A micro-survey on current trends in Make-or-buy decisions
By Oliver F. Lehmann
Running Projects as Businesses
Many project managers have the task to directly provide income for their employer. They are running “Customer projects” or “Projects under contract”, projects that are performed with the foremost intention to bring money home. A customer project has a very simple business case: It must make a profit for the performing organization, and survival and success of this organization depend not only on the technical skills of the project manager and the team, but also on their business acumen, customer orientation, and approach to profitability.
Internal projects are cost centers, customer projects are (mostly) profit centers.
Overall, textbooks and other literature remain silent on the particularities of customer projects. Standards mention them only “en passant” (for example in PMI, 2013, p. 10) or ignore them entirely (BSI, 2000, DIN, 2009), and they are rarely a topic in magazines and at congresses. Training companies have no offerings for project managers to get trained in the business dynamics of customer projects, and academic studies and research also ignore the subject in large part. Given the value of contractor work in projects, it is furthermore astonishing that not much market research is done on the topic and that reliable data for both the as-is situation and future projections are hard to find.
The Rationale of the Research
In a survey from October/November of 2015, the author of this article asked project managers what kinds of projects they were currently managing. He received 246 responses, and the results were distributed as shown in Figure 1.
Figure 1: Internal projects vs. customer projects (see also Lehmann, 2016b, p.9)
Both types of projects had roughly the same relevance with a slightly stronger emphasis on customer projects. When literature on project management generally focuses on internal projects, as mentioned above, this means that the particular situation of about 50% of the project managers is not addressed by books, articles, presentations, etc. When one looks at offerings from consultancies, one finds also that no expert help is given for a better understanding of what it takes for these project managers to not only meet the specific requirements on a technological level, on professionalism and on the selection of tools and techniques but to bring money home with projects.
In his book “Situational Project Management: The Dynamics of Success and Failure” (Lehmann, 2016a), the author proposes an open typology of projects with the intention to help project managers better adjust their practices to the particular demands of specific projects. The typology was also presented in the December 2016 issue of this magazine in a condensed epitome (Lehmann, 2016b). The distinction between internal projects and customer projects is one of the most obvious. Internal projects are commonly done to implement organizational strategies, meet business goals or to respond to mandatory demands from law or other binding regulations. If they are expected to create financial benefits like cost savings or income, these benefits will generally follow the project lifecycle.
Customer projects are expected to produce this income while they are performed, and the timeliness and sufficiency of the income are the most crucial metric for project success. Their benefit realization is commonly ended when the project is finished, possibly even earlier, notwithstanding subsequent income from services that are then operational and no more project revenues. Figure 2 shows how the lifecycles of projects and benefit generation commonly relate. An essential element of the benefit realization lifecycle is obviously the payment scheme that the contractor has agreed with the customer. The essential benefit from a customer project is the money that the project must make.
More (figures, footnotes and references)…
About the Author
Oliver F. Lehmann, MSc., PMP, is a project management trainer, author and speaker. He has trained thousands of project managers in Europe, USA and Asia in methodological project management with a focus on certification preparation. In addition, he is a visiting lecturer at the Technical University of Munich and a volunteer and insider at the Project Management Institute (PMI).
Living in Munich, Bavaria, he is the President of the PMI Southern Germany Chapter and author of the book “Situational Project Management: The Dynamics of Success and Failure” (Taylor & Francis, ISBN 9781498722612).