This is a report about Tesco’s company ICT outsourcing and knowledge management. In the following paragraphs two questions are going to be answered and analyzed according to the information existing in Tesco’s case and also strategic management’s theory.
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.
The huge amount of competion and the global economic crisis that organizations have to face nowadays have 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 information science, helping the business field. It is about networks, web design, programming, online shops etc. Network services is the most common ICT services activity that is being outsourced and that outsourcers who do not comply with contract has the most influence on ICT outsourcing inherent risks.
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.
For a company that has 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 business is running. The result of this difficulty is to outsource ICT specific in Tesco’s case 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. On the distribution side, instructions from the mainframe computer are sent directly to forklift truck operators at depots by radio links. This shows the integration of departments by using ICT. All stores are connected to the mainframe at Head Office via the Tesco Network.
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 important for organizations to adopt the right approach in order to reap the benefits of outsourcing. They should demand the following from any ICT company they are going to cooperate.
Selectively outsource specific ICT functions in stages
Grow into a mutually beneficial relationship
Gradually leverage on the benefits of outsourcing
Continuously review performance and make adjustments
Have Technical support from experienced system engineers
Gain confidence and in-house acceptance before outsourcing more functions
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 surprise them with new ways of purchasing their products (for ex. via online-shops) will keep their loyalty and the margin will be for both sides.
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 established well. ICT helps with this area and it was the primary reason that chain branches use ICT.
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 if the upgrade the company wants to make is small and the fee the ICT Company asks is big.
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.
In case, your outsource ICT service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider
The employees in your organization might not like the idea of you 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, a lot of employees may lose their jobs.
Your outsourcing provider might not be only providing services for your organization and maybe the quality of the service isn’t always guaranteed, especially in low-price agreements.
Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company something that couldn’t happen if you owned the ICT department.
In outsourcing, you may lose your 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 organizations an opportunity to think about what they are stepping into. However if you find a reliable outsourcing partner you probably won’t experience any of these disadvantages of outsourcing.
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