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Background of Study
Project management can be defined as a combination’s skills, knowledge, and practices that allow a project and the project manager to ensure that project is within a required set of budgets, within the given set the time frame, and meet the set of project requirements. The research study initiated by Shendar, 2015 denotes that as the concept of project management is becoming strategic and contains risks that can harm the prospect of the project, businesses as more stress on the project leadership. Project leadership involves the leaders in a project that are responsible to inspire and motivate the team. The study emphasizes the critical and crucial role of the strategic project leadership that highlights the role of the project manager and business leaders that are responsible to deals with strategic aspects of the project, articulated as the vision that inspires the team and transforms their leadership style by the project context. Project leadership is increasingly becoming important, as it leads to addressing the triple constraints of the project, identified as time, budget, and performance. Leisen, Steffen, and Weber (2019) have assessed that related the risk identification in outsourcing IT infrastructure has become a common trend since firms are looking for increased efficiency in other departments, therefore, outsourcing IT to experts leads to the overall efficiency of the organizational system.
The research initiated by Sauer, Gemino, and Reich, 2007, reveals that as the project size, quality, and requirement increase, so the associated increases as well. The research study initiated by Carbone and Tippett (2004) confirms that project quality and size are the prominent elements that increase the risk, the study stresses deploying the risk evaluation strategies to reduce the level of risk. As revealed project managers can reduce the risk by labeling the risk and its impact through the Failure mode and effect analysis (FMEA), which typically helps the business determine the potential failure. Since businesses lack to maintain excellence in all domains, they heavily rely on business process outsourcing to improve the quality of service.
The research kediashi, Et.al, (2012) reveals that outsourcing allows the business to gain excellence in a domain that they are aware it certainly increases the risk which is identified as poor quality service and comprises in the data privacy.
Research Aim
The study aims to determine the strategies for risk management of outsourcing IT infrastructure in service firms companies in the UK. The core perspectives of the study are project leadership and project management. Altogether, the study has the exaggerated concept of leadership, and project management along with its advantages and challenges that shape up appropriate approach to risk management during the outsourcing of IT infrastructure.
Research Objectives
Following are the set of objectives designed for this study:
To examine the concept of project leadership in managing the risk associated with offshore outsourcing.
To determine the challenges and advantages associated with outsourcing IT functions in a project.
To increase awareness regarding IT outsourcing risk for firms to increase the efficiency of firms’ overall system.
To examine the process of risk identification in outsourcing IT infrastructure and its mitigation strategies.
Research questions
What is the concept of project leadership in managing the risk associated with offshore outsourcing?
What are the challenges and advantages associated with outsourcing IT functions in a project?
How risk identification can affect the effectiveness of outsourcing IT infrastructure?
What factors can be implemented by service firms in the UK to strategies the risk of outsourcing IT infrastructure and increase the quality?
What is meant by the concept of offsh
Problem Statement
In the UK outsourcing business, is critical to the economy of the UK, as it is capable to generate around £ 262.8 billion of revenue a year. With much of the capability, it makes it a lucrative industry, however, a study by Blakeley (2018) reveals that despite allocating higher costs to the selection of the outsourced companies they do carry potential risks. Though many studies have previously shed light on the risk associated with offshore outsourcing, much emphasis has not been placed on identifying the risk through project leadership. The study strives to understand the relationship between project leadership and reduction in the risk of outsourcing. This study aims to provide a new dimension to mitigating the risk by using project management and project leadership. It also attempts at facilitating the integrated concept such as project leadership and risk management, in the prospects of offshore outsourcing.
Rationale
Since the concept of outsourcing among businesses has increased, they have lost the potential control over the project that has been outsourced which has created risk, that is mainly incurred by the client. As the study concentrates on the project management principles, it attempts at understanding how the project leadership ability can reduce the risk associated while the project is outsourced. Since out-sourcing is usually done for areas that are not part of the business core process, it denotes that an external agency shows a rough attitude toward it. However, in light of the project management, it is a project that can be evaluated based on its quality, time, and performance. The whole motive of this particular study is how the inclusion of the project leadership can reduce the risk associated with offshore outsourcing. The study mainly concentrates on increasing awareness among IT companies about outsourcing IT infrastructure and the risks associated with its implementation. Since not delivering the project according to the quality, budget, and time required is considered a project failure, the study strives on understanding, the difference project leadership makes in reducing the risk associated with offshore outsourcing and ensuring its success.
Introduction
This study, in particular, sheds light on the integrated concept of project leadership and how it can be utilized to better manage the risk associated with offshore outsourcing. This chapter aims at gathering information about the concept that has been initiated by a previous research study. The initial section provides an overview of the service sector in Europe, it then provides emphasis on the concept of project leadership, and it further provides evidence on the significance of project leadership in project success. The body of the chapter conceptualizes offshore out-sourcing, it then provides emphasis on the underlying reasons for a business going towards the option of offshore out-sourcing. The ending section sheds light on the factors that contribute to the risk associated with outsourcing a project.
Overview of the Service sector in Europe
The service sector plays a significant role in contributing to economic growth in developed as well as under-developed countries. Usually, the advanced nation retains mostly 90% of the enterprises, especially in service firms, and it is one of the important factors in the development of the financials of the country (Zafar and Mustafa, 2017). The service-based firms are not the only solution for the economic progress but also the transformation and development of the employment, generation of income, and scientific progression around the globe (Syed, et al., 2012). According to the report of Government UK (2019) service sector can target different groups which is explained in the available literature.
Service sector definition may differ from nation to nation, especially in the European region, but mostly depending on the employment or assets, either combination of both. Amino (2018), define the service sector, as those firms that deal in different types of services for their clients. On the other hand, the total worth of the service-based enterprise, with the total assets around fifty million but not exceedingly more than five hundred million with a total workforce between 50 to 5,000 (Schulz and Volianska, 2011)
As compared to product-based companies, service sectors have characteristics that help to analyze and identify the needs and sell services accordingly. Therefore, the service companies have some characteristics that distinguished them from other firms such as small size, independence, and close relationship with the customer, along with the business partner, but have limited resources (Mac and Bharied, 2010). The service sector in Europe is considered the economic lifeblood, while in 2006 businesses with up to 249 service companies, exemplified around £1.4 trillion (49%) of turnover and employed 14 million people (GOV.UK,2009).
The most common definition of the service sector is that any business which has services as its core market offering can be classified as a service business. In 2018, there were around 5.7 million service-based companies which were exactly 99% of all business (Rhodes, 2018). The service sector significantly influences revenue assortment in a tax form, developing entrepreneurship culture, creating employment chances, income generations, developing skills of human capital, and most importantly enhancing standard and quality of living. Covering all the above main economic benefits, it develops a perfect competition environment and fair distribution of wealth (Qureshi and Herani, 2011). When there are benefits there is also a potential risk that should be studied while outsourcing. Even today, there is limited empirical research done, to analyze the success of the service sector internationally. Current research emphasizes the fact that service sectors are increasing their share in the global market. Nevertheless, the minorities getting involved in exporting beyond the domestic market (Wynarcyzk, Piperopoulus, Mcadam, 2013). In most of the developed and developing industries, the number of service-based firms is increasing so, there is a need to utilize the extensive range of foundation of finance. Seemingly, well-working capital markets could encourage access to funds, advance enterprise, and empower development situated organizations to work gainfully and make a huge commitment towards business and financial stability. It is recommended that the service sector must consider its flexibility, size, and adaptability while administrating and developing information. In this manner, such firms can react quickly to new chances, expand their tasks and contribute altogether to net occupation creation.
The significant job attributed to smaller organizations experts at service-based division to the critical edge of the UK government motivation, bringing about an assortment of relevant activities and strengthen approaches (Hussain, Millman and Matlay, 2006). When there are benefits, there are also risks, that organizations must face, whether they are small or large. The risk may include, operational risk, strategic risk, security risk, transparency risk, and other risks like the difference between the supplier and consumer ethos, loss of protection and control, and security of the intellectual assets become difficult especially when they become outsourced to another supplier. Specifically in the outsourcing agreement of IT infrastructure, if the price of the contract rise or the term and conditions of the contract are not well explained and performance measurement is not established. It is believed that as a result of outsourcing, the business process faces the risk of losing the know-how of that particular activity. For example, outsourcing IT infrastructure to a vendor that operates with higher power distance concepts would contradict the firm’s performance in terms of the services of that vendor. The foremost reason for contradiction in this scenario will be cultural differences in the organization. The lack of a strategic plan and a poor contract is also a part of the risks of outsourcing (Iqbal and Dad, 2013).
Concept of Project Leadership
At first, it is essential to outline the concept of project management so that a better understanding of project leadership can be obtained. In association, a project is defined collaboration of entities and individuals for the accomplishment of a certain goal. In correspondence, Besteiro, Pinto, and Novaski (2015) defined project management as a series of activities that are strategies for completing a specific outcome. Similarly, Beringer, Jonas, and Kock (2013) defined project management as a set of measures that are input by the responsible individuals and an output is obtained from these measures. A project manager is composed of systematic procedures. The systematic procedures indicate chances of effective achievement of desired objectives. Here effective achievement is referred to as more than desired benefits obtained from the project through management. At this stage, the role of a project manager is crucial as he/she plan organizes, leads, and controls the entire project (Moeller, 2010). Further, the leading role of a project manager determines the guiding and motivating aspects. Consequently, the concept of project leader initiates at this stage. Altogether, project leadership has been identified as a leading act to redirect a team toward successful outcomes when a project is allocated.
The integrated term of project leadership can simply be defined as an act through which the project manager leads the business towards the successful completion of the project. The research initiated by Lundy (2013) that the main reason the project is initiated is it helps sustain and meet the change that has been formulated in the form of project requirements and project objectives. The study denotes that many projects fail and are unable to meet project requirements because they are restricted by the concept of bounded rationality, where the decision-making is restricted by the lack of resources, time, and cognitive thinking ability. By linking the concept of better managing change to project leadership, the study reveals that by dedicating a leader and leadership skills to a project, the project itself can facilitate the changes that if not catered can emerge as project failure and constraints. As stated by the research the concept of project leadership emerged to better manage the prospect of projects and their success rate. In general, project leadership is essential to ensure that the project team, is intrinsically motivated.
Moreover, the literature also indicates the fact that project leaders deliver a fresh perspective on the projects. These perspectives reflect the strategies that are best for the business being managed (Garg and Jain, 2019). Further, a project leader also emphasizes on prioritization of the resources and ensures efficiency throughout the process (Macintyre et al., 2011). Efficiency is referred to as the accurate use of resources concerning the requirement. Additionally, the scope of the project is also controlled by the project leader so that the schedule and budget of the project are all managed in an efficient manner AB. In response to this, a project leader is equipped with the tendencies and capacities to get the work done in a particular manner from his/her followers (Beringer, Jonas, and Kock, 2013).
As the job role of a project leader is wide, the set of skills and traits to motivate and keep the employees on a productive track is also extensive. In association, Musteen and Thomas (2009) defined that a leader is obliged to be visionary so that the long-term vision of the project is successfully understood by him/her. Additionally, Jordan, (2017) defined that a project leader must be able to manage the relationship with their followers through effective communication strategies. Further, a project leader is loyal and devoted to his/her work. Eventually, Verma, (2009) defined a set of characteristics that are present in a project leader namely; charisma, vigilant, and decisiveness. Conclusively, a project leader is an essential entity that assists the organization in obtaining the desired objective.
The study denotes that by applying the concept of project leadership in a typical, project environment a project manager can ensure the integration of the stakeholder, ensure the team members are motivated and most importantly a project manager can strike balance between the time, cost and requirement through the project life cycle. Therefore, the project leader is important for project success. Considering the change's important and necessary aspect of the project, the combination of the leadership skills and attitude allows the project manager to reduce the resistance to change. However, to ensure the project's success the project leadership must support the member with project management support, guidance, and direction, plus it should also be ensured that is project leadership style carries a positive attitude and engages the team lastly it should be incumbent by through communication. Specifically, the current study is related to the project of offshore IT outsourcing in the service sector of UK firms. In this regard, a project leader is referred to as an individual who is responsible for leading the people that are involved in the outsourcing measures of the selected area.
Underlying Reasons for offshore Outsourcing
According to the research initiated by Zafar and Kantola (2018), offshore outsourcing has gained importance and attention both theoretically and practically, the most known reason is it allows businesses to take advantage of the low cost, that results while a transaction is done in a foreign currency. According to the author, certain reasons enforce the management to go for an outsourcing option. The prime reason by the research study is revealed to be lower operational cost, which allows the foreign-based business to gain a significant cost advantage. The other reason revealed is to allow the business to focus on the core process of the business where its core competency is at, whereas outsourcing is the time-consuming process where the business does not have expertise. These reasons give rise to the decision to outsource. Outsourcing an area where the business is less experienced allows it to gain a competency advantage. Additionally, it is not only about gaining a free hand and bargaining more time but, it also allows the business to take the leverage of global knowledge and a competent firm. Since, a business concentrates on the core process, and does not have dedicated a department to an unknown area of expertise, it is better able to manage the internal resources and expertise.
A study initiated by Di Gregorio, Musteen, and Thomas, (2009) reveals that offshore outsourcing mainly reduces the cost of manufacturing business, it allows the business to be freed-up from administrative and technical services. The research confirms that much of the outsourcing tasks and activities are outsourced to SMEs. The research study denotes a positive association between the outsourcing of technical and administrative services and a greater scope of internationalization. In association with the findings from the literature, the role of a project leader is to list the reasons for outsourcing and design a vision. Later on, the project leader is responsible for accomplishing the designed vision by motivating and redirecting the employees towards the desired goals.
Characteristics of outsourced IT projects
It is essential to denote the characteristic of outsourcing projects as it allows the project leader to strategies the use of resources and redirects the people accordingly. In association following are some characteristics of outsourcing offshore;
Characteristics refer to the main factors or the features (Moeller, 2010). Service of intangibility is worthy as it cannot be possessed or even touched but can be produced and used respectively. Some researchers somehow do not agree with the idea of intangibility, mentioning the physical environment and the goods or facilities as the straight part of the service. Therefore, accepting that service can be measured and accessed through a tangible viewpoint. (Macintyre et al., 2011). In this regard, the leaders are obliged to manage the moral hazards while implementing the project.
As far as the nature of physical merchandise, the buyers are responsible to ensure the products (Bebko, 2000). Standardization of administration is troublesome as its convenience cannot be controlled or checked like in the manufacturing business (Verma, 2009). Service ensures the result of the assistance between the benefactor and consumer, in which the consumer is mostly the co-producer of the proposal. Establishment and consumption of the offer occur respectively meaning that service whether ordered, produce, sold, or consumed (Macintyre et al., 2011). Due to this feature, services are vulnerable to variations in demand. It cannot be examined in advance leading to risks for both the provider and the consumer (Verma, 2009). Execution of administration changes relies upon the high points and participants (Macintyre et al., 2011). This concludes the end "item" changes each time it is delivered.
IT Outsourcing and Project Management
Businesses are striving towards reducing their cost for the purpose of maximizing their profits and thus sustaining a suitable position in the highly competitive and saturated marketplace. Business corporations and even small and medium-sized firms outsource some of their functions mainly to reduce their costs (Jordan, 2017). According to Bi et al. (2017), businesses tend to outsource their functions to optimize their processes. The auxiliary functions of the organizations are delegated to contractors or third parties so that they can focus on their main operations. Thus, it can be stated that by outsourcing IT functions, an organization is better able to focus on its core operations and thus sustain a competitive edge in the market. By outsourcing IT functions, the company is not only able to decrease its cost and focus on its main functions, but it can also get its IT work done by professionals and experts (Garg and Jain, 2019). In the current times, many companies are outsourcing their IT functions to attain flexibility in terms of achieving the core aims of their projects.
Factors influencing the success of IT outsourcing projects
The critical review of the literature indicates that certain factors contribute to the success of outsourcing IT in projects. Ward and Griffiths (1996) have defined critical success factors as the areas of business that contribute to the flourishing of business. Healy and Linder (2002) have identified some of the essential factors that have a major role to play abinanaging in the outsourcing of different functions in a business. It has been mentioned by the authors that one of the major reasons why projects can succeed by outsourcing their IT functions is that they can receive high-quality support from IT specialists. It has been mentioned by Gottschalk and Solli-Sæther (2005) that the effectiveness of outsourcing does not simply depend on the cost-cutting but the quality controls and quality parameters that are defined by the third part are also of great importance. This means that the measures that are used by the third-party to monitor the quality standards and benchmarks also play an important role. Williamson (2008) has also pointed out the importance of correspondence with the third party in ensuring the success of outsourcing. This means that the goals of the project should efficiently align with the goals and objectives that are set out by the third party or supplier and contractor.
The abundance of literature about outsourcing has indicated that there are various benefits such as business growth, cost-cutting, growth of production, acceleration of production, speed, and professional expertise (Linder, 2004). Regardless of the wide-ranging benefits of outsourcing, there is a significant percentage of projects that fail due to outsourcing their functions, especially IT functions. As per one of the reports of Deloitte (2008), only 34% of the managers confirmed that delegating IT infrastructure to a third party of contractors yields fruitful results. The report also indicated that managers were of an opinion that a significant amount of their time is wasted in searching for the relevance and quality of IT companies that can match their project goals and objectives. From the review of literature, it can be inferred that lack of quality in the services provided by the IT service providers, undistinguishable tasks, lack of proper communication between outsourcer and service provider, mismatching goals of outsourcer and service provider, and neglecting the service agreements are some of the reasons due to which outsourcing IT functions result in project failure. In this regard, cost-saving, minimal supervision, advanced technological assistance, and a decrease in error are some of the crucial factors relevant to offshore IT outsourcing in the UK.
Project Manager’s Skills in IT Outsourcing
IT projects all around the globe are considered to be complex and highly technical and thus they require multifaceted management skills. A project manager does not only need to possess management skills but should be equally efficient in terms of technical skills and knowledge. The skills of project managers are not limited to management and defining the scope and objectives of the project but it should also include technical skills and risk management skills. In the case of IT outsourcing, the project managers need to communicate and collaborate with service providers (Hirscheim et al., 2002). Espinosa et al. (2007) have pointed out that usually the IT functions of an organization are distributed geographically which means that some parts of its outsourced and offshored which requires a great deal of communication and collaboration. In this regard, the project manager needs to lead the team efficiently. Here, efficiency reflects the tendency of a team to accomplish the desired outcome at the right time.
Leadership is an important trait for a project manager who outsources IT infrastructure. It is composed of different sets such as soft skills and hard skills. Soft skills are referred to as innate tendencies of a leader such as logical reasoning, persuasiveness, and analytical skills (Zafar and Kantola, 2018). On the other hand, the hard skills are learned behavior of the leaders such as numeracy, communication strategies, and diplomacy. The set of soft skills enables the leader to analyze potential risks whilst the hard skill helps in determining measures to address the risks identified. Thus, as per the findings of the research conducted by Banker and Kirsch (2000), a project manager should have a balanced level of both soft and hard skills so that they can be able to manage the team and also be able to make sure that the functions that are outsourced produce fruitful results. A significant amount of literature has pointed out that if the project manager is efficient, it directly and positively influences the project performance.
The significance of project leadership in project success
Baloh, Jha, and Awazu (2008) discovered that the project management of organizations which are used to manage the innovative outsourcing to their business partners to maintain the project success. Project management enhances corporate business planning and increases the rate of project success. The objective of this section is to explore the areas of project management and to what extent the stages of project management are essential for project success via managing the risk. Risk identification is one of the major elements for each company and they are catering the element of the risk associated with the corporate dimension in which the project management aspects are critical in risk mitigation (Ahmed, Azmi bin Mohamad, and Tahir, 2013). The issue of project leadership in assessing the benefit for the company and achieving the objective of the company is getting more attention over the past decade. Various companies are adopting the strategies of project management to ensure the success of the project and to successfully contribute to the project's success. Many global companies have adopted project management measures to enhance operational value and increase the efficiency of the project (Ahmed, and Abdullahi, 2017).
Nowadays companies hire more project managers and employees who have expertise in the areas of project management and project success. Using effective time management via work plan methods, project planning, project coordination techniques, and project value methods. These are some of the methods which are widely used to enhance project success (Novo, Landis, and Haley, 2017). Project leadership is an essential way to examine the area of research and to examine the leadership profiles of successful project managers. The project manager’s ability to define the roles and ability to successfully manage and control the various dimensions of project management add value to the project's success in the corporate sector. In a hyper-competitive environment, companies took measures such as ensuring effective leadership techniques to influence the effective project management for multiple project success (Murugesan2012). Leaders initiate project success via project controlling and project monitoring stages.
According to Laslo and Goldberg (2008), outsourcing is used for project management. Projects are needed to be completed within a specific time frame, budget, and resources. Managers and organizations are required complete in time with favorable outcomes and success. Organizations often used outsourcing when they face a shortage of required resources or to find cost-effective solutions to the problems which are arising in the completion of the projects. Outsourcing provides a solution for the possible insufficiencies of resources.
Challenges and Risks associated with Planning of Resources for Outsourcing
Globally, numerous industries have outsourced their IT infrastructure, the main reason being to achieve, low cost and precision, enhanced productivity, industry-level quality, and increased customer satisfaction. More importantly, outsourcing lets a company outsource weaker and unstable departments’ such as information technology, hence allowing companies to focus on other core areas where it is expert and dominates at. Where admiring the ease and advantage outsourcing give to a company, it’s important to address the risk associated (McIvor, 2017).
Research initiated by Dhar and Balakrishnan, (2006) emphasizes on risk found in the IT outsourcing industry, study enlightens that the outsourcing industry usually poses inherent risks besides, outsourcing a process or department means inviting hidden costs, unexpected out, some,s and diminishing service that distort and negatively influences customer expectation and satisfaction. The further study evaluates various costs by entailing transaction cost theory (TCT), which refers to transaction cost which is incurred in terms of waste of time and effort, it further classifies efforts wasted in searching, monitoring, and negotiating with an outsourcing agency. Whereas other research studies suggest that there are two sorts of cost production and coordination cost, production cost refers to the cost incurred in developing or creating a product or service, and coordination cost refers to the cost allocated in managing and controlling staff Transaction cost is common to increase by asset specificity involvement where production cost increases.
Besides others, the threat involved can be opportunism, where an outsourcing agency or vender might be taking advantage, for instance, aim towards capturing competitors' market and might not perform as per promise and lastly uncertainty. Other unforeseen risks include the risk of undesirable events where unsatisfactory service can cost companies repute, risk of probability function where there is the possibility that it would result in an adverse outcome, risk of variance is a difference in perceived quality by the customer,r and lastly unexpected loss which usage of insurance. As concluding research suggests the risk of outsourcing can be avoided by properly managing and maintaining contractual agreements and quality standards. Moreover, the risk associated with outsourcing can also be managed to keep regular checks, a risk management plan should be initiated and the organization should set its service level agreement (SLA) goals. And finally, companies should frequently manage its portfolio (Rost, 2016).
A study initiated by Kodwani (2007) concentrates on the business process of outsourcing about how it has gained increased importance in human resources where companies are shifting employees’ payroll to outsourcing companies. According to a survey conducted by Hewitt Associates, among various activities and functions, prominent ones being outsourced are outplacement services, employee assistance programs, defined contribution 401(K), COBRA administration, pension calculation, and health benefits. Human resource outsourcing (HRO) is extended to a range that which its processes can be divided into suppliers such as specialists, one-stop-shops, and super suppliers. Specialist includes outsourcing companies such as Hewitt Associates and ADP that deals with payroll processing, training and development, hiring and recruiting, performance management, and performance appraisal. One-stop-shop includes industry players such as Exult and Fidelity Employer services, which provide a combination of human resource services. Super supplier offers above industry-level service, which includes outsourcing companies such as IBM.
However, there are also numerous reasons an organization would outsource its department mainly to reduce information technology requirements and delivery costs, standardize quality and professional improve the strategic IT practices. However, outsourcing information technology might cause certain challenges such as difficulty to operate the designed IT program among employees and staff in embracing outsourced IT infrastructure conflict with certain policies, more importantly, organizations might be endangered of completely losing their data that is backed up by external supporters of the firm. Additionally, the risk associated with outsourcing IT infrastructure entails spillover risk where the company’s secrecy and confidential manner might face a threat of getting leaked.
Outsourcing can also distort a company’s culture; an organization can meet the risk of losing personal touch with its employee it can even discriminate between permanent and outsourced employees. The study suggests that due to increased data privacy it required that companies carefully and cautiously outsource their business processes. It was also observed that more importance should be placed on the outsourcer’s end where employees are not experts as outsourcers become more self-reliant there lies a threat that employees are forced to perform advanced calculations such as 401 (K). Thus, it remains the responsibility of outsourcing companies to improve their process to provide better and enhanced service (Patel, Budhwar, Witzemann, and Katou 2017).
Transaction Cost Theory
Factors contributing to risk related to outsourcing of project
Iqbal and Dad (2013) analyzed the trends related to future outsourcing. The paper suggests that outsourcing today has become unavoidable for business; renowned multinationals have been embedding outsourcing into their various business process. In understanding the trends of the past ten years, it has been seen that it is a decision to make or buy, mainly the decision of business is related to cost-reduction motives. Numerous MNCs have been outsourcing their processes to gain higher operational efficiency. However, the risk is unavoidable as there is a trade-off between cost and quality. Not all outsourced firms can meet up to international standards which refers to the challenge that stands between getting work done. Outsourcing is regarded as the process where a complex and critical department of the business is outsourced; however, business processing offshore outsourcing (BPOO) is now regarded as an evolution of the outsourcing business. It entails a range of services from simple to complex and critical for instance data entry and medical transcription, legal advisory, and processing of bases of pre-set rules; one of the most common examples of offshore out-sourcing is call-centers. Risk related to outsourcing is usually a company losing control over knowledge, which is mainly due to weak intellectual property rights (BPOD, 2019).
The study conducted by Gozman and Willcocks (2019) has illustrated that the risks involved in the IT infrastructure and its influence on the privacy of the cross border and regulations and policies of Project are vital to consider for service firms. To improve the background, this research provides the concept of IT projects which is a trend from the year the 1990s till the current era. There are a lot of sources used in the development of the system which leads to firms incurring huge costs. The investments in the IT systems are big risks because this investment revolves around the probability of zero and one. Therefore, the risk related to the IT infrastructure reduces and changes over time. Moreover, from the various sources, few sources related to the system development are exported from different countries to build a strong network. The strong system of IT reduces the risks associated with Project and the latest security detection systems such as firewalls and modern security devices provide security and decline the risk related to the Project IT.
The study conducted by Erdogmus et al. (2018) supports the concept of the distribution of the risks by taking the facilities management services from the different vendors. For the risk identification, the different systems are designed by the companies which also involves a huge cost, but it can prudently facilitate in the risk identification. There are various alternatives as well which provide support in the outsourcing of the IT infrastructures. For instance, a large company provides facilities management and various relevant services linked to outsourcing. This gives the benefits of the cost distribution and eventually, it distributes the risk as well. This provides support in the risk identification of IT infrastructure in outsourcing. Some factors are impacting the IT infrastructure in the procedure of reducing the risk. These factors are further discussed.
Loss of Control
The loss of control is the major risk factor for the ineffective project execution of the outsourcing projects. The loss of control of the IT infrastructure is one of the factors which increases the threats to security and problems in the IT infrastructure. Moreover, when any firm outsources its IT infrastructure, it gives the entire authority to the third person by trusting the third party with one of the firm’s integral internal operations. The dependence on the experience and expertise of the people involved in outsourcing along with their services and resources leads to a loss of control where autonomy is transferred to the party to whom the service is outsourced (Mathew, 2017). The Loss of control in the project management could be done to the ineffectiveness of the leadership. Moreover, the control ineffectiveness increases the project failure rate which reflects negatively on the company's business or financial revenues.
Lack of Compliance
Lack of compliance is one of the major factors which is contributing to the failure of project management. The risk of ineffective compliance increases the risk of the failure of the project and adds negative value to the project's success. Compliance is one of the major elements for project leaders which affects project management stages and enhances the practical implications of the project management stages (Alexandrova, 2015). Project compliance is one of the major elements which is recognized by the shareholders of the company and to ensure strong compliance to complete the project on time and rightly.
Communication Flow
Communication flow poses a certain threat if ineffective communication between one party to another was done. The management of the company enhances the communication to ensure the success of the project and via effective communication, managers strive to control the outsourcing project. Whereas, the failure in the communication method poses a certain threat that could increase the risk associated with the failure of the project (Iqbal et al., 2017). The project control can be done via effective project communication between the functions and divisions to mitigate all the risks and implications caused by the miscommunication.
Clarifying the scope of the outsourcing project
Many times, companies fail to predict the scope of the project and how the project could benefit the company to achieve the business objectives and to conduct a proper plan to make the decisions of the project management and execution (Chavdarova, and Wang, 2010). Paying attention to the details of the project which is to be outsourced and calculating the financial return of the outsourcing project to minimize the risk associated with the project. Conducting a project management plan to clarify the scope and the needed requirements for the outsourcing of a particular project and undertake the project risk factors and shape the strategies accordingly. Failure to measure the scope of the project and the needed resources to execute the process of outsourcing the project could add value to the failure of the project due to ineffective measures. The scope of responsibilities that are associated with the process of outsourcing the project is one of the major factors for organizations, and the failure in this element could pose a certain threat such as loss of money, failure of the project, and loss of resources.
The role of project leadership in managing the risk of the project
The role of project leadership in managing the risk associated with the project such as some of the risks is outlined above and management of the company is directed by the project leader to enhance corporate strategies to mitigate associated risks. Project managers continuously strive to improve project performance and ensure the motivation of employees. Additionally, the project managers are inclined towards the formation of an effective working environment to enhance project success. However, the role of a project leader is much wider than just the comprehensive management of the project. In today’s global economy, the role of the project leader is significant, and executing each stage of project management requires sufficient resources to execute mass projects (Anantatmula, 2010). Leadership is vital to achieve the projected efficacy and to increase the chances of the project's success in the organization. The objective of this section is to ensure the employment of correct measures and strategies by the project leaders and to ensure the efficacy of various projects.
In association, the potential risks under an offshore IT outsourcing project include loss of control, limited accessibility, continuous development cost, moral hazards, and loss of privacy (Ahmed, and Abdullahi, 2017). In response, the project leaders ought to employ their analytical skills to determine the probability of occurrence and impact of the listed risks while executing the project. Additionally, the swiftly rising change in the behavior and actions of the project leadership influences the rate of failure and success of the various projects (Ahmed, Tahir, and Azmi bin Mohamad, 2013). In contrast, the fundamental responsibility and function of the project leader are to ensure the project leadership is to produce the change and to set a direction for its employees to ensure the effective control and execution of the project. Therefore, the leader’s strategies are the risk management plan that is composed of risk probability, impact, scope, severity, and mitigation method. Here, the mitigation method is composed of avoiding, sustaining, and preventing practices.
Factors of Project Success
Five factors are affecting the project's success which is defined:
Strategic Focus
For any project, the strategic focus is considered the most important factor. In detail, it defines the strategies that are employed by the project managers and related authorities. It is essential because the continuity of operation depends on the strategy of the project. To compete with the deadline, a comprehensive strategy is ought to be determined that also shapes the quality of the project. (Besteiro, Pinto and Novaski, 2015).
Leadership
In project management, leadership is a crucial determinant that defined the motivational guidance of the people working on the project. If the leadership of the project is effective, it results in timely completion of the project along with an accurate amount of resources (Petit, 2012). This is because the increment in the allocation of resources is managed comprehensively.
People
There are various people with different technicalities involved in the projects and the projects will change and mainly rely on the type of people involved in the projects. Project management becomes increasingly challenging if the stakeholders are related to the different backgrounds which creates the probability of disagreement amongst them during the decision-making of the projects (Beringer, Jonas, and Kock, 2013). The people also confront the challenges that are faced by the managers in terms of project management. Such as the skills, decision making and work environment of the project members also impacts the project management (Besteiro, Pinto, and Novaski, 2015). Hence, a competent team results in the success of the project.
Project Process
The project process itself relies on a few determinants such as the nature of the services and different sorts of products and the usability of those products and services. To sustain and fulfill the demands of customers and the business, suitable techniques are used by the project managers to offer the timely delivery of the goods and services (Turner and Müller, 2005). A project process that engulfs the demands of customers and business subsidize into a successful project.
Risk Management
Eventually, risk management is ranked as a significant success factor that results in a project’s success. It is because, risk management allows the project team and managers to identify potential risks and set preventive measures (Wynarcyzk et al., 2013). As a result, smooth execution of activities is practiced and timely completion of the project takes place.
Introduction
This chapter provides insight into the methods that have been used in the entire research study. This research defines the methodology used to undertake the research related to the risk identification in outsourcing IT infrastructure for the service firms operating in the UK. In this section, all methods, tools, and techniques are discussed which are being used to conduct the entire research study. Initially, this section highlights the research philosophy along with the research approach that is used in this study. Moreover, this chapter includes the research design, risks related to the research, and pilot study to obtain the initial results of the research study. The data collection method, sample size, and sampling technique are also part of this section. The most important part of the research methodology is the data analysis that defines the test methods and tools to examine the collected data. In last, this chapter comprises the ethical consideration and limitations of the research.
Research Philosophy
The research philosophy is the pathway through which the complete research is undertaken (Cazeaux, 2017). The research philosophy is classified into three types which are interpretivism, positivism, and pragmatism. In this study, a suitable philosophy is an interpretivism. The justification of using interpretivism philosophy in the study of the role of project leadership in outsourcing IT infrastructure in UK service-based firms is because the focus has been implicit on the explanation and understanding of reality within the extents of human reasoning. Interpretivism is the replication of reality and can be attained through socially built instruments such as emotions, feelings, language, and shared meanings. Interpretivism is the subjective approach in which the researcher makes a depth comparison of the project leadership and its ability to manage risk in outsourcing IT infrastructure in UK service-based firms. The other benefit is that this approach is dynamic, flexible, and provides a detailed understanding of the research.
Research Approach
The research approach is classified into two categories one is inductive and the other is deductive (Armat, 2019). This research is based on the inductive research approach. The advantage of selecting an inductive research approach for project leadership in outsourcing IT infrastructure for service firms in the UK is that the researcher works with greater possibilities as compared to the deductive approach. The inductive approach starts with a specific observation. It does not trail any type of pre-determined information. Following the wide range of information would often be caused by the construction of a new theory. Further, the other advantage of the inductive approach is that helps the researcher to incorporate current theories and literature.
Research Design
Research design is also known as the methodological choice, it is the systematic description and explanation of the procedure of the research study (Dannels, 2018). There are three major types of research design which are qualitative, quantitative, and mixed research methodology. The qualitative research design is used to undertake the study. The major advantage of using this research to identify the risk in outsourcing IT infrastructure in the UK is that this research design builds the insight and understanding of the problems and ideas which are incorporated in the research study In this research design, the collected data can be examined in detail by comparing and contrasting with the previous studies related to the risk in outsourcing IT infrastructure in the global perspective and how it can be managed through project leadership companies in the UK.
Pilot Study
Pilot Studies are small-scale, preliminary studies that aim to examine the important factors of the study (Scaife et al., 2016). The study explores the project leadership techniques in managing the risk of outsourcing IT infrastructure in service-based firms in the UK the researcher takes an interview with one participant in the initial stage. The advantage of a pilot study is that the researcher forecast the findings and the right direction about the researcher. Hence, from the sample size of 4 managers, the researcher conducts interviews with one participant and observes the nature of the data, and decides the right direction for the collection of interviews.
Research Risk
There is a certain risk related to the collection of data that is mitigated through the agreement and permission from the company for the interviews of the employees. The other risk is related to the data conducted through interviews might be biased. Hence, this business creates trembling information related to the project leadership technique of outsourcing IT infrastructure to service firms in the UK.
Sample Size
This study is related to the risk identification of outsourcing IT infrastructure in service-based firms in the UK. The data is collected by the primary research method through the interviews. Hence, the sample size for this study is the 4 managers of the multinational companies in the UK, who have specific knowledge about the project leadership of outsourcing IT infrastructure in service firms in the UK.
Data Collection Method
The data collection is categorized into two main types which are primary data collection and secondary data collection (Ostrow, 2017). In this study, the researcher uses the primary data collection method to gather data about the project leadership technique of outsourcing IT infrastructure in service firms in the UK. The advantage of the primary data collection is that it is accurate and first-hand data. In the primary data collection method, the interview technique is used for the data gathering. The managers are selected from the companies that aggressively participate in the operations and functions that are outsourced. The selection of managers is based on the experience of the managers that have proper knowledge about outsourcing operations. The interviews are collected from the multinational companies that are operated in the different countries of Europe. The justification for conducting interviews with the manager of multinational companies is that the researcher wants all-inclusive views, ideas, and perceptions about the risk identification related to the outsourcing IT infrastructure in service firms in the UK.
Sampling Technique
There are many types of sampling techniques used in research studies (Etikan, Musa, and Alkassim, 2016). The most suitable sampling technique for this study is the snowball technique. The main reason for using this sampling technique is the approach one manager of the multinational company and through that manager to reach the other experienced managers. The justification for using the snowball sampling technique is that it is a time-consuming and costly process to find and meet each manager who is related to the multinational company and has knowledge of project leadership in outsourcing IT infrastructure in service firms in the UK. Hence, the researcher finds one manager and used the contact of those managers to meet the other managers for data collection.
Data Analysis Technique
It is the part through which the results of the study are declared and illustrated. In light of a study conducted by Mihas (2019), it has been depicted that it is the technique through which collected data is investigated, organized, examined, and analyzed. This study is based on primary data collection and qualitative research design. Hence, the suitable method for the analysis of collected interviews is thematic analysis. This analysis caters to both the theoretical assumption and research question of the study related to the project leader in outsourcing IT infrastructure in service firms in the UK. The thematic analysis allows the researcher to develop and progress the range of study based on past individual experiences. This technique of analysis is based on themes that are generated by the researcher and supported the existing data with the findings of the previous research studies. As the thematic analysis does not need the comprehensive technological and theoretical knowledge of preceding qualitative studies, it provides a more reachable and accessible form of analysis, specifically for those initially in the career of the research.
Ethical consideration
Ethical considerations are the essential parts of any research study, in consideration of this the researcher has taken care of values, policies, rules, and regulations of the research while conducting the study (Bryman, 2016). While interviewing the project leadership in outsourcing IT infrastructure in E-service firms in the UK, the researcher has never forced any respondents to take part in this study, every participant related to a multinational company has taken part in the research by his or her consent and by permission of their company. Furthermore, they were given the choice of contribution to the study at any time they deem suitable. The most important thing is that the researcher is guaranteed the secrecy and privacy of participants. The participants are assured about the confidentiality of their identities and names and will be demolished after the accomplishments of the research study.
Research Limitation
Research limitations are the boundaries through which the complete research procedure is undertaken (Serra-Pompei, 2019). This research is based on project leadership in outsourcing IT infrastructure in service firms in the UK. The other limitation is the time and budget while undertaking the research study. This research is undertaken only from the perspective of the service firms of the UK therefore the results of this study can be mainly used in that particular sector and the relevant country. For future purposes, this can be conducted from a global perspective. This is based on the qualitative interviews which have a small sample size and specific information. This can be conducted through secondary sources for comprehensive information related to the project leader in outsourcing IT infrastructure in service firms in the UK.
Conclusion
In consideration of the above analysis, it has been concluded about the importance of project leadership in managing risk in offshore outsourcing. The research is concluded in the deliberation of the service companies which are operating in the UK. For the sustainability of the projects, the management, and its leadership play a key role apart from the business operating in a specific country. Therefore, for effective growth and management, all businesses require leadership. The aforementioned statement can be supported by the study of Leisen, Steffen, and Weber (2019) where it has been defined that the leadership accounts for the leaders of the project who motivate and encourage the team. Inspiring leaders in the company lead their team which results in increased productivity and save time and cost of the project as well. The outsourcing businesses of the UK are precarious to the economic conditions of the UK as it has been found that it produces around 262.8 billion of revenue a year. This indicates that the size of the UK’s outsourced service industry is gigantic which makes it likely to face various challenges and risks.
It has been stated by Blakeley (2018) in the literature that companies should implement risk management and the process of risk identification effectively. The author of this research has carried out interviews with managers of different organizations to get comprehensive data on risk identification processes and to be able to link and conclude recommendations for strategies of risk identification are to be reasonable to the size of the companies. The process of risk identification strategies is evidenced to differ based on the size of organizations. However, the data provided are based on the company operations and from the interview data.
To cater to this risk involved related to the leadership in the project management certain strategies are used in the risk assessment. This research is also based on the assessment of the relationship between the reduction in risk outsourcing and project leadership in the projects. The justification to undertake this particular research is that the focus of this research is mainly on the time and cost of the project which is outsourced. Therefore, in considering the leadership of the project and the role of leaders to reduce the risks linked with the outsourced projects. There are a lot of global strategies such as the model for the risk assessment and decision-making are used by the companies. The outsourcing of services helps organizations to focus on their core activities, capitalized on capabilities in which they have the expertise, and outsource the activities in which they are lacking efficiency. The utilization of outsourcing of services encourages advancements and innovation. It is an effective way of sharing expertise and experience to adapt to changes occurring in the marketplace.
The service sector plays an important role in contributing to the economic growth of developed, emerging, and underdeveloped countries. It is claimed in the research given by Zafar and Mustafa (2017) that the developed country has a majority of the business related to the service sectors in which the increasing financial conditions are the most important element. Therefore, the growth in the economy helps to encounter the financial risks related to the offshore outsourcing of the projects. The service industry of the UK is comprehended as the economic contributor which leads to a better financial position. This conclusion is supported by Vojtech et al. (2017) who illustrated this through a study related to the infrastructure of the entire network. Risk and their impact vary from country to country. Three different categories are there through which risk identification can affect the outsourcing of services which are; project-specific risk, relationship-specific risk, and macroeconomic risk.
Project-specific risks and relationship-specific risks are interconnected in a way that the bad attitude of the client directly affects the project. Similarly, poor implementation of the project strategies will lead to a bad relationship with the customers whereas, the macroeconomic risk is an entirely different risk from the project and relationship-specific risk. In macroeconomic risk, financial accountability is very necessary because the allocation of financing and evaluation of the expenses will decrease risk or increase risk (Aruan, Crouch, and Quester, 2018). Risk identification affects the quality and services of the outsourcing, the dependency of a supplier on the service provider is a high-rate risk because sometimes service level can be decreased and it will affect the reputation of the service. These risks decrease the competitive advantage of the outsourcing of the services.
Offshore outsourcing has attained significance and crucial attention both practically and theoretically. It has been illustrated that the most influential purpose of offshore outsourcing is to operate the business with the benefit of low cost and better output. It majorly helps to decline the cost of manufacturing projects as compared to the service sector and SMEs. Currently, there is a shift in the functions of businesses concerning the increasing technology and growth in IT. With the implementation of IT infrastructure, the offshore outsourcing projects effectively focus on their core functions of the projects and endure the competitiveness in the market. On the other side, the skills of the management and leaders have also a major role in the risk evaluation in offshore outsourcing. Apart from the soft skills technical skill like IT saves a significant amount of time and budget for the projects. This research has theoretical relevance such as the transaction cost theory defines the segregation of the cost which is changing with the governance structure. The loss of control, deficiency of compliance, the flow of communication, and clarifying the scope of the outsourcing project are the factors that are affecting o risk related to outsourcing of project. Also, the other factor which is related to the factors of project management is budget, deadline, members, and stockholders which have a different impact on the management which direct to the impact of offshore outsourcing.
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