Having ciritcal functuons provided by an external entity creates a complicated relationship where a client must rely on a provider. The risk is primarily that the provider will fail or act inconsistently with the client's best interests. Globshop tried to mitigate this risk by establoshing high leverage over their provider. The power of each player in the relationship is determined by many things, some of which are dynamic. For globshop and ISS their relationship was referred to as a partnership. Globshop chose a provider to whom they would be a meaningful client as a way of improvung their power in the relationship and the resulting access to resources they enjoyed. ISS in turn made good on the relationship but over the course of the relationshop grew into a larger player on the market, reducing its dependency on Globshop. This dynamic change reduced globshop's importance to ISS and resulted in the diversion of valuable IT capabilities away from the globshop project.
One of Globshop’s main risks of their outsourcing strategy is a huge degree of control being surrendered when they began to outsource their core business processes to ISS. When GlobShop started working with ISS, they wanted to be able to pull out of the relationship at anytime. They also didn’t want to get in a situation where they became too dependent on ISS with more core processes being handed over to ISS. But these initial plans have drastically changed and they are becoming more dependent on ISS. Globshop tried to manage this risk by being one of ISS's few customers but now since ISS has grown to be a much larger vendor GlobShop is losing the leverage and power they had over them. They are losing control over the decisions they had in the beginning relationship with ISS such as pulling out easily and the prices of the outsourcing carried out by ISS. GlobShop is becoming just a number in ISS's pipeline of customers which they did not want happening when they were first deciding on who to outsource to.
A risk of Globshop’s strategy is the company becoming reliant on ISS. They have become reliant because they have sacrificed a large amount of their key business processes. ISS was selected as the vendor because they were a medium sized and growing company in which Globshop could be a meaningful client to, and they would get the attention and resources they wanted. From this stemmed a partnership. Another reason ISS was selected was so that Globshop was able to change or pull out of the agreement if they didn’t like offshoring. A management change also occurred at ISS which meant that the Project Manager Rahul was no longer apart of the team. A new group of people were introduced to Globshop, but “they were no match” to the group Globshop had earlier. The “special treatment” that Globshop had received from ISS would likely no longer continue. ISS have since become a key player in the industry- this means that Globshop is losing the power they had over ISS who are not reliant on Globshop’s business anymore. The organisation now has many more clients to gain business from. As a result, Globshop is now unimportant and has become lost in the mix.
Some of the main risks of Globshop’s outsourcing strategy is that they could become over-dependent on the outsourcing vendor, they would lose valuable staff and knowledge, it could seriously impact the business if something were to go wrong as they are only using one outsourcing vendor.
To overcome these risks, Globshop initially outsourced only a small piece of their production support in order to test the ‘water’. This meant that the risks were minimized and it was a way to assess the benefits of outsourcing and determine if Indo Systems Solutions was a reliable vendor.
Globshop handled the laying off process very well. The CIO of Globshop met with every single employee that was being laid off. The employees were told in advance if they were being laid off, which gave them time to find new jobs. Globshop offered assistance and referrals to the employees to help them find new jobs. Staff members bonuses were significantly increased if the employee stayed to transfer their knowledge to other staff members; which encouraged staff to stay until their intended layoff date.
Globshop’s strategy of outsourcing has provided them with risks because of the leniency they have given ISS of their business processes. By providing ISS with a lot of their business processes, Globshop ran the risk of not being a meaningful client to the vendor. To manage the risks, Globshop saw ISS as a medium-sized developing company that allowed for them to sustain independent attention from the vendor. Since ISS was not a tier 1 vendor, Globshop were flexible enough to be able to pull out of the connection at any time if they felt offshoring was not for them. Over time, both parties agreed on becoming a partnership so Globshop could be more strategic. This inevitably saw ISS grow into a large company where they did not need to collaborate with only Globshop to maintain a healthy organisation. Neal was concerned that with the offshore market growing, he did not want all of their “eggs in one basket”. It was evident that if Globshop expanded their processes through a few vendors, the risk of their business processes could be spread amongst the various vendors.
A risk that Globshop faced with their outsourcing strategy was the potential of losing a significant amount of control to the vendor they selected. This is significant due to fact that Globshop are handing over the responsibility of such a critical business function to another organisation and face becoming too over reliant on them. To address this issue of control, the selection of ISS as a vendor was important in order to ensure that the relationship established with the vendor would be considered a partnership and strategic in nature. The size of ISS at the time of evaluating potential vendors was significant as they were considered a medium sized organisation. This would allow for a more meaningful relationship to be established. To further facilitate a significant partnership, Globshop adopted a philosophy where outsourcing for cost reduction and operational effectiveness was only a part of what they aimed to achieve. Instead, they also focused on the potential for overall business value and strategic impact which could be achieved.
One of the main and obvious risks associated with the company’s outsourcing strategy is losing valuable and knowledgeable IT employees. This could lead to user resistance, causing overall productivity to fall as employees fear that the change will make them lose their jobs. However, Globshop management think this through by thoroughly explaining the situation and providing incentives and redundant packages to mitigate the consequences of the situation. Moreover, relying too much on ISS is problematic. Initially, the company decided to eliminate reliance by just outsourcing some parts of its IT function. Nonetheless, more functions were outsourced as the company developed good relations with ISS. This increases the risk of having less control over these functions, the management therefore decided to work with more vendors so to better control and diversify the risk.
I think the largest risk facing GlobShop is becoming too dependent on ISS. Not only have they out sourced vital business functions to a third party but they are increasing the amount above and beyond their original plan. 9/11 forced them to increase to move faster and make greater changes than they had originally planned. They are also re-investing the savings they make from outsourcing in new IT projects with ISS making them even more reliant.
GlobShop has attempted to manage this risk by making ISS dependent on them as well. They have done this by choosing a company of medium size so that they would be a major client and therefore they would get the attention they need. Although this mitigates some risk it also brings new ones, such as the possibility of a larger IT company buying out ISS which GlobShop would have no say in or ISS going under which could happen if they are too reliant on just one client. Neither of these situations has happened however and instead ISS has continued to grow and GlobShop is no longer the major client they once were meaning they have lost the special attention they wanted, but are still just as reliant on ISS if not more than before.
One of the biggest risks that Globshop faced was becoming over-dependent on a sole vendor. While an outsourcing strategy is chosen to give advantages such as a cheaper labour “cost and expertise, it also adds complexity to management’s efforts.” In this case, Globshop was worried of the risk of becoming over-dependant on ISS. In the beginning, they only meant to outsource a small function. Over time, Globshop began handing over more and more core business processes to ISS. ISS grew to be one of the leading offshore vendors in India, to a state where they could do without Globshop. Whereas Globshop was now heavily reliant and dependant on ISS, and could not do without them. Due to these concerns, Globshop is looking at other possible options. As their 3-year contract comes to a close, they have realized the risks associated with their over-dependence. Should ISS decide to terminate their contract, they would be losing much of their IT functions. Inevitably, their relationship will come to an end when ISS decides there are bigger partners to work with. The matter at hand presents an opportunity for Globshop to decide to end it on their own terms now. Another strategy would be to work with multiple vendors, which would both help mitigate the risk of over-dependence. There would be many vendors, which means that should a vendor no longer be able to work with them, then Globshop will have back up vendors who can cover. However, it would come at a higher cost. The issue would be whether they will continue with ISS or to find a new set of partners.
There is a risk that a bigger customer will come along for the vendor ISS and this may cause resources associated towards Globshop’s project to be redirected towards the larger project. The vendor deems larger projects more important because they pay more money and there is a large potential for carry on work. The end result is that the client’s project has less time spent on it which therefore effects the quality of the solution or the project may be dragged over a longer time and run over the initial set time frame. Globshop managed this risk by minimising the chance of this happening by selecting an outsourcing vendor that was a medium sized provider, not a large provider that had many large projects on the go. This meant that the medium sized provider would deem Globshop important because they were a large client to them. Another thing Globshop did was continually reinvest their money saved from outsourcing back into more projects that were outsourced with the provider, this gave the provider a lot of projects from the client so they became a very important client and almost like a partner.
The main risk that Globshop faced surrounds their decision to outsource. When Globshop decided to outsource some core business processes to ISS they ran the risk of losing control of those core processes. Globshops initial idea was to go with a small enough company so that the business from GlobShop was highly valued. With ISS growing and gaining some top cliental Globshop is now worried that "ISS was diverting its ‘star employees’ and resources to more prestigious clients" and Globshop is questioning whether or not to outsource some of their critical processes to ISS. "A section of executives believed that despite the success of offshore projects, entrusting the responsibility of critical projects like supply chain initiatives to an offshore vendor is ‘too risky.’" This has left Globshop to look for other options outside of ISS, one of the solutions they have come up with is the idea of multiple vendors that way Globshop would not be solely reliant on ISS.
One of Globshop’s main risks with choosing to outsource is the degree of control they will lose and that there is potential for them to become over-dependant on ISS. By choosing to outsource IT to an offshore vendor Globshop is surrendering a sizeable amount of control to the chosen vendor, which poses a significant risk. This is a risk as IT is a critical business function for Globshop. Initially, Globshop only sought out to outsource a small function. As the travel retailer continued to grow, an increasing amount of core business processes were handed to ISS. As a result Globshop became heavily reliant on ISS. In order for Globshop to manage this risk the choice to look for other vendors is being explored. As GlobShop neared the end of its 3-year sourcing agreement with ISS, their over-dependence on ISS has been acknowledged. Consequently, Globshop executives realised the potential risk of their over-dependence on ISS, and as a result are currently re-evaluating their partnership in order to manage and mitigate. Executives have noted that there are pro’s and con’s of renewing an agreement with ISS, and at present are evaluating the current situation in attempt to manage the risks associated to offshore outsourcing and their over-dependence.
I think the main risk of their outsourcing strategy relates to knowledge-transfer and employee uncertainty. It was pointed out that a great deal of knowledge about Globshop and how to make it succeed was locked up in intangible databases - employee minds. So to maintain the same quality of service Globshop needed to be able to transfer this knowledge to its outsource partner. How could they accomplish this when the relationship was on fixed contract terms and when the outsourcing decision meant many of the knowledge-filled minds has to be given the chop? Furthermore, those employees held onto now faced uncertainty about how secure their jobs really were and could potentially perceive transferring knowledge to outsourced vendors as actively contributing to their eventual redundancy. To combat these challenges Globshop made extensive use of incentives both for outgoing and retained staff by offering generous redundancy packages and encouraging retention schemes. Additionally to quell discontent and fears of uncertainty the CEO took personal responsibility of communicating what was going on and why they made these decisions. In doing so they put a human and reasoned face to the changes rather than producing cold corporate severance flavour to the changes.
Globshops main risk as discussed in the case is the amount of control being passed over to one outsourced vendor. Globshop initially decided to work with ISS as they were not a tier 1 organisation and Globshop expected to be a power holding client which would receive attention and priority service. Over time ISS has grown in size and Globshops business has been lost in the mix along with multiple other organisations. By passing off so much responsibility to one outsourced organisation Globshop has lost internal knowledge and power. This is also a risk due to the fact that if any factors go wrong within the outsourced organisation or the organisation is brought out by one of the top tier organisations, which Globshop intentionally did not want to work with. Globshop is now having to look for new options with regard to outsourcing of IT functions. One of the options discussed to continue to save costs and production time but limit risks, is to continue with outsourcing approach but distribute the responsibility around multiple organisation.
GlobShop’s decision to outsource its IT to a vendor came with several risks. The fact that the vendor was located in India meant that GlobShop employees had to learn to work and communicate effectively with people of another culture. This could have gone badly for GlobShop if the team members could not learn to work together to complete tasks. GlobShop managed this by holding workshops and seminars to show how each culture works and how to manage this difference. Also GlobShop had the risk of giving up a lot of control of their IT to a vendor they had never done business with before. This was managed by only signing a short term, fixed cost contract initially to ensure projects ran on time and within the allocated budget. This helped GlobShop build trust with ISS as they saw projects being completed to a high standard. Once this trust had been built they were able to go into a long term contract with ISS and hand over more responsibility.
The main risk of Globshop’s outsourcing strategy is to become over dependent on ISS. This is the reason why Globshop choose a medium-sized growing company to have the flexibility to change or pull out when needed. But as Globshop started to achieve its cost saving strategy from IT offshoring, it outsources more projects to ISS. These reduced the control of their business processes as most of the projects were done by ISS. To manage this risk Globshop need to spread the work to multiple vendors as the ISS have now grown big and can do without their account. Another risk is the future role of internal IT function at Globshop. If Globshop continue to outsource its main project then it may need to reduce it IT workforce that could simply decimate the IT function. Each dollar that is being saved from offshoring can be reinvested in our business by redeploying those dollars into other IT projects. This created a win-win situation for both companies but increased offshoring mean further layoffs and reduction of IT group. This could be a serious problem for Globshop because they don’t want to get rid of their most experience employees. To manage this risk, Globshop needed to keep the most of the project in-house which was not easy because they were looking to reduce the cost and increase profitability.
There were definite risks involved in GlobShops outsourcing strategy. Firstly choosing a foreign outsourcing partner comes with significant culture and communication based risk; there could for example be issues in communication of business requirements to the third-party or with unethical work practices being observed by the third-party. GlobShop managed these risks by electing to go into partnership with ISS, an IT partner that was a "hybrid" with employees based in both India and the USA. ISS's hybrid structure meant that they should be better able to match GlobShops cultural and communicative needs.
Another main risk is that GlobShop could have become over-reliant on the third-party. Relying heavily on the vendor is not a risk in itself, rather it is a relationship dynamic. Reliance becomes an issue when supply from the vendor is disrupted, when the supplier is not meeting their obligations under the contract, or when the vendor is aware that they can leverage their position to charge more than they could have if there was the potential for competition. One source of risk stemmed from the potential that a larger buyer would divert resources from the outsourcing partner away from GlobShop. GlobShop mitigated this by electing to partner with a small to medium sized vendor. By choosing a smaller vendor, GlobShop could be confident that they would not be pursuing contracts from much larger competitors, and that the GlobShop contract would be of significant financial importance to the vendor. This meant that GlobShop's arrangement with the outsourcing partner, ISS, was almost definitely secure from offers from competing buyers. While this mitigated the risk of supply being disrupted, GlobShop still had to address the other sources of risk that they would encounter as they became more reliant on ISS. GlobShop was aware that, while ISS was providing their solutions, they were also a business with their own interests. To ensure that ISS was fully using their resources to benefit GlobShop, GlobShop endeavoured to bring ISS management into the GlobShop organisation structure and include them as partners to the business. This partnership meant that ISS now had a stake in insuring that GlobShop's business ran well; the objectives of the two organisations were aligned and the risk of ISS abusing their leverage in the outsourcing relationship was minimized.
I see the main risk of Globshop’s outsourcing strategy is a lack of cohesion or positive relationship between the two companies, for example, through lack of communication of information relating to the company or its projects. When work is outsourced, it is expected that the parent company provide sufficient information to the outsourcing company so that it becomes common knowledge, as the offshore company is given a task that the parent company trusts to control both accurately and efficiently. If there is a lack of information or relationship, then the required quality and/or quantity of required or relevant information is not communicated, leading to service and/or production errors, ultimately leading to a loss of income for the parent company. Globshop managed this risk by first consulting ISS upon their engagement, where on-site resources were not as effective working with business partners as Globshop had expected, and ISS had changed some of the people and their process without Globshop’s collaboration. To remedy this, Globshop took more responsibility for the Globshop-ISS relationship, adapted the onshore/offshore model to better work in their environment, and created the role of on-site manager to co-ordinate and oversee the projects at Globshop, from an ISS perspective. This led to an increased liaison between Globshop and offshore staff, which improved the working relationships of the two companies.
As the event in September 11 affected a huge part of the IT process in Globshop, they were forced to adopt a more aggressive strategy in order to cope with the large increase in demand while reducing cost. In choosing to outsource IT process to ISS they had to layoff workers, the risk of doing so, is that most of the workers have been there for over 25 years which meant they have the knowledge and skills of completing the work. Moreover, there was the risk of how stakeholders perceive the company now that they've laid off experience workers. As stakeholders reduces their level of trust in the company. However, they were able to manage this by increasing bonuses for affected workers in order for them to stay longer so that they could pass on their knowledge and skills to other workers that are not affected.
Having ciritcal functuons provided by an external entity creates a complicated relationship where a client must rely on a provider. The risk is primarily that the provider will fail or act inconsistently with the client's best interests. Globshop tried to mitigate this risk by establoshing high leverage over their provider. The power of each player in the relationship is determined by many things, some of which are dynamic. For globshop and ISS their relationship was referred to as a partnership. Globshop chose a provider to whom they would be a meaningful client as a way of improvung their power in the relationship and the resulting access to resources they enjoyed. ISS in turn made good on the relationship but over the course of the relationshop grew into a larger player on the market, reducing its dependency on Globshop. This dynamic change reduced globshop's importance to ISS and resulted in the diversion of valuable IT capabilities away from the globshop project.
ReplyDeleteOne of Globshop’s main risks of their outsourcing strategy is a huge degree of control being surrendered when they began to outsource their core business processes to ISS. When GlobShop started working with ISS, they wanted to be able to pull out of the relationship at anytime. They also didn’t want to get in a situation where they became too dependent on ISS with more core processes being handed over to ISS. But these initial plans have drastically changed and they are becoming more dependent on ISS. Globshop tried to manage this risk by being one of ISS's few customers but now since ISS has grown to be a much larger vendor GlobShop is losing the leverage and power they had over them. They are losing control over the decisions they had in the beginning relationship with ISS such as pulling out easily and the prices of the outsourcing carried out by ISS. GlobShop is becoming just a number in ISS's pipeline of customers which they did not want happening when they were first deciding on who to outsource to.
ReplyDeleteA risk of Globshop’s strategy is the company becoming reliant on ISS. They have become reliant because they have sacrificed a large amount of their key business processes. ISS was selected as the vendor because they were a medium sized and growing company in which Globshop could be a meaningful client to, and they would get the attention and resources they wanted. From this stemmed a partnership. Another reason ISS was selected was so that Globshop was able to change or pull out of the agreement if they didn’t like offshoring. A management change also occurred at ISS which meant that the Project Manager Rahul was no longer apart of the team. A new group of people were introduced to Globshop, but “they were no match” to the group Globshop had earlier. The “special treatment” that Globshop had received from ISS would likely no longer continue. ISS have since become a key player in the industry- this means that Globshop is losing the power they had over ISS who are not reliant on Globshop’s business anymore. The organisation now has many more clients to gain business from. As a result, Globshop is now unimportant and has become lost in the mix.
ReplyDeleteSome of the main risks of Globshop’s outsourcing strategy is that they could become over-dependent on the outsourcing vendor, they would lose valuable staff and knowledge, it could seriously impact the business if something were to go wrong as they are only using one outsourcing vendor.
ReplyDeleteTo overcome these risks, Globshop initially outsourced only a small piece of their production support in order to test the ‘water’. This meant that the risks were minimized and it was a way to assess the benefits of outsourcing and determine if Indo Systems Solutions was a reliable vendor.
Globshop handled the laying off process very well. The CIO of Globshop met with every single employee that was being laid off. The employees were told in advance if they were being laid off, which gave them time to find new jobs. Globshop offered assistance and referrals to the employees to help them find new jobs. Staff members bonuses were significantly increased if the employee stayed to transfer their knowledge to other staff members; which encouraged staff to stay until their intended layoff date.
Globshop’s strategy of outsourcing has provided them with risks because of the leniency they have given ISS of their business processes. By providing ISS with a lot of their business processes, Globshop ran the risk of not being a meaningful client to the vendor. To manage the risks, Globshop saw ISS as a medium-sized developing company that allowed for them to sustain independent attention from the vendor. Since ISS was not a tier 1 vendor, Globshop were flexible enough to be able to pull out of the connection at any time if they felt offshoring was not for them. Over time, both parties agreed on becoming a partnership so Globshop could be more strategic. This inevitably saw ISS grow into a large company where they did not need to collaborate with only Globshop to maintain a healthy organisation. Neal was concerned that with the offshore market growing, he did not want all of their “eggs in one basket”. It was evident that if Globshop expanded their processes through a few vendors, the risk of their business processes could be spread amongst the various vendors.
ReplyDeleteA risk that Globshop faced with their outsourcing strategy was the potential of losing a significant amount of control to the vendor they selected. This is significant due to fact that Globshop are handing over the responsibility of such a critical business function to another organisation and face becoming too over reliant on them. To address this issue of control, the selection of ISS as a vendor was important in order to ensure that the relationship established with the vendor would be considered a partnership and strategic in nature. The size of ISS at the time of evaluating potential vendors was significant as they were considered a medium sized organisation. This would allow for a more meaningful relationship to be established. To further facilitate a significant partnership, Globshop adopted a philosophy where outsourcing for cost reduction and operational effectiveness was only a part of what they aimed to achieve. Instead, they also focused on the potential for overall business value and strategic impact which could be achieved.
ReplyDeleteOne of the main and obvious risks associated with the company’s outsourcing strategy is losing valuable and knowledgeable IT employees. This could lead to user resistance, causing overall productivity to fall as employees fear that the change will make them lose their jobs. However, Globshop management think this through by thoroughly explaining the situation and providing incentives and redundant packages to mitigate the consequences of the situation. Moreover, relying too much on ISS is problematic. Initially, the company decided to eliminate reliance by just outsourcing some parts of its IT function. Nonetheless, more functions were outsourced as the company developed good relations with ISS. This increases the risk of having less control over these functions, the management therefore decided to work with more vendors so to better control and diversify the risk.
ReplyDeleteI think the largest risk facing GlobShop is becoming too dependent on ISS. Not only have they out sourced vital business functions to a third party but they are increasing the amount above and beyond their original plan. 9/11 forced them to increase to move faster and make greater changes than they had originally planned. They are also re-investing the savings they make from outsourcing in new IT projects with ISS making them even more reliant.
ReplyDeleteGlobShop has attempted to manage this risk by making ISS dependent on them as well. They have done this by choosing a company of medium size so that they would be a major client and therefore they would get the attention they need. Although this mitigates some risk it also brings new ones, such as the possibility of a larger IT company buying out ISS which GlobShop would have no say in or ISS going under which could happen if they are too reliant on just one client.
Neither of these situations has happened however and instead ISS has continued to grow and GlobShop is no longer the major client they once were meaning they have lost the special attention they wanted, but are still just as reliant on ISS if not more than before.
One of the biggest risks that Globshop faced was becoming over-dependent on a sole vendor. While an outsourcing strategy is chosen to give advantages such as a cheaper labour “cost and expertise, it also adds complexity to management’s efforts.” In this case, Globshop was worried of the risk of becoming over-dependant on ISS. In the beginning, they only meant to outsource a small function. Over time, Globshop began handing over more and more core business processes to ISS. ISS grew to be one of the leading offshore vendors in India, to a state where they could do without Globshop. Whereas Globshop was now heavily reliant and dependant on ISS, and could not do without them.
ReplyDeleteDue to these concerns, Globshop is looking at other possible options. As their 3-year contract comes to a close, they have realized the risks associated with their over-dependence. Should ISS decide to terminate their contract, they would be losing much of their IT functions. Inevitably, their relationship will come to an end when ISS decides there are bigger partners to work with. The matter at hand presents an opportunity for Globshop to decide to end it on their own terms now.
Another strategy would be to work with multiple vendors, which would both help mitigate the risk of over-dependence. There would be many vendors, which means that should a vendor no longer be able to work with them, then Globshop will have back up vendors who can cover. However, it would come at a higher cost. The issue would be whether they will continue with ISS or to find a new set of partners.
There is a risk that a bigger customer will come along for the vendor ISS and this may cause resources associated towards Globshop’s project to be redirected towards the larger project. The vendor deems larger projects more important because they pay more money and there is a large potential for carry on work. The end result is that the client’s project has less time spent on it which therefore effects the quality of the solution or the project may be dragged over a longer time and run over the initial set time frame.
ReplyDeleteGlobshop managed this risk by minimising the chance of this happening by selecting an outsourcing vendor that was a medium sized provider, not a large provider that had many large projects on the go. This meant that the medium sized provider would deem Globshop important because they were a large client to them. Another thing Globshop did was continually reinvest their money saved from outsourcing back into more projects that were outsourced with the provider, this gave the provider a lot of projects from the client so they became a very important client and almost like a partner.
The main risk that Globshop faced surrounds their decision to outsource. When Globshop decided to outsource some core business processes to ISS they ran the risk of losing control of those core processes. Globshops initial idea was to go with a small enough company so that the business from GlobShop was highly valued. With ISS growing and gaining some top cliental Globshop is now worried that "ISS was diverting its ‘star employees’ and resources to more
ReplyDeleteprestigious clients" and Globshop is questioning whether or not to outsource some of their critical processes to ISS. "A section of executives believed that despite the success of offshore projects, entrusting the responsibility of critical projects like supply chain initiatives to an offshore
vendor is ‘too risky.’" This has left Globshop to look for other options outside of ISS, one of the solutions they have come up with is the idea of multiple vendors that way Globshop would not be solely reliant on ISS.
One of Globshop’s main risks with choosing to outsource is the degree of control they will lose and that there is potential for them to become over-dependant on ISS. By choosing to outsource IT to an offshore vendor Globshop is surrendering a sizeable amount of control to the chosen vendor, which poses a significant risk. This is a risk as IT is a critical business function for Globshop. Initially, Globshop only sought out to outsource a small function. As the travel retailer continued to grow, an increasing amount of core business processes were handed to ISS. As a result Globshop became heavily reliant on ISS. In order for Globshop to manage this risk the choice to look for other vendors is being explored. As GlobShop neared the end of its 3-year sourcing agreement with ISS, their over-dependence on ISS has been acknowledged. Consequently, Globshop executives realised the potential risk of their over-dependence on ISS, and as a result are currently re-evaluating their partnership in order to manage and mitigate. Executives have noted that there are pro’s and con’s of renewing an agreement with ISS, and at present are evaluating the current situation in attempt to manage the risks associated to offshore outsourcing and their over-dependence.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteI think the main risk of their outsourcing strategy relates to knowledge-transfer and employee uncertainty. It was pointed out that a great deal of knowledge about Globshop and how to make it succeed was locked up in intangible databases - employee minds. So to maintain the same quality of service Globshop needed to be able to transfer this knowledge to its outsource partner. How could they accomplish this when the relationship was on fixed contract terms and when the outsourcing decision meant many of the knowledge-filled minds has to be given the chop? Furthermore, those employees held onto now faced uncertainty about how secure their jobs really were and could potentially perceive transferring knowledge to outsourced vendors as actively contributing to their eventual redundancy. To combat these challenges Globshop made extensive use of incentives both for outgoing and retained staff by offering generous redundancy packages and encouraging retention schemes. Additionally to quell discontent and fears of uncertainty the CEO took personal responsibility of communicating what was going on and why they made these decisions. In doing so they put a human and reasoned face to the changes rather than producing cold corporate severance flavour to the changes.
ReplyDeleteGlobshops main risk as discussed in the case is the amount of control being passed over to one outsourced vendor. Globshop initially decided to work with ISS as they were not a tier 1 organisation and Globshop expected to be a power holding client which would receive attention and priority service. Over time ISS has grown in size and Globshops business has been lost in the mix along with multiple other organisations.
ReplyDeleteBy passing off so much responsibility to one outsourced organisation Globshop has lost internal knowledge and power. This is also a risk due to the fact that if any factors go wrong within the outsourced organisation or the organisation is brought out by one of the top tier organisations, which Globshop intentionally did not want to work with.
Globshop is now having to look for new options with regard to outsourcing of IT functions. One of the options discussed to continue to save costs and production time but limit risks, is to continue with outsourcing approach but distribute the responsibility around multiple organisation.
GlobShop’s decision to outsource its IT to a vendor came with several risks. The fact that the vendor was located in India meant that GlobShop employees had to learn to work and communicate effectively with people of another culture. This could have gone badly for GlobShop if the team members could not learn to work together to complete tasks. GlobShop managed this by holding workshops and seminars to show how each culture works and how to manage this difference. Also GlobShop had the risk of giving up a lot of control of their IT to a vendor they had never done business with before. This was managed by only signing a short term, fixed cost contract initially to ensure projects ran on time and within the allocated budget. This helped GlobShop build trust with ISS as they saw projects being completed to a high standard. Once this trust had been built they were able to go into a long term contract with ISS and hand over more responsibility.
ReplyDeleteThe main risk of Globshop’s outsourcing strategy is to become over dependent on ISS. This is the reason why Globshop choose a medium-sized growing company to have the flexibility to change or pull out when needed. But as Globshop started to achieve its cost saving strategy from IT offshoring, it outsources more projects to ISS. These reduced the control of their business processes as most of the projects were done by ISS. To manage this risk Globshop need to spread the work to multiple vendors as the ISS have now grown big and can do without their account.
ReplyDeleteAnother risk is the future role of internal IT function at Globshop. If Globshop continue to outsource its main project then it may need to reduce it IT workforce that could simply decimate the IT function. Each dollar that is being saved from offshoring can be reinvested in our business by redeploying those dollars into other IT projects. This created a win-win situation for both companies but increased offshoring mean further layoffs and reduction of IT group. This could be a serious problem for Globshop because they don’t want to get rid of their most experience employees. To manage this risk, Globshop needed to keep the most of the project in-house which was not easy because they were looking to reduce the cost and increase profitability.
There were definite risks involved in GlobShops outsourcing strategy. Firstly choosing a foreign outsourcing partner comes with significant culture and communication based risk; there could for example be issues in communication of business requirements to the third-party or with unethical work practices being observed by the third-party. GlobShop managed these risks by electing to go into partnership with ISS, an IT partner that was a "hybrid" with employees based in both India and the USA. ISS's hybrid structure meant that they should be better able to match GlobShops cultural and communicative needs.
ReplyDeleteAnother main risk is that GlobShop could have become over-reliant on the third-party. Relying heavily on the vendor is not a risk in itself, rather it is a relationship dynamic. Reliance becomes an issue when supply from the vendor is disrupted, when the supplier is not meeting their obligations under the contract, or when the vendor is aware that they can leverage their position to charge more than they could have if there was the potential for competition.
One source of risk stemmed from the potential that a larger buyer would divert resources from the outsourcing partner away from GlobShop. GlobShop mitigated this by electing to partner with a small to medium sized vendor. By choosing a smaller vendor, GlobShop could be confident that they would not be pursuing contracts from much larger competitors, and that the GlobShop contract would be of significant financial importance to the vendor. This meant that GlobShop's arrangement with the outsourcing partner, ISS, was almost definitely secure from offers from competing buyers.
While this mitigated the risk of supply being disrupted, GlobShop still had to address the other sources of risk that they would encounter as they became more reliant on ISS. GlobShop was aware that, while ISS was providing their solutions, they were also a business with their own interests. To ensure that ISS was fully using their resources to benefit GlobShop, GlobShop endeavoured to bring ISS management into the GlobShop organisation structure and include them as partners to the business. This partnership meant that ISS now had a stake in insuring that GlobShop's business ran well; the objectives of the two organisations were aligned and the risk of ISS abusing their leverage in the outsourcing relationship was minimized.
I see the main risk of Globshop’s outsourcing strategy is a lack of cohesion or positive relationship between the two companies, for example, through lack of communication of information relating to the company or its projects. When work is outsourced, it is expected that the parent company provide sufficient information to the outsourcing company so that it becomes common knowledge, as the offshore company is given a task that the parent company trusts to control both accurately and efficiently. If there is a lack of information or relationship, then the required quality and/or quantity of required or relevant information is not communicated, leading to service and/or production errors, ultimately leading to a loss of income for the parent company.
ReplyDeleteGlobshop managed this risk by first consulting ISS upon their engagement, where on-site resources were not as effective working with business partners as Globshop had expected, and ISS had changed some of the people and their process without Globshop’s collaboration. To remedy this, Globshop took more responsibility for the Globshop-ISS relationship, adapted the onshore/offshore model to better work in their environment, and created the role of on-site manager to co-ordinate and oversee the projects at Globshop, from an ISS perspective. This led to an increased liaison between Globshop and offshore staff, which improved the working relationships of the two companies.
As the event in September 11 affected a huge part of the IT process in Globshop, they were forced to adopt a more aggressive strategy in order to cope with the large increase in demand while reducing cost. In choosing to outsource IT process to ISS they had to layoff workers, the risk of doing so, is that most of the workers have been there for over 25 years which meant they have the knowledge and skills of completing the work. Moreover, there was the risk of how stakeholders perceive the company now that they've laid off experience workers. As stakeholders reduces their level of trust in the company. However, they were able to manage this by increasing bonuses for affected workers in order for them to stay longer so that they could pass on their knowledge and skills to other workers that are not affected.
ReplyDelete