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NEW DEMANDS ON OUTSOURCING: THE LONG-RUN PERSPECTIVE World-class transformations are strongly dependent on the new management structural innovation: use of outsourcers to give technology problem solving in place of insider staff. Critical to improved competitiveness, but most neglected ! Create and maintain a pattern of creative teamwork so that the insider/user’s intimate knowledge of the business, its present and future needs, gets integrated with the expert technology capabilities of the outsourcer. Critical to improved competitiveness, but most neglected ! Image and develop systems which can be “works in progress,” i.e., they have dynamic capabilities to evolve with the inevitable changes the business will confront. Critical to improved competitiveness, but most neglected ! Use a technology development process that empowers line managers to exploit the flexibility and adaptability inherent in these new line technologies by initiating customized enhancements. To meet these challenges, executives need both view on outsourcing as a process and guidelines to facilitate its use. Everyone Now Outsources Record shows lots of client complaining about prolonged suffering & disagreements w/ outsourcers in development and completed of new IS & operation. Paradoxically, IS become crucial to the functioning of most companies & the day-to-day work of their managers, these companies are turning to outsiders to develop and often manage those critical systems. Everyone Now Outsources The impact : Technology costs and skill requirements keep increased Greater use of outsourcing Internal staffs tired and unable keep up with new demands More outsource making up in absence of internal resources. Everyone Now Outsources Two not-so-hidden dilemmas: IS tech may not represent a core tech, but it supports & is an essential component of what coy are about. Outsider systems can’t be built or operate without continuous, knowledgeable inputs from insiders. The Needed Leadership Skills Most companies place little emphasis on leadership skills in the management of outsourced technology. Managers must make the technology their business. Managers need to understand the underlying technology well enough to make critical choices. The Needed Leadership Skills Outsourcing does not eliminate the need to manage IS. Routine decisions can be made by the outsourcer, but not those that relate to business strategy and customer service. Partnering – More Than a Mantra/Song There are lots unanticipated discovery, trial & error and the need for creative problem solving – IS success depends on intimate collaboration between client & outsourcer. Their people & tasks are highly interdependent. Partnering – More Than a Mantra/Song Creative partnerships: continuing give & take, mutual challenges and joint exploration. Partnerships required marrying technical & technology knowledge with business knowledge. A good deal of continuous monitoring is required and coordination interactions need to be frequent. Seductive Traps to Avoid : 1. Mgt must be careful when sponsoring very large leaps forward that seek to push the company in one giant step into a technologically sophisticated future. 2. Senior executives must aware to the tough strategic issues in needs to balance specialization & integration. Seductive Traps to Avoid : 3. Given the centrality of information and communication, the “product” of computer systems, substantial managerial effort (time and money) must be devoted to continuously reintegrating the work of the outsider into the everyday routines and decision making of the line, of the business managers. Big Leaps VS Continuous Learning & Improvement Lessons to be learned: It’s difficult for outsourcer to implement spectacularly complex programs & high frequency of failure. Even experienced & smart managers difficult to image how using a new system will change how they doing jobs. There’s big gap between visionary plan & reality. Big Leaps VS Continuous Learning & Improvement Lessons to be learned: The speed in this technology moves almost guarantees that the system will be obsolete when it’s completed. Best systems allow business managers & users to fully absorb changes and to keep improving, adding, fine-tuning & responding to new marketing & production challenges. Big Leaps VS Continuous Learning & Improvement Lessons to be learned: Managers should insist that new systems be designed to promote feedback to users and flexibility. The managerial issues in outsourcing IS is really the “how to” of balancing business management goals of tight coordination among functions and adaptability with the need for expertise in new technologies (specialization). Predicting the Future 50 years ago, American mgt required to “outsource” its people mgt. It required experts, trained in new technology: human resources. Now, they didn’t actually outsource this people mgt function. Instead, they thought it could be handled completely by staff personnel specialists. Predicting the Future In coming years, there’ll be more frequent contact between line managers and outsourcing contractors. In effect, the outsourcer won’t be further away for communications purposes Virtual organization. Predicting the Future New project/outsourced operation should be evaluate by the terms of how easy it will be to change, update & make continuously responsive to current business demands. Not: how much are we getting today for what price. Outsourcers and their plans must be chosen on the basis of how much they will contribute to the abilities of business managers to manage their businesses.