Archive for the ‘Outsourcing’ Category

Transnational information technology – IT – and transnational corporations

Saturday, July 25th, 2009

Transnational is a term that has been around for a long period of time. Corporate society defines transnational as being registered to perform business functions in other countries in addition to the organization’s home country. Information technology views transnational as providing technology services in other countries for conducting business activities. However, the corporate and information technology views digress in regard to strategic planning.
Corporations will engage in transnational business for various reasons. Two reasons are legal and resource considerations. Legal considerations include tax advantages, legislation and trade agreements. Resource considerations include human and product. Here is an example.

Corporation “A” manufactures tires. Strategic planning indicated the price of rubber will increase over the next few years, thus placing a upward pressures on the cost-per-unit. By placing a factory in India, the tire company will be able to secure the rubber required for the product and also incur lower costs-of-labor. Procuring the human and material resources will offset the additional finished goods transportation, local labor taxes and tariff costs. So, by engaging in transnational corporate practices, the organization can maintain and potential increase profit margins.

Transnational information technology in regard to strategic planning is involuntary. Strategic planning indicates the organization requires specific software to perform enterprise resource planning (ERP). The organization purchases the software based upon price and organizational requirements. The software vendor may provide transnational resources and services. Here is an example.

Company “A” requires enterprise resource planning (ERP) software for continuing operations. The software provider presents a requirements list to the organization for deploying the software. The hardware and software may be distributed by a transnational company; however, the only concern of company “A” is that the software performs according to specifications.

I do not consider transnational outsourcing of information technology services as beneficial to strategic planning. Any manager who has actually researched transnational outsourcing of information technology understands it actually weakens the organizations ability to respond to emerging markets. Just speak to the numerous organizations who engaged in transnational IT outsourcing about the capital lost through the outsourcing project and moving the services back “in-house.”

Transnational corporations and information technology digress in regard to strategic planning. The digression is in regard to voluntary vs. involuntary actions. Corporations engage in transnational activities due to legal and resource considerations. Transnational information technology is due to vendor supply lines and software support. The ability to identify the digression between the two should be on every manager’s mind while engaging in strategic planning.
Mike Kniaziewicz, MIS

What is outsourcing?

Wednesday, November 19th, 2008

Outsourcing is nothing more than obtaining resources that are not obtainable within the organization. When an organization is holding a meeting they outsource the lunch, because it does not make business sense to build a kitchen, stock it with items and employees for a once a month meeting. A prime example of outsourcing at its finest is our daily lives.

Think about what occurs in your daily life. Are you able to drill and refine petroleum in your back yard? No. So you outsource the fuel requirements for your car and home to another organization. However, the outsourcing you may be expecting to read about are the job loses to overseas organizations. Except the term used in many circles for that type of outsourcing is off-shoring.

Off-shoring is used by several organizations to reduce labor costs. The easiest jobs to off-shore are information technology jobs. The reason is because of the World Wide Web and the commoditization of bandwidth. Another reason is the lack of face-to-face interaction between the information technology community and customers.

Management needs to consider a major downside to off-shoring; the ability to develop emerging markets. It generally takes two years to bring an off-shored department up to the point the parent organization starts to experience returns on the investment. Think about all the changes that have occurred over the past two years in regard to business and e-commerce. Do large organizations have the ability to shift that rapidly if they have off-shored their information technology?

Large organizations are starting to falter because they are unable to meet the demands of emerging markets. There is a boom occurring with small technology based organizations. The reason for the boom is the small business’s ability to shift in mid-stream to address emerging markets. Another reason is the small business’s ability to avoid the bureaucracy of larger organizations.


Mikhail Kniaziewicz, MIS