1-What benefits does Schaffer hope to achieve from outsourcing its IT infrastructure?
There are so many benefits that Schaeffer Corporation hope to achieve by outsourcing its IT infrastructure. Let us discuss all of the possible benefits in detail.
Growth Goals:
Since the company is growing and wants to achieve ambitious growth goals in the future time, the company must require improved and extraordinary technology support efforts, which is not possible using the current technology system because entering into new countries and acquiring more business will need a great effort from IT system. Currently, the company’s IT department is working on just day-to-day activities and probably not ready for the big box. If we talk about some outsourcing companies like ABC in our case, they are well-developed countries and have operations in almost every country in which we are operating right now and wish to operate in the future time.
Moreover, the outsourcing companies have large amount of well-trained IT experts, and they have access to current hardware and software resources, which is not possible making the system in-house. If we look into previous years and work, we can conclude that the IT department of the company is not working as efficiently as they would be so having this kind of situation the company will be risker in future as far as growth goals are concerned. The growth goals of the company truly support the idea of outsourcing the IT system.
Furthermore, it is clearly stated in the case study that Schaffer’s board has set strategic growth goals based on growth through acquisition and geographic expansion overseas so this goal cannot be achieved without a flexible and well managed IT system. ABC company which is the choice of the Schaffer’s to go outsource with is a company which is having a large number of IT professionals which is almost impossible for the Schaffer’s to hire the same talent in the company, they also stated that we never had such well trained and flexible employees in our IT department ever.
Saving money:
Saving money is another big benefit for the company by choosing the option of outsourcing The Company will save itself from lots of expenditures. Outsourcing will help companies to save the expenditure of startup cost because the startup needs a lot of funds and a lot of expertise as well. We will not be wrong if we say that the option of outsourcing will save the company’s money by not investing in the current employees in terms of salaries, health insurance etc. It is difficult for the company to search for experts and invest money in them because there is no guarantee if the employee with stay with the company in the future or not.
Moreover, the company will save itself from any maintenance of the servers and most importantly, the development cost of the software etc. will be saved by outsourcing. If we talk about the current IT situation in the company, we can say that it is not established yet in the company. They are standing on the zero level, as this is not the core competency of the company. Starting all of this from scratch will require a lot of money and effort too which is also not confirm that company will going to succeed in it or not, so outsourcing is the benefit for the company in saving its funds.
Initially, the company will require a potential HR system that can hire a potential IT expert for the company this will also cost company, as they have to give training sessions to its employees on what kind of employees, they need for their IT department and what is the need of the system on the future. Therefore, the option of outsourcing also saves the company from training and sessions cost.
Saving time:
Time is the most important factor in everything, the option of outsourcing the IT system will help the company to save time for other operations. Obviously, if the company is not going to outsource and plans to have their own in-house IT system it will take a lot of time for the company to build the one. The company will save time on decision-making and on the tanning of the employees. ABC, which is the option chosen by Schaeffer for its IT services, is a very competent company, they have a huge number of employees, and each of the employees is IT expert. so, if the company is not going for an outsourcing option, they will require a lot of time to investigate competent people and how to get the work done in a short time period.
Furthermore, this is the not core competence of the company to handle IT work so of the company will start doing it in-house they will waste their time more in building the thing which is not their core competency, and this will create problems for the company where they are core competent. Saving time for the right work is the priority of almost every company; therefore, the option of outsourcing will help the company to save its time and effort.
Saving efforts:
The option of outsourcing will help the company to save on the efforts that would be required to build up a new and flexible IT system. The overall company needs to pay the efforts if they are not going for the outsourcing because it is not the work of a few people to develop and search for IT experts. I will not be wrong if I say that the company needs to hire a expert to hire some experts for IT systems, this whole procedure will take a lot of effort from the company and there is a risk of not getting the right employees as well.
Furthermore, if the company is going for in-house facilities the company will require a lot of training sessions that will require a lot of effort from existing employees which can hurt the core competencies of the company.
Achieving the overall efficiency:
By the decision of outsourcing, the company will achieve overall efficiency by saving time, saving efforts and saving money. As discussed above saving time will help the company to look after the other operations, saving money will help the company to invest at the right place and saving efforts will help the company to cope up with the ongoing operations smoothly.
Moreover, the growth goal of the company will be achieved by this decision of outsourcing which will help the company in achieving overall efficiency.
2-Describe the steps taken to develop the RFP and the role that an outside consultant played in this process.
Clear objectives:
The company spent some months preparing a 200-page request for proposal (RFP), which includes what kind of work the company wants to get done and the procedure on how things will proceed in the future times. The company also have discussed the time and cost in the proposal.
The 200-page proposal is all about what the company wants to be outsourced and what exactly the infrastructure and services of the company are.
Identification of the functions which are to be outsourced:
The company itself is so big and has so many different lines of operations therefore, describing what exactly is to be outsourced is the most important step which is taken by the company in describing and building the RFP. The company made a decision on what to build in the house and what exactly to be outsourced.
Benefits of outsourcing work:
In this step company, clearly define on what work should be done and what is the expectations of the company with the outsourcing work.
Selection of the bidder according to RFP:
It has been mentioned in the case that ABC was the lower bidder and cost almost the same which company is having in-house, and ABC was the most efficient and people friendly company they find to work with
Role of outside consultant:
The role of an outside consultant is very important here because the company was having less information on how and where to find the outsourcing companies. The company involved Gartner Consulting to work for them. They find it not easy and not a quick task to do; the company realizes that the procedure of outsourcing would take time. Gartner plays a significant role in guiding the company on what to do first; they guide them on knowing the proper functions of the company before going for outsourcing.
Moreover, Gartner helps the company in exploring what they are so that they can define to the outsourcer what exactly work they want to be done. Gartner asks for the information related to the current employees of the company and they specify the need to know the IT processes of the company very well so they can present it to a third party. In short, Gartner played a significant role in finding ABC Company with the right match.
3-What are the perceived disadvantages to outsourcing raised by its managers?
There were many perceived disadvantages by the managers, let us look in to in detail.
Dependency:
The concern of most of the managers was clearly identified by the level of dependency the company would have if they outsourced its IT function. The managers perceived that this is the disadvantage for the company to not in invest in in-house people and getting the outsource work done. They claim that building our own people will save us from dependency and we can get the long-term commitments from the in-house employees.
High cost:
This is one of the major disadvantages that was perceived by the managers in that this outsourcing will cost us more than anything was, they clearly describe the point that we will need some extra amount than we can do in-house. The managers argue that in future we will lose our holdings on the real amount and we will only pay to the outsourcing company on what they show us.
Less control:
Since the IT department of the company is very important part, the mangers were concerned that the control of the company will go to unknown hands in the future, they keep on trying to present the point of building the in-house capacity and spending on own people.
Risk of non-performance:
The risk of non-performance is the real threat in any new project or work likewise; the managers were worried about the non-performance of the outsourcing company. The point they raised is what if they do not fulfil the requirements and needs of the company? The risk of non-performance was the major disadvantage that has been perceived by the management.
Faraway locations:
Since it is clear, define that the data center will remain in Vilonia; the managers were concerned about the distance because they argue that most of the ABC’S functions are not operated in Vilonia and only less than 20 people are present there. They argue that what we will do if there will be any emergency. Further, they present that point that if we have it in-house, we can handle any situation by contacting people and visiting them.
Fare of terminations of jobs:
Since the company is going to outsource its IT department it was a threat for most of the people of the particular department to end their job if they do not fit in any other operations.
4-Some managers suggested a third alternative: Outsource the IT infrastructure for the Reitzel division only. Which alternative do you think Schaeffer should choose, and why?
The finance manager of Colbert made the point that if we only outsource the IT system for the Reizel, then I would be unfair with the two other divisions because they will bear the additional cost with no additional benefits.
Moreover, the vice president of IT also presents the point that it would be loss for a company to outsourced only one division as we reunite all the divisions previously, he also said that we won’t be able to achieve economies of scale if we only go for one division to be outsourced.
In my opinion the company should go for the whole IT system outsourced for all of the three divisions because it will help the company in future times, if the other 2 departments over performed in future years it will help the company to have efficient IT support. The company will also bear an additional cost of doing the in-house function for two divisions and outsourced only one division.
In addition, the company recently reunited all of its functions in one place for all three divisions. If the company is going for only one division to be outsourced, they will bear an extra amount of separating all the functions again, which would be hectic for the company therefore, I suggest outsourcing all of the three department’s IT system.
5-Why do you think so many disadvantages were raised after the task force recommendation had been developed? How could this controversy have been avoided?
As we all know that accepting change is very difficult for most people. The same situation had to be seen in the company where many people were not happy with this decision because they thought that the power of the company would be separated, and we would have to obey and depend on some other company.
Moreover, many people were afraid of having commutation with ABC people because they think that a lot of time and money will be required to build the relation between the people of that company.
It is clearly defined in the article that most of the employees were worried about shifting to another countries, which are far away from Vilonia, as they were not ready to go to some other countries, so they resisted accepting this.
The fair of lost/terminating of jobs was another problem in the company because nobody wants their jobs to be ended in any way. The employees were very much worried about their jobs or what would happen if the outsourcing got real.
How would the controversy be avoided?
In my opinion, the controversy can only be avoided by showing and presenting the good side of the outsourcing system to the employees. The company heads need to give more and more descriptions to the employees on how this is beneficial for them and for the company as well.
The company can give some written benefits to the employees as well as the company can organized some sessions on what the benefits of ABC company is, and the company should describe their core competencies with the employees and try to get their confidence on that.
Competent employees are the backbone for any organization so the company should retain them by providing the positive picture of the outsourcing project and the benefits attached to it, this is how the controversy in the company can avoided.
