MIS Organization and Outsourcing Define Chief Information Officer, Chief Technology

Officer, Chief Knowledge OfficerDiscuss key functions a appropriate

backgrounds/experiences for CIOsBe 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 outsourcingDescribe the disadvantages of outsourcing and steps

to avoid them

Centralized IS Organization

ADVANTAGESGlobal standards and

common data“one voice”Greater leverage in

deploying strategic ITEconomies of scaleAccess to large

capacityBetter recruitment

DISADVANTAGESNot meeting local

needsSchism between

business and ITLack of business

unit control of overhead costs

Decentralized IS Organization

ADVANTAGESTechnology

customized to local business needs

Closer partnership between business &IT

Greater flexibilityBusiness unit control

over overhead costs

DISADVANTAGESDifficulty maintaining

global standardsDifficulty negotiating

preferential supplier agreements

Loss of controlHigher infrastructure

costsDuplication of staff and

data

Federalist IS Organization

ADVANTAGESMixes advantages

of Centralized and Decentralized IS organization

Promotes strategic control and synergy

Offers groupwide IT strategy

DISADVANTAGESDoes not match

exactly with organization structure

Outsourcing

The purchase of a good or service that was previously provided internally

Farm out data center operations (facilities management)

Farm out tasks and servicesFarm out systems developmentMay transfer IS function to vendor

Our Survey (California Management Review, 1997)

Companies written up in trade press for having signed outsourcing agreements (1988 - 1993)

Telephone interviews34 of 129 companies participated30% financial institutions25 private vs. 9 publicProvided broad range of services

Goals: Determinants of Outsourcing Success

Core vs. commodityPartner vs. vendorTight vs. loose contract

Success: Economic, Technical, Strategic, Overall Satisfaction with Contract

Findings: Primary Reasons for OutsourcingTechnological 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)

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

Findings: Other

Need tight contractsMay be successful for core

functions… especially if linked to tight contract

Can have successful partnerships

Outsourcing Disadvantages

Reliance on vendor/partnerLoss of controlConsiderations about

security/confidentialityEvaporization of cost savingsLoss of competitive advantageSlight of hand with employeesHigh switching costs

Steps to Avoid PitfallsDo not focus negotiation solely on price

consider costs of contract management

Establish short-term supplier contractsUse multiple ‘best of breed’ suppliers?????Develop skills in contract managementCarefully evaluate your company’s own

capabilitiesThoroughly evaluation outsourcer’s capabilitiesChoose and outsourcer whose capabilities

complement yoursConsider cultural fit and technical expertise

Outsourcing strategies

DECISIONCRITERIA

“MAKE”PRESSURE

“BUY”PRESSURE

CoreCompetency

Often core* Oftensupport*

Security/Confidentiality

Veryconfidential

Not highlyconfidential

SoftwareAvailability

Uniqueapplication

Softwareavailable forcommonproblem

Outsourcing strategiesDECISIONCRITERIA

“MAKE”STRATEGY

“BUY”STRATEGY

Partners No reliable,competent,motivated, orfinanciallystable partnersavailable

Suitablepartnersavailable

Time Frame Time availablefor applicationdevelopment

Available timetoo limited

ITProfessionals

Available in-house

Not availablein-house