Outsourcing

Introduction

Since we established the bank, the management wanted to outsource all non-managerial positions within the IT department, this means all system administration area’s (Unix, Microsoft, storage, backup and restore), SAP Basis, service desk and operations, needs to be outsourced. As we the decision were taken that no in-house development at all. The driver behind this decision was to reduce cost on IT department and because most of the systems were new to the region, and there is limited number of locally hired resources for a system like SAP for example, which is the core banking application.

Our Experience

We faced a couple of issues, first of all the level of expertise that we used to get in the administration area are not as expected, the way we do it, is that we get resumes for the candidates from the vendors, and after interviews with them we either approve or reject the candidate. It happened twice that we choose someone who we believed can be trained by our team, because this is the best we could get, and after we train him, and he gets experience in our environment, the company replace him with a junior one. Although the contract states that they don’t have the right to replace the candidate without our approval, but it happened. Second issue was whenever the candidate had a problem with him employer, it gets reflected on his work and we as a customer suffer from that, this happened after the candidate somehow read the contract between the company and us as a client, and he started comparing what he is getting from his company, in return to what we pay his employer for his services.

In other area like IT operations and service desk, it was really effective, because the outsourced candidates had predefined tasks, we prepared for them the operation manuals and monitoring tools to help them get the proper feedback from our customers and how to fix it, and if they couldn’t, to whom they should report it.

The Contract

The Contract between the company and us states that they have to provide us with a replacement incase the candidate becomes not available due to sickness or he in on leave. It happened a couple of times that the company couldn’t provide us with a replacement, due to lack of resources on their side or provide us with un experienced candidate, we reported that to the company but nothing changed as they didn’t have the proper caliber. And raising this issue to court didn’t help a lot, because they company paid the penalty as per the contract, but we couldn’t find another company to provide us with the resources needed.

Conclusion

We failed to achieve the benefits of outsourcing in some of the area as we explained, and especially the cost saving, true that we saved in staff salaries and bonuses when we implemented the outsourcing model, but we lost the stability within our team, if we have hired a single administrator in each area we could have built and trained our in-house team, instead of loosing the candidate after we train and invest in him. There are hidden costs in outsourcing that should be considered which is not only tangible, risk of exposing our departments confidential information to outsourced staff which happened to be with not qualified vendor, whenever we had a candidate replacement we had to change all super users password and application user credentials.

References:

Ha, M 2005, 'IT Outsourcing Benefits, Difficulties Seen', National Underwriter / Property & Casualty Risk & Benefits Management, 109, 22, p. 23, Business Source Premier, EBSCOhost, [Online], Available from: http://web.ebscohost.com.ezproxy.liv.ac.uk/ehost/detail?sid=67123b8f-3e4a-4b1a-a9fd-5bfa485a431e%40sessionmgr12&vid=1&hid=14&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#db=buh&AN=17991877

(Accessed 9 April 2011)

Juras, P. (2008), ‘The hidden costs of outsourcing’. Journal of Corporate Accounting & Finance, 19: 7–15. doi: 10.1002/jcaf.20428, [Online], Available from:http://onlinelibrary.wiley.com.ezproxy.liv.ac.uk/doi/10.1002/jcaf.20428/abstract;jsessionid=DC68CEC8039D7419EAAA2E9B9F1FC9C3.d02t01

(Accessed 9 April 2011)

Mol, Michael J.. Outsourcing. Cambridge University Press, 2007. Cambridge Books Online. Cambridge University Press, http://dx.doi.org.ezproxy.liv.ac.uk/10.1017/CBO9780511621543 , [Online], Available from: http://ebooks.cambridge.org.ezproxy.liv.ac.uk/ebook.jsf?bid=CBO9780511621543

(Accessed 9 April 2011)