Archive for March, 2009

Fall of the Eagle and Rise of the Bear

Friday, March 27th, 2009

Many economists look at the current economic conditions and have different interpretations of where we are going. However, one aspect that is sure to repeat itself is history. That is unless we are students of history and do not repeat prior mistakes.

When we examine our economy we may see many concerns. However, the current administration is concentrating on not repeating the mistakes of the past. In a nutshell the Great Depression was caused by the same concept of speculation that caused the downfall of our current economy. However, the government is not going to allow the banks to fold like they did in the late 1920’s.

Many hard working people are disgusted with the banking industry bailout, but it is necessary. However, with government money comes government regulation. Many will argue government regulation is bad for any economy; however, you need to examine and understand that the lack of regulation is what got us to the point where we need regulation.

 The Government needs to also realize that by putting money back into the banking system is not going to boost this economy out of this recession.  Banks contribute to the multiplier effect when they lend money to people and businesses to produce and purchase goods and services. However, the banks are only concerned with recovering their bad loans at this time.

Examine this actual occurance and judge for yourself if bailing out the banking system is going to grow the economy. A freind of mine recently applied to refince his or her home. The refinancing was to consolidate debt and open the cash flow to purchase goods and services.

  • The house was appraised at over 40% of what the borrower was asking for in way of a mortgage.
  • The borrower’s credit score was just beneath maximum score.
  • The borrower stated that the purpose for refinancing was to consolidate debt and improve the property.

Was the refinance approved? NO. The bank stated that an appraisal of the grounds listed it as in fair condition and that the bank is not willing to accept the collateral on the mortgage. Does this sound familiar to anyone? Is this a bank that is going to help get us out of our current economical difficulties?

What government needs to do is perform a bailout that will place the money back into the hands of the consumers. Big business has already shown they are only concerned with shareholders but reducing their expenses (layoffs) to increase profits to their shareholders.

If you give the money to the citizens what will they do with it? Make purchase and pay off debt. Either way the money ends up right back in the hands of the banks.  However, you obtain a faster growing economy because once people are out of debt they will begin to make purchases, thus forcing businesses to grow their staffs and stop the downsizing spiral.

I feel in this case a good term would be a “tickle up economy.” Think about the key indicator during any economic cycle – Consumer Confidence.  Consumers already lack confidence in big business and banks, so why are we just placing the money in their hands? We need to build the economic confidence of the average citizen and stop concentrating on filling the pockets of the wealthiest 5% in this country.

Mike Kniaziewicz, MIS

Outsourcing Information Technology Functions

Friday, March 27th, 2009

NOTE: These papers are meant to make you think and contain thoughtful opinions.

            In spite of current economic conditions, outsourcing information technology functions is not an easy task for any organization. Reducing costs of labor is one reason for outsourcing, but should never be considered exclusively. Organizations need to consider strategic planning, customer service, and the associated costs of outsourcing. This paper will examine various aspects the organization is required to assess in regard to outsourcing information technology functions.

Information Technology Outsourcing Analysis

Determining Factors

            Organizations have been outsourcing production line functions for decades. The reason was to reduce front-line costs to provide a competitively priced product for consumers to purchase. Some of the factors facilitating production line outsourcing were: government deregulation of trade, lower labor costs abroad, and the high availability of lower priced labor with the technical skills required to produce the organizations product.

            Information technology is now experiencing the same outsourcing process as traditional production line tasks. Commoditization of network services has presented a business environment that is inclusive of a majority of the World’s cultures. Foreign universities and governments have noticed the globalization of network services. Trained and lower paid professionals. Universities abroad are now saturating the information technology field with highly trained professionals.

Strategic Planning

            Strategic planning is an evaluation of where the market is going and the organization’s positioning in regard to the market’s movement. Information technology needs to follow pace with the organization’s business sector. Outsourcing can have a positive and or negative effect on how the Information Technology Department responds to sudden market changes.

            In-house developers provide an organization with the ability to meet strategic planning and emerging market goals. However, many organizations do not have the capitol resources to maintain a full-time development staff. Organizations that do not have resources to provide for a full-time development team are left with outsourcing information technology tasks.

            Outsourcing information technology functions carries the risk of the organization not being able to meet the needs of developing markets ahead of the competition. Outsource vendors require meetings with management to discuss changes. These meetings often do not occur until a meeting is planned at a future time. After the meeting, the outsource vendor will need time to evaluate the proposal, then respond to the organization as when the vendor can implement the changes to meet the developing market. The time required to perform the analysis may cost the organization a competitive edge in the emerging market.

Customer Service

            Customer service is vital to any organization. Information technology not only deals with the organization’s external customers, but also with the internal customers, employees. Outsourcing customer service will provide savings in regard to the cost of labor, but the organization needs to ensure outsourcing does not alienate the customer who purchases the service. Examples of alienating customer would entail extensive on-hold time and or a lack of knowledge concerning the organization’s products or services. Many outsourcing contracts stipulate a length of time, so the organization needs to realize that the outsourced vendor may cost more in sales revenue than savings in labor costs before the contract has ended.

            Customer service can benefit from outsourcing. The upfront benefit would be reducing the costs associated with labor; however, the organization can benefit from the outsource vendor’s expertise in specific areas. Call centers are a primary example of an organization and outsource vendor symbiotic relationship. Organizations that specialize in customer service and are located in various geographical areas can provide 24/7 customer support, because when the call center is not busy with one client’s customers they are able to offset any down time with another client’s customers.  Specialization of tasks is a benefit of outsourcing.

Costs Associated with Outsourcing

            Determining the associated costs of outsourcing information technology require study and metrics. Stephanie Overby (2003) article, “The Hidden Costs of Offshore Outsourcing” describes some of the hidden costs involved with outsourcing. Organizations need to consider these hidden costs prior to committing to an outsourcing project or the organization will be disappointed when the return on investment is not forthright. Some of these costs are:

·        Selecting a Vendor: .2% to 2% of the annual contract.

·        Transition: Requires three months to one year in which the organization will not experience cost of labor savings.

·        Layoffs: Organizations will need to pay current employees salaries to train the off shore organization’s personnel. This may also curtail a large severance package for current employees to stay.

·        Culture: American workers can be expected to participate in the decision making within an organization while many other cultures frown upon work suggestions.

·        Ramping Up: Personnel within the organization outsourcing may not have the certifications to work with the vendor’s software, so the vendor will need to place more personnel onsite to make up the difference in skills.

·        Managing an Offshore Contract: Organizations will need to spend considerably more time with expense reports to keep track of actual work performed by the vendor. (Overby, S., 2008)

Many costs are associated with outsourcing; however the largest cost may be the intangible damage to the organization’s employees. Employees have cares and concerns outside the organization. Organizations that follow the path to outsourcing will not only need to consider the balance sheet costs, but also the costs of losing horizontal silo communication and employees who freely gave suggestions to strengthen the organization.


            Outsourcing information technology concerns has positives and negative aspect to be considered by the organization. Strategic planning and customer service may suffer as a result of the organization not having the ability to meet the new demands of emerging markets. On the other side of the coin, the organization will be able to obtain skill sets from outsourcing that might other wise been inaccessible like a call center for a small business. Organizations need to consider all aspects of outsourcing information technology functions and the effects upon the organization’s culture and not just follow the outsourcing trend.


Overby, S., (2003). “Hidden Costs of Offshoring.” Retrieved April 28, 2008 from _Offshore_Outsourcing/8.


Mike Kniaziewicz, MIS