ITC_3303 E

ITC 3303, Information Systems Management 1

Course Learning Outcomes for Unit VII Upon completion of this unit, students should be able to:

6. Assess the key issues involved in managing the components of IT infrastructure. 6.1 Explore the concept of outsourcing, including the advantages and risks it presents. 6.2 Apply the concept of outsourcing to a given scenario.

Required Unit Resources Chapter 11: Information Systems Management Unit Lesson

Managing Information Systems The information systems function of an organization is critical for organizational success. Because of this, it is important to manage this asset responsibly. There are five major functions to managing an information systems (IS) department, and they are even more critical for young startup IS departments. You can learn about these functions in your textbook. The readings for this unit discuss these major functions in detail, so in this lesson, we will expand upon this to take a closer look at effective leadership in information systems. There are many challenges facing managers and organizational leaders today – meeting organizational goals and strategies, coping with changes in business relationships and technology, encouraging innovation, managing organizational knowledge, managing an organizational environment that is embracing mobility, and handling a workforce that is becoming more virtual. Managing such a challenging and diverse environment requires strong leadership but, unfortunately, many organizational leaders and managers are not well equipped for the job (Kroenke & Boyle, 2020). In the past, organizations used the top-down, or hierarchical, approach to manage information systems in the organization. The top down approach is when upper management makes the strategic decisions and employees are expected to follow along, restricted in their ability to be creative or show initiative. This traditional style of leadership in IS can be problematic in that upper management may not have the experience or knowledge in IS to make those types of decisions. Organizational leadership must understand the nuances of IS and recognize that they cannot force IS to conform to the methods of the rest of the organization (Kroenke & Boyle, 2020).

UNIT VII STUDY GUIDE Information Systems Management

ITC 3303, Information Systems Management 2

UNIT x STUDY GUIDE Title

By using the bottoms-up approach, instead of the top-down approach, IS managers and staff can act in a leadership capacity and interact with upper management regarding IS decisions (Figure 1). This is especially true when there are new innovations to technology. IS professionals will recognize the value of these innovations and better understand how this new technology could affect the organization’s future, especially its competitive strategy.

Outsourcing Outsourcing occurs when you hire another company or organization to perform a service. The textbook uses a good example of how outsourcing can be used to help an organization perform a service. In this example, Google, known as an organization, that provides search and mobile application services did not have the resources to provide cafeteria services to its employees. In

order to provide this service to its employees, the company hired an outside vendor that specialized in food services to manage and maintain the employee cafeteria at Google. This way, Google can use its resources for its main function, providing search and mobile services (Kroenke & Boyle, 2020). The same concept applies to many organizations that do not specialize in information systems. Instead of obtaining and maintaining IS resources, organizations can outsource IS activities so that they can concentrate on their essential function or front-room activities. Outsourcing provides several advantages such as obtaining expertise in an area in which the company lacks. In the textbook example, management for the Augmented Reality Exercise System (ARES) understood that they needed to build an application for this system but recognized that they did not have the staff or the expertise to do this. To solve the staff and management problem, they outsourced this activity (Kroenke & Boyle, 2020). Outsourcing can also help reduce costs. In the Google example from the textbook, by outsourcing the cafeteria activities to another company, Google will not have to deal with the costs of training new cafeteria employees or deal with the day-to-day costs of maintaining the cafeteria. All of these costs would generally be covered under a fixed price cafeteria contract (Kroenke & Boyle, 2020). There are types of outsourcing such as nearshore, offshore, and onshore (work-at-home) that can provide solutions for organizations that do not have the resources to perform certain activities outside the realm of their corporate function. Each of these will be discussed in the following paragraphs.

Nearshore Outsourcing Nearshore outsourcing occurs when a company outsources to a nearby country such as from the United States to Canada, Mexico or Puerto Rico (Figure 2).

Figure 1 – Daily Sprint meeting with management (Klean Denmark, 2011)

ITC 3303, Information Systems Management 3

UNIT x STUDY GUIDE Title

Nearshore outsourcing has several advantages. Because the source of the work is being provided relatively close to the company requesting the service, there may be fewer time zone issues and fewer cultural and/or language difficulties. Also, the geographical proximity makes communication and traveling between the two countries easier (Gerbl, McIvor, Loane, & Humphreys, 2016). This would be especially advantageous for companies outsourcing complex information technology (IT) projects that may require frequent and ongoing communication between the two entities. In addition, in many cases, workers in nearshore organizations will be more highly trained than those in countries much further away such as in India and China, two of the top IT outsourcing destinations for many U.S. organizations (Oshri, Kotlarsky, & Willcocks, 2015). Nearshore outsourcing also provides organizations with cost saving benefits because work is sent to another location where workers will generally be paid lower wages. Another benefit is that, because of close proximity to the U.S., foreign workers will be awake and working during the contracting organizations hours of business should communication need to occur (Gerbl et al., 2016). On the other hand, it may not always be a good idea to use nearshore outsourcing. In some cases, it may be more expensive because the costs of using foreign workers may not be significantly lower. Another thing to consider is time costs: will the nearshore organization be able to operate independently, or will the contracting company have to provide guidance and resources? Another cost to consider is traveling costs: will traveling between the two countries be necessary, and if so, how often (Gerbl et al., 2016)?

Nearshore outsourcing may not be feasible when the IT project is complex or if the tasks involved require management oversight or direction from the contracting company (Gerbl et al., 2016). Nearshore outsourcing would be ideal for simple day-to-day IT tasks such as customer service (help desk), development, analytics, maintenance, and production.

Figure 2 – Nearshore outsourcing example.

ITC 3303, Information Systems Management 4

UNIT x STUDY GUIDE Title

Offshore Outsourcing Offshore outsourcing is when an organization contracts another company to perform operations in a foreign country (Figure 3). For example, a company might outsource to Europe, Japan, South America, and Asia.

Outsourcing to foreign countries can have some disadvantages. One disadvantage is cultural and/or language differences. Other disadvantages are time zone issues and the geographical distance, which could make communication and traveling between the two countries difficult, time- consuming, and expensive (Gerbl et al., 2016). However, in many cases, workers at offshore organizations may be highly trained and generally paid lower wages, which can help reduce costs for the contracting organization. As in nearshore outsourcing, the organization must consider whether or not the offshore company can operate independently or if it will need constant guidance and resources. If traveling may be required, consider how much and the costs involved with that. If the offshore company cannot operate independently or if excessive traveling may be required, it might be better to use onshore outsourcing if the bottom line is to save money (Gerbl et al., 2016). Offshore outsourcing would not be ideal for complex IT projects that may require frequent and ongoing communication. As in nearshore outsourcing, it might be best to use offshore outsourcing for simple day-to-day operations such as help desk, development, analytics, maintenance and production (Gerbl et al., 2016).

Onshore Outsourcing Onshore outsourcing is when operations are sent to another company located within the organization’s home country (Figure 4). In the Google example, Google outsourced their cafeteria operations to another company within the same locality. Several advantages to onshore outsourcing are that there will not be any cultural/language barriers and communication can take place during the time the contracting company is open for business. Traveling, if needed, can be managed efficiently to improve the bottom line (Gerbl et al., 2016). However, onshore outsourcing has some disadvantages; the main disadvantage is a decrease in cost savings. In most cases, onshore outsourcing will not provide cost savings because the direct labor costs can be high (Gerbl et al., 2016). Although, in the case of Google as discussed above, by not having to expend resources into managing and maintaining a cafeteria, Google can use those resources for its own operations.

Figure 3 – Offshore outsourcing example

ITC 3303, Information Systems Management 5

UNIT x STUDY GUIDE Title

Summary IT assets are critical components of organizations and need to be managed efficiently. Organizational structure is also important. Depending on the size and type of the organization, the organizational structure will determine the relationships between employees and managers. This relationship is important for how business leaders develop processes and systems that align with the organization’s goals and strategies. One of the main reasons companies consider outsourcing is for cost savings and expertise gain and to help free up time for managers. Offshore labor costs can be considerably less than wages for onshore and nearshore locations. Outsourcing can also provide expertise for the company that lacks this resource, especially in the development of innovate products. Outsourcing also helps management focus on the company’s main operations instead of on functions in which they do not have the expertise. Some of the disadvantages of outsourcing to foreign countries is time, cultural and language barriers. If travel is required, this may be expensive and difficult to manage efficiently. Another concern is that even though costs can be considerably less, there is no guarantee that the products or services will be of high quality.

References

Gerbl, M., McIvor, R., Loane, S., & Humphreys, P. (2016). Making the business process outsourcing decision:

why distance matters. International Journal of Operations & Production Management, 36(9), 1037- 1064.

Klean Denmark. (2011, February 3). Daily Sprint meeting [Image].

https://commons.wikimedia.org/wiki/File:Daily_sprint_meeting.jpg Kroenke, D. M., & Boyle, R. J. (2020). Using MIS (11th ed). Pearson. Oshri, I., Kotlarsky, J., & Willcocks, L. P. (2015). The handbook of global outsourcing and offshoring (3rd ed.).

Palmgrave Macmillan. Suggested Unit Resources In order to access the following resources, click the links below. The following articles all explore the topic of outsourcing and are excellent materials that will help you complete your assignment for this unit. You are encouraged to review them. Gerbl, M., McIvor, R., & Humphreys, P. (2016). Making the business process outsourcing decision: Why

distance matters. International Journal of Operations & Production Management, 36(9), 1037–1064. https://search-proquest- com.libraryresources.columbiasouthern.edu/docview/1826443062?accountid=33337

Overby, S. (2017). Robotic process automation makes nearshore outsourcing more attractive. CIO.

https://search-proquest- com.libraryresources.columbiasouthern.edu/docview/1869482273?accountid=33337

Figure 4 – Onshore outsourcing example

ITC 3303, Information Systems Management 6

UNIT x STUDY GUIDE Title

Persson, J. S., & Schlichter, B. R. (2015). Managing risk areas in software developm offshoring: A CMMI level 5 case. JITTA: Journal of Information Technology Theory and Application, 16(1), 5-23. https://search- proquest-com.libraryresources.columbiasouthern.edu/docview/1693330445?accountid=33337

Ryan, P. (2009). Outsourcing: A historical cost-saving mainstay. CRM Magazine, 13(2), 34.

https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=a9h&AN=36315837&site=ehost-live&scope=site

Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. To test your knowledge of the material covered in this unit, complete the following activities: Chapter 11 Active Review Chapter 11 Using Your Knowledge Chapter 11 Collaboration Exercise Chapter 11 Review Questions Chapter 11 Study Cards The activities are located within the chapter readings in uCertify. The Active Review, Using your Knowledge, Application Exercise, Review Questions, and Study Cards are located at the end of the chapter.