J-Trading, Full Circle Outsourcing - Essay Example

? J-TRADING: FULL CIRCLE OUTSOURCING Contents Contents 2 J-TRADING: FULL CIRCLE OUTSOURCING 3 Sourcing strategy 3 Motives for each type of service: help desk and data centre 4 Vendor strategy and contracting 5 Cost-Benefit analysis 5 Transition management and ongoing management governance practices 6 Key problems with J Trading’s sourcing strategy and rationality of decisions taken 7 Helpdesk problem in 2002: Recommendations to John Smith 8 Incorporation of off-shoring strategy 9 Recommendation 11 References 13 J-TRADING: FULL CIRCLE OUTSOURCING Sourcing strategy The application management division has been performing well with the employees of the division being interested in the innovation of new application designs that are attractive in the eyes of the customers. The infrastructure division, however, found less interest in their work as most of the time was spent in the support functions to the PC Helpdesk. The support functions for the maintenance of infrastructure for smooth running of the applications were so tedious and time taking that little time was left for the employees to engage in the up-gradation of the system infrastructure. Due to this slow pace of work, J-Trading lagged much behind the latest packs released in the market in terms of the infrastructure available for running the applications. The up-gradation of the system applications suddenly required huge costs to be incurred in one single time. This led the director of the company to propose the sourcing strategy which was unanimously accepted by all looking at the advantages of outsourcing the operations of the company. The sourcing strategy included giving the contract of operation of the company to a third party who is experts in this field (Olive, 2004, p.20). In view of the rising budget in order to upgrade the infrastructure for supporting the applications, the director of the company decided to adopt the sourcing strategy. In order to move towards the sourcing strategy, the company selected the most suitable vendor among the various available options who would fit the requirements of the company in providing services for maintenance of the infrastructure and the applications. The sourcing strategy also includes providing the contract to the vendors for a specific time period during which the performance of the vendor would be assessed and then the contract would be renewed for further outsourcing of the infrastructure and application systems (Weidenbaum, 2004, p.35). Motives for each type of service: help desk and data centre The motive behind the strategy of outsourcing by J-Trading has been explained with respect to the operations of the data centre and the helpdesk. The efficiency of the data centre in storing data was getting reduced due to the slowdown of the process of up-gradation of the application infrastructure. The company aimed to reduce the customer complaints that have been increasing due to the inefficiency in the operation of the helpdesk. The employees of the infrastructure division who were reluctant in ordinary work of supporting the PC helpdesk lacked initiatives to resolve customer complaints. The sourcing strategy has been undertaken with a motive to increase the quality of operation of the helpdesk and providing the customers with ready solutions (Koulopoulos, 2006, p.64). This could be achieved with the services of the vendors to whom the helpdesk operations have been outsourced. The company also had the motive to cut down any fresh expenditure that could have been of huge amount for addressing the helpdesk issues. The sourcing strategy was also undertaken with the motive of recovering the operational efficiency of the data centre. The vendor who has been outsourced with the operations of the data centre would have the expertise in maintaining the servers that would store the data on the business transactions as well as customer feedbacks. The company also envisaged improvement in the quality of data storage which could be achieved through the sourcing strategy. The company would also be able to reduce the expenditures as compared to what was required for upgrading the data centre with the latest technology applications (Parry and Roehrich, 2009, p.52). The manpower required by J Trading would also be reduced that would result in the reduction of administrative expenditures. Vendor strategy and contracting The vendor strategy also looked at the relative advantage and disadvantages for each of the vendors before the stage of contracting. As per the contract, the vendors were required to provide nightly tape backup services and perform services of basic ping for each and every server. The contract was offered only after the vendors met the service contract parameters and the cost benefit analysis was favourable for the company. There were five vendors that were identified by J Trading which finally came down to two vendors, namely the DR Solutions and the Yoshiko hosting. The vendor strategy for the PC helpdesk was more or less formed on the same line of improvement of the quality of service and reducing the cost of operations and further expenditure that have been anticipated (Easterly, 2002, p.36). The customer queries and complaints in the field of commodity trading required the operation of the helpdesk to continue from 8 A.M. to 8 P.M. The contracting with the vendors was difficult as the vendors were required to comply with the long hours of operation. The vendors also required to supply bilingual experts in order to service the customer of both the east as well as the West. The helpdesk representative required to know both Japanese as well as English. All these created advanced filter in selecting the vendors for the operation of the help desk (Kozami, 2002, p.93). The two vendors that were finally screened for cost benefit analysis and final selection for outsourcing of helpdesk contracts were the CMPI and the Outsourcing Solutions. The cost benefit analysis for final decision taken on outsourcing the contract for operation of data enters and helpdesk has been appended. Cost-Benefit analysis The cost benefit analysis conducted by J Trading for its vendors were done on the basis of comparison of the current cist incurred by the company to the proposed cost to be incurred in case of contracting with the vendors for receiving outsourced solutions. The total cost involved in the contract comprises of onetime cost to be incurred by J Trading along with the monthly recurring cost to be incurred for the maintenance of the data centre. The total cost also included the disaster recover cost of the data enter. The current cost incurred by J Trading was $28363.33 and the annual budget forecasted increasing in cost for up-gradation of the data enters. On the other hand, the cost of outsourcing the operations to both the vendors was on an average $23400 (Jaiswal and Levina, 2012, p.66). The cost benefit analysis showed that as per the annual budget, the expenditures for maintaining the quality services and up-gradation of data enter would require more expenses than the cost of outsourcing the application systems and its operations at a fixed cost and availability of additional services. The additional service include higher network coverage, higher speed of internet connectivity, higher number of tape-back up support, etc which were likely to improve the quality of data enter operations. The outsourcing of the helpdesk operation also considered the cost benefit analysis in order to decide the vendor to whom the contract has to be offered (Mazzucato and The Open University, 2002, p.84). CMPI charged an amount of $200 per hour for the services to be offered to J Trading for supporting its helpdesk while the Outsourcing solutions charged an amount of $415 per hour for providing the solutions of the help desk. Both the companies agreed to the requirements of J Trading of receiving around 500 calls per month and addressing customer complaints in the areas of printing problems, network sharing, e-mail access, etc. The difference in the cost of outsourcing for these two vendors has been compared with benefits for taking the decision on outsourcing the operations of help desk (Forey and Lockwood, 2011, p.84). Transition management and ongoing management governance practices The management governance practices in the case of transition from in house operations to outsourcing of the data centre and helpdesk operations have been analyzed as follows. In the course of transition management, the cost benefit analysis revealed that the cost of outsourcing the data centre operations to DR Solutions as well as Yoshiko Hosting is more or less the same. DR Solutions is a global service provider and has wide expertise in this field. The cost of outsourcing to Yoshiko Hosting is slightly less than DR Solutions. However, Yoshiko acquired Verify who is an expert service provider in this field. However, the quality of support to be provided by Yoshiko was doubtful as they relied on their own Japanese employee in order to cement the existing relationship with J Trading and relied on employees of Verify in order to provide solution to complicated problems in data enter (Verweire and  Berghe, 2004, p.56). The management of J Trading adopted fair and transparent governance practices in assessing the comparative capability of the two vendors based on quality parameters and the level of requirement. Yoshiko has also been found to threaten the management of J Trading that they would cease existing relations if the contract was not given to them. The strict code of governance and management decision, however, gave weight-age to the quality service of DR Solutions and offered them the contract for outsourcing of its operations (Frederikslust and Ang, 2008, p.48). In the process of transition from to the outsourced mode of operations, the contract was offered to CMPI and was chosen to be suitable as compared to Outsourcing solutions. The cost of outsourcing the helpdesk operation of CMPI has been less than Outsourcing Solution. Outsourcing solutions, although a bigger player, did not commit any base service level for delivering of helpdesk operations which was viewed to be unfavourable in terms of the quality of helpdesk and resolution of customer’s complaint. Key problems with J Trading’s sourcing strategy and rationality of decisions taken The key problems with the outsourcing strategy were due to the cost constraints and in the strategy adopted for outsourcing only the areas of operation that required performance improvement. After the slowdown of its operations in 2002, the company required any expenditure over $350000 to be approved by the parent body of J Trading in Japan. The cost constraints restricted them in choosing outsourcing partners of very high quality standards (Goold and Luchs, 1996, p.62). However, right decisions were taken on the vendor strategy in which J Trading has decided to select DR Solution for its data centre operations by giving weight-age to the its quality standards. The decision for selected CMPI was not correct as J R Trading was their biggest client and the CMPI being a relatively small player could pose limitations to the quality expectations of the company. Helpdesk problem in 2002: Recommendations to John Smith The decision for outsourcing the helpdesk operations to CMPI proved to be right in the early stages of the vendor contract. The CMPI employees were provided training on the infrastructure and the system application processes of J Trading and they were able to adapt quickly to the helpdesk support operations of the company (Hill and Jones, 2009, p.27). The employees of CMP were all over the pace in the initial stages of the support function. The quick fix problems in the PCs were quickly resolved. However, the director John Smith started to face the problems after six months of the start of the contract when he started to receive complaints from his employees about the nature of support being provided by the CMPI employees. They were serious problems due to the fact that the CMPI support function for the PC Helpdesk were reported to provide solutions to the employees of J Trading in repairing their PC issues without going deep into the root of the problem. This provided quick fix solution to PC issues but the problems started to resurface in the long run thereby affecting the performance of the system and its people (Cunningham and Harney, 2012, p.75). The problem intensified with the arrogant approach of the CMPI helpdesk support when they did not pay heed to the Japanese work culture and even put the senior employees on hold for the purpose of resolving PC helpdesk related issues. The following recommendations could be made to John Smith looking at the terms of contract for outsourced helpdesk operations to CMPI. As the contract has been made for a period of one year, John Smith could look to indicate the top management of CMPI about the service level agreement that they entered into. John Smith being the biggest customer of CMPI could warn them of not honouring the contract in case the service level agreement is not honoured. John Smith could also look to recommend replacement of the existing support employees with new set of workforce to be deployed by CMPI who could be interviewed by him personally. In case of no signs of improvement, John Smith could look to choose new vendors for outsourcing the helpdesk operation. The new partners could be chosen on the basis of past performance on helpdesk support (Abraham, 2012, p.85). Incorporation of off-shoring strategy The sourcing strategy adopted by J-Trading which is a US based arm of the Japanese keiretsu named JICO have been undertaken due to the slowdown of the performance of the company as a result of the decline in performance of the various divisions of the organization. The company is comprised of mainly two operational divisions that drive the business of commodity trading between the East and North America. These divisions are the Application management unit and the Infrastructure unit which facilities the interaction and trading activities with their customers. The case of J-Trading explains the sourcing strategies of the company and the motives behind the adoption of the sourcing strategy with respect to the help desk and data centre of the organization. The cost benefit analysis in selecting the vendors for the purpose of outsourcing has indicated several drawbacks of the decision being made on the vendor contracts for the period of contract (Marr and Gray, 2012, p.60). This has increased the importance of the importance of the off-shoring in the sourcing strategy of J Trading. The off-shoring strategy for J Trading would mean that the company would take necessary steps to relocate the business operations of the company into some other country apart from their home country. J Trading being the US based arm of the Japanese keiretsu could look to broaden its horizon and further expand its territories to other countries where there are several companies which have industry-wide experience in the field of providing outsourcing services for the data centres and PC helpdesks. The strategy of off-shoring the data centre and helpdesk operations could help J Trading to achieve the functional support for their data centre as well as PC helpdesk at competitive cost as well as avail high quality of outsourcing service due to the availability of large number of players providing operational support to the foreign companies through outsourcing contracts (Pearce, 2009, p.98). The off shoring of operations by J Trading could be done by establishing its business through investments in the foreign countries where the company could look to set up its business of commodity trading. In order to go for off shoring of the operations of the data centre and helpdesk, the company would need to analyze the business environment of the foreign country where the operations are desired to be spread. J Trading would need to analyze the economic status of the foreign market in which the off shoring of the operations of the data centre and the helpdesk is intended. The economic status of the place of relocation of the business is to be assessed which would provide insights to John Smith on the attractiveness of the place for off shoring the operations of the data centre and the helpdesk. The technological advancements, the labour market, political and social conditions are also to be judged by J Trading in the process of off shoring (Witcher and Chau, 2010, p.36). By setting up a data centre offshore, the company would be able to get quick access to a wide range of service providers for the purpose of outsourcing. The company would offer the tender for outsourcing in the market which would applications from the expert service providers for supporting the functions of data centre and helpdesk. The drawbacks of language in case of helpdesk operations could be removed by choosing a destination where the people of the organization are proficient with the local language. The incorporation of off shoring strategy is a strategic step where the J Trading would be able to relocate to a location which is rich in the functional support to the helpdesk and the data centre (Sekhar, 2009, p.89). J Trading would also be able to get the incentives in the overall business that is offered by the state in the place in the place of relocation for the desired support in the operations of the data centre and the helpdesk of the company. Recommendation Based on the prospects of off-shoring in the business of J Trading in specific context of operations of the data-centre and helpdesk, the following could be recommended to John Smith. In the outsourcing of operations of the data-centre and the helpdesk, John Smith faced limitations of cost constraints. Due to the limitations of cost, John Smith had to compromise in outsourcing decisions. Moreover, the quality of support to the helpdesk hampered as the relatively small sized CMPI did not go to the roots of the problem. The server related issues in the data-centre for outsourcing of services by D R Solutions led to loss of productivity of J Trading. The off-shoring of the operations of the company into another place could result in smooth transition of the business operations to the mode of outsourcing. The company would be able to take advantage of the various options present in the place of relocation for choosing the partners of outsourcing that would satisfy the service level agreement as desired by the company (Fitzroy and Herbert, 2007, p.29). The incentives offered by the state in setting up the data centre and the helpdesk would also be enjoyed by the company. This would result in reduction of cost of the company and the sustainability in business operations. The high quality of technical support for the data centre with the advanced server operation would result in higher productivity of the company. The smooth operations of the helpdesk would help in reducing the customer complaints and help J Trading to maintain high quality of service in helpdesk operations. References Abraham, S. C. 2012. Strategic Planning: A Practical Guide for Competitive Success. Birmingham: Emerald Group Publishing. Cunningham, J. and Harney, B. 2012. Strategy and Strategists. 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S. 2010. Strategic Management: Principles and Practice. Stamford: Cengage Learning. Read More