Solved by verified expert:Different organizations in the same industry often end up in different locations along the outsourcing continuum. It is logical to assume that the running shoe industry, for example, would converge to one model and level of outsourcing. Since this logical conclusion is erroneous, think about the differential roles played by the HR departments in different athletic shoe companies. Nike pioneered the use of outsourcing in the shoe industry, moving most of its production work to Asia. Adidas likewise once handled its own manufacturing, but also adopted the use of outsourcing in the 1990s. Consider why Adidas made the transition to this business model. In contrast to Nike and Adidas, New Balance continues to maintain a manufacturing presence in the U.S. and the U.K. One consequence is that New Balance shoes tend to be more expensive, but the cost is addressed in marketing strategies. Consider why three major retailers in the athletic shoe industry would differ significantly in the ways that they view partnering or outsourcing. The Krell article in your Required Resources argues that, in terms of human resource outsourcing, saving time is now generally more important than saving money. Based on your research, does this indeed appear to be the trend? Using information from articles, such as Woodhall, et al., “Making the Decision to Outsource Human Resources,” (2009), in your Required Resources, explain how decisions to outsource HR functions are typically made. With these thoughts in mind: Write a cohesive and scholarly response based on your readings and research this week that addresses the following: Using the shoe industry scenario presented above as a point of reference, conduct additional research on the consequences of outsourcing HR functions. How are decisions to outsource HR functions typically made? Describe the positive and negative consequences associated with outsourcing HR functions. Are there factors other than cost or time savings that are important to consider in making these decisions? Who is usually involved in outsourcing decisions? What role should HR executives play in outsourcing decision making?All work must be original and in APA format.
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Focus In to Farm Out
Krell, Eric . HRMagazine ; Alexandria Vol. 56, Iss. 7, (Jul 2011): 47-49.
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Cost savings drove the human resources outsourcing gold rush of the early 2000s. Today, as many agreements
come up for renewal, saving time trumps saving money for leading practitioners. Saving money is not necessarily
the primary objective at this point, notes Ron Gier, VP of human capital planning and employee relations for Sprint
in Overland Park, KS. Outsourcing is about concentrating where you are going to put your energy, where you are
going to build competency as a company and where you can use a partner to perform activities that are not core to
your business. One of Sprint’s top strategic objectives is to provide excellent customer service. To meet that goal,
Gier and his colleagues realized that they needed more time to focus on training, developing and retaining call
center representatives. About three years ago, this need led to the outsourcing of most, but not all, recruiting,
interviewing and onboarding processes for call center representatives. He emphasizes that Sprint’s agreements
are made in conjunction with the company’s supply chain and contract management functions.
Effective HR outsourcing requires strategically selecting tasks that vendors can do better to allow you to focus on
Cost savings drove the human resources outsourcing (HRO) gold rush of the early 2000s. Today, as many
agreements come up for renewal, saving time trumps saving money for leading practitioners.
“Saving money is not necessarily the primary objective at this point,” notes Ron Gier, vice president of human
capital planning and employee relations for Sprint in Overland Park, Kan. Outsourcing “is about concentrating
where you are going to put your energy, where you are going to build competency as a company and where you
can use a partner to perform activities that are not core to your business.”
Cost remains a key consideration, but it should take a back seat to organizational strategy, according to Gier and
other HR practitioners. These HR professionals, along with HRO advisors and researchers, describe a maturing
market that is becoming better suited to delivering on buyers’ desire to focus their decision-making squarely on
“You generally decide to outsource for one of two reasons,” says Lou Cimini, vice president of human resources,
the Americas, for Mansfield, Mass.-based Samsonite Corp.-either “to increase the value of your function and
maintain costs” or “to reduce costs and protect your value.”
Cimini says outsourcing HR administrative and data management functions allowed him “to free up my high-value
team members to focus more time and energy on addressing strategic organizational issues.” For example, Cimini
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could support the development of new customer programs and products during open benefits enrollment seasonformerly “a brutal time for HR.” HR previously was not involved in such innovation.
One of Sprint’s top strategic objectives is to provide excellent customer service. A related HR function objective is
to train and develop top-notch service representatives in the call centers “as quickly as possible,” Gier says.
To meet that goal, Gier and his colleagues realized that they needed more time to focus on training, developing and
retaining call center representatives. About three years ago, this need led to the outsourcing of most, but not all,
recruiting, interviewing and onboarding processes for call center representatives. Gier and his HR colleagues
continue to conduct some call center recruiting to understand this part of the onboarding cycle. By partnering with
a recruiting company, Gier notes, “We are now able to focus much more diligently and effectively on how we can
take our new hires and make them productive.”
Sprint’s approach illustrates one facet of the maturation of HR outsourcing.
“We see more companies moving toward a ‘right-sourcing’ model, in which they focus on finding the best providersnot the best provider-for each HR domain area they are considering outsourcing and then determining if they can
find a provider who fits their needs,” reports Glenn Nevill, the Dallasbased North American practice leader for
Towers Watson’s HR service delivery practice. HR professionals “then want to make some strategic decisions
around how they source. They are not automatically looking to bundle all of their HR functions with a vendor who
can give them a good price.”
Lessons learned during multiprocess, multiyear relationships drive the evolution of this market. Most contracts are
five, seven or 10 years in duration. Peter Ackerson, SPHR, a specialist leader in Deloitte Consulting’s HR service
delivery practice, points out that large HRO providers have learned numerous lessons from clients and from
smaller, single-process providers. These insights include the following:
* Service cost, while important, is “just the price of admission.”
* Clients want higher-quality service and continuous improvement backed by measurable commitments.
* Buyers want precise yet flexible contracts that support high service levels and quick responses when their needs
Single-process outsourcing arrangements tend to be more easily monitored, Ackerson notes, particularly in their
approaches to customization and expansion of services.
Nevill says vendors define their offerings and services better than they did five years ago, simplifying buyers’
decisions and selection activities. “If you are a large organization and you’re looking at outsourcing multiple
processes, there are no more than four or five vendors that you’re really going to look at,” he notes. “Six to eight
years ago, before a lot of consolidation occurred, there were more than 10 options.”
Rajesh Ranjan, New Delhibased research director for outsourcing advisory and research firm Everest Group in
Dallas, has observed a rise in the “componentized approach.” Buyers first outsource a few highly transactional
processes, such as payroll, and then outsource more “judgment-intensive” processes such as recruiting or training
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and development. This is not to say that large, multiprocess contracts are a relic of the 2000s. Globally,
multiprocess HRO activity- agreements involving three or more HR processes covering 3,000 or more employees-is
projected to increase by 8 percent to 10 percent this year over the 46 new large deals that were signed in 2010,
according to a recent Everest Group study.
More Face Time
Not all agreements in the past decade produced mutually beneficial partnerships. This helps explain why “HR
buyers are becoming more aggressive in researching their options when it’s time to renew their outsourcing
agreements,” according to Diane Youden, Dallas-based HR transformation leader with PricewaterhouseCoopers.
Applying greater rigor to decisionmaking and selection, she adds, helps ensure that vendors are providing the
value and services that buyers need.
Youden says buyers are focusing on what she describes as “partnership capacity”-the potential for the two
organizations to work together to achieve mutual benefits and address problems and changes. Some buyers run
through scenarios with potential partners in a workshop setting before making final selections.
Before Samsonite’s Cimini decided to outsource employee self-service to ADP Inc. in 2010, he took two actions
that he says bolstered his decision-making. First, Samsonite’s HR department worked to improve employee
relations and benefits processes that had been disrupted as a result of a previous enterprise software
implementation. “Once we had our processes under control, I could map our performance gaps and I could justify
any differences in cost in hiring an outsourcing provider to handle the processes.”
Second, Cimini visited ADP’s Augusta, Ga., service center. The purpose of the one-day meeting was to “get to know
the people on the team and who would be answering the phones,” Cimini explains. “I also wanted to make sure that
they had a learning environment down there. If one person on their team asked us a question or escalated an issue
to me, I wanted to make sure that everybody on their team would learn from it.”
The face time helped lay the groundwork for a partnership. “You want to treat your outsourcing group as a partner,
and you cannot run away from your responsibilities in that partnership,” Cimini says.
Cost and Time Savings
More HR professionals could achieve HRO happiness by focusing more on value and less on cost, notes Charlotte
Anderson, SPHR, GPHR, managing director of Amethyst and Iris, a consulting firm in Hillsborough, N.J.
“Within companies that view HR service delivery as a commodity,” Anderson observes, “HR outsourcing decisions
are almost entirely related to costs.”
In the past, Gier agrees, “HR outsourcing was really all about finding an activity that existed within your group that
you could give to somebody else and get a cost savings.” Today, Sprint’s HR leaders prefer to “decide where we
want to go from a strategy perspective and then seek out partnerships if they can help us get there,” Gier says.
“This is where a lot of companies got caught up-somebody comes in and portrays a significant savings that you
can’t ignore, but you really have not figured out how it is going to help you accomplish your core objectives.”
He emphasizes that Sprint’s agreements are made in conjunction with the company’s supply chain and contract
management functions. Their input helps ensure that most partnerships generate a positive financial return, Gier
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says. In other words, cost savings mark a secondary outcome.
“Besides the basic dollars and cents, how will the organization benefit?” asks Richard Oyen, SPHR, vice president
of human resources for SumTotal Systems in Mountain View, Calif. If an outsourcing agency does your recruiting,
“will they understand the business needs and manager preferences enough to continually send good candidates?”
When outsourcing HR operations and information systems data, “will a call center give your employees the ‘touch’
your employees need to feel that their issues and questions are being properly addressed?”
These types of strategic questions are factors that Youden says HR executives should weigh in decision-making.
Specifically, she suggests that HR leaders determine whether outsourcing can help “ensure that the HR function is
better positioned to provide the business with the organizational capabilities it will need to deliver against its
That approach defines how Sprint tackled another strategic objective: improving employee wellness to hike overall
business performance and reduce employee medical costs. HR leaders decided that the best use of resources
would not involve running a wellness facility, but understanding, identifying and nurturing strong links between
specific wellness programs and bottom-line measures such as medical costs, employee engagement and
employee productivity. They decided to outsource the staffing of a new on-site health care facility and the
administration of wellness programs.
“We did not want to hire doctors, nurses and pharmacists,” Gier explains. “We really wanted to concentrate on how
[wellness programs] improve the health of our people [and] the performance of our organization, and reduce time
away from work. That’s where we put our energy.”
For more information on current trends and data about outsourcing, see the online version of this article at www
Buyers want precise yet flexible contracts that support high service levels and quick responses when their needs
The author is a business writer based in Austin, Texas, who covers human resource and finance issues.
Human resource management; Outsourcing; Customer services; Call centers
9190: United States; 6100: Human resource planning; 5120: Purchasing; 2400: Public
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The current issue and full text archive of this journal is available at
IS outsourcing – a strategic
School of Business Informatics and Software Engineering,
University of Technology, Pointe aux Sables, Mauritius
Purpose – The purpose of this paper is to study the different facets of the strategic perspective of
information systems (IS) outsourcing, compare strategic IS outsourcing with traditional IS outsourcing
and identify research opportunities.
Design/methodology/approach – This paper is based primarily on a review of the literature.
Findings – IS outsourcing is now an accepted practice and the market is growing regularly.
The initial hype surrounding IS outsourcing has died out and there is now a more rational approach
towards outsourcing with an increasing emphasis for a strategic approach towards IS outsourcing
rather than just a cost-cutting motivation.
Originality/value – The paper clarifies the definitions of IS outsourcing and strategy, taking into
consideration the evolution of the definitions before comparing strategic IS outsourcing with
traditional IS outsourcing. The paper is concluded with identification of future research opportunities
in the field of strategic IS outsourcing.
Keywords Information systems, Outsourcing, Strategic alliances, Management process
Paper type Literature review
Information systems (IS) outsourcing is now an accepted practice and the market is
growing regularly with the 2005 market expected to reach US$159.6 in 2005 (Laplante
et al., 2004) However, the initial euphoria of the 1990s has died down and the risks of IS
outsourcing are fairly well documented. The question now is not whether to outsource
or not but rather how to take advantage and balance the different sourcing options
(market and internal) for IT services (Lacity et al., 1996).
There are several models for outsourcing and recently there has been further
emphasis on strategic outsourcing as compared to traditional outsourcing for reaping
the maximum benefits from outsourcing instead of just concentrating on the cost
aspects (Willcocks et al., 1995; Quinn, 1999; Lacity et al., 2004).
The aim of this paper is to focus on the strategic perspective of IS outsourcing and
try to investigate how it is different from supposed “traditional outsourcing”. It was
found that many terms concerning strategy are often used inter-exchangeably and this
conceptual confusion can lead to wrong decision making (Willcocks et al., 1995). This is
why the first part of the paper is dedicated to clarifying terms and concepts in
IS outsourcing and strategy.
Research opportunities are identified at the end of the paper.
Business Process Management
Vol. 14 No. 6, 2008
q Emerald Group Publishing Limited
2. Definition of IS outsourcing
Outsourcing refers to the use of an external provider of goods or services instead
of having recourse to internal resources to provide the same goods or services.
As such, outsourcing is a decision concerning the boundary of a firm and this has been
a concern since the very existence of firms (Lonsdale and Cox, 2000).
Applied in the IS area, the term has the same meaning although different definitions
have been given to it by different authors:
“. . . the significant contribution by external vendors in the physical and/or
human resources associated with the entire or specific components of the IT
infrastructure in the user organization” (Loh and Venkatraman, 1992). This
definition emphasizes that the role played by the external agent could be
significant as compared to the internal provider. It is also mentioned that the
external agent could be providing physical as well as human resources. Finally,
it is specifically mentioned that the contribution is towards the IT infrastructure.
“. . . the purchase of a good or service that was previously provided internally”
(Lacity and Hirschheim, 1993a). This definition attracts attention to the fact that
internal provision of goods or services may be replaced by outsourcing.
“. . . the commissioning of a third party (or a number of third parties) to manage a
client organization’s IT assets, people and or activities (or part thereof) to
required results” (Fitzgerald and Willcocks, 1994). This definition is different
from others in the sense that it moves from the concept of purchasing to that of
managing. It also stresses the fact that a customer may have recourse to more
than one provider at a time. It also specifies that IS outsourcing is not only
restricted to goods or services but could also include people. Finally, it introduces
the notion that outsourcing is performance oriented.
“. . . turning over to a vendor some or all of the IS functions . . . ” (Apte et al., 1997).
This definition points out that IS outsourcing could involve total dependence on
a vendor. It also shifts the emphasis from goods or services to the broader view
of IS function, probably showing the increasing importance of what result is
required rather than how to achieve this result.
Several authors have used definitions which suit the purpose of their study. However,
it would also seem that the differences in the definitions are related to the evolution of
concerns in IS outsourcing practice. Initially, IS outsourcing involved mainly the use of
service bureaus and systems houses to provide shared data processing services due to
the prohibitive cost of computers. The emphasis moved from the hardware to the
software (which though being a product, is often intangible and is better viewed as the
service it provides), with the use of contract programmers to develop, customize or
maintain application software. Later it became practice to group together hardware
and software and to have recourse to total solutions (Lee et al., 2003) with more
emphasis on results rather than on the process of obtaining the results. Recently, the
line between IS outsourcing and business process outsourcing (BPO) is even becoming
blurred, with some customers being more concerned with the provision of a full
business function with a predefined performance rather than going into the details of
the IS required to provide the business function (Dibbern et al., 2004).
3. Strategic management concepts
Strategy is derived from the Greek word “the art of the general” and its practice has its
origins well anchored in the military. Businesses started making use of strategy in the
1960s and thus came the term “strategic manageme …
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