Managing Virtual Teams: Macro-Soft - Case Study Example

Managing Virtual Teams: Macro-Soft This paper aims at discussing how the concept of virtual teams exists across the world and its influence on various business models. The paper then moves to the case study of Macro-Soft, where the software house has developed and managed virtual teams for developing a tremendous cutting edge over its competition, presenting a classical example of managing virtual teams. The most interesting fact about this case is that the low cost architecture that was the USP of the business matches with the ultimate outcome of developing virtual teams i.e. cost cutting. Introduction According to Rahmatian (1995), the advancements of science and technology, particularly of information technology have linked the world from one end to the other turning it into a global village. Today, interacting with individuals across the globe is not an alien term as it used to be in the past, whereby the traveling of information was required to cross a great many hurdles of various sorts and means. With the advancements of information technology, a growing phenomenon is of specialization rather than generalization, whereby the former implies that individuals have specific core competencies focus their business attention towards the same leaving out the side-operations for other specialty players of the respective industries and markets. The phenomenon is commonly known as outsourcing; its concept is explained as follows in an example. Hereby, firms tend to give out their non-core operations to a firm, having the same operation as their core operation, for attaining advantages such as additional efficacy levels, cost advantage, etc. Classical examples include the outsourcing of hiring and recruiting function, IT set up, marketing and selling function, finance function, etc, and all these are outsourced only when a particular firm wishes to concentrate more towards its prime and core competency. Amongst this trend of outsourcing is another trend known as that of virtual teams, which is often considered a variant of the same or vice versa. What are Virtual Teams? In accordance with Robson (1997), virtual teams are a set up within themselves whereby people from various regions form a team using the internet and information technology structure. In such a set up, the team members need not to meet physically, in fact, internet becomes the major source of contact, and virtual meetings are held as need up. The biggest advantage here is cost saving. Assume an example, whereby there exists a firm that wants to formulate a virtual team for its finance division. It realized that it needs four major services; formulating payables and receivable histories, credits and collections, disbursement of funds, and financial statement formulators. The firm may realize that for the first and fourth service, they would only need individuals who can work from home and develop their documentation. Also they may realize that such professionals are cheaper in cost and smarter in value in the Asian region, therefore, they can hire individuals from that region to assist them in this job. Similarly, for credits and collections, there are specialized firms, who deal in this aspect, and likewise goes for the disbursement of funds – this service is often provided by banks to their corporate clients. The business would then need only a single finance coordinator or finance manager to coordinate with these sections, and the cost would incredibly decline. These four services might need collaboration at certain point in time, but would otherwise work independently with a direct reporting line. The packages offered by the service providers would be lower than the cost incurred if such services are developed in-house. The following sections of the paper analyze the application of the same to a business in the US. Macro-Soft – background and company profile Macro-Soft is a renowned software house with its head quarters in the US, commonly known for its low cost development of customized softwares and applications. This firm, despite its seemingly limited resources has done incredibly well of late brining technology in the reach of a small business, as small business cannot afford to buy expensive software licenses, and also cannot afford the expensive maintenance contracts of the huge and expensive solutions. This was a major gap or a window of opportunity in the businesses sector, particularly relevant to the small businesses, as they wanted convenience at affordable prices. Macro-Soft initiated from Silicon Valley with the intention of fulfilling the same demand gap. Initially it turned out to be a fail project because as they hired local US residents or even expatriates, their salary expectations were on the hire side, while this project was looking at low cost resources. The next move Macro-Soft made was to outsource its developing team to India, Bangladesh and Ukraine, while the head office in the US remained responsible for requirement analysis and developing quotations and proposals. This did bring the cost down considerably and the firm began to move out of its infancy stage to become a profitable venture and break even was ultimately attained. Macro-Soft – take over and turn around… Macro-Soft is a software house that is in the business of developing business solutions for enterprises, specifically targeting small and medium size businesses. The project, as stated was initiated at Silicon Valley, and judging its performance, it was bought at a huge price by a local investor, who had a sense for making the business big. The takeover initially had a negative influence on the business since a change of management was not welcomed by the existing customers and even the employees felt threatened about their existing empowerment. Slowly and gradually, things changed around, and the new management brought up the idea of virtual teams within the organization. The then present state, though considered outsourcing, but was a variant of virtual teams only, but the new management decided to alter the proceedings around. They analyzed the possibilities of formulating virtual teams and cutting down further costs, and thus price of the products and services – this had a reason to it. When the decision of outsourcing was made, it formed Macro-Soft as a giant in the industry in terms of its low cost, attaining market leadership through such low costing that was difficult to match. Gradually, as the trend of outsourcing increased, Macro-Soft lost its stand out point in the market. Additionally, not only local software houses outsourced various functions to the Asian countries but also the Asian software houses developed their off-shore centers in the US, and such was the condition in few weeks after the firm was bought by the new management. This was the time for turn around. Formulation of Virtual Teams – the turnaround strategy As the venture was taken over to attain profits, the management devised a turnaround strategy and that was to develop virtual teams, which would co-exist in structure, be supported through the head quarters, and ultimately beat the competition as it did previously. The management developed the case that there are following major functions of the organization, alongside their functionalities: Developing customer requirement specifications Turning these into system requirements Development of the system After sales services and support Developing quotations and proposals On analysis of these major functions, it was realized that the firm needs to have only two teams at sight i.e. in the US office, one for developing the requirements and the other for on-site support function. Rest all, the management realized, can be outsourced. Another point is that the management decides not to outsource all the functions to a single contact, in fact, it decides that they would keep an on-site coordinator for each activity, while the facilities would be given individually to separate entities. The following section illustrates how virtual teams were formulated within the given set up. Formulation of Virtual Teams & Coordination The cycle of the set up was devised in a manner that supported the operational cycle of the firm. The first step of the operation is to develop customer requirement specifications through interviews, analysis of existing data, and various other modes of ‘pulling out’ customer requirements. This requires direct interaction with the clients, one-to-one, and therefore, this function cannot be outsourced, as it requires direct interaction with clients showing the values of the business. The step is more commonly known as capturing user requirements. The second step of the operation is churning up these user requirements and translating the same into specific system requirements. This is an office job; thus, the firm outsourced it to software houses mainly in Bangalore (India) and Kiev (Ukraine). The job done from here moves to the third step which is the development of quotations and a proposal. This is a confidential aspect, and quotation work cannot be given to the developer. Therefore, the requirements are either embedded with the providence of quotation and proposal, or the alternate options for providing the service of system requirement specification is given the task for providing quotation and proposal. Once the quotation and proposal are developed and approved from the client (this generally is a tedious process since it requires revision to the requirements and the proposal), it is then forwarded to the pre-qualified list of software houses for their proposal on system development. The most efficient bid is accepted and the same developer is given the contract for system development. With the moving cycle of system development, the system changes take place and ultimately a prototype is presented, containing precisely all requirements as stated in a checklist form. The final stage of the dealing posterior to the implementation is the after sales services and support. This stage cannot be handed over to the virtual teams at any cost, in accordance with the management vision, because they believe that the one, whose service is better, is the firm that gets the business. Subsequently, the formation of virtual teams within the organization assists Macro-Soft in developing a sound platform to move towards its strategic goal as it has been since the point of its initiation and that is to develop and implement cost effective solutions for all businesses. The following section of this paper presents a critical analysis of the existing scenario at Macro-Soft. Critical Analysis of the Scenario According to McManus (2002), when firms come into existence and when businesses are initiated, they tend to have a vision. This vision gradually revises itself over a period of time, and moves up to skies, much beyond the first vision created. Many a times, the first vision is aimed at a ten year plan, or even beyond, forcing the business to pursue this vision and attain it throughout the life of its existence. Similar was the case with Macro-Soft; their vision of being the top rated low cost business solution developer was not an objective but rather a journey, especially in IT industry because the competition enhances at all points in time. Subsequently, at one point in time, the firm may be at the top of the table in the defined section; however, at another point in time, it might lose at the same battle field. Particularly with the rise of IT and the boom that it has seen in the last decade, software houses boomed and competition arose from literally every city and country, especially from the Asian countries such as India, Pakistan and Ukraine. This makes survival difficult for any business, let alone booming, unless the firm can develop a USP – Unique Selling Proposition. Chaffey (2004) states that in services industry, experience and costs are the two major USPs that can lead the firm into the direct direction towards the top. USP is a critical aspect of a business for its existence today. Referring to the information technology industry, especially the software houses existing today, there is a cut throat competition, and developing a cutting edge (USP) is also critical. The USP spotted through the window of opportunity by Macro-Soft was its low cost architecture, targeting and visioning small and medium size enterprises primarily. For low cost production, having low cost operations is a mandatory aspect. Following the same, Macro-Soft had adopted various business models, as illustrated previously. However, following the takeover, the implementation of virtual teams provided a good platform to the company to move towards its vision i.e. of low cost business solutions. This is because formulating virtual teams has had significantly positive influence on the development of low cost operations, and operations are outsourced to people with varying backgrounds, giving diversified input to the firm’s operations. Additionally, also giving them options, not allowing the service providers to form any sort of a bargaining power situation, or forming any consortium kind of a situation. This also allows the firm to opt for low cost service providers, having high levels of specialization, and being the best at their work. Alongside, it also brings about extreme creativity to the firm, and that creativity is very fruitful for the business – almost equivalent to hiring individuals from those regions of the world – bringing along with them their diversified set of experience, their knowledge and expertise. In accordance with Fuller (2007), the biggest advantage of this is the cost cutting associated with this that actually leads the firm into developing its competitive advantage, precisely in line with the vision formed during the advent of the business organization. Outsourcing generally allows the one being outsourced to develop a bargaining power towards the parent because the dependency is on the higher side; however, the model adopted kills this basic disadvantage since the functionality within departments is outsourced, rather than outsourcing the whole department. Conclusion There is a thin line that defines the distinction between outsourcing and virtual teams; in fact many a times, one is considered as a function of the other. Each of the two has their merits and demerits. The business under consideration herewith presents a classical case on how virtual teams can assist organizations achieving low cost operations, diversified work force, low dependency on permanent employees, promoting specialization and temporary/contractual setup, and subsequently, the organizational aim of higher profit margins; in this case, all these are achieved in a class manner. The firm had been running successfully in recent times and has not lost the track despite the economic recession that hampered the economy at a global level. The noticeable point here is the application in the right manner towards the right direction. Often firms assume that the application of a technological setup is ample to earn profits; however, the gurus of management information systems reveal that merely applying the technology is not what leads to success but there is a lot more to it than the naked eye sees. Matching the outcome and the benefits of the application towards the vision of the organization is a mandatory aspect of the deployment of information technology infrastructure. At Macro-Soft, the match of the same has led to the development of a success story rising from the Silicon Valley and moving towards the top of the software house rankings in the US. References Barbara McNurlin, Ralph Sprague, Tung Bui (2008) Information Systems Management – International Edition. 8th Edition. Pearson Education Dave Chaffey, Steve Wood (2004) Business Information Management – Improving Performance using Information Systems. 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Pearson Education Wendy Robson (1997) Strategic Management and Information Systems – An Integrated Approach. 2nd Edition. Pearson Education Read More