IS SOURCING
TABLE 1 Back-Of ce Impro vement: Five Options for Back-Of ce P erformance Improvement
Back-Office Performance Improvement DIY
Management Consultancy
Outsourcing IT Operations
Fee-for-Service BPO
Enterprise Partnering
Examples
Ef ciency dr ives Internal reengineering Technology solutions
Analysis work ERP BPR Major change initiatives
Selective/total Data center/ Networks Desktops Development
Accounting Human Resources Call centres
HR transactions Insurance Settlement/Claims Procurement
Potential Benefits
Gains accrued internally Under in-house control/ ownership Easier to sustain gains made
Infusion of external energy, skills By-passing political resistance Scale to handle work
Hand over legacy Reform in-house systems development Improve management practices Cost savings
Hand over non-core processes Cost and ef ciency gains Access to skills and scale Leverage off-shore advantages
Cost and quality gains Technology investment Continuous improvement through Generic competencies Risk–reward
Risks
Inertia of legacy Systems Processes Culture Political issues (e.g., over service standardization) Lack of skills, focus, investment
Skills not transferred Change does not “stick” Cost escalation Little ownership of outcomes
Lack of innovation Technology investment not sustained Cost-service trade-offs Cost of add-on services Loss of know-how
Motivation to invest/innovate? One-off gains Cost–service tradeoffs Add-on services? Loss of know-how
Securing new customers Retaining/developing superior management and knowledge
first look briefly at the more traditional “Do-ItYourself” and “Management Consultancy” options. Do-It-Yourself Sourcing
The case studies of Willcocks and Currie (1997) and Willcocks and Griffiths (1997) show that, in principle, Do-It-Yourself (DIY) should be a strong option from a knowledge perspective. Using the terms of the management theorists, social capital should be strong while structural, human, and customer capital may be more variable, depending on past knowledge management practices and the size of organization. If set up well, a DIY initiative offers lots of opportunities for knowledge assimilation and creation, with a view to subsequent exploitation. In practice, however, especially with backoffice IT initiatives, we found that legacy systems, processes and culture, and political issues often create barriers, or at least lowerlevel objectives for improvements and knowledge creation. Moreover, DIY back-office improvements often did not play a priority role in skill development or a sustained focus on the necessary technical and financial investments. In other words, there were lost opportunities for knowledge assimilation and creation. I N F O R M A T I O N
S Y S T E M S
S U M M E R
Management Consultancy Sourcing
Companies that choose a Management Consultancy sourcing option are looking for an infusion of human capital in the form of new skills, energy, and knowledge, as well as structural capital in the form of knowledge bases and best practices, due to the scale and specialist expertise consultancy firms can offer. While in many cases we found that this approach paid off, the risks that all too often materialized were that skills and knowledge — structural and human capital — were not transferred to the client firm. That is, the changes did not “stick” and there was little internal learning or ownership of outcomes. Client companies often complained of paying for the consultant’s learning, while learning little themselves. Such initiatives lacked the “glue” or knowledge transfer vehicle of social capital. New knowledge was too rarely created for and internalized by the client, who in turn rarely was able to subsequently leverage the intellectual capital inherent in the initiative. IT Outsourcing: The Knowledge Potential
Moving to the third option in Table 1, the outsourcing promise is to leverage the supplier’s superior technical know-how (human capital),
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