Solution
Vineet Kumar answered on
Apr 06 2020
1
Case Study
IT Infrastructure Outsourcing at Schaeffer (A): The Outsourcing Decision
Executive Summary
Schaeffer Corporation is a diversified manufacturer. It has established three divisions that are recognized as Kinzel, Colbert and Reitzel. These are entirely diverse from each other. Reitzel Division of the company is a growth achiever and it helps company to earn 80% of total profits. The recent success in Reitzel division has motivated the authority of Schaeffer Corporation to reset its profitability motivated goals to get maximum profits through the help of new IT system and services. Meeting the future demands, Schaeffer has now to think that the existing centralized structure of IT will continue or to outsource new services to IT.
Schaeffer takes help of Ganter Consulting group in developing a request to obtain a proposal from IT suppliers and to scrutinize the requirement of IT sources. ABC and DEF are two outsourcing companies were considered by the consulting group.
In this context, this report discussed the steps involved in the development of Request for Proposals. This report further describes that the case organization selects ABC Company for outsourcing IT services as it had the lowest bid with $220 and qualified for providing Schaeffer’s required infrastructure for IT but the bid was $20 million more than the cost to develop in-house IT facilities. This report also
ought up some disadvantages related to outsourcing along with some advantages. Further, this report explains the reason for that top managers of the company focused considered the disadvantages of IT outsourcing. In the last, this report defines how the case organization may eliminate the conflicts in the decision to select IT outsourcing.
Table of Contents
1.0 Company Background 4
1.1: What benefits does the company hope to achieve from outsourcing its IT infrastructure? 4
1.1.1 Save Money 4
1.1.2 Save Time 5
1.1.3 Better Understanding of IT Infrastructure 5
1.1.4 Growing Overall Efficiency 5
1.1.5 Need to Grow 6
2. Describe the steps taken to develop the RFP and the role that an outside consultant played in this process. 6
2.1 Important Steps Taken In Developing Request for Proposal (RFP) 6
2.1.1 Define Objectives Clearly 6
2.1.2 Identification of Outsourcing Functions 7
2.1.3 Development of a Written RFP 7
2.1.4 Describe Scope and Nature Outsourcing Work 7
2.1.5 Selection of Potential Outsourcing IT Supplier along with their responsibilities and Roles 8
2.2 Role of Outside Consultant to Development of an RFP 8
3. What were the perceived disadvantages to outsourcing raised by managers? 8
3.1 Cost Expense 9
3.2 Resource Expense 9
3.3 Power of Bargaining 10
3.4 Controls over Functions 10
3.5 Changes in Protocols 10
4. Some managers have suggested a third alternative: outsource the IT infrastructure to the specific division only. Which alternative do you think they should choose, and why? 11
5. Why do you think so many disadvantages were raised after the task force recommendation had been developed? How could this controversy have been avoided? 12
1.0 Company Background
Schaeffer Cooperation is located in a Midwestern town of Vilonia. Annual sales in 2002 presented satisfactory progress that was approximately $2 billion (Brown, et al., 2012, p. 628). Among three divisions, Reitzel division contributed approach 80% in total profits of the company. Only, this division of Schaeffer Cooperation has capability to expand business. In earlier days, each division has their own structure of IT. A few years ago, IT structure of each division was combined to develop a centralized for the entire organization (Brown, et al., 2012, p. 629). But the determined growth goals for each division in early 2002 helped the managers to realize the insufficiency of their IT system to address future demands of the corporation. So, the decision associated with IT outsourcing became a controversial issue to Schaeffer.
1.1: What benefits does the company hope to achieve from outsourcing its IT infrastructure?
Analysis of case study explores that Schaeffer Corporation wants to gain a lot of benefits through IT infrastructure outsourcing. Followings are some expected benefits:
1.1.1 Save Money
The main benefit of IT outsourcing is to save a lot of money that is utilized to run existing IT systems of the company. In this, outsourcing of IT system will help Schaeffer Corporation to save startup costs and other types of operational cost that are necessary for developing the required IT servers. Further, the IT outsourcing will reduce total labor cost (Brown, et al., 2012, pp. 629) as IT structure will need limited employees. Through outsourcing, the organization can save salaries and other expenses which were given to IT workers. Moreover, the save money will help the case organization to provide an extra budget for the maintenance of existing servers, data storage system, programs, archive, and data backup. Also, the IT outsourcing will help in saving space of the case organization as well as expenses on office facilities.
1.1.2 Save Time
Saving time is another advantage of IT outsourcing. That means the case organization will be able to focus on other dimensions of operations effectively rather than only activities related to IT (Brown, et al., 2012, pp. 629). Further, the IT outsourcing will facilitate Schaeffer to use such productive time that is dedicated to existing operations of IT to manage and improve the output of company in the areas of human resource, management and production. As a result, Schaeffer can focus on the related managerial fields which need extra time to ensure successful implementation of policies.
1.1.3 Better Understanding of IT Infrastructure
The decision, related to IT outsourcing, will allow the case organization to gather entire data related to the organization at a single place that is stored in a different place. It will facilitate case organization in deciding whether to go for IT outsourcing or not. Further, the collected data will help the company to know all of its weakness, strength and capabilities which will help it in achieving growth goals. In addition, managers may be able to make better decisions related to the company after the collection of data from a different place which will allow it to generate more revenue.
1.1.4 Growing Overall Efficiency
The outsourcing decision of company for IT system will allow the...