ITC 3303, Information Systems Management 1

Course Learning Outcomes for Unit VII

Upon completion of this unit, students should be able to:

6. Assess the key issues involved in managing the components of IT infrastructure.
6.1 Explore the concept of outsourcing, including the advantages and risks it presents.
6.2 Apply the concept of outsourcing to a given scenario.

Required Unit Resources

Chapter 11: Information Systems Management

Unit Lesson

Managing Information Systems

The information systems function of an organization is critical for organizational success. Because of this, it is
important to manage this asset responsibly. There are five major functions to managing an information
systems (IS) department, and they are even more critical for young startup IS departments. You can learn
about these functions in your textbook.

The readings for this unit discuss these major functions in detail, so in this lesson, we will expand upon this to
take a closer look at effective leadership in information systems. There are many challenges facing managers
and organizational leaders today – meeting organizational goals and strategies, coping with changes in
business relationships and technology, encouraging innovation, managing organizational knowledge,
managing an organizational environment that is embracing mobility, and handling a workforce that is
becoming more virtual. Managing such a challenging and diverse environment requires strong leadership but,
unfortunately, many organizational leaders and managers are not well equipped for the job (Kroenke & Boyle,
2020).

In the past, organizations used the top-down, or hierarchical, approach to manage information systems in the
organization. The top down approach is when upper management makes the strategic decisions and
employees are expected to follow along, restricted in their ability to be creative or show initiative. This
traditional style of leadership in IS can be problematic in that upper management may not have the
experience or knowledge in IS to make those types of decisions. Organizational leadership must understand
the nuances of IS and recognize that they cannot force IS to conform to the methods of the rest of the
organization (Kroenke & Boyle, 2020).

UNIT VII STUDY GUIDE
Information Systems Management

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By using the bottoms-up approach, instead of the
top-down approach, IS managers and staff can act
in a leadership capacity and interact with upper
management regarding IS decisions (Figure 1).
This is especially true when there are new
innovations to technology. IS professionals will
recognize the value of these innovations and better
understand how this new technology could affect
the organization’s future, especially its competitive
strategy.

Outsourcing

Outsourcing occurs when you hire another
company or organization to perform a service. The
textbook uses a good example of how outsourcing
can be used to help an organization perform a
service. In this example, Google, known as an
organization, that provides search and mobile
application services did not have the resources to
provide cafeteria services to its employees. In

order to provide this service to its employees, the company hired an outside vendor that specialized in food
services to manage and maintain the employee cafeteria at Google. This way, Google can use its resources
for its main function, providing search and mobile services (Kroenke & Boyle, 2020).

The same concept applies to many organizations that do not specialize in information systems. Instead of
obtaining and maintaining IS resources, organizations can outsource IS activities so that they can concentrate
on their essential function or front-room activities.

Outsourcing provides several advantages such as obtaining expertise in an area in which the company lacks.
In the textbook example, management for the Augmented Reality Exercise System (ARES) understood that
they needed to build an application for this system but recognized that they did not have the staff or the
expertise to do this. To solve the staff and management problem, they outsourced this activity (Kroenke &
Boyle, 2020).

Outsourcing can also help reduce costs. In the Google example from the textbook, by outsourcing the
cafeteria activities to another company, Google will not have to deal with the costs of training new cafeteria
employees or deal with the day-to-day costs of maintaining the cafeteria. All of these costs would generally be
covered under a fixed price cafeteria contract (Kroenke & Boyle, 2020).

There are types of outsourcing such as nearshore, offshore, and onshore (work-at-home) that can provide
solutions for organizations that do not have the resources to perform certain activities outside the realm of
their corporate function. Each of these will be discussed in the following paragraphs.

Nearshore Outsourcing

Nearshore outsourcing occurs when a company outsources to a nearby country such as from the United
States to Canada, Mexico or Puerto Rico (Figure 2).

Figure 1 – Daily Sprint meeting with management
(Klean Denmark, 2011)

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Nearshore outsourcing has several advantages. Because the
source of the work is being provided relatively close to the company
requesting the service, there may be fewer time zone issues and
fewer cultural and/or language difficulties. Also, the geographical
proximity makes communication and traveling between the two
countries easier (Gerbl, McIvor, Loane, & Humphreys, 2016). This
would be especially advantageous for companies outsourcing
complex information technology (IT) projects that may require
frequent and ongoing communication between the two entities. In
addition, in many cases, workers in nearshore organizations will be
more highly trained than those in countries much further away such
as in India and China, two of the top IT outsourcing destinations for
many U.S. organizations (Oshri, Kotlarsky, & Willcocks, 2015).

Nearshore outsourcing also provides organizations with cost saving
benefits because work is sent to another location where workers will
generally be paid lower wages. Another benefit is that, because of
close proximity to the U.S., foreign workers will be awake and
working during the contracting organizations hours of business
should communication need to occur (Gerbl et al., 2016).

On the other hand, it may not always be a good idea to use
nearshore outsourcing. In some cases, it may be more expensive
because the costs of using foreign workers may not be significantly
lower. Another thing to consider is time costs: will the nearshore
organization be able to operate independently, or will the
contracting company have to provide guidance and resources?
Another cost to consider is traveling costs: will traveling between
the two countries be necessary, and if so, how often (Gerbl et al.,
2016)?

Nearshore outsourcing may not be feasible when the IT project is complex or if the tasks involved require
management oversight or direction from the contracting company (Gerbl et al., 2016). Nearshore outsourcing
would be ideal for simple day-to-day IT tasks such as customer service (help desk), development, analytics,
maintenance, and production.

Figure 2 – Nearshore outsourcing
example.

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Offshore Outsourcing

Offshore outsourcing is when an organization contracts another company
to perform operations in a foreign country (Figure 3). For example, a
company might outsource to Europe, Japan, South America, and Asia.

Outsourcing to foreign countries can have some disadvantages. One
disadvantage is cultural and/or language differences. Other disadvantages
are time zone issues and the geographical distance, which could make
communication and traveling between the two countries difficult, time-
consuming, and expensive (Gerbl et al., 2016).

However, in many cases, workers at offshore organizations may be highly
trained and generally paid lower wages, which can help reduce costs for
the contracting organization. As in nearshore outsourcing, the organization
must consider whether or not the offshore company can operate
independently or if it will need constant guidance and resources. If traveling
may be required, consider how much and the costs involved with that. If the
offshore company cannot operate independently or if excessive traveling
may be required, it might be better to use onshore outsourcing if the bottom
line is to save money (Gerbl et al., 2016).

Offshore outsourcing would not be ideal for complex IT projects that may
require frequent and ongoing communication. As in nearshore outsourcing,
it might be best to use offshore outsourcing for simple day-to-day
operations such as help desk, development, analytics, maintenance and
production (Gerbl et al., 2016).

Onshore Outsourcing

Onshore outsourcing is when operations are sent to another company located within the organization’s home
country (Figure 4). In the Google example, Google outsourced their cafeteria operations to another company
within the same locality. Several advantages to onshore outsourcing are that there will not be any
cultural/language barriers and communication can take place during the time the contracting company is open
for business. Traveling, if needed, can be managed efficiently to improve the bottom line (Gerbl et al., 2016).

However, onshore outsourcing has some disadvantages; the main disadvantage is a decrease in cost
savings. In most cases, onshore outsourcing will not provide cost savings because the direct labor costs can
be high (Gerbl et al., 2016). Although, in the case of Google as discussed above, by not having to expend
resources into managing and maintaining a cafeteria, Google can use those resources for its own operations.

Figure 3 – Offshore
outsourcing example

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Summary

IT assets are critical components of organizations and need to be
managed efficiently. Organizational structure is also important.
Depending on the size and type of the organization, the organizational
structure will determine the relationships between employees and
managers. This relationship is important for how business leaders
develop processes and systems that align with the organization’s goals
and strategies.

One of the main reasons companies consider outsourcing is for cost
savings and expertise gain and to help free up time for managers.
Offshore labor costs can be considerably less than wages for onshore
and nearshore locations. Outsourcing can also provide expertise for
the company that lacks this resource, especially in the development of
innovate products. Outsourcing also helps management focus on the
company’s main operations instead of on functions in which they do
not have the expertise.

Some of the disadvantages of outsourcing to foreign countries is time,
cultural and language barriers. If travel is required, this may be
expensive and difficult to manage efficiently. Another concern is that
even though costs can be considerably less, there is no guarantee that
the products or services will be of high quality.

References

Gerbl, M., McIvor, R., Loane, S., & Humphreys, P. (2016). Making the business process outsourcing decision:

why distance matters. International Journal of Operations & Production Management, 36(9), 1037-
1064.

Klean Denmark. (2011, February 3). Daily Sprint meeting [Image].

https://commons.wikimedia.org/wiki/File:Daily_sprint_meeting.jpg

Kroenke, D. M., & Boyle, R. J. (2020). Using MIS (11th ed). Pearson.

Oshri, I., Kotlarsky, J., & Willcocks, L. P. (2015). The handbook of global outsourcing and offshoring (3rd ed.).

Palmgrave Macmillan.

Suggested Unit Resources

In order to access the following resources, click the links below.

The following articles all explore the topic of outsourcing and are excellent materials that will help you
complete your assignment for this unit. You are encouraged to review them.

Gerbl, M., McIvor, R., & Humphreys, P. (2016). Making the business process outsourcing decision: Why

distance matters. International Journal of Operations & Production Management, 36(9), 1037–1064.
https://search-proquest-
com.libraryresources.columbiasouthern.edu/docview/1826443062?accountid=33337

Overby, S. (2017). Robotic process automation makes nearshore outsourcing more attractive. CIO.

https://search-proquest-
com.libraryresources.columbiasouthern.edu/docview/1869482273?accountid=33337

Figure 4 – Onshore outsourcing
example

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UNIT x STUDY GUIDE
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Persson, J. S., & Schlichter, B. R. (2015). Managing risk areas in software developm offshoring: A CMMI level
5 case. JITTA: Journal of Information Technology Theory and Application, 16(1), 5-23. https://search-
proquest-com.libraryresources.columbiasouthern.edu/docview/1693330445?accountid=33337

Ryan, P. (2009). Outsourcing: A historical cost-saving mainstay. CRM Magazine, 13(2), 34.

https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=a9h&AN=36315837&site=ehost-live&scope=site

Learning Activities (Nongraded)

Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.

To test your knowledge of the material covered in this unit, complete the following activities:

Chapter 11 Active Review
Chapter 11 Using Your Knowledge
Chapter 11 Collaboration Exercise
Chapter 11 Review Questions
Chapter 11 Study Cards

The activities are located within the chapter readings in uCertify. The Active Review, Using your Knowledge,
Application Exercise, Review Questions, and Study Cards are located at the end of the chapter.