One of the reports I’ve had bookmarked for the past few months is project management consulting firm ESI International’s “Risky Business: Organizational Effectiveness at Managing Risk of Outsourced Projects”. You can already guess what it’s about, and it’s no surprise to any of us that the points mentioned as pitfalls for companies include misaligned expectations, unclear definitions of outsourced projects, and poor vendor and contract management.
But what really hit me about the report was this – Most customers who outsource projects, do not have a handle on risk. The survey, conducted in April of this year by ESI included project managers, executives, buyers, and sourcing decision-makers in governments and companies around the world. They were asked to respond to a wide variety of questions on risk assessment, risk management, and how they approach the outsourcing decision, both financially and organizationally. And the numbers astounded me:
As Healthcare Technology Online says, it all comes down to this – “Of the 95% of organizations that buy, provide or both buy and provide outsourced services and functions, fewer than half are able to effectively manage risk of outsourced projects”. This worries me, and it should worry you if you’re a prospective outsourced services buyer.
But let’s put things in perspective here. The survey results are not about the inherent risks of outsourcing (although we know they are there). The results are about companies’ assessment and management of those risks. Since there’s a problem with how firms approach the process, it means that approach can be changed and improved. Three recommendations: