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Cath Everett

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Outsourcing risk not managed effectively


More than half of organisations admit that they require better training and support to improve the effectiveness of outsourcing initiatives in order to boost bottom line performance.

These are the findings of a survey undertaken among 615 contractor managers, sub-contractor buyers, project managers and senior decision-makers from organisations from across the world by Informa’s ESI International subsidiary, which specialises in project and contract management training.
The study entitled ‘Risky Business: Organisational Effectiveness at Managing Risk of Outsourced Projects’ revealed that, of the 95% of organisations that either purchase or provide outsourcing services, less than half were able to effectively manage the risk involved in such projects. This is despite the fact that nearly two thirds spent up to half of their budgets on outsourcing.
But some 55% of respondents admitted that they were either ‘not very’ or only ‘somewhat’ effectual at risk assessment, while a mere 35% believed they were successful in this area. A tiny 6% proclaimed themselves ‘extremely’ competent, however.
In terms of risk management, some 54% said they were either ‘not very’ or only ‘somewhat’ effective, while only 37% claimed to be effectual. Again a mere 6% deemed themselves ‘extremely’ successful here.
J Leroy Ward, ESI International’s executive vice president, said: “The ubiquity of project outsourcing creates opportunities for, and demands on, organisations to better develop and refine the outsourcing competencies.”
The top outsourcing risk identified by 70% of respondents was managing product or service quality. Some 63% cited vendor delays as a key concern, 61% having a clearly defined project scope and 50% poor vendor management.
But three quarters of those questioned admitted that they did not always clearly define project requirements despite the importance of this activity for later project management. Only a third always clearly articulated and defined financial goals for outsourcers, while 32% failed to continually evaluate how well their outsourcing initiatives met their original goals and objectives.
As a result, 61% admitted that they required more risk management training and information. Some 53% needed better development of risk assessment skills, while 51% wanted help in managing service quality. Some 49% were keen to get more training in relation to requirements management and development and a further 47% said they would benefit from obtaining best practice advice.

One Response

  1. Involvement not more training

    As someone involved in outsourcing in a procurement capacity I’m not sure more training would have addressed some of the issues you mention here Cath. Yes buyers need to ensure that risk assessment and management are identified as part of the project plan but I’m not sure they would ever have the skill set to ensure they looked at risks in the same way as someone who is qualified in Risk. (It always amazed me at what risk professionals could see that we wouldn’t even dream of.)

    So for me it’s more about ensuring that the stakeholder plan includes risk along with other functions that can contribute to the successfull implementation of outsourcing rather than training those involved to try to do it all.


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