outsourcing defined - cis.gsu.edu defined •“companies handing work that used to be ... run rate...
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MBA 8125Information technology Management
Professor Duane Truex III
Outsourcing to Offsourcing:Models and rationales for the global
redistribution of work
Professor Truex MBA 8125Informatioon Technology management
Outsourcing defined
• “Companies handing work that used to beperformed ‘in-house’ to outside firms.”– The Economist A world of work, Nov 13 2004 , 2.
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Professor Truex MBA 8125Informatioon Technology management
Outsourcing: Why Do It?• Focus on Core Competencies
– Production, sales, finance/accounting• Realization of Greater Economies (Lower Costs)
– Vendors argue they can recapture scale because they specializein IS and have lower costs because of volume discounts,sharing of resources and expertise, etc.
– Savings are partly passed on to customers (theoretically, atleast!)
Professor Truex MBA 8125Informatioon Technology management
Outsourcing: Why Do It?• Greater Flexibility and Expertise in Workforce
– Organization obtains value-added specializedknowledge the agent brings to the transaction
– Flexibility – organization does not have long termcommitment to employees
• Reduces Risk– Places burden of risk on vendor, rather than on internal
IT department
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Professor Truex MBA 8125Informatioon Technology management
What work?
• Manufacturing initially• Any digital good
– IT services– Banking– Accounting– Administration of all sorts
• White collar work
Professor Truex MBA 8125Informatioon Technology management
In the realm of IT
• “Outsourcing is defined as the contractingof various information systems functionssuch as managing of data,centers,operations, hardware support, softwaremaintenance, network and even applicationsdevelopment to outside service providers.”
(Chaudhury, A., Nam, K. and Rao, H.R. Management of information systems outsourcing: A biddingperspective. J. MIS 12, 2 (1995), 131–159.)
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Professor Truex MBA 8125Informatioon Technology management
Outsourcing: Where toOutsource?
• Which functions or processes should youchoose to outsource?– Core-versus-Context Model– Decision should be made by CIO, COO, CFO
Professor Truex MBA 8125Informatioon Technology management
What’s Being Outsourced?
Source: Aquent Survey
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Professor Truex MBA 8125Informatioon Technology management
Sourcing Models
• Outsourcing domestically• Production and services produced offshore• Outsourcing offshore
– A.k.a., ‘Offsourcing’
Professor Truex MBA 8125Informatioon Technology management
• No face-to-face servicing requirement• High information content• Work process is “telecommutable”• High wage differential with similar occupation in
destination region• Relatively low set-up barriers• Low social networking requirementBased upon these criteria13 Million jobs in the US are candidates for offshoring
a study by the UC-Berkeley Fisher Center’s Real Estate andUrban Economics group estimates
Source: R. Welke
Attributes of Offshored Jobs
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Professor Truex MBA 8125Informatioon Technology management
Drivers offshore outsourcing
• Declining shipping costs• Abundant and cheap bandwidth• Open standards on the internet• Labor-cost differential
Professor Truex MBA 8125Informatioon Technology management
ROI – Information technologyTypical IT ScenarioAnnual cost per programmer (US $ 1000s)1
OnsiteEmployee
OnshoreConsultant
OffshoreDeveloper
Run rate savings are often 50%+ with overall net savings of 30%
NearshoreResource
1 Fully loaded cost including salary, benefits, space, andoverhead costs like transportation, cafeteria
OffshoreQ&A
OffshoreDocument
OffshoreArchitect
A 100 person IndianA 100 person Indiansoftware developmentsoftware developmentteam can result in $6Mteam can result in $6M
savings per yearsavings per year
50-80,000U.S.A.28,000Canada3-8,000China
5-10,000Russia7,200Malaysia6,600Philippines
6-10,000India4,800Poland
Average programmersalaries
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Professor Truex MBA 8125Informatioon Technology management
Some News Quotes
• Accenture Ltd said it planned to more than double its staff in Indiato 10,000 people in 12 to 14 months, taking advantage of relativelylow wages paid to software engineers in the country
• Dell Computer will no longer route its corporate customers (85%)to a technical support call center in Bangalore, India due tocomplaints by customers
• Swedish outsourcing companies are experiencing difficulties incompeting with large U.S. firms. Outsourcing deals take considerabletime to sew together with quite a number of people involved.Investment figures per deal are worth around 700,000 to well overa million dollars for potential suppliers.
• The majority of enterprises in Europe deploying applicationoutsourcing are German, according to a recent survey by BusinessCommunications Review International; Only BPO activity which verypopular in France is payroll management
Source: R. Welke
Professor Truex MBA 8125Informatioon Technology management
The economic models based on importantassumptions
• That displaced workers will find (acceptable)replacement work– The McKinsey study assumes on balance at 70%
of previous wages• Cost of capital assumptions• That the rising affluence of those countries
doing the work will spend sizable portionsback in the outsourcing economy.
Are these assumptions solid? Valid?
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Professor Truex MBA 8125Informatioon Technology management
Not just a “U.S. thing”
Professor Truex MBA 8125Informatioon Technology management
Sequencing of IT Sourcing
• 1st Wave– Hardware
• 2nd Wave– Software and IT Services
• Mostly big companies using IT extensively• Not SMEs who use more tailored solutions and
customer care
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Professor Truex MBA 8125Informatioon Technology management
Outsourcing only commodity goods?
Three layer model1. Top layer-
Tailored IT services, bespoke one-off, custom, services2. Middle layer
stuff on the way to becoming commodities3. Bottom Layer--commodity services and goods
• Common standards, well known problems replicableprocesses
• E.g., help desk functions, low level coding, bookkeeping,telemarketing, collections, credit validation
Professor Truex MBA 8125Informatioon Technology management
The Indian Players are?
Who benefits?McKinsey consulting says that for every$1 US moved to India, the US gains$1.14. Depending on some optimisticassumptions about the rehiring of thoseUS workers who have lost jobs in theprocess.
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Professor Truex MBA 8125Informatioon Technology management
• Hire an intermediary as a broker and guide to quicklymove through learning curve
• To manage risks– Pay attention to legal issues and contracts– Communicate strategy to stakeholders
• Establish meetings and communication with suppliers (andtheir workers) to work effectively
• Think about production and transaction costs
Offshoring Best Practices
Rottman & Lacity, MISQ Executive 2004
Professor Truex MBA 8125Informatioon Technology management
Outsourcing topics commonly discussed
Is there a sustainable best model?Competitive Advantage
How realistic is IP protection when goods, designand production is shared between countries?
Intellectual Property
What are current consumption patterns? Willthey inure to the outsourcing nation?
New Market Opportunities
What costs with each model?Political
Need standard infrastructure? Minimums?Infrastructure
How does one differentiate goods and servicesthat can be commoditized?
Commoditization
Is the labor pool large enough? Language?Education
Are the gains the same for physical and virtualgoods? Transaction costs, efficiency issues
Cost reduction
Played indefinitely? Market potential?Labor Arbitrage
What is the role of…?
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Professor Truex MBA 8125Informatioon Technology management
Four case studies (Truex et al, 2006)
Case 1 Case 2 Case 3 Case 4
Apple iPod Volvo in India GECIS in India Intel in Costa Rica Factors
Model(s) Production and
Services Offshore
Outsourcing
Offshoring
and Offshore
Outsourcing
Offshore
Outsourcing Offshoring
Cost
Reduction
By outsourcing
production and services
in a Taiwan based
company, it is decreasing the overall cost of
production of the iPod
Source auto
components
for exports,
developed as fourth largest
export hub,
added engineering
center and IT
services
Concept
introduced by
GE- low cost
high quality manpower,
which is now
the mantra for most
multinational.
Found software
engineers
By establishing an
R&D and
production facility
outside the US is decreasing the
cost. Labor is
cheap, it has all the benefits provided
by the Costa Rica
government - low tax and free trade
zone
Taiwan has focused its
education towards the production/manufacturing
profile. It provides
opportunities for Taiwan
(and its strategic country partners) towards
reducing unemployment
and for businesses which could take advantage of
the supply of specialized
and cheap labor
India
continues to invest in
education and
companies
can continue to hire highly
educated
workforce at competitive
global salaries
India continues
to invest in education and
companies can
continue to hire
highly educated
workforce at
competitive global salaries.
It has developed
programs and strategic alliances
with recognized
local universities in
order to prepare them to be in the
intel profile:
"Intelization"
Whose Host (Government) Host (Government)
Host (Government)
Host (Government) and Home (Intel
facilities in Silicon
Valley)
Education
Where Host Host Host Host and Home
Short
Term
No new market
opportunities
No new
market opportunities
Initial scope
was servicing home country
No new market
opportunities
Creation of
New Market Opportunities Long
Term
Taiwanese manufacturer
can serve as a global
provider for Apple products, not just iPod.
Additionally, it will
enforce brand
recognition in Taiwan
Entered India
in 1998 and
today is head office for
SAARC region
As market
matures,
GECIS is getting ready
to diversify into
power,
plastics, healthcare,
financing, and
a variety of other services.
Additionally,
can serve
Economies of scale
and product.
Professor Truex MBA 8125Informatioon Technology management
Critical for Apple. It found the
appropriate partner to manufacture at a relative lower
price while protecting design
and innovation.
Engineering center can be
used for R&D purposes, retain talent in-house
Developed people locally
and today are 99.99% local, main strength in BPO
services
With the offshoring
model, Intel secured its property rights since the
facilities belong to the
company and not to a
third party
Intellectual
Property
Maintain first mover advantage
in innovation, product
development and business
model. Further IP is protected
Retain knowledge in-house
--> protecting IP
Retain knowledge in-house -
-> protecting IP
Maintain first mover
advantage. Retain
knowledge in-house -->
protecting IP
Whose Apple Volvo GECIS Intel
Creation
Yes. Apple concentrates in its
core business (design and
market). Partnership model for manufacturing
Yes, takes advantage of
the tax treaties amongst
neighboring countries.
Yes, first mover advantage
Yes, Highly specialized
and educated labor, low
cost structure, free trade zone benefits.
Geographical proximity
to headquarters.
What
Centralization of knowledge and dedication to core business.
Protection of IP is enforced
Access to trained cheaper resource pool of highly
educated manpower
Access to trained cheaper resource pool of highly
educated manpower
Access to trained cheaper resource pool
of highly educated
manpower
Whose Partners and Governments Government Partners and Government Government
Creation
By having the right resources
there is an increase of employment. Opportunities to
increase investment from other
companies
By having the right
resources there is an increase of employment.
Opportunities to increase
investment from other companies
By having the right
resources there is an increase of employment.
Opportunities to increase
investment from other companies
By having the right
resources there is an increase of employment.
Opportunities to
increase investment from other companies
Competitive
Advantage
What Maintain highly educated
population in host country and
increase in employment rate.
Maintain highly educated
population in host country
and increase in employment rate.
Maintain highly educated
population in host country
and increase in employment rate.
Maintain highly
educated population in
host country and increase in employment
rate.
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Professor Truex MBA 8125Informatioon Technology management
Outsourcing rationalization
• The near term rationalization is typicallyeconomic/financial– “In china it is $.11 per/hour vs. the US at $40.00
per/hour”But in the longer term it is:• Relational issues
– But we must consider• Transaction costs• Stakeholder Agency responsibilities
Professor Truex MBA 8125Informatioon Technology management
Transaction Costs = coordination costs in economics terms
Typically three types:1. Search and information costs are costs such as those incurred in determining that
the required good is available on the market, who has the lowest price, etc.2. Bargaining or negotiating costs are the costs required to come to an acceptable
agreement with the other party to the transaction, drawing up an appropriate contract,etc..
3. Policing and enforcement costs are the costs of making sure the other party sticksto the terms of the contract, and taking appropriate action (often through the legalsystem) if this turns out not to be the case.
Transaction costs consist of costs incurred in searching for the bestsupplier/partner/customer, the cost of establishing a supposedly "tamper-proof" contract,and the costs of monitoring and enforcing the implementation of the contract.
Transaction costs vs. production costs.Transaction costs, are "all the information processing necessary to coordinate thework of people and machines that perform the primary processes,Production costs include the costs incurred from "the physical or other primaryprocesses necessary to create and distribute the goods or services being produced"
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Professor Truex MBA 8125Informatioon Technology management
Ouchi: “Markets, bureaucraciesand Clans” (ASQ, March 1980, v 25 #1, pp 129-142.)
Professor Truex MBA 8125Informatioon Technology management
Transaction cost vs.Trust and Control mechanisms
Transaction
Cost
Trust
Bureaucracye.g., accepting an employmentcontract with a company vs. working as an independentlaborer contracting daily
Rule-governed, impartial,impersonal, yielding to legitimateauthority, needs reciprocity
Clanse.g., managing complex multinational arrangements in highlydynamic environments
Driven by shared values andnorms, acceptance of legitimateauthority
Marketse.g., buying a candy bar atthe corner store.Highly impersonal,reciprocity required.
Low
Low
HighHigh
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Professor Truex MBA 8125Informatioon Technology management
Kishore et al FORT Framework(Communications of the ACM (46:12 (December) 2003, pp 86-92)
Professor Truex MBA 8125Informatioon Technology management
Kishore et al and the FORT framework
• Illustrates that outsourcing variations can rangefrom simple to quite complex– Support– Reliance– Alignment– Alliance
• Highlights the essential role of relationship and oftrust
• Considers coordination costs of various sourcingalternatives
Increasingdegrees ofrelationalintimacy andintegration
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Professor Truex MBA 8125Informatioon Technology management
FORT’s: Four relationships
Professor Truex MBA 8125Informatioon Technology management
Other views
• Who?– Lou Dobbs (CNN financial analyst)– Labor– Some economists and sociologists
• Concerns– That we are outsourcing competence in the
process– Sociological change is afoot
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Professor Truex MBA 8125Informatioon Technology management
The New Rich-Rich Gap(Robert Reich, Newsweek, ‘Issues 2006”)
• 15 years ago Reich described and predicted– a three-tiered workforce common to advance societies
1. Bottom tier– Workers offering personal service in retial and service industries
2. Second Tier– Production workers
3. Top -tier– Symbolic analysts
» E.g., Engineers and lawyers» All well-educated, critical thinkers» The ‘knowledge workers’ of the new economy
• That wealth and opportunity gaps would widen withAdvances in technology and globalization
Professor Truex MBA 8125Informatioon Technology management
Prescient and surprised
• Top-fifth of workers held 85% of US wealth• Faster than expected
– The top and bottom tiers grew the middle shrank– Symbolic analysts make up > 20% of all jobs in advanced
economies• Their income is soaring relative to other workers’• In China the wealthiest 5% control > 50% of bank deposits.• India’s symbolic analysts have become a new national elite
• Two types of symbolic analysts have emerged– National– Global
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Professor Truex MBA 8125Informatioon Technology management
National and Global Symbolic Analysts
• Most symbolic analysts– Work within a national economy– Manipulate symbols with aid of computers– The core of the middle class
• Accountant, engineers, lawyers, and other university-trained professionals
• But new powerful class has emerged at the top
Professor Truex MBA 8125Informatioon Technology management
The ‘new class’ of Global Symbolic Analysts
• CEOs, CFOs of global corporations– Partners and executives in global investment banks, law
firms and consultancies– Most have been educated at the same elite institutions
• America's Ivy League universities, Oxford, Cambridge, theLondon School of Economics or the University of California,Berkeley.
– Most work in similar environments, tend to work veryhard,they live comfortably, and enjoy first-class lifestyles and their income and wealth far surpass those ofnational symbolic analysts.
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Professor Truex MBA 8125Informatioon Technology management
Why has the global symbolic analystsemerged on top?
• Global commerce is on a scale and complexity nocommercial contract can adequately cover and nosingle legal system can enforce
• Dealmakers must rely on Trust– people they can trust– The extended relational network of people whom they
trust– Trusted circles developed in the jet-setting live world
round– Significant time in face-toface meetins
Professor Truex MBA 8125Informatioon Technology management
Symbolic analysts grow the bottom-tier• 15 years ago
– 1/3 of jobs in advanced economies were service-oriented, face-to-face jobs
• Today– is > 50%– More work in
• laundries, dry cleaners than in steel mills,• Hospitals and nursing homes than in banks and insurance
companies• More work for Walmart than the entire automobile industry!
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Professor Truex MBA 8125Informatioon Technology management
Why and what implications?
• Aging populations, dual income families– Outsource housework– Require eldercare– Top 10th have enough discretionary income to afford
pampering and hire• Gardeners, coaches, trainers, cooks
– Yet the supply of labor grows faster than the demand• immigration and declining manufacturing sector
– And real wages are dropping as a result
Professor Truex MBA 8125Informatioon Technology management
The middle-tier?
• Ranks of production workers– Fallen from 1/3 in advanced economies to 1/4– Alliance Capital Management in New York, studied 20
major economies• found that between 1995 and 2002 more than 22 million
factory jobs vanished.– US lost 11% of manufacturing jobs– Japan lost 16%– Brazil lost 20%– China lost 15%
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Professor Truex MBA 8125Informatioon Technology management
Why? What is happening
• Productivity Gains– New equipment and new technologies– Market reforms force state-run plants
• Greater production with fewer workers– Office work not immune to productivity gains
and job replacement with software• Digital symbolic work is heading to lower-wage
countries– Accounting, filing legal papers, call centers, tech support,
routine coding…etc
Professor Truex MBA 8125Informatioon Technology management
A class of interests between Nationaland global symbolic analysts
• For National Symbolic analysts– in advance economies– National symbolic analysts are becoming
interchangeable• Jobs transcend boarders and travel where work is cheaper
• Global symbolic analysts– Relational capital is far less transferable– So they have a huge, and growing, stake in
globalization– As globalization grows they are in ever more demand
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Professor Truex MBA 8125Informatioon Technology management
Should national symbolicanalysts be afraid?
• Despite the new competition the demand isstill rising– Growth of salaries of university grads out pace
those without; the professions do even better• If the demand for Symbolic analysts were dropping
salaries would drop
Professor Truex MBA 8125Informatioon Technology management
BUT….
• Without substantial investment in basicR&D and education– We will lose the advantage in science,
engineering and high-value added production– Symbolic analysts will lose ground– Global symbolic analysts will gain and the gap
will widen– The income and wealth gap will widen and the
culture wars will increase.
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Professor Truex MBA 8125Informatioon Technology management
Is design a commodity?• Michael Marks, CEO of Flextronics thinks so
(BusinessWeek on line , March 21, 2005)– Predicts that engineering and design will experience the shift manufacturing experienced– Massive downsizing of in-house R&D operations– “Design is not competitive advantage, it is as inefficient as manufacturing and supply-chain
management used to be”– “you can save 15% to 20% moving manufacturing to low-cost countries but achieve MUCH MORE
dramatics savings shifting design abroad.– OEM firms spend 3 to 5 times we we spend to design a product
• Driver?– All intellectual property is going onto silicon
• The winners?– Those using ODMs and developng their own brands vs.
using OEM products• The Dells, Walmarts and ‘Bestbuys” of the world
Professor Truex MBA 8125Informatioon Technology management
Jobs least likely to be outsourcedSource InformationWeek � Jan. 30, 2006URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=177104711 �
• Customer Facing• App developers• Web-apps programmers• Data-warehouse and
business-intelligence specialists• ERP and CRM pros• Database developers and analysts• Help-desk specialists
•Infrastructure Jobs•Security•Data modelers•Network managers and engineers•Wireless engineers andadministrators•Software engineers•Disaster-recovery specialists•System auditors and integrators•Storage administrators •Enablers
•IT or business architects•Business analysts•Business technologists•Business-process modelers•Project managers
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Professor Truex MBA 8125Informatioon Technology management
Outsourcing: When toOutsource?
• Sooner the better, for a given project– Don’t try to outsource problems– Don’t relinquish total control to vendor– Learn from the vendor
Professor Truex MBA 8125Informatioon Technology management
Outsourcing: So Why NotOutsource?
• Loss of Strategic Assets– IT frequently represents ability to lead the
industry and change structure of the industry.– Managers who do not realize that IT can be a
strategic weapon are more likely to trade thisstrategic asset
– Do you really want this trade away or losecontrol of this strategic asset?
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Professor Truex MBA 8125Informatioon Technology management
Outsourcing: So Why NotOutsource?
• Do Not Realize Greater Economies (actually higher costs!)– Vendors argue that they can recapture scale, but if the contract
overly favors the outsourcer, the organization may pay more thanif the function were insourced
• Lose “Loyal” Workforce– Even if the vendor hires your best people, vendor may put them on
other accounts to attract new customers– OR, if you outsourced to get vendor’s expertise you may just be
getting your own
Professor Truex MBA 8125Informatioon Technology management
• Cannot readily access or utilize increasedsystems expertise– Experts on your system belong to the vendor
• Threat of vendor opportunism– Extreme outsourcing (selling assets, people,
etc) puts you at mercy of vendor– Additional fees
Outsourcing: So Why NotOutsource?
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Professor Truex MBA 8125Informatioon Technology management
Outsourcing: So Why NotOutsource?
• Cost Savings might have been achievedinternally– Large companies should be able to achieve
economies of scale on their own– In-house data centers can automate and
streamline operations and invest in newproductivity-improving technologies just asoutsource vendors do
Professor Truex MBA 8125Informatioon Technology management
Managerial Guidelines forOutsourcing
• Be self-interested• Assess strategic value of current and potential IT assets• Ensure (through contract) assets will not be traded away or
lost through unbonded outsourcing– bond the agents (outsourcers) legally to ensure that the firm will
not suffer loss of trade secrets.– bond the agents through insurance to recover from losses through
non performance of contract
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Professor Truex MBA 8125Informatioon Technology management
Summary
• Offsourcing is a feature of Globalization• It is technology enabled and dependent• It is a growing phenomena
– In frequency– $$ size– Complexity and– In the types of arrangements
Professor Truex MBA 8125Informatioon Technology management
Iff you choose toOutsource-Offshore-Offsource
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Professor Truex MBA 8125Informatioon Technology management
Request For Proposal (RFP)
Detailed list of questions submitted to vendorsto determine if vendor’s product meetsorganization’s specific requirements.
Professor Truex MBA 8125Informatioon Technology management
Criteria for Evaluating Vendors
• Financial viability of vendor
• Other vendor characteristics
• Contract terms and conditions
• For application software packages…– Opinions of other users of the package
– Package characteristics
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Professor Truex MBA 8125Informatioon Technology management
• Does vendor have sufficient capital/surplus to meet on-goingobligations and absorb unexpected financial losses?
• Does vendor have contingent liabilities (e.g., lawsuits) that couldadversely affect its financial condition?
• Has vendor achieved profitability from its operations?
• Concentration of revenue in one or relatively few customers?
Financial Viability of the Vendor
Professor Truex MBA 8125Informatioon Technology management
• Can vendor provide timely on-site and/or telephonesupport?
• Does vendor track user questions/problems?• Does vendor adequately test new products and
releases?• Does vendor have sufficient knowledgeable staff?• Does vendor provide quality training and
documentation?
Other Vendor Characteristics
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Professor Truex MBA 8125Informatioon Technology management
Contract Terms and Conditions
• Is the timeframe within which the vendor is required torespond to problems/questions clearly defined?
• Is the extent of vendor support, training, anddocumentation clearly defined?
• Is the timetable for all deliverables and payments clearlydefined?
• Has a favorable relationship between deliverables andpayables been negotiated?
Professor Truex MBA 8125Informatioon Technology management
• Are all costs clearly defined?• Are there penalties if contractual agreements
are not met by the vendor?• Does the contract allow for in-house use of
the package for acceptance testing purposesprior to purchase?
Contract Terms and Conditions
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Professor Truex MBA 8125Informatioon Technology management
Software Packages:Other Users’ Opinions
• How satisfied are they? Would they purchase itagain?
• How responsive is the vendor to problems?• Is the system easy to use?• What kind of conversion/implementation
problems were encountered?• How difficult is it to interface the package with
existing systems?• What other products were considered?
Why did they select this one?
Professor Truex MBA 8125Informatioon Technology management
• Does it provide the needed functionality?• Is it easy to use?• Is its design flexible enough to allow
changes?• Does it have good documentation and help
functions?• Does it include appropriate control features?
Software Packages:Package Characteristics
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Professor Truex MBA 8125Informatioon Technology management
What Buyers Want
• Clients want vendors to:– Listen to real needs– Be responsive– Be honest and realistic about capabilities– Vendors to be "selective" about clients
Professor Truex MBA 8125Informatioon Technology management
What Vendors Want• Vendors Want Clients To…
– Be selective in sending out RFPs. It costs $$$ to respond.• If you send RFPs to a long list of vendors to do your research, you
may not get quality responses. If you are in research phase, say so.Issue an RFI (Request for Information) instead.
• If you are asking for a response just to comply with Purchasing’s ruleto have 3 responses, tell us. We can generate a "form-response" muchcheaper than one we want to be taken seriously…
– Be honest about what you want.
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Professor Truex MBA 8125Informatioon Technology management
Tips for Success
• In evaluation phase, use network of others who haveexperience in buying similar products/services to help youidentify qualified vendors (Trade Shows, User Groups)
• Build penalty and performance clauses into contracts.Shared risk and reward.
• Define responsibilities and activities on both sides.• Good project management is critical
Professor Truex MBA 8125Informatioon Technology management
More Tips for Success
• Clearly define expectations up front• Define scope/change control process at start• Define relationship• Price is important, not everything.• Price for value is critical issue.