A project is a temporary endeavor undertaken to create a unique product, service or result. A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources (PMI org).
The law of small numbers
If a project must have a beginning and an end with resource allocation between those points, then there is an effort distribution along its life-cycle.
This effort distribution is usually an aggregate of separate phases of the project, from initiation to planning, execution, monitoring and closure. But the main problem is that it’s highly stochastic in nature, since by definition if the project is unique and temporary then you don’t have a lot of statistics to draw from.
The PP dance – Product or Project?
One way to mitigate this issue is to to try to productise your projects – Mainly, minimize the one off parts that are needed for customization and make the bulk of the effort into a product – A product can be made automatically and repetitively with lesser margin of error. A good example is Amdocs which deploy large projects over large product infrastructure, or of that matter any CRM vendor.
The other way is to employ resources with large experience in the project domain. Namely people who have sampled reality for quite a while, and got the feel for the type of effort needed for this rare activity. Those are seldom cheap and you have to keep a projects flow to keep them.
Even if your organization have a constant inflow of projects it’s hard to smooth the effort. In the long term. It’s the usual obese or starve situation – Either sales is pushing in gold plated projects to the backlog, or there are periods of transition with redundant resources, low activity, and layoffs.
(figure .1) As you see above, in red the costs, and in blue the revenues.
One solution for that, is to outsource activities and thus quickly adapting supply with demand, and cutting costs.
How far can you outsource?
It’s quite common to outsource standard activities to external entities. Those can be companies that specialize in certain verticals, from UX on one side, to cleaning services on the other hand.
However, there are several hidden costs to outsourcing:
- The first is the setup cost – One has to account for setup time for choosing the vendor, contracting, as well as knowledge transfer.
- Then there are communication costs as outsourced groups usually talk different “English”, have a time difference and come outside the cultural background of the business.
- Lastly, there is the possibility of loss of control, either by vendor incompetence or just because there is different interests, other priorities or other tasks competing on the vendor’s resources.
Outsourcing large parts of the project in very large projects like those in the security market, or in civil-engineering, is mandatory. Since the scope in usually larger then what is needed for one vendor to fulfill by itself.
Those projects are either led by the prime contractor or by a consortium / legal entity that is responsible for the project.
So, historically we know that for large and complex projects outsourcing is mandatory, and at the extreme, we can actually outsource the whole project to an external entity and thus even hedge the risks of it. Hence, we need to define the criteria for optimal outsourcing.
The magic recipe for outsourcing project management
Too big & complex
This is obvious, reduce risks by organizing a dedicated team and leaders to own the process, pay attention to nursing your own staff for future endeavors. An example for such a project would be building a multi disciplinary learning center for a law enforcement agency.
For a startup company such a project can be product implementation within a large corporation. Not outsourcing it, can get the product team out of focus vary fast if the customer is a demanding one.
Not in the main line of business
The organization is a construction company and the projects is implementation of a new CRM system. There is a learning curve and ideally most errors should be made elsewhere.
Time constraints
The regulator set a hard date for completion, and your staff is occupied fulfilling existing business needs.
Closing HR recruitment gaps
Recruitment cycle is too slow and by the time you get an ‘A’ level candidate, you already need a flying start.
Remote project
Sometimes the client is on a different timeline/s – A serious problem are projects that involve multi sites that are managed together. Not all employees are willing to work 24/7.
Run of the mill projects
For this, the main question that should be asked is how to reduce organizational wide volatility, and the
Reducing project volatility by buffering
If you look at the common denominator common to outsourcing projects, it’s all about reducing volatility.
This may look counter intuitive as businesses are seeking the maximize gross profit which is the difference between revenues and costs. This is true when dealing with a product that have standardized semi-predictive relation between revenue flow and incurring costs.
However when dealing with a projects, the costs, planned as they may be are stochastic in nature. And revenues across the portfolio are random as well, since closing price is very dynamic in nature and dependent on scope and client.
(figure .2) – Volatility reduction is by minimizing the red area between project’s costs and revenues.
The Drum Buffer Rope method to reduce project volatility.
Eli Goldratt outlined the concept in his theory of constraints. He was a physicist. so the theory is nice but the implementation is hazy (some pun is intended), but I’ll try to adopt it to my view of project management.
The Drum
The drum is the activity that is carrying most risk, dependencies, cost or time relevancy. This is the main constraint that is leading decision making. It’s not necessarily on the critical path, as time constraints are not the only ones.
The Buffer
The buffer is a resource or group of resources / PM / experts, that can be allocated in short time for the effort, there is an existing contract, or a fact purchasing effort. They have previous knowledge of the business or technology, and in complex organizations those can be dropped in when there is a need to reduce expected gaps between the project requirements and the ability to response to them.
The Rope
Rope is the signalling device that is connecting the need as created by the drum, with the buffer to supply the needed resource. This is implemented usually within the contractual agreement with the buffer organization and is easily implemented using modern collaboration tools.
This is essentially an implementation of a Negative Feedback Loop in the realm of project management dynamics.
The practicalities
- Define the Drum of the project/s and assess if the Use Case is for outsourcing, whole or parts of the scope.
- Engage with the Buffer – Build a list of external resources that can be contracted and allocated fast. Allocate them email address if policy so permit, or any other means to access internal resources quickly on demand.
- Facilitate the Rope – Allow open communication across organizational borders between vendors and project management so scoping and allocating resources can be achieved almost transparently.
