Outsourced Projects Don’t Always Prove to be Cost Effective

For many years QuantiMetrics, a partner company of DCG, has been gathering, from its clients, a rich set of quality-checked data on software projects. Over the last decade we’ve noticed a growing trend in the number of projects that have been outsourced to external suppliers (see chart below). However, it’s important to note that most of these projects still include an internal cost component, often reflecting the clients’ management activities.

QuantiMetrics Data

What is most interesting about this data though, is that while cost containment has often been one of the driving forces behind outsourcing, our insights do not always support this claim. In fact, these “external” projects often achieve quite different levels of productivity, when judged in terms of unit effort, compared to their in-house counterparts.

The differences between in-house and supplier-based project delivery are statistically significant, indicating that outsourcing is not necessarily the most cost-effective option for project completion.  

This data also reveals the value of benchmarking. Many organizations may believe they are saving money by outsourcing, but without data to compare their progress to, it’s impossible to have a definitive answer. Utilizing benchmarking data to compare progress to similar organizations using both in-house and outsourced project teams will provide a better indication of which route is best for a particular company.

As a result of this research, QuantiMetrics benchmarking now allows clients the option to compare their own performance against that of comparable in-house projects and against a supplier dataset, in order to better discern cost savings and best utilize resources.

If you are interested in reviewing the data to support these findings, please let me know. I would be happy to share! If you’d like to talk more about how you can compare your own metrics to industry benchmarks, please leave a comment below or contact Tony Timbol for more information.


Bram Meyerson
QuantiMetrics, Partner of David Consulting Group

Written by Bram Meyerson at 05:00

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