Information system management is a very important process for both private sector corporations. Good management practice requires important tools that facilitate strategic planning and management so as to archive the desired objectives of the organizations. AT&T being one of the successful organization requires outsourcing as an innovative an important tool for its IS management. Outsourcing would require the organization to relegate some of its IS management activities and commissioning to an external supplier.
This would provide an important opportunity for the organization to improve its performance and even be in a position to provide more and better services that have never been witnessed before in the entire history of the company.
This paper examines the key issue in the change process towards outsourcing and its implications to the management of the organization.
The paper further recommends what should be put in place to ensure that the entire process is a success.
This paper aims at examining the current situation of AT&T in the context of IS management.
The paper explores the opportunities which exist by adopting an outsourcing strategy in IS management.
The paper further aims at recommending changes that are necessary to facilitate the outsourcing process in IS management.
AT&T has been in business since the year 2005 and it has been the leading provide of telephone services both locally and internationally. This organization provides DSL internet services and it is indeed the second largest provider of internet services in the United States.
This organization offers the following services to over 150 million customers.
- high speed internet access
- advanced IP and networking solutions
- home entertainment
- local and long distance service
Though the company has an outlook of success, there are challenges that exist within the corporation that need to be addressed for efficiency in all its operations. In one of the stakeholder meetings in the year 2007 a number of challenges were identified to be hindering the cooperation from high performance and inefficiency within the various departments. The challenges were also pin pointed for delaying the cooperation from achieving its fundamental objectives of being top in the industry. To overcome these challenges it was agreed that the organization has to meet the following needs;
- Improvement of communication between all the departments and companies affiliated to AT&T.
- The flow of information between the employees of AT&T to be greatly enhanced in terms of speed and accessibility.
- To ensure that there is consistency of information provided by AT&T to all the members and customers at all the time in a reliable speed.
- An improvement of internal communication system to ensure that in formation comes from the right people and reaches to the correct people at the right time.
- To consolidate all the company information system resources that are necessary for proper management of information systems in the company.
- All efforts should be directed towards supporting the AT&T global strategy.
Successes of AT&T
- The organization has a strong customer base and occupies a good position in the industry
- The organizations products and services are widely accepted by consumers both locally and internationally.
- The organization has a long standing reputation of providing quality services and products to the consumers.
- The organization is well established both locally and globally.
Challenges of AT&T
- There is a lot of competition in provision of similar services with the growing trends in information technology.
- Management of information systems is not well undertaken by the organization.
- Improving on the customer satisfaction index is a challenge to the organization.
- Slow rate at which internal personnel adopt new systems and technology affects operations in the organization.
- Lack of specialized and advanced information system that can match some competitors.
- Lower rate of response to the needs of the customers
Outsourcing as a broad term refers to the process by which an organization hires an external agent to perform a task that it used to perform itself. This can be in different sectors of the organization for instance product and services.
Outsourcing in the private sector organizations like AT&T is a very useful tool for managing the information systems for the organizations. This means that all the efforts and activities that initially were involved in managing information systems are directed to another supplier of such services. The need for outsourcing arises in organizations because their information systems are characterized by complexity and volatility. They therefore require more concerted efforts that are geared specifically for efficiency in the information systems. This phenomenon in the corporate world has quite often been referred to as privatization.
Information system outsourcing from a wider outlook covers a number of sectors. It covers domains such as development of simple applications to data processing, facility management and leasing of all the functions associated with information systems and information technology in this organization. (Lee 2001)
In the recent past there has been notable increase in the incidences of information systems outsourcing by various organizations. This has been witnessed with a lot of technological uncertainty and curtailing of costs and the need for various organizations to concentrate on the core objectives of their establishment. (King 2000)
IS outsourcing is a multifaceted strategy that includes the initial decision to outsource, choosing of the structure to be used for governance and managing the relationship that is brought about by outsourcing.
As an organization AT&T needs to address a number of issues concerning decisions to undertake IS outsourcing. First of all the activity choices whereby it has to be clearly defined which activities will be undertaken by the supplier and which ones would remain in-house. Secondly another decision would involve deciding on the type of relationship which would be demonstrated by the two parties to facilitate IS outsourcing.
Two major theories have been used to explain the IS outsourcing decisions. The first theory is knowledge or resource based while the other one is cost of transaction based.
According to the resource based theory, organizations are considered to be collections of productivity based on assets, human ,resources and are in a position to gain competitive advantage if at all resources differ from those of competing firms.
The argument is that if a firm does not have resources that correspond to what is expected of it then it is advisable to undertake outsourcing.
The knowledge based theory for outsourcing focuses on the investments the organization has that can be viewed in terms of knowledge and other capabilities potential. The human resources is an important investment for any organization in which outsourcing can impact positively by increasing their knowledge and capacities.
In the view of the relationships or contracts that can be established between the organization and the service provider, there are four contracts that can be utilized.
Arms –length contract
This is almost the same as a sale whereby AT&T and the other supplier firm would be required to exchange a detached homogenous product or service.
Neo classical contract
This one would come up with a means of resolving disputes and even evaluate performance since there are uncertainties surrounding the whole relationship in terms of future contingencies.
This is a relationship in which mutual obligations of each party are spelt. The relationship can change over time without affecting the autonomy of each member. It is very useful for organizing complex business transactions.
This is very important especially when the organization does not intend to hand over a product or service to the other party in the relationship.
Need for Outsourcing
Possibilities of IS outsourcing can be explored if the organization s performance does not meet its desired intentions in the market. This is especially when the organization runs short of a number of factors that are important or necessary for its production for instance knowledge and even capital related resources.
There is need by the organization to standardize management by utilizing system integration. This is part of the greater focus on improving on the management practice within the organization
Secondly the organization intends to promote and enhance better communication within and outside the organization by facilitating cooperation amongst all personnel working for the organization.
The need to improve on the monthly consolidation of accounts bearing in mind that some of the merger companies had the intention of retaining their information systems in place. (Palvia 1995)
Benefits of information system outsourcing
The cost curtailing effect is one important benefit that is associated with IS outsourcing. This cost reduction can be viewed from the resources point of view and from the investment point of view.
Knowledge and technology are likely to emanate from outsourcing activities. The organization is likely to experience new expertise other than its usual personnel. This would help the organization in terms of acquisition of knowledge which would then be transferred to some of its personnel through outsourcing activities. Without outsourcing knowledge acquisition for the organization can prove to be a very costly affair.
Outsourcing has the capacity of creating an advanced and more specialized information system for the organization if it is well undertaken and the relationship well sustained.
Outsourcing presents an important opportunity for this organization to gain from its competitive advantage by making maximum utilization of its resources and apportioning others like IS management to an external agency. This would lead to more efficiency in management of information and communication within the organization. With the IS being managed by another party the organization would be in a better position to concentrate on other important sectors of production and thus it would ensure increased productivity in terms of service provision.
The organization is likely to benefit from outsourcing through the elimination of the large fixed costs during recession and transferring of the adjustment costs to the service provider firm especially when a new technology is adopted. (Palvia 1995)
Information system outsourcing key factors
The success of information system outsourcing is dependent on a number of key factors.
A state of congruence between the service provider and the clients culture, business process and other important factors are fundamental towards the workability and success of IS outsourcing.
The type of relationship between the organization and the service provider. This has to be clearly defined to prevent conflict of interest from arising in the case of executing the activities of the different parties that are involved in the outsourcing relationship. The role of the service provider has to be clearly stated in the arrangement.
Demarcation of the sector that is supposed to be outsourced is also a key factor in the success of the strategy.
Defending the organizations competitive advantage is essential for the success of the outsourcing. This is in the sense that if a product that is unique to the organization being handed to the service provider and allowing the organization to loose its long sustained competitive advantage would lead to the failure of the strategy to achieve the desired outcomes. (Lacity 1993 p18)
Outsourcing should be considered as a major strategy for AT&T to move a step forward towards reducing the difference between what is desired in terms of resources and knowledge and the actual situation of IS resources and potentiality especially when the organizations performance falls short of expectations.
Uncertainty and industry competitiveness are important factors that should not be overlooked in any decision or move towards IS outsourcing.
The management should consider the possibilities of outsourcing if the knowledge set that is needed to develop a particular IS function is too large. This is because examining the current in-house state of IS, there is lack of capacity to handle a larger IS function. This is so because knowledge I a very expensive asset and the competitors would not venture into knowledge acquisition. Taking the first move would be a big advantage to the organization.
Care should be taken in the course of IS outsourcing especially if some product or service that is quite unique from that of competitors is to be handed over. This would be a major precaution in defending the sustained competitive advantage of the organization.
The managements decisions towards IS outsourcing should be also based on an examination of the impact of transaction features like asset specificity. The organizations economics hung around a balance between the production costs and the transaction costs.
For outsourcing to be a suitable move for the organization, there should be low asset specificity, low environmental uncertainty and low measurement problems. To add on this there should be availability of a number of suppliers of IS service or product who are not frequent in their activity.
In a situation whereby few suppliers of IS product or service are willing to invest, the organization would find itself in highly risky IS transactions that are characteristic of the high asset specificity, high environmental uncertainty and with many measurement problems.
In an already established IS outsourcing relationship, this report recommends that the management should always endeavor to sustain the relationship for instance by working hard towards sealing the gaps between the objectives of service providers and the clients. Leaving the gaps to get wide can lead to unsuccessful outcomes of the entire process of IS outsourcing. (Apte1990 p300).
The success of an outsourcing strategy would depend on paying attention to the key factors that have led to success in other organizations. However the organization has to be prepared to carry the risk that comes with information outsourcing.
Apte, U. (1990) “Global outsourcing of information systems and processing services”, The Information Society, Volume 7, Number 4, pp. 287-303.
Gurbaxani, V. (1996). The New World of Information Technology Outsourcing. Communications of the ACM, 39(7), 45-46.
King, W. and Malhotra, Y. “Developing a framework for analysing IS sourcing”, Information & Management, Volume 37, Number 1, 2000, pp.323-334.
Lacity, M. and Hirschheim, R. “Implementing information systems outsourcing: Key issues and experiences of an early adopter”, Journal of General Management, Volume 1, Number 1, 1993, pp. 17-31.
Lee, J. “The impact of knowledge sharing, organizational capability and partnership quality on IS outsourcing success”, Information & Management,Volume 38, Number 1, pp. 2001, pp. 323-335.
Palvia, P. “A dialectic view of information systems outsourcing: Pros and cons”, Information & Management,Volume 29, Number 5, 1995, pp. 265-275.