Outsourcing IT Operations and IT Management - Coursework Example

Outsourcing – IT Operations & IT Management] [Course Name] [Student Name] [Instructor] [Class] Outsourcing Executive Summary This research report starts with an introduction of outsourcing and its impact on the business world. The first part of the report is designed for evaluating the aspects when a company is considering outsourcing part of its business, what elements does it need to include when developing a contract, or formalising a relationship, with a potential vendor. The second part of the report includes points which must be considered by the management when they are outsourcing their IT operations and IT management. The third and last part of the report include factors which involves a case in which a contract was to be signed with an outsourcing company who have their headquartered overseas but with local presence. Introduction Outsourcing involves the conversion of corporate functionalities into pre-defined service agreements which are looked after by third party individuals. This practice has now become common in many international companies especially in food manufacturing companies. The priority for such companies is their consumer safety which is regarded as the most important factor of consideration among food manufacturers. This is why they have outsourced their analytical testing phases with the intention of obtaining accurate and quick results. Outsourcing can also be regarded as the delegation of business responsibility to another party which is able to manage and administer a particular business operation more precisely. Hence before finalizing the contract with a certain company it is required to consider multiple interdependent business and scientific variables while finalizing the contract[Car97]. Outsourcing Business processes When it is time to outsource business processes the management must be extremely careful in selecting an appropriate business associate since their relationship will leave an everlasting impact on the company’s reputation among their consumers. If at any stage the company officials have made an unwise choice it will leave an everlasting impact and can also damage the company’s reputation. Now it has become common to outsource various IT operations to third party vendors similarly there have been a shift of strategy as large enterprises are considering of moving their outsourcing operation towards in-sourcing within their organization[Mar931]. If at any stage the client/vendor association becomes sour then several doubts arise about the suitability of outsourcing. Keeping all these factors under consideration it is required to select the diligent offshore partner which will make the end result more satisfactory for both parties. Usually the prime motivation while entering in outsourcing business is increased profits but a company is also required to consider several other associated factors while entering in outsourcing contract. Factors to incorporate in Outsourcing contract After having a thorough investigation of the factors involved in offshore outsourcing the company must follow the best practices approach. Moreover it is also required to have a clear picture of the pitfalls in order to avoid any disturbances in the contract. By following these simple steps a company can decide to go offshore meanwhile ensuring a stronger association along with enhanced consumer satisfaction and increased profit margin. Pricing Price is always regarded as the vital aspect for outsourcing and it is significant to obtain the best possible price after conducting proper research on your outsourced partners. Pricing is determined after having a thorough examination of the services and reliability of the outsourced partners[Rob963]. The Management Team Another important factor to consider while considering outsourcing is to explore the management team. It is significant to know what type of experience or exposure in required for fulfilling your required objectives. The experienced leaders make the transition process easy and smooth as they have proper control over the variables and know what phase will follow after completion of every step. In case any difficulty arises they can manage that stage by utilizing their skills and experience by employing creative solutions. Service Level Agreement The service level agreement can be regarded as most essential document of transition. If there is nothing written properly then it is probable to have complications in future. The documents serve as written agreements for business operations which leaves no room for confusion. Hence minimum level of quality can be achieved from the services which are provided by the outsourcing company[Jae99]. Flexibility It is essential to evaluate your prospective vendor in a rigid as well as flexible manner while assessing their qualities. It is apparent that outsourcing contracts require sound contacts which is determined by their reliability and experience. It can be a stage when it becomes a necessity to renegotiate the terms and conditions of the contract. The vendor will be flexible enough to comprehend the client concerns and will act accordingly. Communication Communication is regarded as one of the most significant aspect of communication which requires every vendor to understand what is required by the client. Communication must be simple and straight forward which allows client and vendor to understand each other concerns. It is also essential to reply promptly to the queries and must be competent enough to inquire information in clear language which will avoid any delays in the decision making process. Staff Resources Above all it is required that vendor must have sufficient staff available which is not only qualified but also experienced and competent who is able to execute daily business operations smoothly and efficiently. Reliability Every business requires reliability and efficiency as their key elements for having a long term business. If the management of an organization decides to visit potential vendor’s site it is imperative to have infrastructure safeguards which will backup against downtime. Adequate staff must be available for having a thorough check of the technical specifications. Resource management There are two scenarios which must be considered while focusing on resource management. First is the one which requires distributed workforce to manage the workers who are geographically distributed. Then there is an area which involves workers who are located relatively in geographic proximity. The different time zones are the major barriers to project collaboration along with inability to have valuable face time with staff which can never be replaced by online collaboration tools such as texting, emails and instant messaging. Hence it is extremely essential to have a well-conceived plan for project management and communication with outsourced workforce, as this will form a healthy working association with a outsource firm[Jam992]. Real-Time Information It must be ascertained that both parties should have update and state of the art testing technologies which can not only save time but will also be able to reduce costs. The analytical methodologies involved in formulating and testing should involve equipment and prospects which are able to formulate a comprehensive testing program which can gather real time information and execute operations in the similar manner. Important Factors to Look For When Negotiating A Contract Here are some of the significant factors which must be considered while developing a contract with an outsourcing company. The contract can either be verbal or written but it is advised to select written contract agreement. Following are some of the criteria which must be met if you are considering having an agreement with the outsourcing provider. Agreement The two parties involved in outsourcing contract must have a clear understanding of the working operations of each party. They must have a clear meeting of the minds where one party will be providing their services, products or goods while the other party will be accepting the agreed service or products in return on some agreed fee[Bar03]. Payment or Costing When going into an agreement with an outsourcing provider it is required to have monetary reward in exchange of the services offered by one company to the other. This fee is an agreed amount which is specified after having consent from both parties. Lawful Enforcement of Contract The other best possibility is to have a contract agreement in which there are no illegal aspects involved and the contract conditions must be legally enforced by both parties. The legal stipulation and indemnity statues differ from state to state hence it is required to thoroughly evaluate every legal aspect in order to avoid any complications in future. The Purpose for the Contract must be Legal When both parties have understood each other’s obligations it is time to formulate a contract which must possess a legal purpose. A consultant who is not a licensed professional engineer does not holds the authority to have sign a contract but if he/she does then it is regarded as an illegal contract which consequently can never be enforced in a particular state. Outsourcing IT Operations & IT Management Every other organization is looking for ways to have some outsourced business operations. This strategy not only reduces stress from business operations but also allows an expert to put substantial time and effort in attaining a particular work. Modern organizations are trying to reduce operational costs and become competitive by having a design which is implemented in a formalized manner. Outsourcing involves a contract which involves delegation of one or more processes which are critical business operations of a parent company. The main reason of outsourcing IT Operations and IT Management is to attain greater efficiency in executing the routine procedures. Once these two business processes are outsourced it will provide multiple benefits to the base company in terms of attaining a competitive hold on the market[Bar03]. Outsourcing offers various advantages to the business as it allows the company to obtain greater efficiency in carrying out daily business operations. Moreover it also reduces costs, reorganize the staff structure and boost the level of working capital. The quality of products and services is increased which eventually reduce the level of business risk. Outsourcing allows businesses to remove conflicts with extra workers. The number of workers at a place will be less which will allow management to focus more on core business operations rather than focusing only on IT management and operations. Mostly the IT management consider outsourcing as an opportunity for implementing cultural change which introduces mature capability along with new disciplines. It allows companies to exchange best practices and introduce new disciplines within their company and get rid of bad accumulated habits of the past. While considering the internal help desk and support of the organizations it is apparent that companies can attain process discipline and have a strong disciplinary status with an outsourcing provider[Jae03]. If these old issues are left unattended then the company will fall through the cracks of issues and ultimately the organization will start losing the ability of managing their operations. The company is required to have a proper tracking of the associated costs which they have invested in a particular technology. By having a smooth transition of outsourcing IT management and IT operations will allow cultural change to be induced within the company. Company Headquartered Overseas but With Local Presence Considering today’s environment and comparing it with the one present ten years back, we can assess a great big difference in the outsourcing industry. Previously outsourcing was regarded as an innovative approach and was also related more as a risky business operation. However things are completely different now. It is regarded as a mainstream operation which allows seasonal or cyclical demands to be executed using additional resources. Management team If a company is headquartered overseas but they will be having their local presence then in this scenario it is required that the outsourcer should review the Management team which they will be dealing with. The company officials must evaluate the two significant dynamics which involve the strength of the management team along with the organizational structure of the business. Whether it is IT management or IT operations it is required that the outsourcer should have the necessary strength available with their team which will lead towards successful incorporation of business processes. If the management team is able to ensure low turnover then it is time to work closely with cultural and visionary changes which will be followed in a diverse working environment[Jae99]. The company which will be having their local presence must select outsourcing organization which has a flat organizational structure. A flat organizational structure allows both parties to communicate in a smooth flow. The middle management levels are removed in the flat organizational structure which provides opportunities to the key stake holders to have direct contact with staff and customers. Moreover following a flat organizational structure allow companies to have faster response time towards changing environmental conditions and balancing their services according to the customer preferences[Ber03]. Similarly it must also be kept in mind by the outsourcer that they will be dealing with frontline business operations whereas the backend will be dealt by outsourcing provider. At the time of signing agreement it must also be mentioned clearly that the outsourcing company will be responding quickly when their need arises. If the outsourced company selected by the management is an experienced one then there will be no difficulty in managing daily business operations as they will be experts of their area. Right mix For a company which will be having a local and international presence it is required to have a mixture of the right mix. For having a company which will be dealing with various operations from diverse sources it is required to have the drivers of motivations. Moreover it is essential to introduce a right mix of skills and capabilities for dealing with various deterring clients and to ensure reliable business continuity. Apart from all this before outsourcing it is essential to review the outsourcer abilities and evaluate whether they have enough site and sufficient resources available in order to deal with the varied business activities. Similarly it is also essential to evaluate the value adding proposition and the cultural alignment along with the motivational drivers before making a final decision of outsourcing IT management and IT business operations. Transparency The other most significant factor which must be evaluated is transparency in dealing with the critical business aspects. It is required to gain confidence in outsourcers working activities. They must share daily business reports pertaining to our business operations which will further enhance the trust and reliability of the outsourcing company. Flexibility, Stability, Disaster recovery Although outsourcing has become a common business strategy but it also be kept in mind that when a particular area of business operation is outsourced than it can a condition that outsourcing company is based offshore which will naturally be sensitive to any possible risks. The potential outsourcers are required to exhibit sound reliability in their appearance and commercial proposition. This will allow client to make sure that their business is in safe hands[Yuk03]. Conclusion The successful outsourcing demonstrated by clients reveal that outsourcing involves judicious planning and disciplined vendor selection. It is required to have a commitment and collaboration relationship management which can be regarded as the vital success factors in outsourcing. The aptitude to outsource IT functions across various business platforms allow businesses to have end-user support functions which are available around the clock. The new IT infrastructure has opened a new world of possibilities which have unleashed a new competitive advantage which is beneficial both for the established and the start-ups. The trend of outsourcing is continuously increasing on a global scale and capitalizing on these opportunities requires strong and efficient operating system. For being positioned optimally it is required for future growth to plan and consolidate the systems and manage the expenses accordingly. References Bardhan, A. D. & Kroll, C., 2003. The New Wave of Outsourcing. Fisher Center Research Reports, pp. 1-12. Feenstra, R. C. & Hanson, G. H., 1996. Globalization, Outsourcing, and Wage Inequality. NBER Working Paper . Lacity, M. C. & Hirschheim, R. A., 1993. Information Systems Outsourcing; Myths, Metaphors, and Realities. The ACM Digital Library. Lee, J.-N. & Kim, Y.-G., 1999 . Effect of partnership quality on IS outsourcing success: conceptual framework and empirical validation. Journal of Management Information Systems, 15(4), pp. 29 - 61. Lee, J.-N. & Pi, S.-M., 2003 . IT outsourcing evolution---: past, present, and future. Communications of the ACM - Wireless networking security, Volume 46, pp. 84-89 . Ono, Y., 2003. Outsourcing business services and the role of central administrative offices. Journal of Urban Economics, 53(3), p. 377–395. Quélin, B. & Duhamel, F., 2003. Bringing Together Strategic Outsourcing and Corporate Strategy:: Outsourcing Motives and Risks. European Management Journal, 21(5), p. 647–661. Quinn, J. B., 1999. Strategic Outsourcing: Leveraging Knowledge Capabilities. Sloan management review, Volume 40, pp. 9-21. Saunders, C. & Gebelt, M., 1997. Achieving success in information systems outsourcing. California Management Review, pp. 63-79. Read More