Tegan as One of the Largest Educational Toys Distributor - Assignment Example

? (Assignment) Business Tegan was the second largest educational toys distributor in Europe which was also a ?5bn company listed on the London Stock Exchange. Tegan’s business deal with the Chinese toy manufacturer Fan Li has led to a dramatic increase in Tegan’s business orders disproportionate to growth in sales. The ineffectiveness of Tegan’s Accounts Payable system raised some issues subsequent to this rapid business growth. This situation forced Tegan to restructure its A/P system, and the company adopted an outsourcing approach to solve this problem. From the figure 11.20, it is evident that 70% of the companies outsource their projects in order to tap outside sources of expertise (Developing information systems). In the case of Tegan also, the outsourcing offered some benefits since the company’s outsourcing partner Hrad Technica had possessed significant experience in that field. The Tegan entered into a fixed cost contract with Hrad so that Tegan can avoid further costs related to project development. The outsourcing concept has assisted Tegan to escape from the trouble of reinvesting in the technology. The figure 11.20 indicates that outsourcing process would benefit the firms to reduce the costs approximately to 40% (Developing information systems). The Tegan could also take advantages of various costs such as operational and maintenance costs and project development costs. Moreover, Tegan has not adequate expertise to develop a new A/P system itself. Therefore, it is identified that outsourcing the A/P project was the best fitted move for Tegan when comparing with other available alternatives. 2. The Chapter 11 describes various outsourcing challenges. From detailed study, the outsourcing challenge “scope of definition” was the factor that worsened the outsourcing process. Most of the companies fail to define specific scope for the proposed program while outsourcing their IT projects. These contractual misunderstandings raise many problems and weaken the project development. Under such circumstances, the beneficiary organization tend to believe that the required services are within the scope of the contract whereas the service provider argues that it is outside the contract and therefore the organization must pay extra fees. Same is the case happened with Tegan and Hrad. During the progress of the project, Hrad Technica identified certain system features such as “computational forecasting algorithms for selecting and ordering payments” that had not been defined in the initial scope of the contract (Staats & Upton). This situation led to time delay and need of extra funds for the completion of Tegan’s project. 3. There are some tradeoffs involved in having the requirements analysis for a project performed by one of the firms that would ultimately bid on the project. While performing requirements analysis, the project development firm must try to accumulate information regarding the client firm wherever it is possible. Sometimes, the firms send their official representatives to scrutinize the client’s current systems and practices even though it involves some additional costs. This practice may assist the project development team to acquire client’s trust. Generally, outsourcing firms also give an opportunity for the client to posts feedbacks at various phases of project development. Although the client’s frequent intervention may interrupt the project development flow, it is a better strategy to provide improved services to the client firms. 4. From the requirement analysis conducted by Hrad management team, various strengths and weaknesses prevailing in Tegan’s current A/P system were identified. Hrad’s management interviewed number of users of Tegan’s existing A/P system and this technique assisted them to identify the actual requirements of Tegan. Hrad Technica worked on its bid using the company’s formal work breakdown methodology. Sokol and Zelenka separately analyzed each and every element of gathered information and it gave them deep knowledge about the system. Since the Hrad management had a clear picture of the project development, they could submit a conservative bid which had a reasonable chance of winning the fixed contract price. In addition, Hrad management believed that this methodology would minimize the risk elements to a large extent. However, Hrad’s work breakdown technology aided to win Tegan’s A/P project t development contract for a price of ?900,000. 5. Hrad Technica had its scope and requirements problems once the project commenced. As discussed earlier, Tegan was the second largest educational toys distributor in Europe. Hence, Hrad believed that this deal would assist the company to make strong bond with the Tegan. Since Hrad was a rising software outsourcing firm, the close relation with a corporate giant like Tegan could contributed to Hrad’s success. In addition, successful completion of the proposed project would increase Hrad’s reputation in outsourcing industry. On the other hand, inefficiency in project development might adversely affect the good will of the Hrad Technica. Once the project commenced, Hrad’s management discovered some considerable changes required. The Tegan had been using Dunnock, an old version of a packaged software system for the purpose of dealing with A/P. Dunnock had been largely customized internally over the years “and a number of external modules had been custom-written” (Upton and Staats 2008). Hence, Hrad’s project development team discovered that a broader strategy had to be developed so as deal with this severe situation. 6. Smith knew that “leadership” and “commitment” were not the problem in the Tegan’s IT management failure. From the case study, it is clear that Tegan possessed an efficient group of leaders who showed great commitment to the company. The leaders were capable of identifying changing business situations and thereby formulating timely fitted strategies. For instance, Tegan’s management could realize the need of A/P system restructure at the right time and also selected a project development team for the least price. In my opinion, lack of managerial persons with well technical knowledge was the major cause of IT management failure. Julia Jones was the only person in Tegan who could satisfactorily deal with technical aspects of the A/P system of the company. Hence it was a cumbersome task for Jones to check every low level design documents (LLDs) that were sent by Hrad frequently. Since Jones could not respond on time to the LLDs, it interrupted the flow of project development process of Hrad Techica. In addition, Tegan could not adequately explore its A/P system requirements due to lack of sufficient technical experts. 7. Tegan identified four options such as continuing the current project, put in SAP’s A/p module, modification of the existing system, and selection of another vendor. Although, none of these four options are potential, modifying the existing system would be comparatively better. We know that Tegan was aiming at Christmas season, traditionally biggest season for the company. However, Hrad announced that the project would not be delivered until 2009-10 and it would require an additional ?400,000 to complete the project. The delayed delivery of the project would not benefit Tegan since it would not take advantages of the biggest Christmas season. Hence it is better for Tegan to terminate the contract with Hrad and claim for recovery of ?300,000 that the Tegan had already paid. Similarly, it is not recommendable for the Tegan to find a new vendor at this last hour because that may not contribute to the effective project development. The adoption of SAP A/P module would cost ?5 million and such a huge cost is not affordable to Tegan. At this juncture, the Tegan can devote resources to get ideally fixed, or at least patch the existing system. This strategy would aid the company to complete the program before the Christmas season at minimum cost. Works Cited Upton, David M and Staats, Bradley R. Hrad Technika., Tegan C.C.C.. Harvard College, 2008. Read More