Your Case Study organization’s CEO says they would like to “outsource their ICT” and asks to you to “make it happen”; this includes any existing systems as well as new systems. You will use the information gathered in the previous assignments and will need to do your own research on outsourcing.
One of the common things, which the information technology industries are experiencing, is outsourcing activities. The reasons for the business to outsource their activities are to improve their strategic business performance. There are numerable information technology and communication, which are being outsourced such as operation of systems and management of telecommunications, programming of applications. Outsourcing may be defined as or it is viewed as rendering the service of purchasing to the other or third parties. The objectives of outsourcing are mainly associated with the costs and benefits (Balocco et al. 2012).The business outsources their activities to bring about flexibility in the service of information technology and also to reduce the cost of operations. The report would be prepared in context of information technology industry IBM.
Pros and cons of outsourcing:
- The clients to which the information and communication technology would be outsourced would provide them with the access to experience the advancement of technology and experienced personnel and they would be able to enjoy the significant service of upgraded ICT services.
- The shortcoming of in house provision of ICT services regarding the technology fixation can be solved through outsourcing. The in house provision might lead then to make use of obsolete technologies due to financial reasons, so this risk could be managed by using the outsourcing activities.
- The operating and recruitment would be reduced to a great extent. The vendor rendering the ICT services would be able to provide the services at the lower rate as they enjoy economies of scale. The client need not make any additional investment as the service provider’s charges fees on the basis of service provided by them (Gunasekaran et al. 2015).
- The solution provided by the vendors comes in the package form and they provide with all the services relating to infrastructure, integration, personnel, support etc.
- The client is exposed to a number of risks and one of the risks is control risk. The client would not have any control over the quality and the level of service provided. The in house provision would not have any direct control over the management.
- The organization would be exposed to the risks of losing the confidential information to the other parties involved. And also the client receiving the service would not have access to the critical information which the vendor might possess and so there might be difficulties in claiming the validation.
- Outsourcing also posses’ threat to security for the vendor organization and for the client as well. The infrastructure of the technology if shared by numerable number of clients, this would lead to the threats sourcing from multiple sources.
- Last but not the least, outsourcing is also faced with the issues of managing the relationships which can results due to the lack of proper communication and if there is not a proper mechanism of solving the problems jointly. The managing the relationships issue may also arise from the personal conflict.
Different outsourcing delivery models:
The typical models which can be considered by the CEO as a solution measures are:
Single provider of Information and communication technology outsourcing.
Multiple providers of Information and communication technology outsourcing .
Business process outsourcing and business transformational outsourcing
The first model of outsourcing provides the opportunity to outsource the operation components such as supporting the help desks. In case of the second model, the vendors can offer multiple operations.
A global delivery model:
Another name for global deliver model is the blended outsourcing model combines the offsite, onsite and offshore resources. The model can be exemplified by IBM which would enable them in providing outsourcing service which would be seamless. It would allow IBM to manage their relations globally and also the service would be innovatively distributed. The main advantage relating to the implementation of the model is acquiring the service at lower rate without any risks. The large corporations who want to hire the services of the global outsourcings would prefer this approach. The vendor providing the service would be easily adapted to the changing requirement of clients. The costs of managing the application n would fall drastically using this model (Dolgui and Proth 2013). The business challenges faced by the clients would be resolved easily using the global delivery model.
Hybrid delivery model:
Another outsourcing model is the hybrid deliver model and this is one of the popular and successful outsourcing models, which can be employed by IBM for rendering the outsourcing services. Here, majority of the work is done by the offshore development center and it include customizing the designs and ensuring that the outcome of the project is in accordance with the expectations of the clients. The rest is done by onsite center and the IBM would be able to perform variety of tasks relating to gathering the information by directly interacting with the clients and executing the projects according to the needs and expectation of the clients (Attias 2014). The IBM would be able to enjoy a great costs benefit as the most of the work is done in the offshore development where the resources are available at comparatively cheaper costs.
If the IBM is dealing with the complex projects, which need long time to get completed, then Hybrid delivery model can be employed. This would not burden the client with the task of managing the huge onsite team and it can avail outsourcing benefits.
Another model is build operate transfer model:
In this model, the company can enter into contract with the offshore development center or offshore partner so that the operations can be initiated easily and at much faster rate than the provisions made in house (Jadhav et al. 2014). The model includes three phases:
Build: In this, the partners provide a solution to the clients and it would help the clients in establishing the brands.
Operate: the services regarding the management of operations, training, accounting, the offshore partner provides payroll so that they are able to devote their time on the core activities.
Options to transfer: the client is provided with the facility of transferring the operations when they want. In addition, while entering into the contract it is mentioned that after the fixed period, client can transfer the operations in its own house.
Employing the BOT model by IBM would enable them to enhance the bottom line of the customers and offload the costs fully. The company would be free from risk of execution (Fan 2015).
Hub and spoke model:
The company would be able to achieve the advantage of best of breed strategy using this model. This models provides the company with the facility that it is off shore partners can work by collaborating with the own hub centers. After providing the training, the offshore partner would be send to the spoke center.
If the IBM employs hub and spoke model for the purpose of outsourcing , then it would be able to utilize the resources efficiently and as the multisourcing approaches is offered by this model. This comes with the ample of benefits.
Process flow model:
One of the effective tools for managing the ICT outsourcing activities is the process flow model. The process starts with the definition of goals of business and using the strategy to achieve it. The needs for source are analyzed and operations are designed so that the needs are met. Another phase comes with the negotiation of contracts and selecting the vendor and the external service providers’ needs to be transitioned followed up with the managing of the performance of service (2016).
Flow chart representing process flow:
Request for information (RFI):
The decision to outsource should be in aligned with the long term goal of the organization. For IBM, in order to provide the clients or customers with the application and network support, the business should follow the rules related to the request for information which needs to be monitored on a regular basis. The objectives of the IBM and current technical environment need to be included in the RFI (Mukherjee and Mukherjee 2014).
- The selection of the vendor and the negotiation for the contracts should be done as per the parameters established in 1 and 2 phase. RFI needs to be used with the all contractors so there will not be any arising of problems. The contractors should have strategic business alliance
- The consultants should attach the request for information so that it would help them in clarifying about the models, videos and other specifications concerning the issues if raised.
- The register of information is maintained with the date of response and the date of creation along with the unique specification code.
- As per the clause of the contract, the RFI needs to be delivered to the team members and other things needs to be ensured that the members have received the receipt individually.
- The team members who are capable of handling the issues with greater proficiency should also be supplied with the copy of RFI. The RFI needs to be registers with the proper response if observed.
- In the distribution list of RFI relevant users needs to be mentioned and each members can respond using the mail. If the member needs to submit the response, they must be granted with the permission to the RFI tools using admin level.
- The process of review using the origin receipt needs to ensure that the cost related issues is solved. Any variation in the costs and budgeting of the project activities in future should be appropriately monitored by the appropriate consultants.
- Reviewing the responses should be accurate and complete as well as appropriate so that the implication of the schedule and the project budget is assured.
- The status of the RFI should be updated by consulting that team member who is appropriate to the tasks so that they are made of acquainted with the changes being made.
- When the requirements are met successfully, the register containing the contents of RFI should be marked as closed out and if the requirements are not met then it should be labeled as the concern of the outside and it is done for the purpose of reporting.
The tenders invited comes with the various sections which include defining the contract, conditions to the contract , describing the schedule of pricing, details of the quality, quantity and frequency should also be provided for. Tenders are invited under the sealed bid process and the vendors need to describe in complete form about how the requirements of the clients would be met with all the information relating to payment and delivery (Hirschheim et al.2013).
The tenders need to be evaluated in respect of financial, capacity and technical assessments and they also need to be evaluated in terms of transparency. Tender can be technically evaluated whether they are effective in terms of cost and the production capacity needs to be found out. The invitation of the tender must be stated with the requirement and the spares cost is compatible with the bid or not should be evaluated (Contador et al. 2012). Assessing the capacity is closely related with the technical evaluation. The financial viability of the tender should be deeply inspected and this is done to ascertain where they seek any financial assistance or are able to purchase the required raw materials and enquiry should be made there is any redundancy costs or if there is any loss of economy of scale and would it result in incurring costs. The costs relating to long term such as installation of telecommunication or items relating to rental items. Evaluating also needs to ensure that the transparency is maintained and this calls for providing a documented and clear audit trial.
The lists of key performance indicators and service level agreement provide by the outsourcing company is as follows:
Key performance indicators:
- Deviation in actual and estimated costs
- Quantity and quality of the services outsourced
- Customers satisfaction improvement
- The testing cost involved in the project should be at minimum.
Service level agreement:
- Designs involved in testing should be efficient
- Cost of delivering service based on time period
- Staffs conducting the service has adequate knowledge
- Service to be delivered within the estimated budget
Assessing the tender financially should include that the price offered should cover the costs and the costs is lower than the estimated costs when the project have been conceived. Retention, terms of payment and the spare costs are provided in the offer (Frey et al. 2013).
Report to the CEO:
After conducting the detailed analysis of the report of the company, the company IBM needs to shift its focus on providing quality service and manage relationship with the customers. The company needs to develop performance matrix to effectively monitor the quality of service rendered. The arrangement of outsourcing should be planned on a partnership basis, as it would help them in keeping pace with the technological changes (Masrek et al. 2014). In order to provide necessary resources, the company needs the support of top management and a dedicated team of management is needed and this would act as input in providing the customers with the quality work. The outsourcing of communication and information technology of IBM would bring in more talents in the offshore services of the business processes. The process model in the report of IBM provides a framework so that the outsourcing of ICT would be done in informed way. This would enable the IBM outsourcing department to minimize the risks involved and maximize the benefits (Khidzir et al. 2013). The suggestions provided in the framework of the phases would provide the maximum benefits.
The templates of the request for information would bring in large number of tenders for the outsourcing activities. The request for information should be prepared according to the guidelines set for the engineers who seek some training activities in IBM so that it is more exposed to the environment needing the application, network and software support. The outsourcing project needs to be dealt with by providing the proper input which could be sustained and this can be done through the contraction and transition phase. In order to ensure that there is a seamless relation between vendors and agency, there needs to be awareness about the policies and regulations concerning the project. The management team needs to be familiar with performance management, information assurance, and other terms such as cost accounting. Another recommendation to be made regarding the ICT projects is that the service level contract should be crafted in such a way so that there is a provision regarding changes in technology, penalty for poor service, benchmarking. In order to response to the needs of agency, the management team should have an up gradation so that it is able to cope up with the advancement and development of technologies. Say for example, in the existing service contracts, if the team needs to refine the measure of performance or address any issues in the service contract, the team needs to be well aware of the assurance products and all the other requirements. As the outsourcing of activities has been recommended on the basis of partnership, so there needs to be arrangement that the management and technical issues can be communicated frequently. And following points needs to be looked into:
- A matrix of pre set performance carrying the carrying the weekly or daily report of the status of service should be provided to the agency.
- In order to address the long term needs or the immediate concerns, arrangements of weekly or monthly meetings should be done.
- There should be an established protocol to be followed by the vendor when they need to address the issues concerning change in technology or the needs for service.
- Communication is to be made effective and qualitative by including the high level management when there is a need to introduce a major shift.
The explained and the thorough analysis of the outsourcing activities of the IBM has brought into light several things which should be involved in the outsourcing of ICT activities and to ensure its success. The various recommendations made regarding the vendors, employees relating to the outsourcing activities after analyzing the reports needs to be implemented by the company. The request for information would provide the company with the large number of suppliers as it is meant for advertising and for inviting the tenders. The widely accepted outsourcing delivery model is general model for all the outsourcing activities. Following is the list of journals depicting the plans and schedule on the specific date along with the status.
Attias, I., 2014. How companies evaluate their offshore outsourcing activities?: A study of the challenges and opportunities associated with outsourcing to different countries.
Balocco, R., Ciappini, A. and Corso, M., 2012. The impact of ICT sourcing on ICT organisation, competences and continuous innovation. International Journal of Technology Management 8, 60(3/4), pp.179-201.
Contador, J.C., Ferreira, A.A., Sim?es, S.A. and Souza, W.J., 2012. It outsourcing: methodology for selecting suppliers criterion for competitive advantage. JISTEM-Journal of Information Systems and Technology Management, 9(1), pp.123-146.
Dolgui, A. and Proth, J.M., 2013. Outsourcing: definitions and analysis.International Journal of Production Research, 51(23-24), pp.6769-6777.
Faizan, M., Ulhaq, S. and Khan, M.N., 2014. A., Defect Prevention and Process Improvement Methodology for Outsourced Software Projects.Middle-East Journal of Scientific Research, 19(5), pp.674-682.
Fan, W., 2015. Optimal pricing and highway network improvement problem under a build-operate-transfer scheme. Advances in Transportation Studies, (35).
Frey, S., Reich, C. and L?thje, C., 2013. Key performance indicators for cloud computing SLAs. In The Fifth International Conference on Emerging Network Intelligence, EMERGING (pp. 60-64).
Garrison, G., Wakefield, R.L. and Kim, S., 2015. The effects of IT capabilities and delivery model on cloud computing success and firm performance for cloud supported processes and operations. International Journal of Information Management, 35(4), pp.377-393.
Gunasekaran, A., Irani, Z., Choy, K.L., Filippi, L. and Papadopoulos, T., 2015. Performance measures and metrics in outsourcing decisions: A review for research and applications. International Journal of Production Economics,161, pp.153-166.
Hirschheim, R., Heinzl, A. and Dibbern, J. eds., 2013. Information Systems Outsourcing: enduring themes, emergent patterns and future directions. Springer Science & Business Media.
Hodosi, G. and Rusu, L., 2013. How do critical success factors contribute to a successful it outsourcing: A study of large multinational companies.JITTA: Journal of Information Technology Theory and Application, 14(1), p.17.
Jensen, P.D.?., 2012. A passage to India: A dual case study of activities, processes and resources in offshore outsourcing of advanced services.Journal of World Business, 47(2), pp.311-326.
Khidzir, N.Z., Mohamed, A. and Arshad, N.H., 2013. ICT Outsourcing Information Security Risk Factors: An Exploratory Analysis of Threat Risks Factor for Critical Project Characteristics. Journal of Industrial and Intelligent Information Vol, 1(4).
Ludwig, H., Stamou, K., Mohamed, M., Mandagere, N., Langston, B., Alatorre, G., Nakamura, H., Anya, O. and Keller, A., 2015, November. rSLA: Monitoring SLAs in dynamic service environments. In International Conference on Service-Oriented Computing (pp. 139-153). Springer Berlin Heidelberg.
Manning, S., Larsen, M.M. and Bharati, P., 2015. Global delivery models: The role of talent, speed and time zones in the global outsourcing industry.Journal of International Business Studies, 46(7), pp.850-877.
Masrek, M.N., Yaacob, M.Z., Seman, M.R. and Ibrahim, A., 2014. The Contribution of Service Quality and Partnership Quality on IT Outsourcing Success. Journal of Emerging Trends in Computing and Information Sciences, 5(10).
Mukherjee, S. and Mukherjee, K., 2014. An empirical study on possible consequences of implementing offshore information technology outsourcing strategy. International Journal of Business Environment, 7(1), pp.1-31.