Table of Contents
Summary
From the article, Outsourcing Summary GlobShop is a travel company that operates globally and has experienced a wide range of business challenges between the 1990s and 2000s. During this period, the company was disorganized, which resulted in a lot of redundancy in the manner in which the resources were being used (Ranganathan, Krishnan, & Glickman, 2007). GlobShop responded to the challenges by reorganizing its IT department, which included putting into place measures such as a streamline IT governance system, a centralized global It budget and the consolidation of the IT operations.
One of the measures that the company put in place during the reorganization was cutting down on the cost of IT by outsourcing support and maintenance services. In November of the year 2000, the company hired the services of an Indo-Systems Solutions (ISS) which is an Indian vending company. The vendor; Indo-Systems Solutions (ISS) was tasked with providing GlobShop with a solution for its current problems (Ranganathan, Krishnan, & Glickman, 2007). They were to assess whether there was need to either renew or extend the initial outsourcing. They had to take into consideration the risk involved if they became over dependent on the indo-system solutions and the role of IT at the company.
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Deciding factors
The decision to have some significant parts of the company’s operations offshored to India was informed by a number of factors. First, the decision was arrived at after the September 11, 2001 attack by terrorists (Ranganathan, Krishnan, & Glickman, 2007). The reactions of the terror attack had a very negative effect on the tourism industry both in the short term and the long term. As a travel company, GlobShop was affected too. The company had no choice but to cut down on cost while they were still undergoing reorganization. The company’s It department was alive to the fact that some very hard decisions had to be made. The second factor that contributed to this was the fact that India has a large population which could provide the required workforce. The availability of cheap labor would work very well for the company as they would be able to cut down on the cost of operation (Maertz, Wiley, LeRouge, & Campion, 2010). Third, India had a medium sized economy that was still growing. As a result, GlobShop would get the attention they required in the country. Since the company had just started offsourcing, they need a flexible economy that would be alive to their needs. Fourth, Indo-System Solutions (ISS) was a hybrid company which had been able to establish itself in both India and the USA. For this reason, it became quite easy for them to offer guidance based on experience and expertise on operations in India.
Change process
GlobShop handled the change process quite well after the decision to offshore its operations to India had been made. After the terrorist attack of 9/11, the company decided to continue working with ISS, for support in handling of the merchandising system and the retail operations. One of the immediate business impacts of the decision was that the anticipated 36 month reorganization was adjusted to 9 months (Ranganathan, Krishnan, & Glickman, 2007). The result of the aggressive offshoring period and the acceleration period of the company operations was that a substantial number of employees in the IT department were laid off. The company made the hard decision to lay off these employees as it was seen as being in the best interest of the company. However, the main problem that they faced was the transfer of knowledge from the employees who were affected. As a result, they created a culture where they were required to train the new employees and were the loyalty was rewarded with large numbers of layoffs (Ranganathan, Krishnan, & Glickman, 2007). The differences in cultural settings between India and the USA were quite significant and the company faced the challenge of bridging this gap between the global IT firm and the offshore staff in India. This required training on teamwork and cultural diversity. This contributed in a big way towards extending the relationship between ISS and Glob Shop. The relationships created helped the executives to start realizing positive results in their collaboration with the offshore company.
Success
From the turn of events, the decision to offshore some of the operations was successful. The main force associated with outsourcing is profits. GlobShop saved a lot of money that would have otherwise been used in company operations. Within a period of 18 months, the company was able to cut down on its IT expenses by a margin of 35%. Within the first year, the staff working in the IT department shrunk by 43% and then by 59% by the end of the second year (Ranganathan, Krishnan, & Glickman, 2007). Studies on the level of satisfaction of the users indicated that there was an improvement of 1.5 within a scale of 1-5. ISS also used the knowledge and the experience that they had acquired in the IT industry to make recommendations to GlobShop on the new initiatives that they could pursue. This included areas such as architecture, content management and navigation.
Despite the fact that the move to offshore some of the projects was quite a success, it was such a risky move. Revealing some of the crucial company details, this would be done when offshoring operations, would be considered as a violation of the privacy policy (Olsen, 2006). It is therefore important to take into consideration the policies in confidentiality of the country that one intends to offshore to and ensure that they are similar to those applied in the US. Another major issue that was a major risk on the part of the company was the high number of layoffs that were applied by the company. They could have reduced the morale of the workers, but it did not. In fact, operations improved, and the company earned more money from the move.
- Maertz, C. P., Wiley, J. W., LeRouge, C., & Campion, M. A. (2010). Downsizing effects on survivors: Layoffs, offshoring, and outsourcing. Industrial Relations: A Journal of Economy and Society, 49(2), 275-285.
- Olsen, K. B. (2006). Productivity impacts of offshoring and outsourcing.
- Ranganathan, C., Krishnan, P., & Glickman, R. (2007). Crafting and executing an offshore IT sourcing strategy: GlobShop’s experience. Journal of Information Technology, 22(4), 440-450.