ראשי » A Methodology of Managing Hi-Tech Outsourcing Projects

A Methodology of Managing Hi-Tech Outsourcing Projects

 

מאת: שי שרגל, מיכל וייסבלך וגיל פלדמן  – פילת יעוץ ניהולי הנדסי

פורסם לראשונה פברואר 2001

Abstract
A global outsourcing project has to cross boundaries of language and culture. It forces its manager to face unique challenges, involving synchronization of the different participants in the project, standardization in quality requirements, and numerous technical difficulties. Complexity increases when management of the project is performed by outsourcing as well. This article focuses on these very cases, suggesting a genuine methodology for outsourcing the project's management.

Introduction
As a result of rapid competition and the need to expertise, outsourcing is becoming more and more common. As part of the worldwide globalization, it crosses geographical boundaries and limitations of language and culture. Leading suppliers are chosen mainly according to quality and cost, location is of secondary importance.
The basic definition for outsourcing is "A contractual relationship between an external vendor and an enterprise in which the vendor assumes responsibility for one or more business functions of the enterprise" (White & James 1996).
According to that definition, outsourcing can be implemented in many different ways, on every business function. The difference between implementations lies at the "level" of the outsourcing. All levels of outsourcing are meant to gain benefits such as enlarged capacities, improved technology, balanced resource efficiency, lower prices, lower risk and peace of mind, enabling the firm to focus and exploit to its limit its advantages, benefiting from the sub-contractors' competitive advantages at the same time.
The major disciplines companies outsource belong to non-core business processes, such as payroll processing, logistics and IT. These are called: outsourcing of activities. When facing a unique project, a company may outsource managerial functions as well, such as R&D management, project management and so on. These are called: outsourcing of management, which enables the company to choose the most professional project manager, who has the qualification and experience required. In addition, an outsider project manager can solely dedicate himself to managing the project, without being occupied elsewhere.
On Hi-Tech surroundings Outsourcing of activities, even in a global environment, is rather common. While doing so, one must consider several aspects, as international law, different calendars and working hours, different languages and different quality standards.
When a global project requires Outsourcing of management, this is a totally different ballgame. In this case the project manager is responsible not only for all the "regular" managerial aspects, but for the global aspects as well. The responsibility scope in these cases is very wide. Instructions as to When, by Whom and How it should be done are detailed in the following methodology.

Methodology
The methodology hereby consists of three majors decisions to be made, throughout the different (four) levels of the project:

1."When": or – Does the project require outsourced management?
The first decision about outsourcing management is to decide whether it is suitable to outsource the project's management at all. In some cases, it would be wiser (and cheaper as well) to give up the idea, than to force outsourced management on an inappropriate project.
That question should be asked before moving from design to detailed planning, while defining the project's structure and objectives.
Outsourcing of management is relevant in the following cases
: * Projects that are of an unusual or irregular magnitude (in the firm's terms). In project of this kind, there's a significant relevance to the project's outcomes. A project like this might effect the firm's future activities for whole.
* Uncommon and unrepeatable projects or projects in an organizational structure other than "Project Oriented". In these cases the project requires an expert in resource usage, which the firm is mostly lacking.
* Cases in which the company does not have the managerial knowledge and experience needed to conduct the project. Any attempt to nominate an inside manager, whose knowledge and background are strictly technological, is a tremendous risk.
* Projects involving global cooperation. These projects, requiring total devotion, would better be managed by outsourcing their management. The outsourced project manager is simply superior because he can devote himself fully to the management of the project, not having other inter-firm obligations.

2."Who": or – Who is the right manger for this project?
The project manager, being an outsider to the firm, should be selected with great caution. His effect on the project is crucial. The considerations before nominating an outsource project manager are:
* Knowledge – Managerial knowledge is the basis to this manager's comparative advantage in the firm. It must enable him to establish his status in the firm and function without hesitation.
* Experience – Proved experience in similar industries or processes. The role of experience is of enormous importance. It gives the project manager an advanced perspective; one that knowledge alone lacks. In addition it enables him to solve or even prevent problems by being familiar with types of common obstacles.
* Background – Technical background, and an approach to Hi-Tech technologies, including Research & Development. One of the manager's most severe difficulties will be to communicate with the technology experts, and to understand their terminology. Therefore he must be familiar with the relevant environment, and able to analyze its complexities.
* Backup and Support – Credible backup and support from a well-established company. The advantages of the above elements are both in cumulative experience gathered at the backup firm, and in the tradability of the project manager by another when and if necessary. Although we refer to the project manager as a single person, that person must be part of a managing group that would be able to support him.
* Personal skills – A number of personal skills, which will enable the chosen person to manage the project efficiently. No matter how good is the record of the project manager, Personal skills and characteristics make a difference. When you finally get down to managing the people, it's the inter-personal touch that does it.

3. "How": or – How should the project be managed?
Many projects nowadays, and especially projects in Hi-Tech environment, are best described as a core divided into two aspects. the technology aspect includes considerations regarding technology and R&D matters, the management aspect includes considerations regarding logistics, budgeting, marketing, timing & scheduling, resource usage considerations etc. The combination of both aspects is crucial to fulfilling the project's goals and keeping to its measures.
This concept is presented in exhibit 1:
Alas, too often a conflict arises between these aspects, affecting at least one of the project measures (Duration, Budget, Quality). On outsourcing projects, conflicts are more common and more crucial because several companies are involved, each dictating its own constrains. In these cases, the project manager's primary task is to settle the contradictions between these aspects, and to find a solution, which will enable the project's successful continuation and completion.
Trying to solve those conflicts, a project manager's worst mistake would be compromising on both constrains. According to T.O.C, (Theory Of Constraints, Goldratt 1997) this action will simply preserve the conflict by not fulfilling the needs of either aspect. A compromise in this case, is not equivalent to two incomplete victories, but reflects two certain losses.

3.1 Choose Technical leader/s.
The technology leader should be in charge of all the technology aspects involved in the project management. He comes from a technological background. When a project combines several different technologies, and demands more then one "technology leader", to support all the technologies on the span, we recommend dividing the technology aspect between several leaders.

A typical project is conducted throughout four levels:
I. Target market interface – including understanding of the frequently changing needs and requirements of the market and the client, and a rapid response towards them.
II. Feasibility assuring – including the translation of the above needs and requirements into an applied technology, whether existing or innovative one.
III. Monitoring – including a continuous process of comparison between he project's progress and goals, responding by updating the schedule and the resources allocation.
IV. Sphere perspective – including integration of all the project's components into the complete project's plan and implementation, obtaining the insight of the influence on the outer-project surrounding and ensuring the achievement of the pre-determined goals.
All these levels are relevant throughout the project's complete life cycle. The interface with the market, for example, is due all along the project's continuation, thus enabling the company to make fine tunings in the specifications. Furthermore, each stage in a project requires its own feasibility assurance and monitoring, and an extensive overview should always be kept.

3.2 divide responsibility for each level between the project manager and the technology leader/s.
Integrating the four levels creates conflicts on a regular basis. The most critical matter to argue over is the responsibility share between the project manager and the technology leader. These two positions are overlapping both responsibility and control over resources, and as a result may find themselves fighting over a joint set of goals. Therefore, the project's leading team, assisted by the firm's management, must agree upon a clear responsibility division between managerial and technological aspects.
On most cases, the advised responsibility balance is achieved by dividing these levels according to exhibit 2:

Project Level Project Manager Technology Leader
Level I *
Level II *
Level III * *
Level IV *

Exhibit 2. The 4 Levels Distribution

On some cases it might be necessary to increase the resolution of the determination of responsibilities and authority, and divide responsibilities by sub-levels.
Special emphasizes for each level are demonstrated at the implementation section.

The Implementation
In the project under discussion, a Hi-Tech company that manufactures Electro – Optic equipment (named here "Electro-Opt") had to conduct a global outsourcing project, which involved worldwide suppliers and customers.
"Electro-Opt" is a medium-size company. It uses outsourcing of activities on a regular basis, on several manufacturing processes. This outsourcing enables the company to keep its manufacturing functions flexible.
For most of the projects, outsourcing of activities is satisfying. The managerial team of the company manages all the projects that take place in the company.
However, the project under discussion was a unique one, forcing "Electro-Opt" to consider seriously outsourcing of management.
After determining the goals and objectives of the project and the way they should be measured, the company considered outsourcing of management, according to the following stages:

1."When": or – Does the project require outsourced management?
"Electro – Opt" chose a positive answer for the first question, determining an outsourced project management. The main reasons are summoned as follows:
1. The project's scope: the project was one of unusual magnitude: more then doubling "Electro-Opt" usual manufacturing capacity, involving global participants. That scope forced "Electro – Opt" to sign short term outsourcing contracts (with manufacturers) and to supervise more suppliers, on different locations around the globe.
2. The customer's conditions: The customer, being a governmental company in its country, was in position to dictate several conditions, regarding the item's specifications, the suppliers and relationship between them and "Electro-Opt". These demands were to be fulfilled as a pre-condition to applying the deal

The relationships between the variable factors in the project are described in exhibit 3:
These conditions increased the project's complexity.
3. The size and nature of this project were irregular and were not expected to appear again. Therefore, developing an inside management would have been a waste of time and resources.

2."Who": or – Who is the right manger for this project?
"Electro-Opt" chose an experienced project manager that represented a consulting company specializing in project management. The most important advantage of the consulting company was its multi-discipline expertise, maintaining a well-established reserve of experience and knowledge behind the outsourced project manager. "Electro – Opt" preferred hiring someone who had managerial record and not a pure technical one, assuming they have enough technology experts to support him.
At the first stages of the project, when the PM's workload was heavy, two representatives of the consulting team acted together as the project's managers. When the project progressed further and the workload lightened, only one representative remained as the project's manager. Here we witness another advantage of outsourcing – flexibility, according to the project's demands.

3. "How": or – How should the project be managed?
3.1 Choose Technical leader/s.
The project involved three technical aspects: Electro optics, Mechanics, and Electronics, each acting as a separate unit. Therefore, three technical leaders were nominated.

3.2 divide responsibility for each level between the project manager and the technology leader/s.
Each of the four levels was defined in details as for the work breakdown structure, the scheduling and the resource allocation. This phase was carried by the selected project manager, the technology leaders and management representative (the managerial team was responsible to managing all the other projects and to supervise management of this project as well).
The responsibilities for the different levels were divided according to exhibit 2, between the project manager, and the technology leaders, according to each expertise. The main emphasizes for each level are detailed below:

Level I requires a market-oriented perspective. It involves continues contact with the customer and the suppliers involved. This phase has a crucial influence on the project's evolution and future success. This level is mainly under the PM's responsibility, assisted by the technical leaders regarding pure technical aspects.
The root of success in this level lies in establishing a good, long lasting relationship with all the participants of the project. While doing so, the PM had to face problems unique to a global project:
* Defining timetables – In addition to problems related to different time zones, resulting in only few common working hours and making direct conversations almost impossible, the timetable was subjected to the combination of four(!) religions. That dictated different working days during the week and different holidays, thus causing reduction of working days and lengthening the allocated time for the whole project.
* Communication – At first, "Electro-Opt" assumed that most of the contacts could be carried by e-mails, phone calls, faxes and other indirect communication methods. Gradually they discovered that although a global project can't run without them, they are simply not enough when dealing with projects of such a magnitude. Different time zones made direct conversation during working hours almost impossible. After some time the project manager concluded that about 80% of the problems encountered during the project could be solved in a matter of hours, when meeting personally, or drag along for weeks, when counting on electronic communication only. Therefore, personal meetings had to be held. A tough schedule was set for direct phone calls and face to face meetings: a phone call at least once a week, no matter if there was any current problem to solve, and an appointment once a month. At these conversations a special emphasis was set upon developing a personal relationship between the project manager and the suppliers/customer's representatives. This familiarity helped creating a better atmosphere of reliance between the participants, resulting in better communication regarding aspects connected to the project itself.
* Cultural differences – Manner of speaking that was considered straightforward by "Electro-Opt, was considered rude and insulting by one of the suppliers. What one considered as "urgent", other referred to as of second importance, and so on. It took some time to learn how to negotiate people of foreign cultures. The PM's experience on other global projects prevented crucial mistakes.
* User acquaintanceship – learning about the potential user of the project's product. What are his needs and limitations, how does he define a "regular" use vs. irregular use. Global differences affect the product specifications. "Electro-Opt"'s product, for example, contains an instrument for the user's face. The structure of the customer's face is different from the one familiar to "Electro-Opt", therefore the product required special adjustments to the customer's needs. The product also contains some metal pieces, which are usually covered to prevent rust. The usual cover was not enough for the user's environment, where the climate is humid and salty. The PM passed that information to the relevant technology leader, who had to develop special adjustments for the user's structure and climate.

Level II requires wide technological knowledge, which will enable translation of the summoned market needs to technical specifications of the product. Mainly, this level is under the technology leaders domain. Nevertheless, the project manager was involved here as well, as a result of the project's complexity and importance. The technology leaders completed the detailed specifications of the product, according to the information gathered by the PM on level I. Before starting the manufacturing program, the PM checked the specification against the customer and the suppliers.

Level III involves both managerial and technological aspects. The Technology leaders work on a high-density resolution, checking progress of each of the steps within the technological phases. The project manager is responsible for monitoring on the wider scope – checking each phase against its milestones, assuring proper progress of suppliers and of "Electro-opt" itself. Any change of schedule or resource allocation must get his confirmation. Combined with level I, it is the project manager's responsibility to create standardization of quality requirements between all the participants of the project. Even the simplest quality definitions might be understood differently in different cultures. For example, the instruction to "lightly oil" one of the items that had to cross the sea resulted damaged items due to use of too much oil. In order to unite quality regulations of all the project's participants, the PM, cooperating with suppliers and customer's quality assurance managers, defined "new" quality standards, using clear, measurable, definitions. These standards applied to all the participants of the project.

Level IV requires peripheral view of the project itself and the project's surroundings. Such a vision is purely under the responsibility of the project manager. It demands high level of familiarity with all the aspects of the project, including technology, marketing, financing, manufacturing and more. When dealing with a global project, that level deals with International Labor laws and regulations as well. Signing a global outsourcing contract requires detailed knowledge of the relevant labor laws, including social security regulations, employment conditions and costs and other resources availability.

Conclusions
Therefore a set of conclusions resulted. Those are:
*  Direct line of communication must be established between the project manager to the customer and to each of the suppliers. Otherwise the information flow is damaged, leading to lack of trust between the project's participants. In order to increase reliability and information flow, it is recommended to establish fixed schedule for phone calls and/or meetings.
* Any agreement signed between the project's participants must clearly define responsibility shares for each one of them. The responsibility must be attached to a specific person and not to the organization as a whole. That way, the project manager could contact the relevant person directly, without delay.
* Before a contract is signed with a customer, the R&D team and the manufacturing team must confirm the technical specification required by the customer. Keeping this procedure will promise a better response to customer needs, while minimizing the chance for arguments or misunderstandings at advanced stages.
* The company should define strict quality requirements, for each of its suppliers, before the project begins. This is a crucial issue, especially when the project involves many suppliers, from different countries, which might have different quality standards.
* The resource usage along the project must be planned according to the critical chain of resources of all the projects taking place at the same time. Projects performed at the same time must not damage each other. That issue is under the responsibility of the project manager, as part of level IV that requires a peripheral view of the project's environment.

Summary
In conclusion, the perspective under consideration is a genuine concept for the combination of an outsourced project manager in a global Hi-tech environment project. A project manager carrying relative advantages from the management aspect, together with one or more technology leaders, bringing along their expertise, are a winning team. The greatest value of this team is the ability to overcome conflicts regarding inter-discipline constrains, using a multi-discipline and numerous-perspective approach. The methodology described contains the exact phases an organization should conduct, in order to implement successfully and benefit from this dual-lead management in complex projects.
The methodology is presented in exhibit 4:

The methodology presented is rather raw and simple, but still must be dealt phase by phase. There are no short cuts, and one must not try to maintain it without obeying these crucial steps.

References
1. White, Robert & James, Barry, 1996. The Outsourcing Manual. Gower Publishing Limited.

2. Dr. Goldratt, Eliyahu M. 1997. Critical Chain. Daniela Di – Nur publishers

 

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