Group Name: The Incredibles
MANAGEMENT INFORMATION SYSTEMS
IS Failure due to Outsourcing
Group Members:
Vineet Goyal (4156329)
Anshul Popli (4152159)
Abhijit Singh (4161419)
REASONS FOR OUTSOURCING
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Cost Saving
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Cost Restructuring
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Focus on Core Business
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Access to Talent
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Tax Benefit
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Reduced time to market
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Enhance capacity for innovation
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Gaining access to world class capabilities
TOP IT OUTSOURCING COMPANIES
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ACCENTURE
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ISS
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SODEXO
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INFOSYS TECHNOLOGIES
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CONVERGYS
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CB RICHARD ELLIS
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CSC
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WIPRO TECHNOLOGIES
MOST FREQUENT CAUSES OF RELATIONSHIP
FAILURE IN OUTSOURCING
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Buyers' unclear expectations up front
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Poor Governance
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Poor communication
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Provider’s poor performance
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Buyer’s multi-supplier environment
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Interest becoming misaligned over time
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Not mutually beneficial
•
Poor cultural fit
TOP IT OUTSOURCING COUNTRIES
1.India
2.Thailand
3.Mexico
4.China
5.Indonesia
6.Malaysia
7.Philippines
8.Jordan
9.Egypt
10.Bulgaria
INVOLVED IN OUTSOURCING
•
Also, with remote based managed services, Internet conductivity is critical. The entire
support structure relies on being able to maintain access to network nodes via the
Internet. If conductivity fails, then the necessary maintenance and support cannot be
delivered.
•
If you rely on an outside contractor who generally has to come onsite to support your
network, then you live in a world where you simply hope critical services don’t go down at
a time when your ability to conduct business will be interrupted.
•
Busy IT contractors may take days before they can come in to help, and this will likely be
unacceptable if the problem is making it impossible for your staff to work. All the money
saved by using a pay-as-you-go contractor can be lost with one serious issue within your
network.
HOW SUCCESSFUL OUTSOURCING CLIENTS
DEFINE SUCCESS IN THEIR RELATIONSHIP:
• Achieving the projected cost reduction
• Delivering best in class services
• Achieving the SLAs and KPIs
• Achieving initial process improvements
• Achieving Successful implementation
• Achieving increased business agility
• Increasing innovation
• Working together seamlessly despite ongoing change
• Achieving approved customer satisfaction
SHORT VIDEO ON OUTSOURCING PROBLEM
http://www.youtube.com/watch?v=7k89aC8ZGw8&feature=results_video&playnext=1&list=PL0
A4ACFD470014241
INTRODUCTION OF SAINSBURY
• Parent Company: J Sainsbury plc.
• Headquarters: London, UK
• Founded in 1869
• Products: Banking and retail
• CEO: Justin King
• IT Director: Rob Fraser
• Sales of FY11: 22,943m GBP
SAINSBURY OUTSOURCING IS DISASTER
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SAINSBURY OUTSOURCED SUPPLY CHAIN SYSTEM FROM ACCENTURE.
•
A 1.8B GBP BUSINESS TRANSFORMATION DEAL.
•
NEW AUTOMATED CENETERS COSTED NEARLY 100MILLION GBP WHICH
EVENTUALLY WASTED.
•
SYSTEM FAILED TO GET THE STOCK ON THE SHELVES .
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REVERTING MANY PROCESS TO MANUAL WHICH WAS HIGHLY TIME CONSUMING.
•
WHICH RESULTED GBP 290M WRITE OFF OF IT EQUIPMENT.
SPECIFIC CAUSES FOR FAILURE IN SAINSBURY
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ACCENTURE OBVERSELL AND SET THE EXPECTION THAT CONNOT BE MET
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SAINSBURY MANAGEMENT FAILURE TO MANAGE ORGANIZATIONAL CHANGE
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DISCONNECT BETWEEN OUTSOURCER AND SAINSBURY MANAGEMENT
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LACK OF SUPPORT FROM DIFFERENT HODS (Head of Departments)
INTRODUCTION OF VOLKSWAGEN
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Parent Company: Volkswagen AG
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Headquarters: Wolfsburg, Germany
•
Founded in 1937 (Germany)
•
Products: Automotive
•
CEO: Martin Winterkorn
•
Sales of FY11: €159.3 billion
DESCRIPTION OF THE CASE
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Launch of too many models.
•
Required high IT environment to support rapidly growing industry requirements.
•
IT requirements were outsourced from Perot systems with a 10 year deal.
•
IT staff even less than 10.
•
Lack of manpower to even handle outsourcing project.
•
Later to led to introduction of new It projects quick
decision making regarding IT up gradation and
systems.
REASONS FOR OUTSOURCING FAILURE IN
VOLKSWAGEN
•
Multiple IT service providers
•
No single point for governance for IT issues
•
Cost overrun as budget was only $60 million where
as $210 million was required.
•
IT projects behind schedule
•
Lack of internal IT department
INTRODUCTION TO BOEING
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Parent Company: The Boeing Company
•
Headquarters: Chicago, Illinois, U.S
•
Founded in 1916
•
Products: Aerospace and defense
•
CEO: James McNerney
•
Sales of FY11: US$ 64.306billion
DESCRIPTION OF THE CASE
•
•
•
•
•
•
•
Boeing manufactured 787 as one of its biggest achievements.
It faced a lot of difficulties in its manufacturing.
787 revolutionized the way it manufactures.
It went into partnerships with a number of contractors to help them
financing it 10 billion dollar project.
In an article issued by the AINonline shows that both Boeing and airbus
incorporate outsourcing lessons learned by their counterparts.
The relationship between the international association of machinist and the
society of professional engineering employees in aerospace improved the
negotiation process.
The two bodies have warned Boeing to control its outsourcing activities as it
is curtailing the recruitments of new aerospace engineers.
CAUSES FOR FAILURE
•
Boeing faced a lot of supplier problems.
•
Because of a number of suppliers they were not able to manage properly.
•
Overrunning of cost.
DUE DILIGENCE REQUIRED BY THE CLIENT
DURING THE RFP PHASE
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Financial verification: Baseline costs for each element of service to be provided by the
vendor. Usually these costs refer to the initial or baseline year of the contract.
•
Procurement verification: Third party software licenses and associated costs. This
includes both initial license fees and subsequent maintenance costs.
•
Infrastructure verification: Asset inventory and associated costs, including computers,
peripherals and networks.
•
Human Resources: Employee costs, including benefit plans, salary scales, union
involvement, and organizational structures.
•
Processes and systems: Processes and methodologies used by the client organization.
•
There are oter aspects that are equally important such as culture, governance models and
so on.
CRITICAL SUCCESS FACTORS FOR OUTSOURCING
Factors
Explanation
Careful selection of what to Example: Volkswagen’- It is very important for organization to select carefully
what to be outsourced however company should also keep some IT processes
be outsourced
in-house especially when it is involving future plan for It department
Choose the right
outsourcing service
provider
Example: Sainsbury- choosing the right service provider is really important for the
success of outsourcing. Focus need to be done on suppliers competency and
capabilities three capabilities needs to be focused delivery competency,
transformation competency and relationship competency.
Develop detailed contract
with some flexibility
Example: Boeing- before outsourcing a detailed contract should be developed for
risk mitigation. Flexibilities are required to anticipate changes in business
environment. Length of contract varies on nature of business.
Build relationship between
the business and
outsourcing company
Example: Volkswagen- when company commits outsource of business
procedures there is requirement of change in internal management and
relationships. Both IT and Business executive should involved in decision
making. Since their commitments are important for outsourcing arrangements
REFERENCES
•
Mathew, G. (2005). Reasons for Outsourcing Failure. Doing Due Dilligence Right. Available:
http://it.toolbox.com/blogs/guruspeak/reasons-for-outsourcing-failure-doing-due-dilligence-right5529. Last accessed 21st March, 2012.
•
Dave . (2010). The Real Reason Outsourcing Continues To Fail. Available:
http://www.lessonsoffailure.com/developers/real-reason-outsourcing-fails/. Last accessed 21st
March, 2012.
•
Goolsby, k. (2004). What Causes outsourcing failures?. Available: http://www.outsourcingcenter.com/2004-08-what-causes-outsourcing-failures-article-37826.html. Last accessed 21st
March, 2012.
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Accounting Web. (2007). ..Accounting Web's 10 notable outsourcing failures . Available:
http://www.accountingweb.co.uk/blogs/accountingweb/accountingwebs-10-notable-outsourcingfailures. Last accessed 21st March, 2012.
•
Hiltzik, M. (2011). 787 Dreamliner teaches Boeing costly lesson on outsourcing. Available:
http://articles.latimes.com/2011/feb/15/business/la-fi-hiltzik-20110215. Last accessed 21st March,
2012.
•
Austin, R. (2006). Volkswagen of America: Managing IT priorities. Horward Business School.
REFERENCES
•
Information-age. (2006). Sainsbury's to axe CIO. Available:
http://www.information-age.com/channels/it-services/news/292426/sainsburys-toaxe-cio.thtml. Last accessed 21st March, 2012
•
IAOP. (2011). The 2011 Global Outsourcing 100. Available:
http://www.iaop.org/content/23/152/2040/. Last accessed 21st March, 2012.
•
IT business edge. (2010). Six key success factors for outsourcing. 2010 market survey. 1-9.
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Putra, J. IT Outsourcing, Benefits and Critical Success Factors. Available:
http://julianday.files.wordpress.com/2011/02/accenture-dyk-case-3-it-outsourcing-benefitsand-critical-success-factors.pdf. Last Accessed on 22nd March, 2012
•
. McCue, A. (2004). Sainsbury's puts brakes on IT after £290m write-off. Available:
http://www.silicon.com/management/cio-insights/2004/10/19/sainsburys-puts-brakes-on-itafter-290m-write-off-39125085/. Last accessed 21st March, 2012.
•
McCue, A. (2004). CIO Jury: Is IT to blame for £290m Sainsbury's loss?. Available:
http://www.silicon.com/management/cio-insights/2004/10/22/cio-jury-is-it-to-blame-for290m-sainsburys-loss-39125219/. Last accessed 21st March, 2012.
THANK YOU
Any Questions