Page 290 - Global Project Management Handbook

PROJECT MANAGEMENT FOR OUTSOURCING DECISIONS 14-15

without decreasing revenue, adds value to the company. In most cases, stock prices go up
with the announcement of an outsourcing decision, reflecting the anticipation of an
increasing return in the future. In reality, shareholder satisfaction is one of the biggest
drivers behind outsourcing decisions. Even though shareholder pressure cannot be
neglected, it is important for company management to remain objective and not take
unnecessary risks in their decisions.
Relationship Management. Four fundamental characteristics give shape to an out-
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sourcing relationship :
● Depth of the relationship. Depends on the criticality of the outsourced job. As the
job gets closer to the core business process, greater depth is required.
● Scope of the relationship. Depends on the nature of the work outsourced.
● Choice of asset to use. Depends on the firms’ ability to invest in asset development.
● Choice of business culture to adopt and exploit. Depends on which culture will enable
a better and faster achievement of the objectives.
In order for an outsourcing process to survive, the relationship characteristics should
be defined before the transition starts in lower organizational levels. Trust and communi-
cation are needed from the very beginning. Differences in style and culture are unavoid-
able, but as long as the parties recognize such differences, they can agree on common
approaches. As part of the collaboration, both the outsourcer and the vendor should share
responsibilities for the transition stage while setting goals and standards. A strong rela-
tionship will support the changes that company will face in the next stages, and it is also
an essential element for a long-term and productive business process where all of the par-
ties get the maximum value through a win-win situation.
Problems during the implementation stage should not be neglected in view of the fact
that even the smallest disagreements may grow into serious crises in the long run. The
project team should treat these problems in an organized manner with confidence and
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reliability. Cheung presents a dispute-resolution approach consisting of six steps : pre-
vention, negotiation, standing neutral, nonbinding resolution, binding resolution, and liti-
gation. These steps should be followed in order such that binding resolution and litigation
are used only if the previous methods fail because they are harsher applications.
Clear and exhaustive documentation prevents ambiguity and serves as a reference for

management of future relationships, minimizing miscommunication between parties. All
processes through the process need to be documented in every detail. Comprehensive
documentation not only supports a tight communication between vendors but also helps
to resolve disagreements that are likely to occur.
Smooth transition is vital for the success of an outsourcing project. Involvement of
many stakeholders makes it more complex and fragile. While the changes are actually
implemented, every stakeholder is concerned about his or her own situation. Some
employees feel one minute away from losing their jobs and resist the change, whereas
executives and shareholders see it as a cost-reduction effort and favor the change.
Studies show that the reason behind most failed change projects is inadequate consid-
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eration of people and communication. Miscommunication and lack of employee sup-
port cause prolonged training and testing phases. Today, a major proportion of
American workers are oversensitive to any kind of decision process that may lead an
outsourcing decision. Job security was a governing issue in the 2004 elections and
continues to be overriding in media. As a result, employees who are in the process of
transferring their jobs overseas are more reactive to the change and can resist one-to-
one training. Overcoming the resistance barrier is not easy but can be achieved by
communicating with people and ensuring retraining programs and career-development