IT Outsourcing Essay

Today’s market place continues to shrink due to computer technologies and communication being at the speed of light. This makes the act of doing business on a large scale not only possible but expected. An organization needs implementation of outsource strategy to happen on every level within the company structure in order to function. Many factors contribute to a company’s success or failure. Company is defined by more than just its product or service and the price at which this product or service is sold in the market place. An effective organization has much strength in its favor to remain competitive. Factors such as: flexibility, creativity, openness to use of technology and innovations, communication across the organization and talented employees are a must for competitive advantage. It is an organization’s ability to adjust to changing times that creates a foundation for the public to admire. How an organization continues to reflect such a persona is entirely contingent on so many factors but really it comes down to vision and action. Integrity is crucial. Upholding the company’s value system and word to the public remains a key facet for success. Building any strategy or campaign on this premise presents the best possible and true corporate image to the public and allows for a great amount of trust to form. Building character and trust is very important within the financial world but also the retail forum of health products because there has been a backlash due to corporate lack of governance and scandal but also telecommunications is much like a double-edged sword. With the wrong image, comes poor press and lack of a first impression. It can make or break the situation. In this respect, outsourcing can be a complex game. In order to better understand customers, it is important one understands how marketing works. This means not only having knowledge of traditional methods but also knowing the fundamentals of e-marketing and e-commerce. Today’s Internet is a triumph for human ingenuity and spontaneous order. In some parts it embodies leading edge technology like Asynchronous Transfer Mode but really it is the use of new technologies combined with older ones that makes the Internet so fascinating and vital to business. Specifically the Internet ends distance limitations and it empowers individuals in important new ways to create new enterprise (Gasman, 2005, p. 2). The Internet is relatively vast in its freedom. Unlike the traditional telephone, the Internet is not charged by the mile or any distance. This brings people together. Retailers see the Internet as a marketing tool they can use to target a smaller, regional niche market. One must understand it is in the best interests of companies to make the e-retailing transitions because of the fact that most shopping now happens online. This is due to the increase in e-commerce and instant need for convenience. E-commerce makes purchasing easier and faster. It fits into the lifestyle of today’s 24/7 world where people do not have the time to shop at the mall or pay bills by writing out checks. Statement of the Problem The subject of IT outsourcing and e-business strategy in China’s pharmaceutical industry, its frameworks, convenience and also problems or implications were assessed in this research. As a result of this study, this research presented preliminary findings related to IT outsourcing in China. This leads us to looking at how e-strategy and use of the Internet to facilitate outsourcing has created a whole industry of service for the consumer or in other words, e-services. This required a look at different models to assess strategy and analysis a company’s role in the market. Purpose of the Study The overall purpose of this paper and study is to investigate the role of IT outsourcing within a Chinese drug company. This lead to further study of its use within the health industry in China. As growing importance in an organization’s competitive advantage and globalization makes an Internet presence an expectation, the right marketing strategy becomes all the more important in a company overall strategy but it also equals power. An organization needs careful research prior to investment but also needs to strategize and ponder if the consumer is worth the profit. This paper will look at how a proactive strategic analysis allows an organization knowledge of the market in order to build a lasting presence and customer relationships. This paper will also explore the implications of outsourcing. Review of Related Literature Information Technology is a powerful means that helps organizations meet the challenges of a competitive market environment and enable the firms to stay ahead of the competition. The information revolution is exerting substantial effects on the structure and functions of organizations. From the beginning of the computing era various studies have been made that predicted several positive effects ensuing from the implementation of information technology (IT) (Cash & Konsynski, 1986). Many cases have been published, as well as articles in the professional press, which predicted a net increase in business results of companies that invested more in IT (Buday, 1986). However, during the little more than 10 years of this research line, contradictory results have been found From the 1970s to 1980s, those companies that invested more in IT suffered a relative setback in the work factor productivity indexes. This paper will discuss the relationship between IT and competitive advantage in following content. We believe that IT is necessary to improve competitive position of the organization. Many business professionals point to the use and deployment of IT as a point of weakness, not a point of strength in their organizations. They think that the reason for this is often that IT is being driven from a technical perspective, not from a business perspective. This phenomenon exists because many businesspeople think that the IT is too complicated, too expensive, too risky and too changeable. They would not like to spend time on understanding the complex information technology management. Most businesspeople only understand how specific technologies affect their ability to do their specific jobs. Poorly understand IT initiatives often end in failure. The previous literatures reveal that IT brings huge impact on careers and information technology has impacted many jobs such as IT has replaced human labor and many organizations no longer pay people to simply oversee others and pass along information. The business benefits that are derived from the strategic use of technology are significant, but they are accompanied by risks that must be addressed. The failure to address IT vulnerabilities within their own organizations and throughout the supply chain can have devastating consequences for business operations. China and Outsourcing To this day, the country of China remains an enigma, isolated from the Western world and shrouded in mystery conceptualized by the Communist Red. Its culture both ancient and modern fascinates one on many levels mainly because it is so completely foreign. Aspects of their way of life, customs and lifestyle elements mirror the Communist doctrines and the absence of pure freedom seems sad to Westerners. Still slowly China is opening its doors to the West. There is a changing tide, a force at work. It is the advent of globalization, mass communication and new technologies that changed the atmosphere of China. The world is forever shrinking due to the marketplace is growing at the speed of light and commerce taking place over new mediums. This makes possibility happen. People from every nation have yearned to participate in this explosion. The Chinese have been no exception. They have reached a point in their history where they must not only hold on to their cultural identity but also embrace change from outside. This has been the only way to take advantage of globalization and create a new persona for China. Still the seed of change had to grow from somewhere. This transformation did not happen over night. It can be difficult and frustrating for one to understand yet try to respect. It is out of understanding what one fears that one can be a catalyst for change. Only then can the barriers come down. Much of the emergence of globalization can be attributed to the world economy. China has made steps of change within recent years and as a result found itself at the forefront of economic explosion. At this time the Chinese economy is growing at the rate of ten percent a year, faster than any other country in the world (Richardson, 2005, p. 1). As a result, the region of the Pacific Rim and more specifically South East Asia is considered an emerging market, one that many international corporations are focused on gaining a competitive advantage. This industry of health food and vitamins is no exception. Due to vast changes in available technologies, it is expected and imperative that all companies have an Internet presence or utilize a global e-strategy that involves their business practices to evolve into e-commerce. Two Models This project utilizes two models to analyze IT outsourcing. The models are as follows: (1) Kurt Lewin’s Force Field Analysis theory and (2) SWOT. These two models and others like them assist management and strategists in understanding a company’s standing within the market place. By assessing a company’s strengths and weaknesses or forces at work within a market or organization, one can have a better idea of which areas need attention. Force Field Analysis Theory  Field theories really took the basic form of the fluid mechanics developed in the eighteenth century, in which equations linked a â€Å"flow† or potential for transmitted force to spatial coordinates, but applied this form to situations where no fluid could be found; examples are motion induced by gravity, electricity, or magnetism. I will follow general use and employ the term â€Å"field theory† to denote only those theories that do not involve a clearly existent substantial medium. Lewin’s field theory provides â€Å"a method for â€Å"analyzing causal relations and of building scientific constructs† (p. 01) on several psychosocial concepts involving human actions, emotions, and personality. These psychosocial concepts include human frustration, levels of aspiration, marginality, punishment and reward, and social identity. Lewin’s field theory is built on two constructs (a) human behavior is derived from a combination of mutually interdependent co-existing facts in the life space of individuals, and (b) these coexisting facts have the characteristics of a â€Å"dynamic field,† because â€Å"any part of the field depends on every other part of the field† (p. 87). Using the analogy of â€Å"phase space† in physics, which represents a multitude of factors that might influence events in open systems, Lewin articulated the importance of â€Å"psychological space† in real life. Lewin reasoned that an individual’s life space, including one’s personal characteristics and environmental influences, is an inherent part of the individual’s total situation–momentary and general life situation as perceived by the individua l. He argued that the total situations or fields are more important in studying group behavior because at any given time, individual human behavior, is not only derived from, but is also likely to change, due to the individual’s perception of current situations based on their past cultural orientation, race, status, and experience. To account for such complexities and interdependence of the internal and external factors affecting individuals, Lewin advocated a middle course. By applying these field theory principles to groups in given situations, Lewin observed that it is possible to glean general patterns, underlying relationships, and structural characteristics that can be transposed to other real-world situations. As an example of the field theory principle, Lewin (1997c) advocated the use of a psychological approach to understanding fields that influence individuals and noted that a teacher can never succeed in giving proper guidance to a student if she or he does not learn to understand the psychological world in which that individual student lived. This objective description in psychology actually means describing a situation in its totality–a sum total of facts which makes up that individual. SWOT Assessment It is important to determine the impact a strategy will have on the operations and activities of an organization. The objective is to utilize present technologies and future innovations to plan the future of a company. It is important to allow a flexible framework for strategy to interact within the environment. Further the objective is to gain understanding of the surroundings and behaviors under which they are operating. The key is to create an excellent strategy in which to include within the organizational culture. It is best management remains informed of potential challenges and SWOT allows for clarity. IT Infrastructure and the Practice of Outsourcing As the act of doing business becomes more innovative due to new technologies and high levels of communication, it is surprising that doing business become more complicated and expensive. Is it the factor of elevated expectation and competition from global markets, it is a lack of understanding your own organisation and its cores? Angelo Mozilo believes that outsourcing creates room for improved focus upon core values and it is with the implementation of high speed communication and data systems that enables people to better interact with each other (2002, par. 3). It allows for context to be processed outside the core, only to return when needed. Outsourcing is much like a double-edged sword, it can be seen as a negative as much as a positive. Many believe that it is stealing from American jobs to use cheaper labour sources in countries like India. Timothy Smith surmises that outsourcing has three functions in making organisations more efficient, effective and reduces costs. â€Å"Outsourcing enables organisations to reallocate resources† (Smith 2001, par. 3). This in turn allows the organisation to spend less time on those tasks, saves it money in labour and location by changing focus from survival to enhancing competitive advantage. An organisation can only do this when it becomes people focused. Truly what IT outsourcing does for the business to supplier to the customer relationship is create a new business process that isolates pieces of IT by restructuring the entire segment of the customer’s business. This includes value added improvements in the organisational logic of processes, implementation of best-in-class technology, extensive management and employee training as well as adoption of best practices in the vendor’s field of experience. This may sound like a lot of both monetary and human resource investment but over the long run such implementation will allow the organisation to focus on core rather than context. It goes to show what many successful CEOs would say, â€Å"don’t sweat the small stuff† and this motto will take you to the next level of continual learning and success. Exporting organisations are also seeking ways to lower costs while increasing customer service. A relatively new approach is supply chain management (SCM). Supply chain management differs from traditional materials and manufacturing control in several ways (Burn & Hackney, 2003). First, SCM views the supply chain as a single process. Second, SCM requires strategic decision-making due to its impact on overall costs and market share. Third, supply chain management regards inventories as a mechanism of last resort. Finally, it requires an integrated approach to systems. Integration results in reduced inventory and significant cost benefits (Trunick, 2005). The success of SCM usually involves implementation of an information management system. Still the model is evolving to include new innovations being used as tools. The Amorphous type of chain changes as the company introduces new strategies. This type of model best reflects the continuous flow of ideas and possibilities within the e-commerce construct or Internet medium specifically. It helps anticipate future occurrences. This aids a company’s tracking of Internet use especially when applied to advertising and promotions, as it is known â€Å"the number of businesses utilising the Internet for e-business purposes was significantly low at 28% though an further 33% were actively considering the implementation† (Ritchie & Brindley, 2002, p. 2). The function of procurement within the logistics process is moving to a new plane of sophistication due to new technologies to make the job simpler. Much of it is moving to the platform of the Internet to maximise efficiency and productivity. E-Procurement is now moving from easy-to-automate tasks like invoicing generations to more complex concerns such a E-marketplace implementation, operation and electronic collaboration. Literature suggests that currently focus in on technologies that support E-procurement of direct goods that are mission critical. Also because raw materials that go into production of the finished product many account for â€Å"80 percent of a company’s expenses, the saving derived from implementing E-procurement is compelling† (Thierauf & Hoctor 2003, p. 250). In other words, E-procurement technology offers lower purchase prices to faster fulfilment cycles as well as lower administrative overhead to better control. As a result, companies realise broad, measurable benefits from the implementation of E-procurement. Companies stand to gain even more impressive results from coming generations of the technology that includes connecting to trading exchange with their own industries. This also enables a customer better informed purchases as a company learns to manage production on a daily basis. This means the capability for the supply chain to extend beyond customers and suppliers improves. This also improves the ability for the company to communicate with the customer and the supplier. This leads to new ideas and knowledge about the process as companies and suppliers work in a join environment. Sometimes organisations look to outsourcing inventory as a way to cut costs and speed up the process. GHL will find that by using the Internet as e-strategy that they can achieve multitasking on new levels, allowing for many lines of communication as once. The Internet will allow GHL to tap into a bigger supply base to ensure dependable supply and backup sources. This in turn will reduce the amount it takes to secure shipment of new products. Enterprise Resource Planning (ERP) systems are particularly valuable in new product introduction because it acts as a means of sharing information. Enterprise Resource Planning (ERP) systems are software packages that attempt to integrate the information flow within a company, solving the problem of incompatibility between systems and operating practices. The ERP system will streamline the GHL’s data flows and provide management with direct access to a wealth of real-time information. This is facilitated by the used of database technologies which will link applications together and pass relevant data between them as necessary. Any new information added to one of the system updates the other systems automatically, thus creating complete integration between them (Soh, 2002 and Grandt, 2005). Directory services and middle ware are used in order to connect the applications and provide an infrastructure for users to communicate with each other and connect to the sources of information. There are many benefits and drawbacks to using this method of data transportation. It is important to analyse rather not this will be good fit for a company like GHL. â€Å"A key difficulty is that departments distrust the information provided by another department, be it via an information system or some other mechanism. Therefore checking and cleaning the data should be made an integral part of the implementation† (Bonner, 2002, par. 5). If ERP is integrated with the organisation’s decision-making structure, ERP can begin to deliver business benefits, impacting data delivery levels. Still its success can only be measured by the attitude of the user.