MIS Organization and Outsourcing

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MIS Organization and Outsourcing

• Define Chief Information Officer, Chief
  Technology Officer, Chief Knowledge Officer
• Discuss key functions a appropriate
  backgrounds/experiences for CIOs
• Be familiar with typical IS roles and processes
  (and what the IS organization does not do)
• Compare and contrast centralized, decentralized
  and federalist organization structures
• Discuss the reasons for outsourcing
• Describe the disadvantages of outsourcing and
  steps to avoid them

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Centralized IS Organization

• ADVANTAGES
• Global standards and common data
• one voice
• Greater leverage in deploying strategic IT
• Economies of scale
• Access to large capacity
• Better recruitment

• DISADVANTAGES
• Not meeting local needs
• Schism between business and IT
• Lack of business unit control of overhead costs

3
Decentralized IS Organization

• ADVANTAGES
• Technology customized to local business needs
• Closer partnership between business IT
• Greater flexibility
• Business unit control over overhead costs

• DISADVANTAGES
• Difficulty maintaining global standards
• Difficulty negotiating preferential supplier
  agreements
• Loss of control
• Higher infrastructure costs
• Duplication of staff and data

4
Federalist IS Organization

• ADVANTAGES
• Mixes advantages of Centralized and Decentralized
  IS organization
• Promotes strategic control and synergy
• Offers groupwide IT strategy

• DISADVANTAGES
• Does not match exactly with organization structure

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Outsourcing

• The purchase of a good or service that was
  previously provided internally
• Farm out data center operations (facilities
  management)
• Farm out tasks and services
• Farm out systems development
• May transfer IS function to vendor

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Our Survey (California Management Review, 1997)

• Companies written up in trade press for having
  signed outsourcing agreements (1988 - 1993)
• Telephone interviews
• 34 of 129 companies participated
• 30 financial institutions
• 25 private vs. 9 public
• Provided broad range of services

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Goals Determinants of Outsourcing Success

• Core vs. commodity
• Partner vs. vendor
• Tight vs. loose contract
• Success Economic, Technical, Strategic, Overall
  Satisfaction with Contract

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Findings Primary Reasons for Outsourcing

• Technological considerations (8)
• Cost Savings (6)
• Strategic considerations (infrastructure building
  - quickly) (5)
• Human resource considerations (3)
• Mandated by central office/Acquired by another
  company (3)
• Consolidate Data Centers (2)
• Efficiency (1)
• Cash Infusion (1)

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Other Reasons for Outsourcing

• Allows greater focus on information and its
  application in organization
• IS personnel issues (expertise with IS personnel
  issues retaining highly qualified IS staff
  talent in new technologies)
• Greater capacity on demand

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Findings Other

• Need tight contracts
• May be successful for core functions especially
  if linked to tight contract
• Can have successful partnerships

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Outsourcing Disadvantages

• Reliance on vendor/partner
• Loss of control
• Considerations about security/confidentiality
• Evaporization of cost savings
• Loss of competitive advantage
• Slight of hand with employees
• High switching costs

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Steps to Avoid Pitfalls

• Do not focus negotiation solely on price
• consider costs of contract management
• Establish short-term supplier contracts
• Use multiple best of breed suppliers?????
• Develop skills in contract management
• Carefully evaluate your companys own
  capabilities
• Thoroughly evaluation outsourcers capabilities
• Choose and outsourcer whose capabilities
  complement yours
• Consider cultural fit and technical expertise

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Outsourcing strategies
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Outsourcing strategies