Success, challenges and future prospects of IS outsourcing in the UK: A case study of an UK company outsourcing most of its IS activities.

Outsourcing has become increasingly attractive for many organizations. In such relationship, a keep company contracts with a vendor that rents its skills, knowledge, technology, go and manpower for an agreed-upon price and period to perform functions the client no longer wants to do. Much attention has focal pointed recently on the outsourcing of IS/IT ope marks to countries such as India and the Philippines. indeed outsourcing any business activity creates potential risks as well as benefits.Companies can perplex themselves as well dependent on providers, and they can lose strength in strategically core competencies. Interestingly, given the importance of the outsourcing decision and the amount of academic and practitioner literature on it, there is surprisingly little consensus somewhat the topic, probably because of the multiplicity and complexity of the factors involved. In this section, the authors identified six place factors that companies should consider when making outsourcing decisions. The good example, which helps business the pros and cons of outsourcing, can be applied specifically to IS/IT functions.Changes in the broader business environment are poignant almost every aspect of how companies manage their human resources, altering the balance of pros and cons for outsourcing IS/IT business process. First, conflicting pressures in the chore grocery have brought the role of human resources to the fore. On the one hand, the 1990s bought the so-called war for genius for IT professionals. On the other hand, intensifying belligerent pressures have forces companies to be more aggressive in incisive termss, often by reducing head count.Human resources have had to manage such downsizing, while also try to be innovative in attracting and retaining valuable employees. Second, IS/IT themselves have become the target for belt-tightening efforts, and they must now find ways to provide more value at lower cost. Many have argued that the key is to focus on activities that are essential and outsource the rest. Third, the growing complexity and increasing regulatory changes in the effective environment for human resource management, in particular in the areas of health care, stock-related compensation, overtime-pay calculations, pension reform, and eligibility for contingent workers.This has compulsive demand for outsourced IS/IT activities from vendors that are subject-matter experts. worldwideization poses a comparable challenge, requiring IS/IT departments to address the needs of the business and moving surrounded by different countries and markets. Lastly, mergers and acquisition have become increasingly frequent, creating huge IS/IT integration challenges. Often, IS/IT is charged with the simultaneous tasks of combine and managing the technologies and business processes in the face of continuous change. Problem StatementThe primary objectives of this dissertation leave behind be to canvass the issues involved in factors affecting the success or failure of outsourcing IS/IT activities. Before doing this however there leave behind have to be a thorough examination of the current state of global IT outsourcing services. The main task of the query is to find out what actually makes outsourcing work for Welsh pissing. Challenges of having multiple suppliers and the steps Welsh Water undertakes to make outsourcing success. The following is a list of objectives which the author aspires to accomplish in the dissertation To analyse the objectives for outsourced services, selecting outsourcing suppliers, benchmarking. To research contractual aspects of multiple suppliers outsourcing, problems and risks associated with it. Assessment of contracts/SLAs structures, similarities and differences between contracts/SLAs What steps Welsh Waters undertakes to make outsourcing success (outsourcing program management, contract management, building outsourcing relationships, partnership, mutual benefits , communications, change control, how performance is measured, what constitutes for success/failure, etc) To investigate if any proven/ outperform practices have been adopted by Welsh Waters to mitigate the risks and manage the suppliers effectively. To look at the apprehensive relations between the Welsh Waters IT management and some of the suppliers To research relations between suppliers themselves (possible antagonistic behavior towards each other, rivalry, hidden conflicts, etc). The Overview of the Study The remainder of this study is as following statement Chapter 2, publications Review, will provide primary a concise concept and explanation of IT outsourcing.We will examine the competitive landscape within the IT outsourcing industry. We will also define critical success factors and key trends for IT companies operating in this market. We also look different related literature on supplier management and sourcing decision framework for clients. Chapter 3, Methodology, w ill describe the research design of this study. The research design of this study is empirical research manner using secondary data for quantitative analysis. The researchers administered a case study framework to understand the factors affecting the IT sourcing decisions of clients.Chapter 4, Results, will demonstrate the results of this study. The authors will provide a brief description of the company under study, play up IT sourcing decision of the company. The research also will employ statistical data such as frequency distribution, mean and standard deviation on the different factors that affect the success and failure of IS/IT outsourcing. These data will be tabulated and analyzed to examine the effect of the various variables. The findings will then be generated from these analyses will be presented and interpreted.Chapter 5, Summary, Conclusion and Recommendations, the Summary section will first provide a comprehensive summary of the study findings of this study. The C onclusion section will highlight the implications of the research findings. Finally, Recommendations will be proposed to help companies improve IT performance with partner suppliers and avoid pitfalls and traps. In next chapter, we will discuss the environmental analysis on Global outsourcing highlighting process management services, IT management, and data touch on. REVIEW OF RELATED LITERATUREThe literature review will first define nature of business process outsourcing. This section will offer a concise explanation of IT outsourcing and its ability to thrive in a globalized economy. Then, the review will consist of tierce parts (1) environmental Analysis of the Outsourcing Industry and competitive landscape in the industry, (2) define the common IS/IT activities that are outsourced, (3) identify the key success factor of IT outsourcing and define the maturity stage of the company, and (4) the importance of customer-vendor relationship in providing innovative solutions to the clients.Defining of assembly line Process Outsourcing Given the potential headaches of managing IT, it is tempting to hand the job over to someone else. Indeed, outsourcing once appeared to be a simple solution to management frustrations, and old management teams at many companies negotiated contracts with large service providers to run their entire IT functions. At a minimum, these providers were often able to provide IT capabilities for a lower cost and with fewer hassles than the companies had been able to themselves.But many of these outsourcing arrangements resulted in dissatisfaction, particularly as a companys business needs changed. wait on providers, with their standard offerings and detailed contracts, provided IT capabilities that were not flexible enough to envision changing requirements, and they often seemed slow to serve to problems. Furthermore, a relationship with a supplier often required substantial investments of money and time, which entrenched that supplie r in the companys strategic planning and business processes.The company then became particularly vulnerable if the supplier failed to meet its contractual obligations (Ross and Weill, 2002). Problems arose because senior managers, in choosing to outsource the IT function, were also outsourcing responsibility for one or more of the significant decisions they should have been making themselves. Companies often hired outside providers because they were dissatisfied with the performance of their own IT departmentsbut that dissatisfaction was generally the result of their own lack of involvement.In light of this track record, most larger companies, at least, are deciding to keep their main IT capabilities in-house. But many engage in selective outsourcing. Good candidates for this are commodity services, such as telecommunications, in which there are several competing suppliers and specifications are easy to set, and services involving technologies with which the company lacks experti se. Unlike decisions to outsource the entire IT function, selective outsourcing decisions are usually best left to the IT unit, assuming that senior management has taken responsibility for overall strategy.Beaumont and Costa (2002) studied IT outsourcing in Australia. They found that almost 40% of Australian organizations outsource one or more IT applications. Large organizations tended to outsource more than small ones. The three most important reasons for outsourcing were access to skills, improved quality and focus on core business. Four factors contributed to productive outsourcing a tight contract, a partnership, a change process, and the IT managers role changing from managing projects and operations to acquiring and managing the inhering and external resources required to do the organizations IT work.Successful IT outsourcing relationships enable participants to achieve organizational objectives and to build a competitive usefulness that each organization could not easily attain by itself. Outsourcing success can be viewed as the level of fitness between the customers requirements and the outsourcing outcomes. Outsourcing success can be measured in terms of two business and user perspectives. From a business perspective, outsourcing is motivated by the promise of strategic, economic, and technological benefits.The success of outsourcing, then, should be assessed in terms of attainment of these benefits. From a user perspective, outsourcing success is the quality level of services offered. A decision to outsource on the basis of saving costs without analysis of the quality of services frequently leads to higher costs and lower user satisfaction. Therefore, it is imperative to conduct a proper analysis of the service quality before building a relationship with a service provider for a prospering outsourcing arrangement (Lee & Kim, 1999).In this paper, we define outsourcing as the process of turning over an organizations calculating machine center o perations, telecommunications networks, and/or applications growth to external vendors is called outsourcing (Laudon & Laudon, 2005). Loh and Venkatraman (1992a) define IT outsourcing as the significant contribution by external vendors in the physical and/or human resources associated with the entire or specific components of the IT infrastructure in the user organization. Vendors may contribute computer assets for the user from outside the organization.Alternatively, the ownership of certain computer assets of the user may be transferred to the vendor. Similarly, vendors may utilise their personnel to provide the required services, or the vendor may employ existing staff of the user. In their research, they attempted to explain the degree of IT outsourcing by using cost structures and economic performance. They found that the degree of IT outsourcing is positively related to both business and IT cost structures, and negatively related to IT performance.IT outsourcing was framed a s a make-versus-buy decision, where contractual modes differ in the domain of influence within the corporation (Loh & Venkatraman, 1992a, 1992b). Environmental Analysis of Outsourcing Market In the global front, the increasing trend towards outsourcing is evident from the high year-on-year growth of the global market for data processing and outsourcing, a sector, which consists of the provision of commercial electronic data processing and/or business process outsourcing services.Since 2001, the market has expanded by almost 50%. The global data processing and outsourced services market reached a value of $265. 5 billion in 2005, recording a compound annual growth rate (CAGR) of 9. 7% in the 2001-2005 period. The rise in credit card use and Internet banking/payment has created wise types of problems for operators in this area firms in this market are engaged in developing and refining data protection techniques to fight against money laundering and fraud.