The Strategic Issues In Information Systems Commerce Essay


Salfware development services is one of the leading software consultancy company that provides the services for the software development, support and maintenance. The company was started with the partnership of the three students Alex, Gordon, Polly who are responsible for the vast development of the company with the turn over of £650,000 last year. As a result of their tremendous success, the three partners decided to expand their business in three different ways. Gordon idea was to buy a company outside and interested in change of place with his family. However Alex option was in terms of competitive edge to reinvent Salfware as a virtual organisation to manage outsourcing projects mainly focus on offshoring. Meanwhile Polly wanted to expand salfware within UK that establishes its presence in major cities and recruiting new graduates. Polly's idea is economically tougher which requires a solid MIS infrastructure to manage expansion centrally.

Strategic alliances and networks have become an essential part of existing strategic organizational thinking. Their widen seems to match up with the increasing speed of joint enterprise formations and outsourcing actions that have dominated the business arena in the past decade or so. The widening scope of networking examines the light of the fundamental economic, sectoral and social dimensions. Outsourcing remains a fundamental economic factor in network development, and shows that networking , as a novel form of organization. The success of the growth of the company mainly depends on the organisational issues. This report explains which will be the most beneficial option for the growth of the Salfware development services in the organisational structure.

Literature Review

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To achieve the growth of an organisation, Strategy (in the business sense) is the use of plans and goals to establish our requirement in the process . A excellent strategy will balance risks and rewards to attain a required position between the competitive world . For long-term feasibility, this equilibrium should support protecting and favouring potentials that will increase the firm into the future. Any organization stimulated with an ambition to achieve must go through a process of strategic planning. The difficulty is, not many groups fully recognize how to create a strategic plan that is at the same time economical and flexible. Most organizations try to perform strategic planning in the wrong order. (Constantinides, E (2006)).

According to Deborah executives who use strategic plans as an important weapon against the competition and to control external measures enhance their odds of success. Companies without a firm strategy are easy to spot. (Deborah House 2004). An organization expands a choice of action so as to achieve definite objectives which are considered mandatory through the competitive strategy formulation, if the organization is successfully to compete in the marketplace (McKinlay, A. and Starkey, K 1988)). These strategies must be flexible enough so they can be adjusted to the reactions of competitors, suppliers, employees, and others both inside as well as outside of the organization. This inbred flexibility is what makes the strategy a competitive one in that it permits - indeed, forces - the organization to become proactive rather than reactive to the uncertainty and change prevalent in today's global marketplace.

The significance of including an outsourcing strategy in the overall firm's business has become gradually more important over the last decade. According to Saul J. Berman and Jeff Hagan(2006) the progress and operation of a growth strategy that includes the staff in development, execution and skill improvement is one of the best ways to make sure that your organization's business development attempt result in increased market share and success.

Outsourcing suggest companies the chance to grow in market presence without a corresponding expansion in organizational size or establishment. Strategic outsourcing can assist a rapidly growing company avoid a premature internal transition from its comfortable entrepreneurial phase to a more intrusive mode of operation. By this way, outsourcing let firms to preserve their entrepreneurial speed and agility, which they would otherwise give up in order to become well-organized as they greatly expanded. (Brian Leavy,2004)

The initial step to successful offshore operation is to plan a solid and realistic outsourcing strategy. In order to attain this, the organisation must deal with a number of key questions. The development is not easy as frequent different interest, at management level, crash. But the process will almost definitely touch employees, their employment status or benefits. Outsourcing is a strategic business decision that should be made only if a company observes true business profits accruing from it. (Yvette Masson Franzil 2008). Badly-planned outsourcing could result in erosion of service value and cost rise, but a well-planned outsourcing decision can help you sleep healthier at night, knowing that the responsibility of deliverables is in safe hands..

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DeSanctis, Staudenmayer and Wang (1999) observe that organizational virtualization is a process affecting four aspects of organizational life:

Space: the space dimension refers to the extent of spatial dispersion of employees across different locations.

Time: the time dimension pertains to temporal dispersion; in other words, the degree to which employees operate asynchronously and the duration of relationships.

Boundaries: the boundary dimension refers to organizational dispersion: the degree to which organizational processes extend the boundary of the focal organization.

Culture: the culture dimension relates to cultural dispersion: the extent to which an organization consists of employees from different cultures.

Global outsourcing is facilitating business without obstacles in a borderless world. As endeavours think global, their outsourcing models have transformed to pursue suit. Global outsourcing utilizes a combined onsite, offshore and near shore outsourcing solutions to attain strategic business objectives for the outsourcing company. Global outsourcing alleviate risks for the customer as it is not country-specific or geography-dependent and enables more freedom and flexibility in decision-making and functions during the outsourcing process. It allow businesses to study, adapt, develop and progress while ensuring inevitability in quality and delivery in their business processes. (Ilan Oshri et al,2009) The most probable major trends can also be spelled out. There will be a continuing rise in outsourcing revenues for global outsourcing, with BPO overtaking ITO within five years. Multi-sourcing will continue to be the dominant trend.

Analysis of the three strategic options:

Gordon's Plan for growth of the company

The view of Gordon is quite selfish but executable in term of globalization structure. As the Cold War recedes from view, consumer markets grow more global every day (Cavusgil and Zhou, 1994). Brands like Coca-Cola, McDonald's, and Microsoft are just as popular across the world as they are in the USA. In business markets, much of the world's manufacturers and suppliers are located in low-cost countries (e.g. Nike in Thailand and Sony in China). Since 1995, the internet has further enabled coordination between overseas suppliers of services and goods and their buyers.

Organisational Culture:

Since the mid-1980s, the international dimension of business has placed new types of pressure on organisations. The development of management knowledge and practices to facilitate global learning has been one response ( Fulkerson and Tucker, 1999). In organisation studies, for example, the term culture was generally applied within the explanatory framework of functionalism to describe either dominant patterns of organisational behaviour established over time, or organisational systems and structures in their normative sense. Arguably, these two cultures are less problematic in the context of a single national culture, where shared meanings are mediated through common social and organisational discourses


National culture:

While the pressures of globalisation on business have implications for all aspects of management, the influence of national culture within a typical organisation results in an extremely complex environment. At one level, the external social, religious and political values of the host national culture subtly influence the internal structures and systems of a organisation .On the surface of a international development, a Web of information about social norms, values, policies and administrative processes, as well as various regulations, guides the behaviour and actions of stakeholders. In the case of organisational learning, the masking of ideas is a highly political process because of the strategic nature of knowledge within joint ventures (Inkpen and Crossan, 1995).

System Culture:

With power and knowledge but two sides of the same coin, particular configurations of ideas and practices legitimise and reinforce very specific ways of knowing. The problem here for international management is twofold. Cultural ways of knowing are exceedingly ethnocentric and parochial by definition; therefore, cultural discourses at the deep level of a JV have few points of overlap save the forbearance of stakeholders. Consequently, in JVs where the discourses of system culture collide rather than converge, harnessing the various aspects of intellectual capital as a core competency is a significant challenge. Moreover, in developing countries, JVs are characterised by a one-way transfer of technology and knowledge - from the western (or industrially developed) partner to the local (or indigenous) partner (Liu and Vince, 1999). In this environment, knowing is far more than a normative or neutral process. This struggle to create shared meaning is a highly political process, especially when organisational learning per se is either ineffectively managed or poorly understood. Therefore, organisational learning for international management development must take into account the underlying power relationships, which are exacerbated by cultural dissonance within a JV.

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Fig 1:Management development Activities (Liu and Vince, 1999)

Implications for international management development

Addressing the shortage of competent international managers

The influence of national culture on organisations generally has significant implications for all levels of a company's operations. Whether in head office or a remote site, studies increasingly indicate that it is exceedingly difficult to simulate cultural influences or to train people to live abroad (Berrell and Gloet, 1999). No doubt, while culture must be experienced first hand, there is also a shortage of managerial talent capable of operating internationally, especially at the general manager or CEO level.

Recruitment and selection issues

Recruitment and selection is also one aspect of organisational learning in its broadest interpretation. JVs benefit from recruitment and selection policies that actively seek out expatriate managers who have lived for extended periods in the other partner's culture. Recruiting such people increases the likelihood that knowledge about the influence of culture will become a facilitating rather that an inhibiting factor in the organisation.

Training and management development issues

The typical management training program, normally conducted by the head office, can only scratch the surface about living an expatriate life. This is especially the case for western managers moving to high-context cultural settings in Asia.( Oded Shenkar, Yoram Zeira 1987).

Polly's plan in growth of the development:

Across the last two decades there has been a great deal of research into the social and environmental reporting practices of organisations operating in developed countries. The major implication in the expansion of the company within UK are

Economical factor

Resource factor


High Competition

Increase in training process for the new graduates

Networking is appropriate for a variety of organizations and may be modified to meet individual circumstances. (Harbridge Consulting Group Ltd 1991)It can serve as a transitional stage to help organizations to become leaner, more innovative and responsive in order to meet today′s organizational challenge to change. However, the implication mentioned above are more critical that may lead to the disaster of the Salfware Development Services.

Alex's plan in growth of development:

According to me Alex idea in the development process of Salfware development Services is more efficient in the organisation culture. Outsourcing has received considerable attention in the popular and business press over the last few years . However outsourcing has received less attention in the empirical, academic literature. Offshoring is a strategy of redesigning, redefining, reshaping, and energizing organizations all over the world (Casale, 1996). The potential of outsourcing is enormous. If implemented correctly, some authors claim it can dramatically improve an organization's effectiveness

The virtual organization is a modern organizational construct that allows corporations to face new challenges in a hypercompetitive environment. The following are the four elements that a virtual organisation depend on:

Technology capabilities are the infrastructure capabilities required to exchange information with suppliers, partners, subcontractors and customers electronically.

Information management capabilities are the information representation capabilities required to interpret and manage the electronically exchanged information effectively.

Process capabilities are the maturity and adaptation levels of the business processes that are linked electronically in the collaboration.

Organizational capabilities are the flexibility and creativity of the people and organization participating in the electronically linked collaborative venture.

Salfware Development services as an virtual organisation seem to be complex, but the benefits through which the organisation acquires are more.

Motivations for managing outsourcing

Outsourcing can free up assets and reduce costs in the immediate financial period. Organisations outsourcing parts of their in-house operations report significant savings on operational and capital costs. There are many other motivations for outsourcing, beyond short-term cost savings. It can enable firms to focus on "core" activities. (Willcocks, L.P. and Lacity, M. 2009)Other benefits of outsourcing appear in literature on strategic management, operations management, purchasing and supply, and innovation. Short-term costs savings can provide clear evidence. Other outcomes, including improved credibility, image, greater workforce flexibility, and avoiding being locked into specific assets and technologies, are harder to measure.

Case study:

Companies in the U.S. pay about $68 billion every year to other companies for outsourced services and although a major part of these contracts succeed, there is an increasing concern due to recent broken deals. A recent study shows that 80% of companies that outsource their customer based functions are failing to meet their cost savings targets. (Brian Leavy,2004)

Usually companies fail to budget hidden outsourcing costs such as customer dissatisfaction that can eventually jeopardize the future of the firm.

Outsourcing is central to IBM's repositioning - both as a driver and an enabler. Under the new strategy IBM has become both an extensive provider of outsourcing services to others as part of its offering as a solutions integrator (primarily in the IT area), while at the same time becoming a more extensive user of outsourcing services itself (primarily in the product area from contract manufacturers). For example, IBM's own IT outsourcing services is now one of the main revenue drivers in the company's new e-business on demand strategy and one that generated $13 billion in the European market alone in 2002. Further back its value chain, IBM's decision to outsource a growing share of its own production is helping it accelerate its ongoing migration to a services-led model and reconfigure its resources to support this strategy. Within the last two years the company has entered into a $5 billion outsourcing contract with Sanmina-SCI Corporation to manufacture its NetVista line of desktop computers, later expanded to include a significant portion of its low- to mid-range server and workstation lines, along with some distribution and fulfillment activities. Substantial transfers of assets and overheads have been involved in both of these deals, which the company sees as allowing it to leverage the skills of the industry where it makes sense to improve our costs, and focus our own investments on areas that deliver the highest value to our customers.(IBM,2009)

Managing outsource relationships

Outsource relationships are likely to be medium to long term, collaborative arrangements with service level agreements (perhaps two-way) and some form of relationship assessment. Skills and competencies required to formulate and manage these relationships may be very different from those needed for traditional forms of contract. The research reveals that there is a lack of skills and expertise in organisations to deal with more strategic, collaborative relationship management, rather than shorter-term, adversarial contracting. This has been highlighted by Lonsdale (1999) and Cox (1996) while the broad lack of management approaches was revealed by Marshall (2001). Guidance and contract frameworks could be provided, especially in the public sector, to prevent an array of varying specifications of contract being placed with the same outsource provider. It is not only necessary to develop new skills for the management of outsource relationships but also to learn how to manage the capability to conduct them.


The most significant risks lie in the need to develop new management competencies, capabilities and decision-making processes. These include decisions on which activities should remain within the organisation and which outsourced, whether all or part of the activity should be outsourced, and how to manage relationships rather than internal functions and processes.

Mistakes in identifying core and non-core activities can lead organisations to outsource their competitive advantages. However, what is core one day may not be so the next. Moreover, once organisational competence is lost, it is difficult to rebuild. There is a difficult decision regarding how "close to core" outsourcing should be. (Saul J. Berman, Jeff Hagan 2006) Some organisations choose to retain some capability and capacity in-house and outsource part of the activity. Failure to manage outsourcing relationships properly, perhaps through service level agreements, may reduce customer service, levels of control and contact with customers. The assessment of costs of "make or outsource" should include the additional cost burden of managing the outsource relationships.


The option that I would recommend is the reinventing Salfware development service as a virtual organisation to manage outsourcing. A review of relevant IS/IT outsourcing literature has revealed the following virtual organizational goals or objectives that organizations aim to achieve in their outsourcing projects:

lower costs

access the required expertise and skills

increased efficiency/service level

greater focus on core functions

increased flexibility

reduced the problems of managing industrial relations and

risk sharing

Organisation Issues in Outsourcing:

The most significant reasons for outsourcing are to enable organisations to focus on core activities, to reduce costs, providing short-term financial benefits and balance sheet improvements. "Increased flexibility to configure resources to meet changing market needs" is also a very important reason. Explanations for these expected benefits were largely based on economies of scale and scope. Scale economies would come from using focused, larger-scale specialists for activities where the outsourcer lacked the necessary volume of requirement for current technology. Scope economies would be gained through access to a wider range of services, provided by niche specialists. Focusing on fewer, manageable core activities, organisations could lessen the costs and complexity of their own operations.

Outsourcing allows organisations to remove functional "silos" - separate departments and business units - and barriers between them. This provides better customer focus, flexing and changing offerings and processes to meet changing markets. This is particularly beneficial to larger, more mature organisations whose strong, hierarchical structures make them less agile. For such organisations, re-engineering business processes to improve flow across functions is difficult: outsourcing enables "opting out" from complex internal organisational change. The objectivity of outsources relieves organisations of the constraints of cultures, established attitudes and taboos, providing fresh ideas and creativity for new opportunities.

Enable focus on core

Reduce costs, providing short-term balance sheet and P&L benefits

Increased flexibility to configure resources

Increased ability to meet changing market needs

Provision of benefit through economies of scale and scope

Ability to access best in class skills and capabilities

Freeing of constraints of in-house cultures and attitudes

Provision of fresh ideas and objective creativity

There are several factors that govern successful outsourcing decisions

Change the focus of measurable and intangible objectives

Contract negotiation (alliance/partnership)

Risk assessment/management

Corporate memory

Relationship and contract management


This report shows the analysis of the three strategic plan can be implemented in the Salfware development services and their implications. The recommendation shows that outsourcing will be more efficient plan in the business progress of Salfware development services. From all these benefits it is understood that Alex idea will show a gradual growth as a virtual organisation to manage outsourcing projects. Outsourcing as a strategy has the potential to drive competitiveness and value creation in many ways beyond the narrow goal of cost reduction alone. Achieving greater focus, scaling without mass, fuelling disruptive innovation and enabling strategic repositioning are just four of the many promising options that outsourcing as a strategy can offer and support. However the other two options are also reliable but their implication show that they are less compatible for the expansion of Salfware Development Services.