MIS Organization and Outsourcing

1. 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

2. 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 Centralized IS Organization

3. 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 Decentralized IS Organization

4. 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 Federalist IS Organization

5. 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

6. 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

7. Goals: Determinants of Outsourcing Success • Core vs. commodity • Partner vs. vendor • Tight vs. loose contract • Success: Economic, Technical, Strategic, Overall Satisfaction with Contract

8. 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)

9. 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

10. Findings: Other • Need tight contracts • May be successful for core functions… especially if linked to tight contract • Can have successful partnerships

11. 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

12. 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 company’s own capabilities • Thoroughly evaluation outsourcer’s capabilities • Choose and outsourcer whose capabilities complement yours • Consider cultural fit and technical expertise

13. Outsourcing strategies

14. Outsourcing strategies