Unit VII Case Study: Outsourcing

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Unit VII Case Study: Outsourcing

As a manager of an organization, you will often need to find ways to cut costs. One way to cut costs is to outsource by hiring another organization to perform the service. Consider the following scenario:
As a manager for the public outreach department, you realize that the current system for managing outreach issues is outdated. You would like to have a new outreach system developed using the Cloudera platform to help manage ‘big data.’ However, no one in the organization has the expertise. You will have to outsource the project to save on costs and avoid management problems. Two companies have sent in a bid, one from Vancouver, Canada and one from Mumbai, India. The bid from India was slightly lower than the bid from Canada. Compose a response that includes the following elements:

Instructions for Unit VII Case Study: Outsourcing

  • Define what is meant by outsourcing.
  • Explain how Peter Drucker’s statement (covered in the textbook) about how one company’s back room is another company’s front room pertains to outsourcing. Use an example.
  • Summarize the management advantages, cost reduction, and risk reduction of outsourcing.
  • Summarize the outsourcing risks concerning control, long-term costs, and exit strategy.
  • Discuss which company you would outsource to and why. Does distance matter?
Your case study must be at least two pages long, and you must use at least two references as a source for your essay. See the Suggested Unit Resources section for some sample articles on outsourcing. Be sure to cite all sources used in APA format and format your essay in APA style.

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).

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