I had to write a paper for my CIS 3001 class at Georgia State University about IT Project Outsourcing. I chose to answer the question below:
What kinds of projects are candidates for successful IT outsourcing? What kind of projects are NOT suitable for IT outsourcing? Consider the nature of the application, development process, technology platform, etc. in the discussion.
Below is my response. Enjoy.
IT Project Outsourcing
As IT projects become larger and more complex, there is often a push to outsource as many projects as possible. While this approach may be successful at times, it should not be the standard for project development. We will examine project characteristics best suited for outsourcing and characteristics best suited for in-house development. It is important to understand a decision should not be made based solely on one characteristic alone. We should consider all characteristics of the project as a whole in order to reach the proper decision.
After surveying five colleagues, I’ve gathered a least of attributes to be considered, along with the given ones, before outsourcing a project. Characteristics as follows are: SSR (size, supervision, and requirements), trade secrets involved, internal use vs. revenue generating, maintenance, and uniqueness.
Projects come in all shapes and sizes, from implementing a million of dollar infrastructure to building a simple database. Large projects are best left within the organization as size, supervision and requirements become an issue. Initially, I wrote these three separately but they kept referencing each other so I’ve decided to make them one attribute with three parts. The larger a project grows the more supervision and highly defined requirements are necessary. Large projects have many parts meaning more requirements. If each requirement is not granularly defined, which often happens, there is room for interpretation. The more under defined requirements a project has – large projects have more requirements – the less capable the project is to be outsourced. According to Stephen Gao, “The top candidates for successful IT outsourcing are website development and data storage. The reason that these two are top candidates for successful IT outsourcing is that they both require a very specific focus.” Supervision is necessary for all projects. The more supervision a project needs – large projects require more supervision – the less capable the project is to be outsourced.
Trade secrets should not be outsourced by way of IT projects. It is best to keep all competitive advantages within the organization. Banks outsourced their transactions systems and are now put a competitive disadvantage as they no longer own their product. Don’t be quick to outsource. It’s always easier to give control away than to take it back.
IT projects have two main purposes: internal use vs. revenue generating. Internal use projects are usually candidates, allowing they meet all other characteristics, for outsourcing. They tend to be less intensive, less unique, require less maintenance and reveal few trade secrets. Revenue generating IT projects are key parts of the business once they start making money. They are larger in size, meaning you now have to consider SSR characteristics. They are more unique and difficult to manage. It is best to complete these tasks in house where they can be monitored and implemented correctly. Anh Cao summarizes this point very well – “ Revenue generating projects are not suitable for IT outsourcing while small internal-use-within-department projects are suitable for IT outsourcing.”
Maintenance should be considered when deciding on outsourcing a project. The constant upkeep of an application can make it difficult for the business to keep the out of their control. They will be at the mercy of the outsourcee and their time frame, as well as running an expensive tab. By keeping an application that requires constant maintenance in-house, the organization has the ability to quickly and freely change the application to fit their needs.
The uniqueness of a project is a major factor to determine where to outsource a project. Uniqueness refers to the originality or where the project has ever been done before. Projects that are common knowledge and can be done with precision should be outsourced to those more experienced. These are projects such as mobile application development and database building. Projects that are uncommon and complex should remain in house because they are generally larger in scale and should review the SSR characteristic before proceeding.
An infinite amount of examples exist when it comes to IT projects. I will provide brief examples analyzing these characteristics and explain if I think the project can be outsourced or not.
The first example is related to my favorite fast food chain – Chick-Fil-A. Say CFA is considering a free Menu Calorie App for the new iPhone 4S. Relatively speaking, this is a small project with very specific requirements – calorie count per menu item. There are no trade secrets being revealed, as the calorie information is available to the public. No revenue is being generated. Mobile applications are not unique and the maintenance is low. I believe a project such as this is an ideal candidate for outsourcing as it passes the majority of the key characteristics provided at the beginning.
Another example happens once a semester at Georgia-Pacific with their Capstone Program, a form of outsourcing. Georgia-Pacific puts together a small list of projects they would like completed but don’t have the time or manpower. All projects are small in size, contain no trade secrets and are for internal use only. The projects require students to program and build databases, none of which is highly unique. Each project has specific guidelines and little supervision required.
The third example is of a soda company creating a soda dispenser. The backend of the soda dispenser is filled with technology, not just syrup. Project size is large and the requirements are subject to change. Supervision is key when implementing the dispenser. Maintenance is constant during the development stage. A dispenser of this level has never been done before and is full of trade secrets as well as generates revenue for the organization. Based on these characteristics, it would be wise of the company to develop the product in-house, rather than outsource it. Trade secrets are involved and SSR are prevalent throughout.
IT projects have many characteristics to consider when deciding to outsource. Projects with low SSR (size, supervision, requirements), involve no trade secrets, are for internal use, lack originality and have low maintenance make good candidates for outsourcing. Projects with high SSR, involve trade secrets, are revenue generating, highly unique and have high maintenance make poor candidates for outsourcing.