Earned Value Business Management
is nothing more difficult to take in hand, more perilous to conduct, or
in its success, than to take the lead in the introduction of a new order of things."
Machiavelli, The Prince 1561
Keywords: Earned Value, Performance Management, Outsourcing, Trends, Actual Costs, Scheduled Costs, Planned Costs, Mathematics of Losing.
Earned Value Business Management - Using EV to Manage Outsourced Contracts [P006a]
Managers working in a business environment where key processes have been outsourced are battling to retain control over projects they are responsible for delivering/funding. The key issue they confront is their lack of direct authority to control the destiny of the project. This is caused in part by their lack of visibility of many key commercial processes and in part by the outsourcing model itself.
Many levers previously used by project managers to control vendors working on their projects (eg hiring/firing authority, options for future work, payment provisions, knowledge of contracted rates, etc) have been taken away from the project managers working within the ‘client business’ and subsumed into an overall ‘outsource’ agreement.
To succeed in this environment, project managers need to use new techniques to regain effective control of their projects. One of the most effective is to harness the power of Earned Value Analysis to create a high level of visibility (particularly early in the project) and to use the persuasive power created by the regular reporting processes to regain control. Understanding trends and trend analysis is a key part of this process.
This process must be implemented with a blend of psychology and technology to obtain the maximum benefit and should focus on helping the vendors become effective and profitable. In an outsourced environment, the clients project managers can only achieve success by making their outsourcing partner successful.