Is Outsourcing Fool’s Gold? Group F: Sara Cisneros Wanda Di Maggio Gregory Gonzalez Cinthia Rojas

Question 1 Hiring an organization’s existing IS staff is common practice when starting a new outsourcing arrangement. What are the advantages of this practice to the outsource vendor? What are the advantages to the organization?

Advantages for the Outsource Vendor It allows this same outside vendor the opportunity to play an impromptu “midlevel management role where they can assess, and evaluate the productivity and necessity of each employee. It targets those IS staff members who are not productive or skilled enough for termination. Another advantage to outsource vendors is that it get their first-level employees by hiring those from the organization.

Advantages to the Organization One advantage to the organization that engages in outsourcing is that it can save money. Obtain expertise Avoid management problems Free management time Risk reduction

Question 2 Suppose you work for an outsource vendor. How do your respond to the charge that your managers care only about how they appear to their employer (the outsource vendor), not how they actually perform for the organization.

The outsourcing vendor managers are likely evaluated on how well they manage (or reduce) the costs of their part of the organization while following the outsource vendor’s profit generating procedures. Most outsourcing agreements include service level agreements (SLA’s) which require a minimum level of performance from the outsourcing vendor for the customer. Often these agreements also include financial penalties if the vendor does not perform well enough. So if they do not perform well, their employer may incur financial penalties from not meeting SLA’s. This negatively affects the manager’s appearance. Even if the manager’s top priority is managing their appearance to their employer, how they perform affects a big part of that appearance. In other words, they need to be concerned with both.

Question 3 Consider the statement, “We can’t figure out how to manage an important function in our company , so you do it!” Do you agree with the sentiment of this statement? If this is true, is it necessarily bad? Why or why not?

I personally do not agree with this sentiment. However every business situation is different and in some cases, hiring another company to do something a company does not know how to is a good thing.  I think what it boils down to is a cost comparison, that is, the company that can’t “figure out how to manage an important function in our company…” needs to decide whether it is more economically sensible to hire outside of its ranks or try and used its internal skill sets (employees) to get the job done.  Each case is different.

Question 4 Explain how it is possible for an outsource vendor to achieve economies of scale that are not possible for the hiring organization. Does this phenomenon justify outsourcing? Why or why not?

It is possible for an outsource vendor to achieve economies of scale that are not possible for the hiring organization because the outsource vendor services multiple companies like the hiring organization and thus is able to reach economies of scale much more quickly and easily due to the sheer volume of business they are conducting in their specific field. Yes this phenomena justifies outsourcing because it encourages focus on the business core of the company so that its resources are not wasted doing a job (like running a cafeteria) that it does not have skilled employees (like cooks for ex.) to manage.

Most definitely this phenomena justifies outsourcing because it constantly increases the economies of scale of the outsourcing vendor, and traditionally, such increases bring along with them streamlined processes of doing the business which increase productivity and a host of other good business behaviors.

Question 5 In what ways is outsourcing IS infrastructure like outsourcing the company cafeteria? In what ways is it different? What general conclusions can you make about infrastructure outsourcing?

It is similar because the task being outsourced is not the main FOCUS or BUSINESS of the company- just something peripheral like providing food for workers at a company cafeteria. Outsourcing is a great way to streamline a companies business. It also is great for enhancing the peripheral factors that attract employees to a company such as the fact that the company has a great cafeteria (which they outsourced to a premier catering company).