Dean Barbera
Exam #1 – Question #2
Submitted by:
Dean Barbera
To:
Professor Russell KH Ching, Ph.D.
In Partial Fulfillment of The Course Requirements
For MIS 271
At:
Department of MIS
College of Business Administration
California State University, Sacramento
On:
October 24th, 2005
Home Depot could significantly benefit from outsourcing most of their IT operations. In relation
to the Model of Strategic IT Planning Home Depot is located in the Turnaround Sector. This
sector represents Low Current, High Future impact of technology for Home Depot. Home Depot
has reached the level of being the largest home improvement retailer in the United States, and the
second largest retailer, without a significant commitment to IT. Certainly the future holds a need
for a much larger commitment to IT, but the past has shown that IT is outside of Home Depot’s
core competency. Home Depot has blindly entered the realization that Information Technology
is becoming a critical part of strategic planning. This is shown by Home Depot’s vast
investment over the past several years without true vision of where the investment is going. One
prominent analyst stated that Home Depot had cable ran everywhere, without a plan of what to
use it for.
Outsourcing as well as offshoring are considerations that Home Depot should being to consider.
Consumer credit, help-desk services, employee training, web-presence and back-office
processing are some of the functions that are outside of Home Depot’s core competencies and
excellent candidates for outsourcing. Currently the IT function is so new in the culture of Home
Depot, that outsourcing would see little cultural resistance. Additionally, Home Depot’s work
force does not belong to labor unions, often a powerful force preventing organizations from
outsourcing choices. Outsourcing these functions would help Home Depot’s competitiveness by
providing quicker access to current technologies and skills as well as greater capabilities to
respond to changes in the market.
The functions listed above as candidates for outsourcing and offshoring should be combined into
three separate categories. Each category should be outsourced to a different organization. The
organizations chosen to perform these functions should report to Home Depot’s CIO. The CIO
position should be filled with somebody capable of managing the companies balance between
what IT services are performed internally and outsourced. The CIO should also have vision and
awareness of emerging technologies. The risks of outsourcing can be minimized when a CIO is
capable of managing the needs of cost-savings and core competency focus with the ability to
structure contracts and alliances to best serve Home Depots IT future.
The first category of IT outsourcing is consumer credit services. This function should be
completely outsourced to an organization specializing in this type of service. Credit relating
services can take up valuable time and processing resources. Although this function will be
outsourced, each of Home Depot’s locations will have to have an area with a workstation and
telephone capable of privately allowing customers to communicate with the outsourced credit
organization. Fortunately most of the 1,900 locations have private areas designated for
applicants to fill out applications online. These areas can be used as duel purpose stations for
both potential employment and credit applicants. Home Depot employees should be focused on
customer product needs and not be an intermediary in often uncomfortable credit related
decisions. The outsourcing of credit relating services is one part in moving Home Depot back to
focusing on core competencies.
The second category of outsourcing is help-desk related services, back-office processing and
web development. This area should not only be outsourced, but considered for offshoring.
Currently these functions are housed in Atlanta at Home Depot’s new technology headquarters.
Considerable expense was made in the production and staffing of this new facility. Many other
organizations are successful moving their help desk and back-office functions offshore. Home
Depot’s CIO can structure an aggressive contract with a proven organization that allows for the
greatest level of oversight combined with excellent cost savings. Organizations structured to
handle processes such as help-desks or other call centers use weight time management processes
to maximize efficiencies. This generally comes about when companies focus on their core
competencies.
Finally, Home Depot should outsource the portion of IT which coalesce employees to
information technologies; employee training. Many nationwide training services are available,
in addition to moving towards video conferencing capabilities. To illustrate the inefficiencies of
Home Depot’s training department it only need be pointed out that it is operated out of the
Atlanta office. Atlanta could not be any less centrally located to most of Home Depot’s
locations.
Using Lewin-Schein Model for Change, Home Depot can begin the migration of outsourcing
with communications detailing how this will improve company and employee focus.
Additionally it may improve stock price, which affects most of Home Depot’s 325,000
employees. After the communiqué, implementation would be staggered and managed, keeping
staff abreast of the changes. Attempting to keep employees as part of the change rather than
outside the loop will help ease the ill will generated by the alterations. The benefits of the
change should be continually communicated from the top down in order to keep transformation
friction to a minimum. Outsourcing and offshoring the listed functions will refocus Home Depot
on their core competencies and allow them to maintain their position of dominance in the home
improvement industry.
Bibliography
"New Locations to Create 850 Jobs" The Home Depot
Jul 30, 2004 http://ir.homedepot.com/ReleaseDetail.cfm?ReleaseID=14921
"The Home Depot, Inc." Hoovers
Oct 22, 2005 http://www.hoovers.com/home-depot/--ID__11470--/free-co-factsheet.xhtml
"Home Depot: Thinking Outside the Big Box" BusinessWeek Online
Oct. 25, 2004 http://www.businessweek.com/print/magazine/contect/04_43/b3905090_mz017.htm?chan=gl
"The Home Depot" Answers.com
October 19, 2005 http://www.answers.com/topic/home-depot