The case study written by Jeffery and Anfield is intended to throw light on a deal involving Technology Infrastructure Solutions (TIS), an IT-based firm and a whole seller company i.e. Office Supply Inc. (OSI) who needs to outsource its information technology solutions. The company has faced a drastic downfall in its stock prices and net income in two continual years and a raise in its expenditure. Though OSI offers diverse products in the market, its technological products account for the highest percentage of its net sales among other product lines ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"9Bp96sfI","properties":{"formattedCitation":"(Jeffery Mark)","plainCitation":"(Jeffery Mark)","noteIndex":0},"citationItems":[{"id":20,"uris":["http://zotero.org/users/local/2y0xTiQs/items/Y32HJIAL"],"uri":["http://zotero.org/users/local/2y0xTiQs/items/Y32HJIAL"],"itemData":{"id":20,"type":"article-journal","title":"Outsourcing at Office Supply Inc.","container-title":"Kellogg School of Management Cases","page":"1-19","abstract":"Students will: Understand the strategic context of IT outsourcing and when it will benefit a firm; Understand IT infrastructure outsourcing and management issues such as personnel reductions and organizational change; Learn which outsourcing pricing model is the best fit for a project; Create a rigorous cost-benefit financial analysis and ROI model for IT infrastructure outsourcing; Analyze the model and learn how to financially engineer the deal to be a win-win for the outsourcer and client.","DOI":"10.1108/case.kellogg.2016.000252","ISSN":"2474-6568","author":[{"literal":"Jeffery Mark"}],"editor":[{"literal":"Anfield James"}],"issued":{"date-parts":[["2017",1,1]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Jeffery and Anfield). However, the IT department of the company has delivered inadequate effects over the performance of the organization over time. That is why the company OSI consulted TIS to outsource its services in IT infrastructure and solutions to lessen the technological expenses as well as reduce the organizational complexity to get benefitted in the long run.
Outsourcing is defined as the repositioning or shifting of a corporate function to a different location or a third-party vendor that contracts to execute and manage it on behalf of the parent company ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"cz9NtEdi","properties":{"formattedCitation":"(Hodosi and Rusu)","plainCitation":"(Hodosi and Rusu)","noteIndex":0},"citationItems":[{"id":19,"uris":["http://zotero.org/users/local/2y0xTiQs/items/NNN5ENR6"],"uri":["http://zotero.org/users/local/2y0xTiQs/items/NNN5ENR6"],"itemData":{"id":19,"type":"chapter","title":"IT Outsourcing: Definition, Importance, Trends and Research","container-title":"Risks, Relationships and Success Factors in IT Outsourcing: A Study in Large Companies","collection-title":"SpringerBriefs in Information Systems","publisher":"Springer International Publishing","publisher-place":"Cham","page":"1-9","source":"Springer Link","event-place":"Cham","abstract":"This chapter presents the definition of Information Technology Outsourcing (ITO), the importance and trends in ITO, the research problem, goals, and motivations including the delimitations of performing research in ITO in large companies.","URL":"https://doi.org/10.1007/978-3-030-05925-5_1","ISBN":"978-3-030-05925-5","note":"DOI: 10.1007/978-3-030-05925-5_1","title-short":"IT Outsourcing","language":"en","author":[{"family":"Hodosi","given":"Georg"},{"family":"Rusu","given":"Lazar"}],"editor":[{"family":"Hodosi","given":"Georg"},{"family":"Rusu","given":"Lazar"}],"issued":{"date-parts":[["2019"]]},"accessed":{"date-parts":[["2019",11,29]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Hodosi and Rusu). OSI works in diverse products and has a great customer base who place their orders online. The need for outsourcing arose due to the following reasons at OSI:
Complex IT infrastructure and its management
The high maintenance cost of servers and databases
A lower number of IT experts due to a higher turnover rate
Training costs to train IT professionals
OSI was encountered with the challenge of managing its supportive department which resultantly affects the efficiency of its core competences. For this purpose, the organization plans to consider the option of outsourcing its technological management solutions from TIS that is known for providing remarkable IT experience to big ventures in the market.
The outsourcing from TIS will benefit OSI with:
great IT knowledge and experienced workforce
reduced costs based on economies of scale
highly equipped IT set-up
technological infrastructure management and security
more focus towards its operational functions and business
TIS proposed a plan determining the cost factors as well as improved IT solutions, fewer downtime periods and the satisfaction of the customers. Along with assisting OSI, TIS also analyzed its profit margin and service charges for providing the services. Consequently, TIS suggested a cost-plus pricing model for the contract based on business process outsourcing.
Action Plan:
The plan proposed by TIS for 5 years was depicting the reduction of its expenditure for OSI but the major constraint observed was the first year of the contract in which TIS could cover the integral portion of cost-saving for OSI was in question. However, the TIS suggested plan looks adequate for OSI to outsource its IT solutions but OSI can diminish the constraints involved in this deal by acting on IT infrastructure outsourcing that will significantly reduce the equipment expenses, its maintenance and depreciation costs. Moreover, OSI needs to implement change management practices within its organization to make outsourcing successful by setting up measures and metrics to ensure quality assurance and processes to minimize the communication gap between the two firms ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"yJpPdohL","properties":{"formattedCitation":"(Damanpour et al.)","plainCitation":"(Damanpour et al.)","noteIndex":0},"citationItems":[{"id":24,"uris":["http://zotero.org/users/local/2y0xTiQs/items/FGSAGIHR"],"uri":["http://zotero.org/users/local/2y0xTiQs/items/FGSAGIHR"],"itemData":{"id":24,"type":"article-journal","title":"Outsourcing and insourcing of organizational activities: the role of outsourcing process mechanisms","container-title":"Public Management Review","page":"1-24","volume":"0","issue":"0","source":"Taylor and Francis+NEJM","abstract":"The decision to outsource organizational activities is studied widely, but research on the insourcing of outsourced activities is scarce. We study the outsourcing decision as a process, and investigate the influences of organizational mechanisms on its sustainability. We argue that organizational learning from the outsourcing decision process could over time result in competencies that enhance the sustainability of outsourcing decisions. We examine outsourcing and insourcing processes longitudinally. The results indicate that the outsourcing process mechanisms, especially the mechanisms associated with implementing the outsourcing decision, predict insourcing. We discuss the implications for future research on outsourcing and insourcing of public services.","DOI":"10.1080/14719037.2019.1601243","ISSN":"1471-9037","title-short":"Outsourcing and insourcing of organizational activities","author":[{"family":"Damanpour","given":"Fariborz"},{"family":"Magelssen","given":"Catherine"},{"family":"Walker","given":"Richard M."}],"issued":{"date-parts":[["2019",5,1]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Damanpour et al.). This outsourcing will also provide the OSI IT workforce to support the services provided by the third-party as well as look for new technological solutions for the firm.
OSI IT outsourcing involves many risks that may put the firm in danger. Though the outsourcer will help OSI to focus on its integral operations and bring innovation to its business by providing IT support along with ensuring availability and data security, it will also put OSI to the risk of reliance on a third-party source involving the risk of conformance with the policies of OSI, disagreement to contractual terms, inefficacy in the operations, misfortunes in the transition period and customer reliability issues ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"vi0s5gAi","properties":{"formattedCitation":"(Lair)","plainCitation":"(Lair)","noteIndex":0},"citationItems":[{"id":28,"uris":["http://zotero.org/users/local/2y0xTiQs/items/EX2QX9JA"],"uri":["http://zotero.org/users/local/2y0xTiQs/items/EX2QX9JA"],"itemData":{"id":28,"type":"article-journal","title":"Outsourcing and the Risks of Dependent Autonomy","container-title":"SAGE Open","page":"2158244019845177","volume":"9","issue":"2","source":"SAGE Journals","abstract":"Outsourcing affords those who engage in it a type of autonomy, albeit a highly dependent, and thus risky, one. The autonomy associated with outsourcing comes from how it allows entities to pursue their activities in a more self-directed manner (e.g., it gives entities greater control over what activities they perform as well as how they are performed). However, this autonomy is only made possible by an entity becoming dependent on those who take over its outsourced activities. In other words, it is only by becoming dependent on others that outsourcing frees entities to peruse their activities in a more self-direct manner. Recognizing the dependent nature of the autonomy associated with outsourcing is important because of the risks it poses both to the entity engaging in outsourcing and to some broader social concerns. This article focuses on three such risks: how this autonomy is dependent on the availability of suppliers willing and able to take on one’s outsourced affairs; how this kind of dependency can lead to a loss of an entity’s internal capabilities; and how an entity can inadvertently outsource, and thus lose control over, its core activities. Given that the dependence inherent in outsourcing relationships is the source of so many of outsourcing’s benefits as well as its risks, this article highlights the highly precarious nature of this dependent form of autonomy.","DOI":"10.1177/2158244019845177","ISSN":"2158-2440","journalAbbreviation":"SAGE Open","language":"en","author":[{"family":"Lair","given":"Craig D."}],"issued":{"date-parts":[["2019",4,1]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Lair). However, these risks can be mitigated by communicating the contractual terms appropriately before the agreement, keeping the parallel systems in line for the first year of transition and practicing the initiatives of change management within the organization.
Works Cited
ADDIN ZOTERO_BIBL {"uncited":[],"omitted":[],"custom":[]} CSL_BIBLIOGRAPHY Damanpour, Fariborz, et al. “Outsourcing and Insourcing of Organizational Activities: The Role of Outsourcing Process Mechanisms.” Public Management Review, vol. 0, no. 0, May 2019, pp. 1–24. Taylor and Francis+NEJM, doi:10.1080/14719037.2019.1601243.
Hodosi, Georg, and Lazar Rusu. “IT Outsourcing: Definition, Importance, Trends and Research.” Risks, Relationships and Success Factors in IT Outsourcing: A Study in Large Companies, edited by Georg Hodosi and Lazar Rusu, Springer International Publishing, 2019, pp. 1–9. Springer Link, doi:10.1007/978-3-030-05925-5_1.
Jeffery Mark, and Anfield, James. “Outsourcing at Office Supply Inc.” Kellogg School of Management Cases, edited by Anfield James, Jan. 2019, pp. 1–19, doi: 10.1108/case.kellogg.2016.000252.
Lair, Craig D. “Outsourcing and the Risks of Dependent Autonomy.” SAGE Open, vol. 9, no. 2, Apr. 2019, p. 2158244019845177. SAGE Journals, doi:10.1177/2158244019845177.
