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Does outsourcing of PMO Functions improve Organizational Performance?

Qualitative study evidence from a case study in South Africa

 

SECOND EDITION

By Waffa Karkukly, PhD

Ontario, Canada

 



Abstract

This paper presents a qualitative case study, part of larger study that includes a quantitative study as well to investigate and analyze: first, the reasons and impact of outsourcing PMO functions namely (project delivery, project manager development, project methodology and tools, project portfolio management) for organizational performance, and second, the role of governance and standards in outsourcing and performance relationship.  The research is done through multiple case studies representing different industries and geographic locations.  The case presented in this paper is conducted in the mining industry in South Africa. The results indicate that outsourcing of PMO functions have contributed to improved performance.

Introduction

Although there is substantial literature on the topic of outsourcing and project management, the PMO attracts limited attention.  Similarly outsourcing of project management office functions has received no attention in the literature; therefore, there is a practical and theoretical motivation to study outsourcing PMO functions especially in tough economical times were organizations seek not only cost savings, but maximizing performance.

Over the decade, outsourcing has received increasing research attention in response to the increased demand on outsourcing as means for organization to compete and be effective in today’s market challenges. (Mclvor, 2008).

One reason for creating a PMO may be to guarantee consistency of approach across projects. The PMO establishes project management methods, defines and implements processes and procedures, provides project structure, and deploys supporting systems and tools, as well as provides project manager development and training (Bates, 1999).

Literature Review Summary

Outsourcing today became an important practice in organizations with many organizations looking ways to leverage external capabilities.  Outsourcing started in manufacturing for cost reduction and soon moved into other vital organizational functions such as Finance, payroll, tax, HR, call centers, and services oriented.  The model shift and the enhanced capabilities of the outsourcing firms have allowed smaller organizations to step up to the “big” organization level and performance simply by taking advantage of the outsourcing model and having access to the expertise and talent that large companies have. (Brown and Wilson, 2005).

Outsourcing can be defined in simple terms to describe a situation where one organization gives work to other firms, which can execute this work more efficiently, usually for lower costs, and whose capabilities complement or supplement their own. (Kancharla 2007, p.59)

Current outsourcing Industry

Today, the outsourcing market is more solid than ever before, with many companies reaping the benefits of outsourcing, and many outsourcing companies having developed further skills and enhanced their services to accommodate the rising challenge; hence, it is no longer manpower source only to finish particular tasks, it is more of partnership and alignment between the outsourcing company and their outsourcing provider (Dominguez, 2006).

The increasing occurrence of outsourcing has led to it being considered central to the strategic development of many organizations.  Outsourcing is increasingly being employed to achieve performance improvements across the entire business. For example, one particular growth area has been the externalization of Information Technology (IT) with a recent report showing companies outsourcing 38% of their IT functions to external providers (Mclvor, 2005)

The firms that have higher outsourcing success take the time to do their due diligence and to build a business model for outsourcing. Successful outsourcing engagements also require organizations that don’t allow outsourcing a broken process or function. (Dominguez, 2006).

Outsourcing for Performance

Outsourcing provides a potential path to price reductions and increased flexibility, allowing firms to convert fixed costs into variable expenses, and increase their economies of scope. Studies indicate that short term price savings continues to be a predominant reason for both offshore and domestic outsourcing (Ellram et al., 2007).  A key element of using outsourcing as a source of competitive advantage is the management of suppliers. Accessing the capabilities of suppliers offers organizations the opportunity to measure and improve their own performance. (Mclvor, 2005)

In summary, the outsourcing trend may have started for cost reduction and access to specialized skill sets in specific industries, most popular IT, HR, Hospitality.   While many organization functions have been open to outsourcing, project management functions have not yet been outsourced as other functions have been, such as IT for example.

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Editor’s note: Second Editions are previously published papers that have continued relevance in today’s project management world, or which were originally published in conference proceedings or in a language other than English.  Original publication acknowledged; authors retain copyright.  This paper was originally prepared while the author was a PhD candidate at SKEMA Business School in France and published in PM World Today in June 2010. It is republished here with the author’s permission.

How to cite this paper: Karkukly, W. (2010). Does outsourcing of PMO Functions improve Organizational Performance? Qualitative study evidence from a case study in South Africa; PM World Today, June 2010; republished as a Second Edition in the PM World Journal, Vol. VIII, Issue I, January 2019. Available online at https://pmworldjournal.net/wp-content/uploads/2019/01/pmwj78-Jan2019-Karkukly-outsourcing-pmo-functions-case-study.pdf

 



About the Author


Waffa Karkukly, PhD

Ontario, Canada

 

 


Waffa Karkukly
is currently the President and Managing Director for the www.globalpmosolutions.ca. During her career, she has been involved in managing technology and project management offices, as well as being a strategist and change agent transforming organizations through alignment between strategy and operation and delivering through projects, programs and portfolios.  Waffa has helped organization improve their IT and / or Project management practices through building standards and proven solutions that improved the delivery process of an organization.  Waffa is an active PMI member and a frequent speaker and panelist at the various PMI events. Waffa has a BSC in Information Systems from DePaul University and an MIT from Northwestern University in the United States, and a PhD from SKEMA School of Business in France. She is a certified project management professional (PMP) and Agile Certified Professional (ACP) by the Project Management Institute (PMI®), as well as a Change Management Practitioner (CMP).  Waffa is dedicated to improving the understanding and standards of project management practices, especially in the Value proposition of building and sustaining successful PMOs. Waffa can be reached at [email protected]