Chapter 8: Manage Outsourcing And Vendors

Introduction

In a project, when you hire someone or a company to do part or all of the work in the project, it is called outsourcing. The use of outsourcing goes back thousands of years. Machiavelli referred to outsourcing when he discussed using mercenary troops, for example.

In international projects, there are many varieties of outsourcing. Three types are:

• Outsource one or more activities across all locations. Examples here might be construction oversight, project management, or communications.

• Outsource specific or general activities within one location. Here you are drawing on the experience and ties of the outsourcing firm to get started in this country, as an example.

• Outsource a short-term piece of work across multiple locations. This can be viewed as a one-time situation.

• Outsource part of the ownership of the firm in the country—franchising or affiliation.

The outsourcing firm can be local, international, or the local franchise of an international firm. All of this matters since it may indicate how much communications and coordination there is in the firm.

There are a number of benefits to outsourcing for international projects:

• You literally may not be able to do business without a tie to a local firm.

• Your learning curve in the country is reduced if you can pick up the knowledge from the outsourcing firm.

• Members of the staff can be freed up to do other work due to the outsourcer’s presence.

• You may have greater business success by having a local partner.

• Costs will be lower by using local firms with their competitive labor rates.

Outsourcing is often a major part of modern international projects. There are a number of reasons for this. Some of these are:

• Your company lacks the experience and expertise in a particular country or region.

• You lack political ties to the government which may be essential to gain licenses and permits.

• It is just too expensive to bring in overseas people to do the work.

• Local regulations may require that native firms be employed.

However, there are also disadvantages.

It is not that you can trade-off between the advantages and disadvantages. For many international projects, there is no choice. It may be a requirement to do business in a particular location.

Because of the extent of its use and importance in a project, it is imperative that you plan in detail and then manage the outsourced work. In international projects, things can slip by. You must manage it like you would the rest of the project.

Another note here is needed for the situation with multiple consultants and vendors. This is not unusual in a larger international project with several locations. Normally, in work within one city, we would discuss how the vendors would get along and share knowledge. This is not true here. Your best and safest route is to compartmentalize the consultants so that they have little contact with each other. The only exception for this is when you are dealing with technical work wherein they must work and interface with each other.