessen. Grundlagen und Vergleich des Branchenprimus Indien mit anderen Destinationen, Saarbrücken 2007, S. 17, Translation of the author: In case of Total Outsourcing respectively Strategic Outsourcing, the main part of a specific business activity, in terms of a separable part of a business operations, is outsourced by a service provider. All quotations are translated by the authors and the quoted statements are only fractions of the evidences Page 8 of 11

9 ABOUT THE AUTHORS RÜDIGER GEIST Co-Author Rüdiger Geist, PMP, IPMA Level B is the Managing Director of Spirit@PM GmbH, a Swiss-based consultancy specializing in coaching, consulting, outsourcing and training in the areas of Project, Programme and Project Portfolio Management. He actually is also Associate Professor of Project Management at Kalaidos Fachhochschule (Zurich). In the past he also lectured for the International Institute of Management (Fribourg) and IFA AG (Zurich). He was Managing Director for Agora Associates GmbH during , where he was engaged in consulting, coaching and training in project, program and portfolio management. He was previously lead PM coach, project manager and project portfolio manager for Credit Suisse; senior project manager, coach and portfolio manager for SPOL AG; assistant CFO, contract manager, project manager, and coach for CSC Switzerland; project designer, manager and coach for CSC PLOENZKE AG in Wiesbaden, Germany; and information systems developer for BVV Versicherungsverein des Bankgewerbes AG, Freie University and others in Berlin. Rüdiger has a Diploma in Political Science from Freie University Berlin (1988) and in Informationsorganisator from Siemens/Nixdorf, Berlin. He is also a CMMI and SPICE certified assessor. Rüdiger holds an IPMA Level B project management certification and the Project Management Professional (PMP ) certification from the Project Management Institute (PMI ), as well as the PMOS (CSC) and a Masters Certificate in Project Management from George Washington University (GWU) in the USA. Rüdiger has authored papers and presentations at IPMA and PMI conferences and sat on the board of the PMI Switzerland Chapter as Vice President Education & Certification. Fluent in English and German, Rüdiger is based in Zurich and can be contacted at rg@spirit-at-pm.com Page 9 of 11

10 Gerhard Ortner Co-Author Gerhard Ortner, IPMA Level C, is professor in the bachelor s program Project Management and Information Technology and the master s program Project Management and Organization at the University of Applied Sciences bfi Vienna, Austria. He holds a PhD degree from the University of Technology Vienna, where he worked for more than 10 years in the department of industrial organization and has several years of experience in project management with specific regard to organizational and technological topics. Recently he published a German book on Project Management Offices. Iris Schirl Co-Author Iris Schirl is director of a bachelor programme Project Management and IT and a master programme Project Management and Organisation at the University of Applied Sciences Vienna in Austria. Before, she was responsible for the coordination of EU-funded projects at this institution. Iris studied Sociology and European Studies Management of EU projects. Her research interests are in the fields of higher education research and project management research. The University of Applied Sciences bfi Vienna has a research focus on Management of project-oriented enterprises and conducts applied research. Iris can be contacted at iris.schirl@fhvie.ac.at Page 10 of 11

11 Tibor Stockinger Co-Author Tibor Stockinger is Project and Service Portfolio Manager of Sika Informationssystems AG in Switzerland. He is also associate Professor of Project Management at Kalaidos Fachhochschule (Zurich) and senior lecturer at Wirtschaftsinformatik Schule Schweiz and IFA AG (Zurich); responsible expert in Project Management at Wirtschaftsinformatik Schule Schweiz as well. He served as an expert examiner for diplomas in higher education of Project Management at the Federal Office of Switzerland and authored diploma exams for more than 15 years. He was Managing Director for Stockinger Networks , where he was engaged in consulting, coaching and training in project management. Tibor was Senior Project Manager for global front products at Credit Suisse; Executive Project Manager and coach at Swisscom AG; Projectmanager and Key Account Manager at Ascom AG. Tibor has a Diploma in Executive Master of Business Analysis from University of Bern and MAS in Business Analysis from Zurich University of Applied Sciences. Furthermore he holds federally certified Diplomas in Commercial Information Technology and Information Technology Project Manager. He is also a PMI certified assessor and holds an IPMA Level B project management certification. Tibor is based near Zürich and can be contacted in English or German at tibor@stockinger.ch Page 11 of 11