Outsourcing of Information Technology Infrastructure

IT infrastructure was centralized into shared services for the whole business enterprise. The company efficiently merged three data centers into one, removed a large number of servers, brought the system and support development staff together and formed a corporate desk. Before the consolidation came into place, the business had its unique application systems. In the aftermath of the merger, corporate IT group bought an ERP system which replaced human resource, finance, distribution, and production systems into three divisions (Brown et al. In 2002, the Schaeffer board considered outsourcing of its IT resources. Before Schaeffer decided on outsourcing, it must understand the IT services which it provides in details. The corporation should also know every piece of equipment in each location and have an understanding of the IT processes.

What the employees are doing about outsourcing is also crucial for the corporation to understand. The final aspect is for Schaeffer Corporation to know about every service it offers in its areas of operation which it considers outsourcing. Apparently, these dynamics are what Schaeffer Corporation hopes to realize from outsourcing. Perceived Disadvantages of Outsourcing as Raised by Managers The managers argued that when Schaeffer outsourced its operations of information technology, it contracts for services for many years into the future. An outsourcer or Schaeffer do not have the slightest idea of what would happen to the processed volumes of transactions or the locations which are served at the real time. Upon the evaluation of the bids, it was realized that ABC Corporation was the lowest of the bidders.

The bad news from the managers was that the projected proposal could cost approximately $220 million for its seven years. This could require more than the amount expected by Schaeffer by $20 million when it continued providing IT services in houses. Outsourcing would place the company in an awkward position as it would not be able to know where the conditions change. Unanticipated costs would also exist during the execution of the contract and the management of the connection with people of ABC Corporation. Hana argues that when it is vital that the IT support available for Reitzel to be outsourced, the Reitzel's part of the data center should be outsourced (Brown et al. This would have extra advantages including the maintenance of IT professionals in Schaeffer.

When this is taken into consideration, there is a backup plan when outsourcing fails. This approach will assist in understanding the concerns of the people and direct efforts towards definitions of criteria for performances (Brown et al. Outsourcing Reitzer division is the best alternative because Schaeffer is looking for exciting opportunities, which are difficult to accomplish with the current information technology staff. Having ABC as a partner in business gives the company better positioning for the exploitation of dynamic opportunities for the growth it is looking for. In the present proposed agreement, Schaeffer will pay ABC Company for any assistance it gets just like any contractor is paid for services rendered. This will make Schaeffer married to ABC. Regardless of having a great relationship with people and excellent reputation, there is uncertainty in the future of persons involved with ABC.

Presently, Schaeffer is a high priority for ABC. However, before long there will be more opportunities for ABC and this means that deals with Schaeffer are likely to be jeopardized. What happens when there is a new circumstance which is not included in the contract, and one has to renegotiate its terms? What is worse is that at the time Schaeffer would have lost its bargaining position. Worries also arose from the fact that many outsourcing relationships did not work well before. It will also be difficult to forge closer connections with users within the divisions to allow information technology to efficiently provide support to the business' needs and strategic directions. These are the primary reasons why there was the development of some disadvantages after recommendations for the use of this proposal of in-house outsourcing.