1. MIS Organization and Outsourcing zDefine Chief Information Officer, Chief Technology Officer, Chief Knowledge Officer zDiscuss key functions a appropriate backgrounds/experiences for CIOs zBe familiar with typical IS roles and processes (and what the IS organization does not do) zCompare and contrast centralized, decentralized and federalist organization structures zDiscuss the reasons for outsourcing zDescribe the disadvantages of outsourcing and steps to avoid them

2. Centralized IS Organization ADVANTAGES zGlobal standards and common data z“one voice” zGreater leverage in deploying strategic IT zEconomies of scale zAccess to large capacity zBetter recruitment DISADVANTAGES z Not meeting local needs z Schism between business and IT z Lack of business unit control of overhead costs

3. Decentralized IS Organization ADVANTAGES zTechnology customized to local business needs zCloser partnership between business &IT zGreater flexibility zBusiness unit control over overhead costs DISADVANTAGES z Difficulty maintaining global standards z Difficulty negotiating preferential supplier agreements z Loss of control z Higher infrastructure costs z Duplication of staff and data

4. Federalist IS Organization ADVANTAGES zMixes advantages of Centralized and Decentralized IS organization zPromotes strategic control and synergy zOffers groupwide IT strategy DISADVANTAGES z Does not match exactly with organization structure

5. Outsourcing zThe purchase of a good or service that was previously provided internally zFarm out data center operations (facilities management) zFarm out tasks and services zFarm out systems development zMay transfer IS function to vendor

6. Our Survey (California Management Review, 1997) zCompanies written up in trade press for having signed outsourcing agreements (1988 - 1993) zTelephone interviews z34 of 129 companies participated z30% financial institutions z25 private vs. 9 public zProvided broad range of services

7. Goals: Determinants of Outsourcing Success zCore vs. commodity zPartner vs. vendor zTight vs. loose contract zSuccess: Economic, Technical, Strategic, Overall Satisfaction with Contract

8. Findings: Primary Reasons for Outsourcing zTechnological considerations (8) zCost Savings (6) zStrategic considerations (infrastructure building - quickly) (5) zHuman resource considerations (3) zMandated by central office/Acquired by another company (3) zConsolidate Data Centers (2) zEfficiency (1) zCash Infusion (1)

9. Other Reasons for Outsourcing zAllows greater focus on information and its application in organization zIS personnel issues (expertise with IS personnel issues; retaining highly qualified IS staff; talent in new technologies) zGreater capacity on demand

10. Findings: Other zNeed tight contracts zMay be successful for core functions… especially if linked to tight contract zCan have successful partnerships

11. Outsourcing Disadvantages zReliance on vendor/partner zLoss of control zConsiderations about security/confidentiality zEvaporization of cost savings zLoss of competitive advantage zSlight of hand with employees zHigh switching costs

12. Steps to Avoid Pitfalls zDo not focus negotiation solely on price yconsider costs of contract management zEstablish short-term supplier contracts zUse multiple ‘best of breed’ suppliers????? zDevelop skills in contract management zCarefully evaluate your company’s own capabilities zThoroughly evaluation outsourcer’s capabilities zChoose and outsourcer whose capabilities complement yours zConsider cultural fit and technical expertise

13. Outsourcing strategies