This week's question is about the 2007 Globshop case study about offshore outsourcing by Ranganathan, Krishnan & Glickman. You'll need an hour or so to read it. In your opinion, what was the most significant change made by Globshop in the course of outsourcing its information systems? (Why was this change so important to Globshop?)
In my opinion the most significant change made my GlobShop during the outsourcing of its information systems was the restructuring of their IT unit within the organisation to match the outsourcing of their IT development. Although GlobShop had initially started out with the plan to outsource minimal amounts of their IT function to cut costs, once they started to plan the restructuring of their IT staff they realised that there was even more opportunity for cost savings by increasing the level of outsourcing. With their old IT unit structure (decentralised in 10 separate and independent IT departments), there was very limited opportunity to engage with outsourcing vendors because each department was only responsible for a small area and had limited funding. However because GlobShop restructured their organisation to move all IT functions to head office, they were able to outsource more to ISS and gain more value from the partnership. This restructuring was also crucial to GlobShop being able to cut IT costs by 35% within 18 months of the partnership due to reduced redundancy within the organisation.
ReplyDeleteI agree with Aidan, the most significant change made by the organisation was the corporate restructuring of GlobShops IT unit. As a result of the organisation restructuring, the IT units will streamline the different business processes and systems worldwide and also “pave a way for significant cost savings.” The change was important as “it was an eye-opener” for Roger (the person responsible for consolidating the IT organisation) and his team. Their study showed that not only did GlobShop spend over $60 million dollars annually on IT but across ten regions 250 applications were internally developed. As part of the re organisation, the need to cut IT costs (or other costs in general) is what drove GlobShop to outsource, which the textbook mentions is one of the most common factors that drive companies to outsource. As Aidan mentioned, more opportunities to reduce costs eventually led GlobShop to outsource more IT projects offshore.
ReplyDeleteOut of all the changes made by GlobShop and the things they outsourced, handing responsibility for the data warehouses over to ISS was the most significant. This signalled a transition from a cost-cutting outsourcing agreement to one of value-adding, something that requires a much greater coordination of client and vendor. Showing the success of data warehousing led to greater outsourcing by GlobShop as it proved the effectiveness of outsourcing and helped turn decline into growth. It also had the benefit of getting business leaders onboard with the outsourcing strategy. Cost cutting is not glamorous but the improved information availability and reduced reporting times were things the the business leaders could buy into. Getting the drive from business leaders, as well as CXOs helped push GlobShop into a new phase of outsourcing.
ReplyDeleteI also agree with Aidan and Angela that the most significant change was the Restructuring of Globshop to match the outsource developments. the outsourcing Globshop made with the Indian group involved the development of applications, maintaining and supporting its retail infrastructure as a change strategy in its corporate goals.this change is important just like Aidan stated as Globshop used outsourcing to enhance cost reduction efforts in its information Technology activities. the point that Jesse made out is also significant as the the initial outsourcing of production support which lead to data warehousing led to the realisation of the benefits outsourcing could bring which leads to the benefits outlined by Aidan, Angela and Jesse
ReplyDeleteIn my opinion, GlobShop's most important change in the course of outsourcing its information systems was the centralisation of their IT departments, in particular the streamlined IT governance. Before this, GlobShop's IT was very decentralised with each region managing its own system and processes and ultimately making separate decisions. With the introduction of the streamlined IT governance, each IT unit now had to report to higher positions before making any important decisions. This was important because GlobShop now had more control over how IT was run, especially with the spending of money. There were no more redundant or unneeded systems installed throughout the company and this helped achieve GlobShop's goal of reducing costs as well as paving the way for outsourcing support and maintenance because the centralised governance made it easier to maintain the system in all of its regions.
ReplyDeleteThe most significant change is centralizing IT management at Globshop. This is becuase before the change, Globshop was decentralized which meant that each region had its own IT division. With each IT division, 10 regional IT Directors reported to the president of the regional business unit. With such a decentralized set up, Globshop had duplication of application, services and technology resources. This was expensive to maintain and communication was difficult between the IT divisions. With centralizing IT management at Globshop, Rogers's idea was to consolidate the 10 regional IT units into one global IT unit in Asia and USA. With Globshop being centralized, the company had reached their goal by reducing costs from IT services that are no longer needed, and information would be easily accessed from two regions instead of ten.
ReplyDeleteAlthough the corporate and IT restructuring were definitely important, the most significant change made by Globshop was the change in relationship dynamic with ISS. To begin with, the outsourcing arrangement was merely to reduce costs, and it was only upon seeing the value that ISS could add through activities such as the data warehouse, that the relationship changed to be more of a value-adding partnership. This was most significant for GlobShop as it allowed for ISS managers to be privy to highly sensitive information and allowed them to be more involved with all GlobShop processes. This meant that ISS could create IT projects that more accurately reflected the needs of GlobShop and added more value to their day-to-day operations. However, this also placed GlobShop in a position where perhaps too much of their inner workings had been revealed to an external party, and they were heavily dependent on ISS for their IT functionalities. This meant that GlobShop was able to be more competitive, reduce costs, and improve productivity, but also increased risk and vulnerabilities.
ReplyDeleteI agree with everyone that Globshop have made change in their course oof outsourcing its information system. The most important thing they have done is restructure their governance structure from decentralize to centralize. As a result, it have increase the cost of reduction due to easy and cheap transit of information and other related products. It is important because outsourcing is based on cost benefits since most business operations operate on cutting cost of production to realize mass turnover. However, the risk of outsourcing is the managing IT problem from offshore. It lead to the change of IT system to be centralization.
ReplyDeleteI agree with other bloggers that restructuring of its IT unit and centralization of IT are really significant changes and they have explained them clearly. Looking at other changes, I think the
ReplyDeletereductions of its workforce is a pretty significant change too made by GlobShop during the course of outsourcing. This was a big issue because it involved emotional impacts to the people affected. This change caused them to face another concern which is transferring of knowledge from employee working there for 25 years to another employee or to an offshore vendor - because there is no proper documentation. Though these concerns happened, after a period of time, GlobShob had successfully reduced its workforce onshore. 'IT shrank 43% in the first year, and 59% in the second year.' Over a period of time three out of four IT jobs were moved offshore - it is important to GlobSHop because it saved them a great amount of money.