The Disadvantages Of Outsourcing ICT

This is a report about Tesco’s company ICT outsourcing, knowledge management and knowledge management systems. In the following paragraphs two questions are going to be answered and analyzed according to the information existing in Tesco’s case.

Outsourcing ICT is quite commonly used by organizations as an approach to strategic management. Access the advantages and disadvantages that outsourcing can bring in developing effective uses of information systems in an organization such as Tesco.

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The great competition and the global economic crisis that organizations have to face nowadays, made Information Communications Technology outsourcing a really attractive management tool in order to cut expenses in non-core activities, specific in overheads of Information Technology departments.

By deciding to outsource, there would be a lot of benefits but also a number of risks associated with it. It is important for a decision maker to be aware of the advantages and disadvantages of ICT outsourcing, before making the decision to outsource.

Outsourcing ICT has to do with the whole existing information in the business field. It is about networks, web design, programming, online shops etc. Network services is the most common ICT services activity outsourced and outsourcers who do not comply with contract will badly influence the organization’s process in a very risky way.

The Technology of information and communication is growing fast and the vendor business has to be updated and synchronized with the era of 2010. So it would be far easier for them to sell their products and serving their customers in every possible way.

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Big organizations that have to deal with so many products from soap to bread it would be more difficult to take the risk and create their own Information and communication department from scratch and keep it upgraded while their whole process is running. The result of this difficulty in Tesco’s case is to outsource ICT specific functions to Trilogy Company.

The advantages of outsourcing ICT in an organization such as Tesco.

ICT is vital to Tesco. Every aspect of their operation is controlled or monitored by ICT – stock, distribution, payroll, communication methods, and so on. ICT is essential to the running of a modern store. It is used for planning, monitoring, auditing and communicating between store operations.

For example, when an item has its barcode read at the checkout, the system not only logs the price onto the till, but also logs the financial transaction between Tesco and the customer and the fact that the stock has been reduced by one item. This shows the integration of departments by using ICT. All stores are connected to the mainframe at Head Office via the Tesco Network.

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Another advantage of Outsourcing ICT from a business perspective is that organizations are realizing that owning and operating their own IT infrastructure no longer makes sense. The cost of that is much bigger and the results are never guaranteed. This coupled with the common resource lack make outsourcing a viable alternative.

It is very important for organizations to adopt the right approach of outsourcing ICT in order to have benefits. The outsourced ICT selected company they are going to cooperate with, must follow certain organizations’ demands. First they have to manage well specific ICT functions in stages, to work with responsibility over review performance, to make adjustments and to support technically with experienced system engineers. The gained confidence and in-house acceptance by the organization as well a very good relationship and cooperation will give the best benefits in the organization’s performance.

With the right approach and the suitable outsourcing of ICT the organizations will manage to stay high at the competitive edge in the market. Serving the customers in the best way and surprising with new ways of purchasing their products (for ex. via online-shops), their loyalty will be kept and the margins will be increased.

A big company like Tesco has many sub-stores, some in the same country and some abroad. The communication between them and the line the company sets everywhere should be well established. ICT helps in this area and it is the primary reason that chain branches use ICT.

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In summary outsourcing ICT for a company such as Tesco is important for increasing the ability to reach the goals of the company, reduce human risks, saving time, helping the company to stay competitive and minimize the operating costs.

The Disadvantages of Outsourcing ICT in an organization such as Tesco.

As it was already mentioned above, the outsourcing ICT has also disadvantages that raise the risk the company has to take.

For example, at times, it is more cost-effective to conduct a particular business process, rather than outsourcing it, not that much in IT but maybe the company’s upgrade wants are small and opposed to the ICT Company’s big fees.

When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization.

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In case, your outsource ICT service provider becomes bankrupt or goes out of business, your organization will have to transfer immediately the business processes in-house or find another outsourcing provider

The employees in your organization might not like the idea of outsourcing your processes and they might express lack of interest or lack of quality at work. Also outsourcing can create potential redundancies for your organization because a lot of employees may lose their jobs.

Your outsourcing provider might not be the right who is providing services for your organization. Also the quality of the service isn’t always guaranteed, especially in low-price agreements.

Since your provider might be catering the needs of several companies, there might be not be complete devotion to you and your company something that shouldn’t happen if you own the ICT department.

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In outsourcing, you may lose control over the process that is outsourced and don’t be able to fix something in time because you are not in charge of this field. Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies and you might also have to spend a lot of time and effort in getting the contract signed.

There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.

The disadvantages of outsourcing give to organizations an opportunity to think about what they are stepping into. However if you find a reliable outsourcing partner you probably won’t face any of these disadvantages of outsourcing.

Question 2

What do you understand by Knowledge management and knowledge management systems? Analyze how useful such a system could be to Tesco and why it is often difficult to persuade employees to use such systems.

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Knowledge Management refers to the process of collecting the gathered experience of a company or organization, whether it is in databases or documents, or even in the minds of executives of the company or organization and then share it and use it at those parts of the business that will provide the maximum contributory benefit.

KM has been growing rapidly in the last years as a business model. More and more businesses and organizations have developed stores of knowledge related to customer service, product development, human resource management, etc. This fact also created new jobs related to knowledge management and made a necessity for the existence of knowledge management in a modern business and the need for trained managers to be responsible for the process.

Nowadays fields like media, information, computer science, public policy and public health have started contributing to Knowledge Management research. Also non-profit organizations and huge companies have resources specific to internal Knowledge Management efforts, usually as a part of their business strategy, human resource management and information technology departments.

There are many consulting companies that advice and provide strategy regarding KM to the organizations.

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For the better use of Knowledge Management the companies needed to use Knowledge Management Systems  mostly IT based systems that manage the knowledge in companies , gather it, storage it and sharing it as information. Such systems as Software tools, databases, networks, Internet access, worldwide communication etc.

A KM system is needed to enable employees to have quick access to the organization’s databases, sources of information, and solutions, this is mainly helping to encourage innovation and improve efficiency. When employees have the knowledge or information and are able to use it at the right time, relationships with customers, suppliers and dealers improve. These workers are able to make better decisions by using the information that their company gives them access to.

How useful such a system could be to Tesco and why it is often difficult to persuade employees to use such systems.

A Company like Tesco today has to gather the wisdom and knowledge as fast as they can. Share the results across the rest of their branches and at the same time continue to develop and share new knowledge. Tesco’s leaders know how serious is to let the knowledge flow within the organization.

Tesco is consist of 220,000 human beings, which means that is necessary to make an environment that would help their staff feel motivated and valued with return the better service to their customers. Loyalty is basically driven by personal relationships and the employees are the face of the company when a customer enters a Tesco branch.

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From the results of the projects that have been taking place they realized that there were customers who were not experiencing warm and friendly service from Tesco and that internal levels of staff morale were suffering in reaction to increasingly ambitious cost and efficiency targets in stores.

Trilogy (WhatIf, InterAction and Bridge consulting companies) was hired by Tesco to help transform the quality of its customer service and raise it to the market-leading standard. To reach the needs of Tesco’s millions of customers Trilogy developed the Living Service Programme. The main idea of this concept was to change for the best. It was also clear that its aim was the change of process and not the change of the people but by, with and for Tesco people.

In many ways the Living Service Programme is Tesco’s recognition, through committed investment of time and money. Among the project’s significant intangible benefits is the widely noted enhancement in the quality of dialogue and communication within stores. Staffs report that the ‘them and us’ culture is practically a thing of the past, with deep effects on the work climate and employee attitudes to the company.

The programme was designed to improve commitment bottom-up as well top-down in the organization and this needed to be clear to avoid the misunderstandings. It was undertaken by 660 stores in 26 weeks, in this period the staff trained to provide excellent service and cooperation with the other employees and also using the knowledge/information when needed.

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The usefulness of LSProgramme was obvious to the head managers of Tesco and the Trilogy Company but from the employees there was skepticism. People often feel vulnerable to the importation of techniques that may appear to criticize their behavior, values, and styles of interaction. Also Initiatives with really innovative attributes may be treated with suspicion if they come from the organization’s leadership because their apparent oddity can be interpreted as a failure to understand the day to day reality of the business. One of the key enemies of change is the perception that change is being imposed by one group upon another.

Tesco managed to redirect the evolution of its culture in a way that keyed into its employees’ beliefs and motivations while focusing faithfully on the needs of its customers. This was a project in which the personal became the practical: a case of cultural change carried out at the human scale, person by person, and action by action.