The Pros and Cons of External Project Management

Every IT resource is finite. This is especially true of the human capital in an insurer’s data center. Accordingly, a key consideration for carriers is whether to utilize outside project managers to oversee lengthy implementations.

In addition to freeing up internal resources, an outside project manager may have a core expertise that a company only needs one time. Karen Furtado, a partner at SMA Inc., says that although the use outside project managers is relatively rare, they can provide competencies that can help insurers override obstacles in a project. “External resources can often see problems that are overlooked by internal resources,” she says. “A professional project manager that is brought in is certainly bringing in a rigorous framework. They know how to manage a project.”

What’s more, unlike an internal project manager who might be hamstrung by office politics, an external project manager is able operate relatively unfettered. “If I were doing software implementation, I would want an independent PM, from neither the software company nor the insurer,” Furtado says. “When you use an outside PM you can get an unbiased view of where your project is and they are motivated to finish on time and on budget.”

Yet, using outside project managers does present new challenges, notes Mike Fitzgerald, senior analyst at Boston-based Celent. “The outsourcing of IT projects has caused project management to get a lot more rigorous and scientific then it was previously,” he says. “Once you outsource to another organization, they are going to require things that are final and definite.”

Another potential downside to using outside projects managers is that projects can take time to get off the ground as the managers familiarize themselves with the particularities of the insurer.

“The ramp up time can be much more significant,” says Rachel Alt-Simmons research director in the insurance practice at Needham, Mass.-based TowerGroup Inc. “It can create a lot of challenges.”

An additional concern for insurers, says Fitzgerald, is ensuring knowledge transfer between the project manager and the internal team tasked with upkeep of the new system. “If an insurance company is considering bring in an outside service for project management, they need to make sure that they are clear not only about what the project is going to deliver, but also what capabilities are going to be left behind,” he says.