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Homework answers / question archive / Introduction: Outsourcing has become a good way for the big companies at first and then the SMEs to implement it for many reasons like the reduction on the cost assigned for that specific task or also having a good thing which is assigning some secondary tasks or operations for these outsourcing companies

Introduction: Outsourcing has become a good way for the big companies at first and then the SMEs to implement it for many reasons like the reduction on the cost assigned for that specific task or also having a good thing which is assigning some secondary tasks or operations for these outsourcing companies

Economics

Introduction: Outsourcing has become a good way for the big companies at first and then the SMEs to implement it for many reasons like the reduction on the cost assigned for that specific task or also having a good thing which is assigning some secondary tasks or operations for these outsourcing companies. Moreover, the governments also nowadays doing this great step and have implemented the outsourcing in their operations and some of it's tasks and in this report we will focus on one of the ministries in Oman which is the Ministry of Transport, Communications and Information Technology and this ministry had supervised many national projects like, the airports and ports which connect Oman with the world and share in diversifying the sources of income and beside that obtaining the sustainable development in fields like, industrial, economic, tourism, industrial, and other fields (ABOUT THE MINISTRY. (n.d.)). However, the IT industry have become one of the major sectors in the outsourcing and it came the 1 on the active area in outsource by a 28% (Advantages to st Outsourcing You Might Not Have Thought Of, 2021) which is quite good number and for that the purpose of this report is to study the Ministry of Transport, Communications and Information Technology and how does it implement the outsourcing in its operations. In addition, this report will go through this ministry and discover how the ministry implements outsourcing. The structure of this report is as follows, literature review, research methodology, research findings and discussion, and recommendations. 4. Literature review: 4.1 What Is Outsourcing? Outsourcing is simply defined as, when a company hires an external party to create goods and preform services that were originally made in-house by company’s staff and employees. This step is usually taken when companies decide to cut down costs as a measure for cost-reduction. It affects a broader range of positions such as customer service, IS services, manufacturing, and the back office. The beginning of outsourcing was first noticed in 1989 as a business strategy and continued to be an essential part in 1990s of business economics. It encouraged companies as well as businesses to focus on core business objectives through allocating valuable resources where they are most effective. Organizations may choose wither to outsource IS service On-shore, nearshore, or offshore to a more distant country. Both offshore and nearshore outsourcing are usually pursued by companies to save money. 4.2 Opportunities: Outsourcing is known as a development tool for most countries, including transitioning economies. Since its existence it has brought big benefits to businesses. The most basic reason that motivates companies globally to embrace outsourcing is cost reduction. It is an effective service to reduce unnecessary costs. This objective can be achieved through a variety of means such as shifting fixed costs into variable costs, as well as shrinking nonessential infrastructure. Another reason is that companies can focus on their augmented strategies by outsourcing noncritical activities. This step provides businesses some freedom by giving enough opportunities to comprehend the mechanics of innovation, compete in the market, and constantly upgrading their services. In addition, companies outsource a specific process to ensure the access to highly developed technologies and knowledgeable expertise. Vendors compete usually in this area to enhance their reputation and attract more clients for outsourcing services. 4.3 Challenges: On the other hand, Outsourcing does have some challenges. A non-transparent contract could eventually be an impediment for future disagreements. The contract must be structured after negotiating the future requirements of the service provider and the outsourcer to prevent any future misunderstandings. Moreover, political issues such as instability, changing employment laws, inflation, and tax laws could be a headache for both client and vendor and would increase the hesitation to one’s choice of outsourcing. Furthermore, conflict of interest and privacy issues are a major threat in the security of outsourcing. Clients develop a limited amount of trust to outsource confidential and sensitive data to outsourcing vendors. Monitoring systems must be implemented to prevent any type of infringement. Last but not least, communication and language barriers can set of projects too far off their destination, especially when companies decide to go for nearshoring or offshoring. Assumptions could be made that some parts of the service offered are on the company’s end and here where the issues start to arise. 4.4 Critical Success Factors: There are a number of dependencies and factors that are significant to the success of managing and implementing outsourcing operations. Proper planning of applying those dependencies will enable companies to be triumphant in its outsourcing ventures. The process begins with analyzing the operation and creating a development plan that matches the organization’s needs with a continues monitoring and evaluation. The first step in achieving a successful outsourcing service is that goals and objectives must be clear on the client side. With the use of stakeholder’s participation, companies should know their motives and priorities and rank their criteria. Companies should understand that outsourcing does not only affect processes, but it can also influence livelihood of many employees. Another reason is that companies should know their strengths and weaknesses. Most organizations make the mistake of waiting for the vendor to discover the disorganized IT asset base or preform due diligence thus, it creates internal conflicts and starting an unstable relationship. To add to that, vendors advise client companies to not only look at the cost-cutting side. Looking at IT outsourcing market prediction paper for 2009, Gartner company mentioned that “inflexibility caused by an excessive cost reduction focus results in business disruption in 30% of outsourcing deals.” Companies that outsource IT functions such as desktop support and help desk enables IS staff and higher management to focus on competitive differentiation. Contracting with outsourcing vendors will give customers access to tools, disciplines, expertise, and methodologies that they couldn’t have got otherwise. 5. Research Methodology 5.1 Data Collection We adapted previously validated interview questions that are used in other articles that prove its reliable and valid. The interview questions for the study have been modified to fit the aims and context of the study. The interviewees will be asked question on topics below: 1. How to determine what to outsource and what not 2. What are the strategic motives for IS outsourcing decisions? 3. What are the key motives for organization to outsource IS? 4. What are the main IS functions organization outsource? 5. IS outsourcing Delivery Model 6. IS Outsourcing Challenges/ Risks 7. IS Outsourcing Critical Success Factors (CSF) 8. Knowledge Transfer 9. Top Management Commitment and Support The interview guide and interview transcript are provided at Appendix 1 1. Sample We’ve collected data from a group of IT department employees in Ministry of Transport, Communication and Information Technology (MTCIT). The group of interviewees have different rules in the MTCIT IT department to ensure that the data we collected are comprehensive and cover all the needed aspects related to information systems outsourcing fields. 2. Data Analysis (Thematic Analysis) Question Appendix 1 - Q1 Theme Interviewee Background Codes Job title Qualification work experience Response Muhannad Al Shukri • Job title: IT support • Qualification: Bachelor’s in information technology • # of years of work experience: 2 years Badar Al Sayegh • Job title: Networking engineer • Qualification: Bachelor’s in network engineering • # of years of work experience: 3 years Appendix 1 - Q2 Organization Background - Two subdepartments - 23 staff members Appendix 1 - Q3 Make-or-buy Decision - 24/7 support - Help desk & data center outsourced Appendix 1 - Q4 - Cost cutting - HQ services Appendix 1 - Q5 IS Outsourcing Motivations / Benefits /Determinists Appendix 1 - Q6 IS Functions Outsourced - Core business focus - Cost cutting - Flexibility - Physical services outsourced - Cloud services outsourced Muhannad Al Shukri: The IT department is placed in the Ministry of Transport, Communication and information Technology, The IT staff are around 23 who are divided between the data canter department and the IT support department. Badar: An important factor is to see if we need a 24/7 hours support for a service. Most of the services that needs 24/7 hours support and monitor like the data canter will be outsourced. Another thing is to see if the Ministry has the needed skills to do the needed task. In case the Ministry does not have the needed capabilities, the IT function will be outsourced. Muhannad: The two main strategic intents are cost reduction and having a high-quality services. Muhannad & Badar: • Cost Reduction • Focus on Core Business • Flexibility / Rapid delivery Muhannad & Badar: • Software development and maintenance • Data communications network • • • Appendix 1 - Q7.1 Appendix 1 - Q7.2 IS outsourcing Delivery Model Appendix 1 - Q8 IS Outsourcing Good relationship Challenges/ Risks Appendix 1 - Q9 Appendix 1 - Q10 Appendix 1 - Q11 Nearshoring - Global expertise access - High-end technologies Highly credible vendors IS Outsourcing Better results in long Critical term Success Factors (CSF) - Similar culture = better communication - Qualified skills Help Desk and Support operations Internet services / web hosting Systems Security and controls & management Nearshoring is the model used by the Ministry Muhannad: To get access to global expertise and take advantage of highend technologies. Badar: It is also cheaper and can be more efficient than the other two models. But it can be costly and can be complex to monitor in some cases. Muhannad: No, we did not face any of these challenges. The reason is that we are maintaining a good relationship with our vendors and trying to solve any problems immediately in the beginning. Badar: The risks can be mitigated by ensuring that the Ministry is contracting with highly credible vendors who can deliver their promises. Also, the risks can be mitigated by maintaining good relationships with the vendors by having periodic meeting to discuss the latest updates. Badar: Yes planning is very important in any outsourcing project, the right planning well help in achieving better results in the long term and will ensure the Ministry is going in the right direction. Muhannad: Vendor selection is one of the most important factors that can affect the success of any outsourcing project. Working with people who have a similar culture will make the communication process much easier for us. It is also important for us to be sure that the people who are working in the vendor having the right skills and qualifications to work with us. In term of the processes, we need to ensure that the vendor can run the projects smoothly and being flexible if any changes are needed to be done. We are not focusing a lot on the company size and culture as long they are doing their job in a professional way. About the technology, of course the vendor should be knowledgeable of the needed technologies and are able to provide the high-end technologies that can increase the efficiency in the processes. Appendix 1 - Q12 - Set the ground for everyone - Written precisely and comprehensively - fair Appendix 1 - Q13 - Good relationships - Good experience & Avoid problems Appendix 1 - Q14 - Ensure needed information exist Appendix 1 - Q15 - Difficult to monitor and execute Appendix 1 - Q16 Badar Also agreed with what Muhannad said Badar: This is the most important factor that set the ground for everything else. It should be written precisely and comprehensively and should be fair for both parties. Muhannad: Also agreed with what badar said. Badar: Having good relationships with our vendors is very important because this lead to have a good experience with the vendor and avoid any problems that can occur because of the weak communication and the lack of trust. Muhannad: Knowledge transfer to the vendor is important to ensure that the vendor is having the needed information to work in the outsourced services. Muhannad: Of course, because without their support the outsourced processes and services will be difficult to monitor and execute in the right way. After a discussion between Muhannad and Badar they ranked the success factors as follow: 1.Contract 2.Outsourcing Planning 3.Vendor Selection 4.Relationship 5.Top Management Commitment and Support 6.Knowledge Transfer 6. Research Finding and discussion Following the interview that we had with Mr. Muhammad Al Shukri and Mr. Bader Al Sayegh from the Ministry of Technology and Communications Department of Information Technology, where Muhammad said in a brief introduction about the Information Systems Department that it is a department located in the Ministry’s headquarters by the self and consists of 23 employees divided between the data center department and the support section Information Technology. Then we asked them about how to determine the tasks that must be performed internally in the company and between outsourcing, so they answered that the main element in determining whether they needed to be outsourced or completing the internal task is whether this service requires support around the clock or not? If it requires support, then they do it using outsourcing, and if it is not, then they achieve it internally. In addition to that, they see whether the Ministry’s employees possess the required skills or not, and if they possess them then they do not need to seek assistance from the outside and vice versa. As for the question of what the strategic goal behind the decision is to outsource, the answer was two goals, which are to reduce costs with high-quality services. We conclude that the ministry reduces costs while not ignoring the high quality. Their answer came to a question on what are the motives that make them outsource as to reduce costs, to share risks and to focus on the core of the work also to the presence of flexibility and to deliver work in record time. Then we asked them about the most important IT functions that they outsource, and their answer was: software development and maintenance, data communications network, help desk, and support operations, Internet services/web hosting and systems security and controls & management. The IS outsourcing Delivery Model that the ministry follows is nearshoring and we ask them why? their answer was to get access to global expertise and take advantage of high-end technologies and It is also cheaper and can be more efficient than the other two models. But it can be costly and can be complex to monitor in some cases. In addition, we asked them if they face any risks or challenges and they said that they did not face any challenges because they are maintaining a good relationship with their vendors and trying to solve any problems immediately in the beginning. We asked them about how they mitigate IS outsourcing risks and the answer was That the risks will be reduced by ensuring that the Ministry contracts with highly reputable vendors who can follow up with their commitments. Additionally, the risks can be mitigated by maintaining good relationships with the vendors by having periodic meetings to discuss the latest updates. In the last section in the interview, we asked them about the IS critical success factors (CSF). Firstly, wither IS outsourcing planning is important or not and they replied that planning is critical in any outsourcing project; proper planning will aid in delivering better long-term outcomes and will ensure that the Ministry is on the right track. Secondly, we asked them a very important question which is how important is vendor selection? Choosing the right vendor that has the right mixture of competencies? and they answered that One of the most critical considerations that can influence the performance of any outsourcing project is vendor quality. Working with people who share our cultural values would make contact a lot simpler for us. They have also mentioned that it is important for us to ensure that the vendor's employees have the necessary expertise and credentials to work for us. In terms of the processes, they need to make sure that the provider can run the projects seamlessly and is adaptable if any improvements are required. They are not focusing a lot on the company’s size and culture if they perform their duties professionally. In terms of technology, the vendor should, of course, be familiar with the required technologies and be able to deliver high-end technologies that can improve process performance. Bader indicated in his answer to the question of how important it is for the contract between the parties to be clear and have clauses that serve both parties that this is the most crucial element since it lays the foundation for both parties. It should be written clearly and fully, and it should be equitable to all sides. Regarding the importance of relationships in building trust and communication, Bader replied that having positive relationships with our vendors is critical because it allows us to have a positive experience with them and eliminate any issues that might arise due to a lack of contact or confidence. Furthermore, about the importance of transferring knowledge to the vendor and about the importance of obtaining support from managers, Muhammad said Knowledge transfer to vendors is critical to ensuring that they have the expertise they need to perform the outsourced services, and without the managers support, it would be impossible to properly track and implement outsourced systems and resources. Finally, we asked them if they could rank the Outsourcing Critical Success Factors from the most critical to least critical. Their answers were as follows the first-place contract then outsourcing planning then vendor selection relationship then top management commitment and support finally in the sixth place Knowledge Transfer. Compering with what we have found in the literature review we can say that the ministry has followed a good example of dealing with the nearshore vendor for outsourcing services. They have chosen this delivery model because it provides high quality services, less cost and they can focus on their core business objectives. However, there was a conflict with our literature review that some cases for outsourcing the ministry’s IT functions will cost more than the usual. According to what we found in the literature review regarding the it functions to be outsourced the ministry have followed similar steps such as help desk, and support operations. finally, we can conclude that the literature review findings do match the points mentioned in the interview greatly. • The interview transcript can be found in the appendix 1 Appendix INTERVIEW GUIDE Interviewee Background Q1. Talk about yourself and your position? Muhannad Al Shukri • Job title: IT support • Qualification: Bachelor’s in information technology • # of years of work experience: 2 years Badar Al Sayegh • Job title: Networking engineer • Qualification: Bachelor’s in network engineering • # of years of work experience: 3 years Organization Background Q2. Talk about the IT department in the ministry? (structure / number of staff/ budgets etc.) Muhannad Al Shukri: The IT department is placed in the Ministry of Transport, Communication and information Technology, The IT staff are around 23 who are divided between the data canter department and the IT support department. Make-or-buy Decision Q3. How do you determine what to outsource and what to keep inside the organization? Badar: An important factor is to see if we need a 24/7 hours support for a service. Most of the services that needs 24/7 hours support and monitor like the data canter will be outsourced. Another thing is to see if the Ministry has the needed skills to do the needed task. In case the Ministry does not have the needed capabilities, the IT function will be outsourced. Q4. What is the strategic intent behind IS outsourcing decisions? Muhannad: The two main strategic intents are cost reduction and having a high-quality services. IS Outsourcing Motivations / Benefits /Determinists • Q5. What are the key motives for your organization to outsource IS? √ Cost reduction Risks sharing √ Focus on core business √ Flexibility / Rapid delivery Get access/ Acquire new Knowledge, expertise and Enhance Credibility Skills Jumping on the Bandwagon Others (specify) IS Functions Outsourced • Q6. What are the main IS functions that your organization is outsourcing? √ Software development and Disaster recovery (DR) maintenance √ Data communications network √ Help Desk and Support operations Database Management and maintenance √ Internet services / web hosting ERP development and maintenance √ Systems Security and controls & management Others (specify): IS outsourcing Delivery Model Q7.1 What is the preferred & main IS outsourcing delivery model? • Domestic/ Onshoring • Nearshoring (Is the choice the Ministry is going with) • Offshoring Q7.2 why? And what are the advantages, disadvantages, and risks? Muhannad: To get access to global expertise and take advantage of high-end technologies. Badar: It is also cheaper and can be more efficient than the other two models. But it can be costly and can be complex to monitor in some cases. IS Outsourcing Challenges/ Risks Q8. Do you face any of these challenges? • Shirking (the vendor deliberately underperforms while claiming full payment) • Poaching (illegitimate effort to make extra revenue by misusing the client’s critical business data or resources) • Opportunistic re-pricing (In long term contract, the vendor changes the financial terms at some point or overcharges for unanticipated enhancement and contract extensions) • Potential loss of control [client may be locked-in (trapped and unable to leave their relationship with that provider)] Muhannad: No, we did not face any of these challenges. The reason is that we are maintaining a good relationship with our vendors and trying to solve any problems immediately in the beginning. Q9. How are IS outsourcing risks mitigated? Badar: The risks can be mitigated by ensuring that the Ministry is contracting with highly credible vendors who can deliver their promises. Also, the risks can be mitigated by maintaining good relationships with the vendors by having periodic meeting to discuss the latest updates. IS Outsourcing Critical Success Factors (CSF) • Q10. Is IS Outsourcing Planning important in term of: o Having clear goal and objectives o Makes good business sense (strategic value) o Due Diligence (investigating about the vendor) Badar: Yes planning is very important in any outsourcing project, the right planning well help in achieving better results in the long term and will ensure the Ministry is going in the right direction. • Q11. How important is vendor selection? Choosing the right vendor that has the right mixture of competences in term of: • • • • • People: o Cultural similarities o Skill levels o Profiles of staff (education level) o Communication skills o Project management skills o Training offered to the staff o Ability to retain key staff o Commitment, motivation of people Processes: o Ability to recognize and run projects, o Ability to do large projects in multiple locations, o Quality o Flexibility in resources- scaling up Company: o Size, o Culture o Strategy o Decision makers Technology: o Knowledge of technology o The technologies used o Their experience in the needed technologies. Cost: o Estimates costs on travel if required o Estimates of connectivity hardware shipping costs o Software licensing costs. Muhannad: Vendor selection is one of the most important factors that can affect the success of any outsourcing project. Working with people who have a similar culture will make the communication process much easier for us. It is also important for us to be sure that the people who are working in the vendor having the right skills and qualifications to work with us. In term of the processes, we need to ensure that the vendor can run the projects smoothly and being flexible if any changes are needed to be done. We are not focusing a lot on the company size and culture as long they are doing their job in a professional way. About the technology, of course the vendor should be knowledgeable of the needed technologies and are able to provide the high-end technologies that can increase the efficiency in the processes. Badar Also agreed with what Muhannad said • Q12. If we came to contracts, is it important for the contract to be: o Precise o Complete / Comprehensive o Balance o Flexible Badar: This is the most important factor that set the ground for everything else. It should be written precisely and comprehensively and should be fair for both parties. Muhannad: Also agreed with what badar said. • Q13. How important is the relationship in term of: o Trust o Good communication (formal / informal/ frequent contacts) o Establish win-win situations o Motivation (when exceeding performance) Badar: Having good relationships with our vendors is very important because this lead to have a good experience with the vendor and avoid any problems that can occur because of the weak communication and the lack of trust. • Q14. Is knowledge Transfer to the vendor important? Muhannad: Knowledge transfer to the vendor is important to ensure that the vendor is having the needed information to work in the outsourced services. • Q15. Is it important to have the top Management Commitment and Support? Muhannad: Of course, because without their support the outsourced processes and services will be difficult to monitor and execute in the right way. • Q16. Could you rank the Outsourcing Critical Success Factors from the most critical to least critical? After a discussion between Muhannad and Badar they ranked the success factors as follow: 1. Contract 2. Outsourcing Planning 3. Vendor Selection 4. Relationship 5. Top Management Commitment and Support 6. Knowledge Transfer References: - Leavy, B. (2004). Outsourcing strategies: opportunities and risks. Strategy & Leadership. - Motahari-Nezhad, H. R., Stephenson, B., & Singhal, S. (2009). Outsourcing business to cloud computing services: Opportunities and challenges. IEEE Internet Computing, 10(4), 1-17. - Ishizaka, A., Bhattacharya, A., Gunasekaran, A., Dekkers, R., & Pereira, V. (2019). Outsourcing and offshoring decision making. - Lok, K. L., Opoku, A., & Baldry, D. (2018). Design of sustainable outsourcing services for facilities management: critical success factors. Sustainability, 10(7), 2292. - Khan, S. U., Niazi, M., & Ahmad, R. (2012). Empirical investigation of success factors for offshore software development outsourcing vendors. IET software, 6(1), 1-15. - Advantages of Outsourcing You Might Not have Thought of. (n.d.). Retrieved from https://www.backofficepro.com/blog/advantages-to-outsourcing-you-might-not-havethought-of/ - ABOUT THE MINISTRY. (n.d.). Retrieved https://mtcit.gov.om/ITAPortal/About/About.aspx May 10, 2021,

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