BIS2 Assignment 2Student Number: 1002631 Review of GlobShops IT outsourcing strategy Beginning with an end in mind (What is the desired outcome?) Globshop is a niche retailer in the travel industry. After Lux bought a majority ownership stake in 2000, Globshops IT functionalitychanged in many ways. The first change was a deliberate decision by management to reorganise and move from a decentralised business model to a more centralised one. The implications on IT were that a part of application support and maintenance was outsourced to ISS. The second change occurred as a result of the terrorist attacks on the World Trade Centre in September 2001. This brings us to the current situation at the firm where all production support for the merchandising system and some retail applicationshave been controlled by ISS for the last few years as well as development. A3 year contract is now due to either be renewed, extended or altogether terminated. The diagram below shows the process undertaken to achieve desired outcomes. We first assess what Globshop is looking to achieve. Then Analyse what s currently being done to meet these goals, and how effectively this is being done. Next we analyse other options and form a strategy based on all this information. Globshop can then implement the strategy based on performance and the cycle continues. If yes, continue This was to improve functionality and transfer of information and reports within the organisation at higher levels.However. Time was saved and hence overall costs were reduced. Business leaders were pleased with visible results in productivity and efficiency. However a scenario similar to that of the US Navy may occur where EDS/HP took complete control of the IT systems and gave extremely poor service. ISS could too become more and more relaxed and lapse in the service provision.The Goals Roger Deen. Outsource everything:Globshop could extend its contract completely and give all IT responsibility to ISS.Overall costs reduced by 35% so far .Working with Business Partners: When requested. . quality. there are new rising concerns due to the size increase in ISS.Concerns that Globshop is becoming heavily dependent on ISS for IT operations . ISS have provided flexible support adjusting to Globshops needs as and when asked. ISS dealt with the situation with agility and the outcome was effective. Productivity has been increasing overall so far and the work is of a higher quality than in the past. . have to put up with all the inconveniences caused. He also wants to ensure that throughout this process the global IT team at Globshop is responsible and accountable for IT outcomes. as well as new risks being undertaken.Data warehouse: Globshoprequested a new data warehouse to be created. the current CIO at Globshop is continuously developing and implementing an outsourcing strategy. offshore . An Analysis of the current IT outsourcing strategy (How are the goals being met?) Outsourcing offshore to ISS: what employees are saying about the current outsourcing scenario: . ISS is already in operation and Globshop as happy overall with the progress to date. speed and agility. more team members were brought onsite by ISS to allow a smoother integration of work with business partners.Concerns about role of internal IT department in Globshop . Costs have been reduced. mainly focused at reducing company costs. Outsource to more than one (3) firm(s):Globshop could team up with other partners (bidding would not achieve overall company outcomes as seen in the report). This would rid the problem of a growing firm. Employees within IT are also finding it difficult to see possible future roles in the company. but could completely disturb operations. however would involve heavy time and cost investments. The implications of this could not only be expensive form Globshop.Concerns about quality of current and future onshore team Initially all goals have been met. keeping a small inshore IT team to monitor ISS. The problem was that the Navy became so dependent on EDS/HP that they were unable to leave even when they wanted to. It could choose 2 other companies. which is also cheaper and benefits from economies of scale. Costs may significantly reduce due to benefits from using a large highly skilled workforce. This comes with higher risks than rewards however. while simultaneously improving productivity. Analyzing alternative development strategies (What else can be done to achieve the goals?) Outsource to a new company:Globshop can restart the research process and completely change to a new company in a similar position to ISS when they started off. if anything happens in a firm. not to mention their current dependency on ISS. Using ISS. VP of Finance. IT would also find this more difficult to manage. also. The risks will be spread across 3 companies and ISS can slowly be given reduced responsibility. agility and also cost effectiveness in the long run if managed strategically. But this option will help achieve productivity. Interpreting our analysis (To formulate an optimum strategy for present case) Achieving outcomes via strategic offshore outsourcing As we know. Using 3 Indian companies. In house IT would increase costs but there may be some benefits to this. Speed and agility will all be internal too and loss of control will no longer be a problem. however a the firm would have to match offshore company prices and promise to provide onshore staff to support the overall process. Globshop already started with a decentralised in-house IT system and moved to a centralised now when it partnered with ISS. Increased internalisation:this would involve reducing ISS responsibility and moving it back within the firm. It would be too time consuming and expensive for Globshop to attempt to create an internal decentralised IT strategy.Globshop is a global firm with offices and retail outlets worldwide. Returning to the old system has little strategic benefit and will not achieve the desired outcomes within an acceptable timeframe.or onshore and outsource alternative IT functions to them as well as ISS. This has the added advantage that responsibilities can be transferred if one firm performs better than another. The other 2 firms would have to be chosen carefully so as to make the transition and combination of work as smooth as possible. As we know. This would instigate healthy competition and keep each firm on it s toes. A firm onshore in Boston or USA would still need to position a workforce in major offices around the world. Labour is significantly cheaper and so are the relative overall operating costs. In the short run there will be transitional costs incurred which is a fear mentioned by Sally Curry. as well as culture. Another fundamentalreason would be to partner with a firm able to support Globshops global nature and meet it s complex international requirements. the fundamental objective for Globshops every action is to reduce costs. Skilled labour would be more expensive to hire. . efficiency. on the other hand would mean similar styles of working.Globshop experienced 35% lower costs and improved efficiency after teaming up with ISS. there will always be 2 others who have the knowledge needed to prevent a complete loss of operation. Internalisation clearly doesn t come highly recommended. quality. an American company and a Chinese company could cause great cultural differences and conflict when operating. There will be obvious benefits of having the IT company close by. It seems like a backwards step in essence. not to mention the additional administrative costs of hiring globally. Indian firms are also cheaper and more resourceful as Globshop has already seen. The problem is that Globshop would stop benefitting from reduced costs due to economies of scale. The IT department will also find it easier to manage an arrangement of this nature. Globshop can control it s own IT and quality. The savings on Application Management relationships can average up to 40% if a firm in India or China is chosen in comparison to the USA. ISS has showncommitment and shown results. Other strategic goals are being met too. has benefitted Globshop overall despite minor hiccups along the way. The current win-win strategy has Globshop reinvesting savings from offshore IT services back into IT which then can be used to give ISS more business and revenue. The future of IT in Globshop. despite growth of the firm. making it highly inefficient to choose a new outsourcing company now. affecting performance in all areas. So far ISS has given Globshop good service and is helping them to reduce costs 35% already in the current amount of time. - - - - . Globshophas become heavily dependent on ISS.The current offshore outsourcing agreement with Indian company. By renewing the contract. ISS may experience internal diseconomies and organisational issues as it grows larger and larger. though based in India. however this now seems less significant compared with the Fortune clients ISS has. IT staff can continue working alongside outsourcing companies to meet company needs. ISS. without having to worry the day to day operational tasks. chances of negligenceare already low despite losing Rahul. showing speed and agility. IT outsourcing has been a great way so far to reduce firm costs.Globshop loses everything causing catastrophes unimaginable. already provide an offshore workforce to main offices in Asia and USA and Globshop benefits from the lower labour costs incurred by Indian companies as well as tapping into the vast IT knowledge base in the country. it is difficult to predict the outcome of any choice. so. This is congruent with the main goal of the firm. with ISS responding quickly to needs. overlapping to Globshop. The company has finally begun to understand Globshops requirements and business activities. A future with ISS? ISS. as well as having minimum resistance to partnering with the ISS IT team. Summary and Case recommendation Spreading the risks When making a strategic decision. Outsourcing should relieve IT staff of time consuming activities. allowing them to focus on strategic and long term outcomes. They already have established working teams and systems in place. If ISS crashes. Globshop has no influence on how ISS is run. as well as overall added productivity. This is an example of spreading risks and also ignites healthy competition amongst the companies. It remains the most strategic solution due to its vast resource base and low costs. Meanwhile they can transfer responsibilities to the new companies as they familiarise themselves with Globshop operations. Globshop used thorough research and a good strategy when choosing ISS and outsourcing IT functions to other firms in India. Globshop can reap the current rewards of an existing outsourcingarrangement built over the past few years with ISS. but Globshop need to stay on their toes to keep up with changes in the markets and to keep risks low. Roger can create an IT outsourcing team.Management and Information Systems by Eff Oz and Andy Jones .Crafting and Executing an Offshore IT sourcing strategy. Meanwhile as for the concern about becoming too dependent on outsourcing companies.outsourcemagazine.http://www. If each firm is tied up in a healthy win-win contract. then there would be no need to outsource this.com .Globshops experience. Using multiple firms gives the internal IT staff plenty to manage and coordinate simultaneously. with great coordination from IT staff then Globshop will stay on an upward progress curve. Having internal staff monitoring can also ensure efficient usage of time and productivity.Class Lecture notes .co.http://www. Roger mentioned the risks involved of outsourcing supply chain management. as other firms have experienced too. in order to maintain a degree of control. it is recommended that Globshop keep some IT tasks it is efficient at within the firm. but if managed well they can be contained and continuous benefits will be seen. responsible for managing and coordinating with the outsourcing companies.techeye. CIO.http://itoutsourcingstrategy. References: . if it can be effectively managed by internal IT staff. It is vital to remember that there are always risks involved when outsourcing IT.. by C Ranganathan.However. creating a win-win situation for existing employees too. Poornima Krishnan and Ron Glickman .uk/ .Research Paper by neoIT: Onshore versus Offshore Outsourcing: Significant differences require unique approaches .net/hardware/us-navy-learns-the-terrors-of-outsourcing-to-hp . Assigning a member of staff to each function ensures a degree of awareness of every area of IT outsourced.