In a recent Computerworld article, "Unlearn Outsourcing 101: Back to Basics," author Joe Hogan, VP of strategic outsourcing programs at Unisys, recommends that outsourcing decisions be based on a lot more than simply cost-cutting. He states:

Outsourcing is not about cost savings; it’s about cost savings over time – the time needed to build a relationship with the provider, streamline processes and innovate. In fact, roughly 70% of outsourcing agreements fail because they don’t take into account the long term. Those who enter them with false expectations become disillusioned and give up.

He also recommends the right tools for managing the relationship: a framework that links business processes to infrastructure; and "accountability tool" that shows the reporting structure, provides a de facto governance process, and accelerates resolution if issues arise; and comprehensive measurement. Of course a Project Workforce Management approach fits this work model quite well.

I would add to Hogan’s recommendations that companies should be sure to outsource the right work. I see too many companies make the mistakes of over-outsourcing, so that potentially strategic functions are handled by people who do not have the same vested interest in the long term success of the organization.

The first to be outsourced work should ideally be the commoditized, "boring" work that is not core to your company’s value proposition. Then, it should be definable in discrete projects with well defined deliverables. When outsourced work meets these criteria, and is managed with the proper Project Workforce Management tools and techniques, these company-vendor relationships will build value and drive business success over time, as Hogan suggests.