Whenever an organization seeks to grow strategically, modernize their systems, or meet growing regulatory requirements, they will undoubtedly encounter projects of all shapes and sizes.
Projects are often looked upon as opportunities by leadership, but they also require planning, budgeting, and specialized staffing, which cannot be overlooked. With the complexities of modern business, any growing company in any industry will inevitably face requirements for which they do not have resources or are simply not in their wheelhouse.
So how do leaders address projects that require specialized expertise and knowledge while balancing their current business needs?
Before Deciding, Audit Your Capabilities
By evaluating the state of the organization’s skill sets (e.g. Project Managers, Subject Matter Experts), resource availability, and budget against the need to execute effectively, decision-makers can begin to get an honest look at their capabilities.
The project’s success or failure potentially depends on These initial considerations and the manner in which they are addressed before the project begins.
After all, it is commonly stated that 70% of all projects fail, and jumping into a goal without the right skills is wishful thinking at best.
Once a leader has awareness of where their capabilities stand, they can then start planning the approach to the project. Generally, the approach to new projects boils down to two standard options: Insourcing vs. Outsourcing. Companies can either enlist employees and managed resources themselves or partner with specialized third parties to deliver planned outcomes.
What is Insourcing for Projects?
Insourcing for projects involves developing internal resources who can manage objectives and provide technical solutions. This often requires hiring employees with specialized skills and developing the team over a long period of time.
Insourcing project management and specialized labor would be ideal every time if companies had the right skill sets and resource availability. In reality, projects are temporary endeavors, which are unique in focus, so decision-makers do not get that luxury.
Benefits of Insourcing
Through insourcing, you are building an infrastructure of managers who are dedicated to the company’s vision and mission. Furthermore, insourcing will build process maturity and subject matter expertise over time, which can have compounding benefits for future projects and ongoing support needs. Insourcing is an investment.
When a team is built from within an organization, there is a culture of direct communication and general alignment to the same goals. These benefits can directly impact the effectiveness and timeliness of a project. Additionally, the level of control and awareness is very high for an internal project.
Typical Concerns with Insourcing
While staffing projects through insourcing can be an effective approach, there are also many constraints that should be considered. When a company takes on a project, it must balance resource availability and take energy away from its primary mission.
First and foremost, insourcing can be costly. When looking at the cost of a project, internal resources can be far less expensive than hiring outside. However, this cost comparison assumes no additional costs related to hiring new skills and maintaining employees long after the project has closed.
As noted earlier, 70% of projects fail. As a result, insourcing can be a scary undertaking if the project is terminated. By that point, sunk costs could be as much as if a project were outsourced successfully.
What is Outsourcing?
On the flip side, decision-makers will often consider an outsourced approach in which project management consultants and specialized labor are brought in to deliver on temporary objectives.
By outsourcing, organizations can essentially rent (through varying forms of contract) skilled resources who operate in a specific focus for their profession.
Benefits of Outsourcing
Outsourcing can provide decades of experience without the costs, time, or risks involved with developing internally. When you are on a project timeline and budget, learning as you go can become very expensive very fast. Likewise, flexibility and scalability are two primary benefits that come with hiring outside project management professionals.
Hiring the right outside resources can allow a company to focus on its mission. If you want to be the best widget-maker in the market, you want to focus your energy on that, not investing in ancillary skills that will provide limited long-term benefits.
In addition to providing skills and resources otherwise not available, outsourcing provides a much-needed outside perspective to leaders from seasoned professionals who focus their careers on organizational improvement in the area of need.
Typical Concerns with Outsourcing
Of course, as with any significant decision, there are tradeoffs–and outsourcing is no exception.
Whenever you involve a third party, there is more need for clarity, thorough communication, and alignment to a vision. With the decision to outsource a project, leaders need to expect differences in culture and approach toward problems that will need to be managed appropriately.
Furthermore, companies may work in secure fields with sensitive data and intellectual property, which should also weigh into the decision to outsource.
Any leader who has overseen outsourced complex projects knows that consulting services can be expensive when compared to the hourly rate of an employee. Considering the temporary nature of a project, it is easy to understand why sticker shock occurs. However, it is important to consider the holistic cost/benefit of skills, experience, and return on investment that can easily offset the different costs.
Which Project Management Solution is Right for My Project?
So how does a leader decide which path is the right one?
Because every organization has differing focuses, skill sets, and long-term goals, there are many possible variables that are specific to that company. While this list is not inclusive to all situations, these considerations apply to most projects:
Decision Factors to Consider
- Not only the cost of the project, but associated costs of hiring, developing resources, and maintaining resources afterwards
- Does the organization have the project management and specialized skill to execute on the objective?
- Does the organization have what it takes to conduct a project according to industry best practices and deliver a specialized solution?
- Would knowledgeable outside perspectives benefit the project?
- Would putting energy toward the project detract from the company’s strengths?
- Oftentimes, companies are already so saturated with ongoing business they lack the ability to balance yet another major project on top of everything else.
Ultimately, decision-makers must make a determination whether to insource or outsource a project before it begins. In particular, the upfront considerations for insourcing require extra care and time, as those resources need to be hired, developed, and allocated–whereas outsourcing project consultants provides more on-demand flexibility.
Once a company develops an honest snapshot of its capabilities and limitations, they are already past the first major challenge to planning project success, allowing them to begin developing resources around the project.