Outsourcing at Office Supply Inc. Case
INTRODUCTION
Office Supply Incorporated (OSI) is a company in crisis, with challenges in its cost structure and poor IT performance. Outsourcing to Technology Infrastructure Solutions (TIS) is an opportunity to both reduce costs and complexity for the firm, but first must consider whether outsourcing is a good strategic fit for OSI. Outsourcing is known as the practice of turning over responsibility of some or all of organizations information systems to a foreign firm in order to stay competitive. Outsourcing is not new to the business world, as it dominated the manufacturing sector the past couple of decades. There are various advantages and disadvantages. Advantages include lower costs, better quality, and downsizing to focus on the core competencies, highly motivated workforce, and Information System performance problems. Disadvantages include loss of jobs and its effects, hidden costs that are often not calculated security and confidentiality issues, cultural barriers, and lack of control over the supplier. Companies need to effectively research for to be successful in an outsourcing relationship because outsourcing failures are very costly and are difficult to reverse. Outsourcing is a now a popular strategy for many organizations as the worldwide market for computing services are projected to grow yearly. In the future, new outsourcing destinations such as Eastern Europe are expected to pop up. It is essential to carefully weigh both the advantages and disadvantages before heading into an outsourcing relationship with another party.
Currently, OSI’s IT spends about 4% of sales and has been steadily increasing over the past year. Gross margin is declining due to the competitive pressure, particularly from the local players. Even there are so many companies would like to offer OSI to help them out with their IT infrastructures. Benjamin Wagner, the company’s chief financial officer, still needs to analysis the outsourcing very carefully because there is no
Office Supply Incorporated (OSI) is a company in crisis, with challenges in its cost structure and poor IT performance. Outsourcing to Technology Infrastructure Solutions (TIS) is an opportunity to both reduce costs and complexity for the firm, but first must consider whether outsourcing is a good strategic fit for OSI. Outsourcing is known as the practice of turning over responsibility of some or all of organizations information systems to a foreign firm in order to stay competitive. Outsourcing is not new to the business world, as it dominated the manufacturing sector the past couple of decades. There are various advantages and disadvantages. Advantages include lower costs, better quality, and downsizing to focus on the core competencies, highly motivated workforce, and Information System performance problems. Disadvantages include loss of jobs and its effects, hidden costs that are often not calculated security and confidentiality issues, cultural barriers, and lack of control over the supplier. Companies need to effectively research for to be successful in an outsourcing relationship because outsourcing failures are very costly and are difficult to reverse. Outsourcing is a now a popular strategy for many organizations as the worldwide market for computing services are projected to grow yearly. In the future, new outsourcing destinations such as Eastern Europe are expected to pop up. It is essential to carefully weigh both the advantages and disadvantages before heading into an outsourcing relationship with another party.
Currently, OSI’s IT spends about 4% of sales and has been steadily increasing over the past year. Gross margin is declining due to the competitive pressure, particularly from the local players. Even there are so many companies would like to offer OSI to help them out with their IT infrastructures. Benjamin Wagner, the company’s chief financial officer, still needs to analysis the outsourcing very carefully because there is no