Current Practice Analysis for Sourcing and Vendor Management

Management of Information Technology (BCO6653)
Current Practice Analysis for
Sourcing and Vendor Management
Submitted by:
Naresh Khandelwal- 4567427
Siyao(Doris) Guo- 4596918
Mohsin Ali Khan- 4579651
Place date submitted here
29/08/2018
Management of Information Technology (BCO6653) Current practice paper

Current Practice Analysis for Sourcing and Vendor Management
Naresh Khandelwal, [e-mail],
Siyao(Doris) Guo,
Mohsin Ali Khan,
Abstract
The changes within the business market has seen the need of integration of IT in every
business. This can be seen as the business process of picking the best IT vendor for the
company. It has introduced IT out sourcing in the market as well as insourcing, the paper
helps one understand the clear definition of both and helps one understand vendor
evaluation. In the process challenges and strength of IT outsourcing are also covered in-
depth with literature review of previously conducted research on the area giving a deeper
insight to the matter. The literature review carried out also positively compares with the
current practice and shows the advantages of the sourcing and vendor management. The
study helps one understand the advantages associated with sourcing and gives the
competitive advantages brought about by sourcing. Different findings have been attained
from the study, these includes the impact associated with concurrent sourcing, the findings
give an in-depth view off how the two approaches work and their impact to the business or
organization. IT has been seen as the leading hand in achieving competitive advantage in
the continuously competitive market in the current world hence perfect integration of the
sector within the business significantly impacts its market position.
1. Introduction
Due to the globalization in every industry, companies have been forced to
deliver quality so as to manage fight the growing competition. In the IT
sector, out sourcing is one of the leading practices and is controlled by
multiple variables, through out the paper we will clearly define what this
means within the business management as well as a closer analysis of the
challenges facing the sector as well as the magnitude outsourcing has for
the company. Outsourcing has been growing due to the changes in the
vendor evaluation process over time. The changes within the global
market have advocated for a more advanced market demand and
delivery process. For the companies to succussed whin the industry, most
of them have also adapted to concurrent sourcing which entails running
both outsourcing and insourcing, this helps the company deliver quality
services at a cost-effective price hence enabling the success of the
company in the current market which is rapidly transforming into a global
market. The integration of information technology within the company has
led to all thee changes so as to enable companies cope with technological
advancements in the current world. For companies to get into agreement
with the vendors, and in our case the outsourcing in most cases provide
services as well as products but the process of reaching the right vendor
entails a number of steps which are briefly mentioned in the introduction;
these include the vendor evaluation, selection and the development of an
Management of Information Technology (BCO6653) Current practice paper

Current practice analysis for BCO 6653 * Management of Information Technology 2
agreement contract of how to carry out business between the vendor and
the company.
2. Literature analysis
In the current global competition, Vendor evaluation and selection is a strategic decision not
only because it enables companies to reduce costs, but also improves profits. The majority
of the previous research on vendor selection considers mostly cost as the deciding factor
and doesn’t reflect strategic perspective, but as the change of the world-wide environment
with the consideration of market demand, including other factors like service, delivery, and
productivity has become more and more necessary when it comes to vendor selection.
Vendor selection is a strategic decision with multi-criteria approach. 10 criteria are carried
out to take into consideration: quality, delivery, productivity, service, costs, technological
capabilities, and application of conceptual manufacturing, environmental management,
human resource management and manufacturing challenges (Parthiban, Zubar and
Katakar, 2013).
2.1 Outsourcing
In today’s business, a significant number of firms have decided to outsource their
information technology functions and service, either some or all, depending on the rate at
which the firm’s coordination knowledge depreciates, to highly skilled and experienced
external vendors. According to a joint research conducted by Klynveld Peat Marwick
Goerdeler (KPMG) and HfS Research, IT is among top three functions outsourced by the
firms across diverse industries globally, such as insurance, banking, manufacturing, energy,
entertainment, retail, and telecom.
2.1.1 IT outsourcing success factors
At operation level, clients and vendors should be partners-in-action, in that they should
share outsourcing goals and objectives, planning and decision making, resources, history,
relational governance, benefits and risks, and even transactional costs. Acting as partners-
in-action, the clients and vendors improve their chances of developing a successful
relationship, and in turn, a successful outsourcing partnership (Gorla and Somers, 2014).
At relationship level, clients and vendors should work toward becoming partners-in-context,
in other word, they should trust the long-term value and reciprocity of the partnership and
should be committed to developing relational capabilities together. Doing so would not only
help them capitalize on each other’s resources to develop cooperative advantage, but
would also bring other tangible and intangible gains. Besides, build up a powder-balanced
partnership also feeds back to strengthen key operational prerequisites (Gorla and Somers,
2014). It will also justify and sustain the relational contract between partners.
At environment level, previous research demonstrated that country-specific institutional
mechanisms impacted resource-based advantages, a number of studies have highlighted
the role of regulatory environment, cultural diversity, and manpower availability in
outsourcing relationships. Firms assess environmental factors such as the availability of
knowledge, skills, and abilities (KSA), regulatory environment, and cultural compatibility with
their partners while operationalizing their outsourcing relationship.
2.1.2 IT outsourcing performance threats
First, project performance depends on the commitment and involvement of stakeholders
beyond the control of vendor project managers, requiring the support of senior management
to secure commitments from those stakeholders.
Second, vendor project managers are not members of the executive team. Therefore, they
are unlikely to be familiar with their organisations’ strategic intents and oversight from senior