BCO6653 Management of IT: Current Practice in Sourcing & Vendor Mgt

This report provides a comprehensive analysis of current practices in sourcing and vendor management within the context of modern business and information technology. It defines IT outsourcing and insourcing, and explores vendor evaluation processes, challenges, and strengths. A literature review compares previous research with current practices, highlighting the advantages of sourcing for competitive advantage. The study examines the impact of concurrent sourcing, where companies simultaneously insource and outsource IT activities, and its effect on business performance. The report emphasizes the importance of integrating IT for maintaining a competitive edge in the global market, covering aspects such as vendor selection criteria, outsourcing success factors and performance threats, and vendor responses to demand shocks. Furthermore, it delves into the benefits and challenges associated with concurrent sourcing, where firms combine in-house IT capabilities with outsourced services to achieve cost-effectiveness and strategic agility. The analysis underscores the need for businesses to strategically manage their IT sourcing and vendor relationships to optimize performance and achieve their business goals.

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

Current practice analysis for BCO 6653 * Management of Information Technology 3
executives on the conduct of projects is needed to ensure projects stay on track. (Liu and
Yetton, 2008)
Third, projects compete with other projects and priorities for resources. Typically, project
managers do not have strong organisational power bases. Therefore, with the resources
required for projects subject to competing demands (Liu and Yetton, 2008)
Finally, strong and visible commitment from vendor-based sponsors is important to motivate
vendor project teams and to remove potential barriers to their performance.
2.1.3 IT outsourcing vendors respond to demand shocks
Buffering is a strategy that is external to and bypasses an inter firm linkage to reduce the
severity of the impact from ex post demand fluctuations (Su, Mao and Jarvenpaa, 2013).
Two distinct buffering strategies emerged from our data analysis. One was to reduce the
importance of orders from a specific client by improving efficiency and cutting cost based on
accumulated knowledge and other resources; the other was to seek orders from alternative
clients or other markets, which required expanding the knowledge base and bringing
changes to the current organization.
Bridging is another strategy refers to actions that seek to strengthen the current relationship
Exploitative bridging explores new collaborative relationships with the current client that
seeks new market opportunities; Explorative bridging consolidates the current relationship
by more efficiently exploiting existing knowledge and resource bases. According to Lavie
and Rosenkopf’s (2006) argument about function exploration–exploitation, explorative
activities involve acquiring and generating new knowledge, while exploitation accesses and
leverages existing knowledge.
A vendor’s choice of response strategy varies from client to client, based on the power
relation with the client. On the one hand, the client’s power determines the vendor’s options
of response to demand shocks: bridging or buffering. More specifically, in the case of high
client power (i.e., there exists a high dependency on the client), the vendor strives to
strengthen its relationship with the client and to stabilize the supply of orders. This goal
results in the vendor’s adopting a bridging strategy. In contrast, when the client’s power is
low, the vendor might choose not to strengthen its relationship with the client. The vendor
will adopt explorative buffering by directing its resources to areas of higher return, in
addition to exploitative buffering.
2.2 Concurrent sourcing
Concurrent IT sourcing is also a growing trend in business. We define it as to
simultaneously insource and outsource the same information technology (IT) activities by a
client. This sourcing strategy allows firms to combine the advantages of in-house IT such as
greater responsiveness to strategic opportunities with those of outsourcing such as cost
competitiveness.
Without in-depth knowledge of the outsourced IT activities, it is difficult for a client to
properly interpret information provided by inter firm monitoring mechanisms. (Tiwana and
Kim, 2016) Carrying out similar IT activities in-house allows the client to better understand
the outsourced activity, increasing knowledge of the transformation process. This provides
the client firsthand knowledge to better interpret and evaluate vendors’ work quality and to
help vendors’ model their own IT activities on how the client’s in-house IT department
performs them.
However, concurrent IT sourcing by itself doesn’t enhance IT performance because it simply
replicates the same set of IT activities in-house and with vendors. It acts as a catalyst for
enhancing IT performance only when the vendors’ IT capabilities are complementary to the
client’s in-house IT capabilities.

Current practice analysis for BCO 6653 * Management of Information Technology 4
Literature analysis summary
You will need to provide, in the last part of your literature analysis, a summary of the key
points you have discussed, or conclusions that you have arrived at based on your
discussion. State also in this summary how you see this literature review can possibly help
in formulating a solution to the situation in the case.
3. Current Practice Section
Vendors provide goods and services to Businesses. Companies can have a single vendor or
multiple vendors governed by different contracts, payment rates and terms and different
point of contract. These vendors are managed through a range of activities which starts by
finding a vendor providing the best deal at lowest price and implementing a contract
between the two businesses which are mutually beneficial to both the parties (Perkins &
Wailgum, 2017). This process requires skills, resources and time. According to Markstorm
(2014), it is beneficial for the Businesses to have an effective vendor management process in
place to establish goals to achieve best service, quality, cost, and satisfaction and select and
manage third-party suppliers that assist in achieving those business goals.
3.1 Process Evaluation and Vendor Selection
The relationship between the vendor and the business is initiated even before the contract is
signed between both the parties. Selection of the vendors is not just cost-driven but also
consist of several other considerations (Markstorm, 2014). Factors such as the cultural fit
between the two businesses, financial stability, and similarity of work environment between
the two organisations can be influential while sourcing a vendor. Hidalgo (2016) strongly
suggests that in the present time, it is highly recommended to source vendors which can take
proactive criticism and are able set right any unfair or undesirable situation. The vendors
should be able to understand the importance of delivering the services outlined in the Service
Level Agreements in order to be more effective (Overby, Greiner & Gibbons, 2017). As the
sourcing advisors are working and engaging with multiple vendors at the same time, the
service providers (vendors) have a limited time cap to propose a best solution for the client’s
requirements (Bannister, 2018). At certain circumstances, the sourcing advisor may not have
sufficient information about the provider’s capabilities with regards to the specific
engagement. Therefore, it becomes important for the providers (vendors) to constantly
engage with the sourcing advisors to effectively communicate and demonstrate their
capability of delivering their service and highlighting past success experiences specific to the
client’s needs.
3.2 Insource versus Outsource
Sourcing of goods and services remains a problematic area considering the increase in
number of vendors and services available in the market place and to deal with complicated
decisions of insourcing or outsourcing the goods and services (Markstorm, L., 2014). The
marketplace provides more opportunities, but it is important to identify the services that can
and cannot be outsourced adapting to the changing nature of business and technology. The
subject of whether to insource or outsource becomes competitive and the focus of the
approach should be to identify the areas in which the specialised skills have already been
developed in-house and the fact that insourcing enables the organisation to retain the
control over the quality of the service. The decision to outsource cannot be made lightly and
should be because once it is done, it can be very time-consuming and costly effort to bring
something back in-house (Mansfield, A. 2017).
3.3 Contract Development and Negotiations
Another important aspect of managing the relationship with vendors is establishing a good
contract defined by performance-based incentives and SLAs (Service Level Agreement)
(McGowan, 2018). These factors vary and are based upon the service being provided, but are

Current practice analysis for BCO 6653 * Management of Information Technology 5
important as they provide a foundation for incentives and penalties. According to Jacobs
(2018), the best contracts are developed with the flexibility to allow enhancement of a
service within mid-contract and can provide streamlined extensions if required. Popvsky
(2017) argues that it is wise to use the Businesses’ own templates as opposed the vendor’s.
This would standardise the agreements and would collectively create outcome-based
engagement mechanisms.
As the level of service that is expected from the vendor is defined in the Service Level
Agreement, it is a critical component of any outsourcing and technology vendor contract
(Overby, Greiner & Gibbons, 2017). The SLA metrics can be identified by examining the
operations of the Business (customer) and deciding what is important. Hence, depending on
the metrics, the following types of metrics can be established to monitor the level of service
expected.
3.4 Managing working relationship
Once the contract is signed, the next step is to build a collaborative partnership with the
vendor (Papovsky, M. 2017). This can be done by establishing a clear and precise
communication about the company goals and strategy, and by being transparent with the
vendor in terms of business expectations. This can be achieved by providing a structure to
the vendor to communicate directly with the internal client and at the same time the vendor
can be motivated to perform by promoting them with rewards and incentives (McGowan,
B. 2017). It is also vital to gain commitment from the internal staff to coordinate with the
vendor and provide them with the required information. Managing the vendor is an on-going
process which includes monitoring the progress, capturing the results and measuring
feedback.
3.5 Evaluating the results
It is possible to evaluate a potential relationship with the vendor and decide if the business
needs to outsource its relationship to a vendor based on the information gathers on a regular
basis. The decision to change a vendor or bring back the process in-house is costly and time
consuming and time consuming and cannot be taken lightly (Bloom, E. 2017). Hence, a
constant evaluation of the results will help to utilise the maximum benefit out of the client-
vendor relationship and maximise the return on investment.
4. Comparison of Literature and Current Practice
From the studies outsourcing has been seen to provide effective information on how
businesses Products and services offered have significantly improved. This has been also
identified in current practices. In most of the cases, companies opt to outsource so as to
reduce the cost of production via insourcing. The literature covered helps give the research
an educative deduction rom the case. It is evident that most outsourced services are less
costly and are performed more effectively within the business. From the current practices,
the selection of vendor entails multiple stages which reflect the literature covered. As per
the literature companies ensure that their cost of production is reduced and to achieve this
the vendor selection process involves the selection of the cost-effective vendor. With the
changes in the market and due to the increased competition cost is usually not only the
major point of concern but the quality of the product or service, this has been mapped out in
the literature as well as seen also in the current practice. To achieve quality services and
products, the vendor selection requires the company to select the vendor with the best
qualifications not only cost effectiveness. Outsourcing has enabled the companies in the
provision of high quality products and services since the vendor evaluation processes in
most companies give the best out of the practice. Also, as seen in the literature concurrent
sourcing has been an area of interested where businesses have opted fir both outsourcing
and in sourcing, in the current practice, this has been made possible with the use of IT
outsources as well as insourcing in most cases. This has increased the productivity of the IT
sector in most cases and reduced the cost associated with running it. It is in order for a

Current practice analysis for BCO 6653 * Management of Information Technology 6
conclusive vie that clearly states that a comparison between the literature and the current
practice happen to be accurately correct.
Conclusion
Conclusively, it is evident that vendor selection is an essential part of the
business in the current business world. IT outsourcing on the other hand
has played a huge ole in the growth of the IT sector within the business
word. The ability of the business to carry out a concurrent sourcing on the
other hand magnifies the effectiveness of the IT sector within the
business. This amplifies the quality of services and products delivered by
the company. At the same time checking on -a cost effective bargain.
There has been a number of shortcomings regarding the IT outsourcing by
companies but the cos has been overwhelmed by the pros. This has been
analysed within the paper and provided an in-depth summary. A
comparison between both outsourcing and insourcing has also been
covered but from the study, if the company is in a position of running both
insourcing and out sourcing, this significantly impacts the company’s
outcome. The technological changes within the business industry calls for
the need of every business to be well conversant with the new trends
within the market, and as seen outsourcing give the company the chance
to have a technological input from the well-situated companies in the IT
field. This give the business a competitive advantage. The integration of
technology within every business is one of the most important business
aspects that sees the company or the business survive the changes within
the technologically advancing market.
References— Literature
References— Current Practice
Bannister, J. (2018). How to build value into sourcing deals. [online] CIO.Available at:
https://www.cio.com/article/3269113/business/how-to-build-value-into-sourcing-deals.html
[Accessed 28 Aug. 2018].
Bloom, E. (2017). Enhanced productivity through vendor management analytics. [online] CIO.
Available at: https://www.cio.com/article/3190727/analytics/enhanced-productivity-
through-vendor-management-analytics.html [Accessed 28 Aug. 2018].
Perkins, B. & Wailgum, T., (2017). Supply chain management (SCM): Definition and FAQs.
[online] CIO. Available at: https://www.cio.com.au/article/626511/supply-chain-
management-scm-definition-faqs/ [Accessed 28 Aug. 2018].
Mansfield, A. (2017). 3 small mistakes IT vendors make during a sourcing event that are
detrimental to their success. [online] CIO. Available at:
https://www.cio.com/article/3234631/business/3-small-mistakes-it-vendors-make-during-a-
sourcing-event-that-are-detrimental-to-their-success.html [Accessed 28 Aug. 2018].
McGowan, B. (2017). CIOs reveal how they measure vendor success. [online] CIO. Available
at: https://www.cio.com/article/3246456/cio-role/cios-reveal-how-they-measure-vendor-
success.html [Accessed 28 Aug. 2018].
Papovsky, M. (2017). A maturity model for vendor relationships: you can’t marry all of them.
[online] CIO. Available at: https://www.cio.com/article/3230467/business/a-maturity-model-
for-vendor-relationships-you-cant-marry-all-of-them.html [Accessed 28 Aug. 2018].

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Staff, C. (2016). What makes a vendor relationship work?. [online] CIO. Available at:
https://www.cio.com/article/3056188/leadership-management/what-makes-a-vendor-
relationship-work.html [Accessed 28 Aug. 2018].
Overby, S., Greiner, L. & Paul, G., (2017). What is an SLA? Best practices for service-level
agreements. [online] CIO. Available at:
https://www.cio.com/article/2438284/outsourcing/outsourcing-sla-definitions-and-
solutions.html [Accessed 28 Aug. 2018].
Markstorm, L., (2014). 6 essential steps for managing vendors. [online] CIO. Available at:
https://www.cio.com.au/article/555629/6-essential-steps-managing-vendors/ [Accessed 28
Aug. 2018].