The Information Systems Outsourcing Bandwagon
Important topics in this realm are how IS outsourcing can contribute to innovation, how it can be dynamically governed, how to cope with its increasing complexity through multi-vendor arrangements, how service quality standards can be met, how corporate social responsibility can be upheld and how to cope with increasing demands of internationalization and new sourcing models, such as crowdsourcing and platform-based cooperation.
These issues are viewed from either the client or vendor perspective, or both. The book should be of interest to all academics and students in the fields of Information Systems, Management and Organization as well as corporate executives and professionals who seek a more profound analysis and understanding of the underlying factors and mechanisms of outsourcing.
His research and teaching interests are software engineering processes, information systems outsourcing and information behavior. He has previously been an assistant professor at the University of Mannheim.
His research focuses on various aspects of the division of work in information systems, such as outsourcing, offshoring, virtual work, platform ecosystems, and systems integration. See All Customer Reviews. Shop Books. Add to Wishlist. USD Sign in to Purchase Instantly. Overview This book attempts to synthesize research that contributes to a better understanding of how to reach sustainable business value through information systems IS outsourcing. Show More. Table of Contents Introduction. Average Review. It is too one-sided. The problem is that all deals are so different.
These contracts do not, however, set performance standards or include penalty clauses if the vendor fails to meet requirements. The payment schedules in these standard contracts may also favor the vendor. For example, an outsourcing vendor for a metals company proposed its standard contract.
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This contract required the metals company to pay the bill on the first day of the month, prior to service delivery. We got it to in arrears net forty-five. So they play those games. As both parties are often anxious for the relationship to begin, the temptation to close negotiations swiftly is strong. The out-sourcing vendor, in particular, may try to convince its customers to sign the contract before items are clearly specified.
At a diversified service company, the CEO signed an incomplete outsourcing contract in January The vendor promised to define services, service level measures, and service level reports within the first six months. As of June , these items remained incomplete, primarily because of the discrepancies over the contents of the baseline bundle. Managers at the company argue that certain services were understood to be covered in the contract.
The vendor argues that if they are not already in the contract, then those services are subject to excess fees.
This problem could have been avoided if the commencement date was postponed in order to complete the contract. During negotiations, the vendor uses a host of technical and legal experts to represent its interests. These experts thoroughly understand the way to measure information services and how to protect their interests. Participants in our study noted that experts are a critical success factor in negotiating an equitable contract.
Although participants admit that outsourcing experts are expensive, they believe experts will help prevent excessive above-baseline charges. We recommend two types of outsourcing experts: a technical expert and a legal expert. Technical experts are particularly helpful when measuring baseline services. In addition, customers may feel wary about using their in-house technical staff to assist in baseline measures, as many of these people may be affected by the outsourcing contract.
Together, the legal expert and internal lawyer can pose a formidable legal team. Customers will typically wish to hire a legal expert at the final stages of negotiation. A technical expert, however, is typically needed much sooner, particularly during the measurement of baseline services. The outsourcing vendor will charge a fixed fee for delivering this bundle of services and an excess fee for services above and beyond the baseline.
Therefore, customers must measure every service during the baseline period to ensure that these services will be included under the fixed-fee obligation. Assuming that the outsourcing arrangement encompasses the entire IS department, customers should measure data processing, telecommunications, applications development, applications support, and residual services. Residual services include any services that are not captured in the other categories, such as user consultation, training, report distribution, and office moves.
Each of these areas is briefly discussed below. Data processing and telecommunication services. Of all the IS service areas, participants felt that data processing and telecommunications were the easiest to measure. Monitoring facilities track the number of jobs submitted, the resources used for each job tape mounts, data storage, computer minutes , turnaround time for jobs, on-line response time, and system availability. Similar reports are generated by network management systems for telecommunications.
During the baseline period, participants felt confident that their monitoring systems adequately captured their current level of processing. Resource requirements, however, vary based on the machine.
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Vendors will typically develop a conversion model based on a sample set of test transactions run on their test machine. Applications development and support. These service areas are difficult to measure because the activities are labor intensive. Participants in the study typically decided to use head count as the baseline measure.
Thus if analysts and programmers currently work in applications, the customer becomes entitled to full-time equivalents FTEs. Two hundred FTEs typically equate to 8, hours worth of work a week people times a hour workweek. Participants, however, cited four problems with this measure. First, the vendor may eliminate people and make the remaining staff work excessive hours. But the programmers have to pick up more hours; they are tired, sick. They make mistakes. Vendors siphoned their best employees from the account to attract other customers. Third, included in the FTE hours are nonproductive hours such as vendor group meetings and analyst training.
Fourth, the FTE does not provide a measure of productivity, merely hours worked. Because the vendor charges for hours that exceed the FTE, customers fear that they have no way to detect if vendors exaggerate project estimates. These service problems, however, cannot be blamed on vendors. They are free to hire, fire, and assign staff any way they see fit.
A Decision Model for Information Systems Outsourcing: Using a Multicriteria Method
If the customer wants control over head counts, hours worked, project estimates, and staff quality, perhaps it should not outsource applications. Residual services. In full-blown outsourcing arrangements, companies often neglect to measure many services because 1 the services are not reflected in current IS budgets, 2 they are not currently monitored or measured, and 3 customers assume they fall within other service areas. For example, users often ask in-house analysts to help them set up their printers, verify spreadsheets, recommend products, and so forth.
The analysts usually respond without documenting or charging users for these favors. However, if the customer does not document and measure these services, the vendor will not include them in the baseline.
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Residual services include such items as disaster recovery testing, environmental scanning for new hardware and software, microcomputer support purchase decisions, installation, training, repair , office relocation services such as rewiring and node changes, storage management to balance cost and performance trade-offs, and teleconferencing support. Many residual services are difficult to measure; how do you measure advice, courteous service, and environmental scanning?
In most cases, these services can be measured only during the baseline period by maintaining service logs.
Because outsourcing decisions often degrade morale, IS employees may ignore or sabotage the measurement effort. Therefore, some companies assign the users to maintain the service logs during the base period, rather than the IS employees. The consequences of not measuring services were readily apparent in this study. Participants that neglected this phase all suffered serious service problems and excess charges because they failed to measure all information services during the baseline period.
Some participants assumed that their requests for proposals RFPs documented their service needs, but RFPs are only high-level descriptions of service requirements.