Riordan Outsourcing Plan

Abstract
Riordan manufacturing virtual organization is focused on achieving and maintaining financial and resource profitability to sustain growth. The company’s finance and accounting department needs to have a seamless compatibility among its three different sites to provide consistency in data and eliminate redundancy of records and process. Outsourcing has been identified as a method to deliver the solution. Research has been conducted by a team to identify the pros and cons associated with technology outsourcing projects. Scholarly peer reviewed articles are used for identifying the pros and cons. Non-peer reviewed articles will be considered if they are from reliable sources. Outsourcing software development enables Riordan Manufacturing to increase efficiency in satisfying customer needs, storing quality data, and achieving high profits. Risks are recognized to be challenging in system security, personnel satisfaction, and company litigations. More organizations realize the cost savings in offshore outsourcing. Outsourcing could result in potential cost savings, organization-wide consistent reporting, and increased focus on strategic activities. A substantial business transformation will be measured by efficient processes, increased productivity, and optimized strategy for an outsourcing venture. An organization with well managed outsourced functions can result in consistent full benefits of outsourcing.

Technology Offshore Outsource Plan
Riordan Manufacturing, Inc. (Riordan) recognizes room for improvement in its Finance and Accounting (F & A) department. Currently, Riordan has three operating entities in Georgia, Michigan, and California. These entities “each have their own Finance & Accounting Systems and they provide input that is consolidated at Corporate…San Jose” (University of Phoenix, 2013, Finance & Accounting Overview). Corporate receives data in multiple forms requiring file conversions, re-entry, and re-coding that is inefficient and wastes resources. Riordan evaluated the cost savings and effect on core functions to offshore outsource a business function. Riordan has considered the advantages and disadvantages of offshore outsourcing as well as those specific to outsourcing F & A functions and has developed a project plan with specific performance measures to evaluate the profitability of outsourcing its F & A department.
Riordan Manufacturing Financial & Accounting System Issues
Riordan Manufacturing is facing multiple challenges in its Finance and Accounting System. The systems are poorly implemented. There are different sources of data such as data files, hardcopy reports where some data needs to be re-entered. Some data needs to be reconverted and calculated to its proper account. The F & A systems output is time consuming and labor intensive in the process of internal and external audit. Income and Balance sheet is delayed by three weeks. It has a ripple effect in consolidating reports to be in compliance with new government requirement in a timely manner.
When too many systems are used and each system is different, manual process needs to bridge the gaps to make the system work. This causes a large amount of work and possible errors. The process is not centralized and reports need more auditing. When Riordan acquired the operating entities in Michigan and Georgia, the matter of F & A system compatibility was not addressed (University of Phoenix, 2013, Finance & Accounting Overview). Not updating to meet changes in the organization added more complexity in making the compatibility of all systems seamless.
Solutions
An infrastructure needs to be created and developed software that will address the needs of the F & A system and employees. When an integrated systems framework had been developed, fewer manual processes would be necessary. Framework should include data repository to address storage. A global ERP will be created to unify the business processes in different locations. Any updates on pricing, discount, and inventory changes will reflect automatically in the system. Many of Riordan’s system problems continually encountered can be prevented with the right proficiency and a proper supply of resources.
Outsourcing is the act of shifting some of a company’s repeated internal process and decision to outside providers, as set forth in a contract (Barrar & Gervais, 2006). Many executives are discovering outsourcing is about corporate growth, making better use of skilled staff, even job creation in the United States and not just cheap wages abroad (Engardio, Arndt, & Foust, 2006). This strategy allows a company to focus on its core competencies. Outsourcing innovation can conduct a strategic analysis and moves through the process of identifying the best candidate defining the requirements, selecting the providers, and transitioning the functional process.
Defining Scope and Responsibilities
Riordan Manufacturing will identify goals, current processes, performance metrics, and cost by doing an internal analysis. This will be marked as baseline. Riordan will also create a project schedule. The IT department will be involved in analysis and deciding what solution will best fit the needs of the company. IT can evaluate where to host the repository, licensing of software, security, and support the upcoming changes.
The outsourcing provider will provide multiple solutions. Recommendations will include the framework, platform, tracking system, hardware, resources, cost, and, time schedule. Arranged training, creating documents, and manual reviews are part of the timetable. The outsourcing provider’s time and availability with local staff will be a factor to consider. It will be in Riordan’s benefit if the outsourced schedule has the same office hours as Riordan. Continuous collaboration will be more effective and issues will be solved faster.
Risk Management
The process of risk management is planned to reduce or eliminate risk that will have an impact on Riordan’s business and financial system. There are six dimensions of risk management, namely performance, reputational, intellectual, liability, enforcement, and business continuity risks (Rubin, 2009). To address these risks, a contract is drawn binding both parties for securing any rights, defining inclusion of legal claims, ownership of codes and retain of resources if it is human, software, and hardware upon termination of contract. Risks are identified and discussed with the outsourcing provider to have a successful alliance.
Performance Measurement Six Sigma identifies areas of production that needs improvement to enhance its performance. The metrics more commonly used are as follows: * Improvement quality – Six sigma calculates the number of defects during the initial application stage, and the numbers can be compared without a problem. * Process variability - Six sigma ensures that the process is as constant as possible with minimal defects. * Finances – Companies assess the cost of improvement and compared with the current process to justify and quantify the improvement. * Acceleration of process time – Time is valuable, therefore streamlining the process can significant help reduce turn around as quantifiable metric. * Assessment of productivity – It assesses if the improved process works more efficient and generates more product for less materials.
Pros and Cons of Potential Outsourcing Projects for Riordan
Offshore outsourcing has been a growing phenomenon in businesses within the last decade. The need to maximize profit by hiring cheap skilled labor in foreign countries to produce quality work/products is what drives companies into offshore outsourcing.
When businesses consider outsource is most likely definite to reduce costs in areas of production. Weighing the pros and cons as well as considering cost saving factors can help Riordan objectives. Various information technology sections, such as computer processing, data processing, and technical support, are among the most outsourced areas in the technology field. Riordan manufacturing is in the process outsource two major components of its information technology.
Riordan manufacturing can maximize profits from outsourcing by gaining access to specialize IT skills, which may results in faster product delivery. Taking advantage of this market opportunity can improve business processes and workflow that will create lower cost and cheaper labor. Also the ability of having a flexible staff allocation and the ability of internal staff to focus on other important business areas is a potential advantage for outsourcing. Although, while there is plenty of advantages to outsourcing, there are also disadvantages. There are some significant functions that may disrupt communication and interpret misunderstood requirements such as cost overruns, inadequate deliverable quality, testing reliability, cultural issues, and language issues and problems selecting appropriate and quality vendors.
Cost constraints that Riordan can endure come from many bugs that may occur from outsourcing their products. About 30% to 40% of the software developed in offshore sites will have coding or other software errors, resulting in domestic companies paying 10 times the cost to fix the product than was spent to develop it. Many companies do not take these costs into consideration when choosing offshore outsourcing. However, Riordan can avoid making the same mistake that other companies have made by forecasting the costs needed to fix software issues because of their choice to outsource and compare it against the company’s wages. Sending jobs overseas creates an economic impact in the Homeland.
Pros and cons of IT Outsourcing Finance and Accounting Functions
The main objective of the Finance and Accounting departments has been to optimize the utilization of the cash and credit resources (Telegenisys, 2008) . Their main goal has been to allocate the funds in such a way that daily functions of other departments such as production, sales, inventory, etc., are carried out efficiently and effectively. Globalization has placed competitive pressure on these departments and as a result F & A departments are required to keep a tab on their own expenses and overheads (Telegenisys, 2008) . Outsourcing of the F & A functions are the most preferred solution for achieving the above objective; however there are advantages and disadvantages that are associated with outsourcing.
Pros of IT outsourcing Finance and Accounting functions
There are main advantages that are associated with outsourcing F & A functions. Outsourcing F & A can deliver immediate cost savings by performing work at a lower cost location, which provides economies to scale (Nowacki & Masood, 2013) . Often the outside provider s also providing high quality services because of its use of more experienced staff supported by larger investment in research and technology (Nowacki & Masood, 2013) . In addition to this, outsourcing can also decrease the expenses spent on employee vacation, trainings, sick days, and holiday pay. Outsourcing will allow duties of F & A to be assigned to specialized groups of the outsourcing company. This creates more time for Riordan staff to focus on core business matters. Time is also an important factor to consider. Riordan usually spends 15-20 days to complete financial reports after the month ends, but outsourcing can reduce this time because of the specialized departments. Also instead of doing the work in three different locations of Riordan, all the work can be done in one area and reduce the fragmented issues that Riordan faces.
Cons of IT Outsourcing Finance and Accounting Functions
Despite all the advantages that are associated with outsourcing IT Finance and Accounting functions, there are also some disadvantages that have to be considered. Security is an important issue that needs to be considered before deciding to outsource F & A functions. By outsourcing, Riordan would be revealing all the financial details to the other firms. The company should do enough research to ensure they are dealing with a reputable firm, and they should also conduct interviews before making a decision (Wahm, 2012) . Detailed contracts should also be drawn to protect Riordan. Distance is a key factor that should be considered. Having an in house employee is always convenient to go to and communicate with. Outsourcing would make it difficult to communicate with employees because of distance and time differences.

Advantages of Technology Offshore Outsourcing
It is not uncommon for organizations to offshore outsource business functions for various reasons, including controlling capital costs, increasing efficiency, reducing risk, reducing labor costs, and increasing focus on core business. If a third party can maintain the outsourced function accurately and in a timely manner, this real-time data can be predictive of market trends (Nowacki & Masood, 2013). This can result in direct benefits to an organization.
“Outsourcing converts fixed costs into variable costs [and] releases capital for investment elsewhere…” (AllBusiness, 2008, para. 3). This reduces large capital expenditures and allows those funds to be reallocated to revenue-producing activities.
Offshore outsourcing can allow organizations to realize cost savings if economies of scale exist. This is achievable if outsourcing providers “can combine the volumes of multiple clients” (Meyer, 2013, para. 15). Outsourcing providers who service multiple clients may lower their contract fees through increased efficiency and expertise. Through contractual agreements, outsourcing providers also displaces some of an organization’s risk by absorbing the risk relating to their function. This is again to the advantage of the organization that outsources.
Payroll costs can be the largest expense in a budget. Offshore outsourcing can reduce these costs by employing cheaper labor in other countries. Outsourcing providers absorb hiring and training costs as well as staffing for peak loads when increased amounts of staff are needed during busier times of the year (Meyer, 2013). This in turn allows internal staff to focus on core business functions. Outsourcing work to third parties increases the time in-house employees spend on revenue-generating activities.

Problems Associated with Technology Offshore Outsourcing
Offshore outsourcing is not without risk. These risks sometimes outweigh their benefits and companies should consider them carefully before committing to offshore outsourcing. Risks to outsourcing include unexpected escalated costs, disputes, and litigations with third parties, security breach, loss of organizational competencies, complying with foreign laws and regulations, cultural differences, and potential loss of human capital (Overby, 2003).
The cost of transitioning to a third party provider can add up. There can be significant expenses in interviewing, traveling, negotiating, and lawyer fees. These expenses are accrued upfront prior to a company realizing the potential cost savings of offshore outsourcing. It is important to take the time to draw up comprehensive third party contracts when outsourcing. These contracts can protect an organization from litigation, disputes, and security breaches. Sophisticated security measures should be in place to protect a company’s business integrity, regardless of contracts and legal documents. Weak security measures could jeopardize the wellbeing of an entire organization and should not be underestimated.
The risk of losing organizational competencies remains controversial. Some schools of thought support that outsourcing functions cause internal employees to lose the competency of performing those functions whereas other schools of thought support that employees can focus on key business functions without dealing with functions that third parties can carry out. Depending upon individual opinion, this can either be an advantage or disadvantage of outsourcing. In turn, if business functions are transferred to third parties, some organizations can eliminate previous job functions and reduce their workforce. Outsourcing work displaces internal labor and is a disadvantage to employees.
Finally, working with foreign countries presents cultural barriers and challenges with foreign laws and regulations. Organizations should have an understanding of local regulations when contracting work in these countries. It is also important to understand the culture of the contracting country to understand how they differ, what special considerations should be made, and to get an understanding of their labor force and quality of work.
Conclusion
The finance and accounting project involves the development of new software to increase productivity and efficiency. In weighing the advantages and disadvantages of outsourcing, the benefits of subcontracting offset the risks. Existing knowledge will be transferred in phases establishing right governance and ensure self-sufficiency. Quality will be stressed from the conception of the requirement, development, testing to the end product and user acceptance by the Riordan.
Riordan will evaluate continuously outsourcing benefits and will revisit relationships with contractors every six months. Riordan Manufacturing will incorporate outsourcing as part of its organization culture, and IT infrastructure. Communication will be a tool in keeping both Riordan’s employees and outsourcing resources a part of the company’s goal. The company will keep searching for strategic partners that will understand its business.

References
AllBusiness. (2008, January 1). The benefits of outsourcing for small businesses. Retrieved from http://www.nytimes.com/allbusiness/AB5221523_primary.html
Barrar, P., &Gervais, R. (2006). Global Outsourcing Strategies: An International Reference on
Effective Relationship. Burlington, VT: Gower Publishing, Ltd...
Engardio, P., Arndt, M., & Foust, D. (2006, January 30). The Future of Outsourcing. Business Week, p. 50-58.
Herath, T., & Kishore, R. (2009, Fall). Offshore outsourcing: Risks, challenges, and potential solutions. Information Systems Management, 26(4), pp. 312-326
Meyer, D. (2013). 4 Advantages to outsourcing. Retrieved from http://www.sourcingmag.com/content/c051011a.asp Nowacki, P., &Masood, I. (2013). How high-tech firms benefit from Finance & Accounting outsourcing. Retrieved from http://www.cognizant.com/insights/perspectives/benefits-of-finance-accounting-outsourcing
Overby, S. (2003, September 1). The hidden costs of offshore outsourcing. Retrieved from http://www.cio.com/article/29654/The_Hidden_Costs_of_Offshore_Outsourcing?page=1 &taxonomyId=3197
Rubin, H. (2009, Nov/Dec). Outsourcing to China: Risk Management and Strategies.
The Licensing Journal, 29(10), 7-19.
University of Phoenix. (2013). Virtual Organizations, Riordan Manufacturing, Inc.
Retrieved from University of Phoenix, CIS568 - Information Systems Concepts website.

References
Nowacki, P., & Masood, I. (2013). How high-tech firms benefit from finance and accounting outsourcing. Retrieved from http://www.cognizant.com/insights/perspectives/benefits-of-finance-accounting-outsourcing
Telegenisys. (2008). Finance and accounting outsourcing services -dependencis and benefits. Retrieved from http://www.telegenisys.com/whitepapers/finance-and-accounting-outsourcing-services.pdf
Wahm. (2012). Pros and cons of outsourcing accounting services. Retrieved from http://www.wahm.com/articles/the-pros-and-cons-of-outsourcing-accounting-services.html

References: Nowacki, P., & Masood, I. (2013). How high-tech firms benefit from finance and accounting outsourcing. Retrieved from http://www.cognizant.com/insights/perspectives/benefits-of-finance-accounting-outsourcing Telegenisys. (2008). Finance and accounting outsourcing services -dependencis and benefits. Retrieved from http://www.telegenisys.com/whitepapers/finance-and-accounting-outsourcing-services.pdf Wahm. (2012). Pros and cons of outsourcing accounting services. Retrieved from http://www.wahm.com/articles/the-pros-and-cons-of-outsourcing-accounting-services.html