IT Outsourcing and Vendor Management Essay

IT Outsourcing and Vendor Management

Introduction

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            FantasticGreece.com is an Athens based tourism services providing web portal. The company is relatively new in its field compare to its peers and looking forward to provide enhanced travel search, hotels and transportation bookings, user generated feedback and other add on services to its customers. The company believes that new services will not only provide customers better options but also flexibility to design their own packages.

            To provide the above mentioned services the company has to outsource as the present IT capability is not sufficient or skilled enough to do so.

Market Dynamics and Challenges Faced by FantasticGreece.com

Consumer Insights

            Holiday consumers look for three core things when they start planning for the holidays. First Information about the destination, second how they will go and stay at the destinations and finally how they will pay for the holidays and other expenses.

Information about the Destination

             Customers to a traveling website often come with destination in mind and at time they can travel. What traveling and other services like FantasticGreece.com can do is providing them customer content not only regarding the services but also the destinations. This will not only help the customers in planning better holidays but also keep bring the customers back to the website for other travelers experience.

Secondly customers want dynamic packaging of the tours and traveling schedule. More the options for the customer better his experience with the website will be.

Thirdly customers want complete solution from one place rather than booking different things at different places. This not only reduces customers bargaining power but also company’s ability to deliver a seamless traveling experience. Nobody wants to carry lots of documents while traveling.

Finally customers are looking for best value pack, not necessarily the most economical but most valuable. For example customers may seem traveling economic class as intelligent but living in cheap hotels as bad experience.

Payment options are also critical in determining the choice of package by the customer.

Competitive Forces

            All the competitors are looking forward to provide seamless experience through almost similar hotel rates, airline offers and add on services. So the big question is what should be the differentiator.  The online booking has made the market more competitive than ever before.

The winner will be the one who will able to provide the most personalized experience.

Situation Analysis

FantasticGreece.com at present is not in a position to deliver a seamless personalized experience. In fact at present it is even struggling to provide the bare minimum information. The solution to the present problem is to outsource the IT solution that can help the company to compete with online intermediaries like lastminute.com, expedia.com etc.

Steps in IT Outsourcing and Outsourcing Life Cycle

Strategic Assessment

            The need for a new dynamic packaging software is evident for FantasticGreece.com as without the software it doesn’t able to provide as customized solution as its customers are doing. Secondly the company is not in position to develop the product in house as it doesn’t have the capability to do it. (Brown, Douglas, 2005)

            Thirdly outsourcing will not put the company’s competitive efficiency at risk; instead it will improve and make the company compete better with its competitors.

Needs analysis

            The IT outsourcing solution need to solve three core problems – Providing more better product packaging, safeguarding the customer’s information and better customer relationship management. Important Components in Deciding the Vendor’s Evaluation Sheet are (Smolik, Petr 2003)–

Booking and Back Office Automation – Automated booking and back office functioning is critical in saving costs for the company. This will not only enable the company to have lesser work force but also better performance tracking system.
Better Product Packaging and Flexible Distribution – The task is not only to provide more options but more freedom to customer to make personalized traveling plans. Dynamic packaging is essential in this regard as it will help the customer to decide on choices in real time with real prices and offers.
Affordable Technical Infrastructure – It is the key in any IT Outsourcing project, if the cost of running the program is higher than the benefits generated from it then it is not feasible for business.
Employee Management – Outsourcing doesn’t mean that company has no commitment toward employees’ management. In fact it needs to have more skilled employee who can analyze the performance of the vendor. Vendor ability to attract the best talent should be very high on vendor evaluation chart.
Inventory Management and Supply Chain Integration – FantasticGreece.com is online intermediary and it is responsible for integrating the supply chain. It has to have right information regarding inventory available with different partners like hotels, rental services, flights etc. (Power, Mark John ,2006)
Forecasting Ability – Does the vendor software able to forecast the sales and able to adjust prices accordingly. The limits can be decided by the company and its chain partners but software needs to have this function.
Workflow-Driven Product Packaging and Advanced Interface – It includes mass creation of different options of services, automatic business functionality and authorization and stable packaging rules.
Real Time Performance Evaluation, Supervision and Work Load Assessment of all the employees working on the company’s account. It also includes benchmarking of various departments like Customer Relationship Management, Promotion, and Money Recovery etc.
Vendor assessment

            The company has short listed five vendors -, GoQuo Ltd., Trisept Solutions, dynamicpackaging,net, The Solutionz Group and Accovia. All the above vendors provide competitive solution with different competitive edges.

GoQuo software is a one dimensional product aimed at product efficient product packaging.
DynamicPackaging.net is much more comprehensive software as it provides dynamic product packaging along with various options of complimentary rental and other interest services like spa, safari etc.
Trisepts Solution is also a comprehensive product packaging and inventory management company. It will provide solutions to create unique vacation by inculcating various variables in the product. The support services are mostly confined only to the product.
The Solutionz group is a strategic group and going through the website it can be easily assessed that the core focus of the company is in delivering strategic solutions rather than operational solutions which fantasticgreece.com is looking for.
Best Vendor

Accovia is the best vendor for fantasticgreece.com. The biggest advantage the company has over its customer is that it has vast experience in delivering executing services compare to other vendors that specializes only in delivering the software. The company’s expertise in field like Travel procurement, travel distribution, travel intelligence along with packaging will enable Fantasticgreece.com to build a long term strategic partnership.

            Secondly the company also has expertise in products like customer relationship management which is critical for the success of a traveling intermediary company. Customer relationship management services will not only help in bringing back the customers but also help in getting new customers. (Click, Rick L, 2004)

            Thirdly Accovia has a human resource management program which will help the fantasticgreece.com to leverage the experience of its work force and establish benchmarks.

Contract and negotiation management

            Contract and negotiation management is essential in any vendor contracts. The terms should be clearly mentioned and performance expectations should be clearly defined.

Project initiation and transition

            Project Initiation and Transition will not only require management commitment but also support from the lower level of management. Bridging the work culture difference of two organizations is the most critical aspect and it often defines the success and failure of the project.

Relationship management

            Relationship management between vendor and company should be clearly defined. Who is responsible for the performance and execution on both sides etc. If there are any deviations in the performance then the organization has to assess the situation again.

Common traps FantasticGreece.com should avoid while outsourcing

Lack of management commitment – More often than not outsourcing is done just to reduce cost and management doesn’t commit fully to it as it believe it is not essential part of the business process. In case of FantasticGreece.com it is not only essential part of business process but also a very potent tool to compete with other market players. (Rose, Jeremy, 2001)
Minimal knowledge of outsourcing methodologies – As we assessed during the vendor evaluation, number of players are providing the solution but not providing back up or execution infrastructure. In such a scenario a company often ends up with only physical infrastructure and then need to spend highly to train the work force to work on it.
Lack of an outsourcing communications plan – Communication between the vendor and company has to be clearly defined otherwise there will be performance deviation.
Failure to recognize outsourcing business risks – Outsourcing is not risk free, if you end up with wrong vendor than it can easily destroy the business.
Failure to tap into external sources of knowledge – Leveraging vendor knowledge is the key to outsourcing. In fact partnering vendor in knowledge creation can be a way forward to higher growth. (Rose, Jeremy, 2001)
Not dedicating the best and brightest internal resources not affects the performance but also questions the commitment of the company towards outsourcing. (Rose, Jeremy, 2001)
Not appreciating cultural difference often results in failure of outsourcing.

Conclusion

FantasticGreece.com is facing a challenge not only from its competitors but also from its customers as customers in the traveling industry are looking for better personalized product packaging and complete solution.

            With Accovia as vendor the company can focus in delivering and bundling different products as per the customer needs. It will also provide FantasticGreece.com to focus on its core competency that is being an expert in Greece Tourism.

IT solution outsourcing today is more than just pure software outsourcing, it is an integration of business processes to provide customers a complete solution. It also help the company to leverage outside expertise in vendor’s particular field thus creating a win win situation for both the parties.

As in the present case Accovia able to earn money through contract and FantasticGreece.com can focus on its core competency of having better contracts with hotels and other service providers in Greece. This will not only result in better conversion but also greater customer satisfaction.

References

Brown, Douglas (2005). Black Book of Outsourcing : How to Manage the Changes, Challenges, and Opportunities.Hoboken, NJ, USA: John Wiley & Sons, Incorporated, 2005

Click, Rick L (2004). Business Process Outsourcing : The Competitive Advantage. Hoboken, NJ, USA: John Wiley & Sons, Incorporated, 2004.

Duening, Thomas N (2005). Essentials of Business Process Outsourcing. Hoboken, NJ, USA: John Wiley & Sons, Incorporated, 2005.

Pollitt, David(2005). Outsourcing and HR. Bradford, , UK: Emerald Group Publishing Limited, 2005.

Power, Mark John (2006). Outsourcing Handbook : How to Implement a Successful Outsourcing Process. London, , GBR: Kogan Page, Limited, 2006.

Rose, Jeremy (2001). Information Systems & Technology Outsourcing: Case Lessons from “TravelTrack.Hershey, PA, USA: Idea Group Inc., 2001.

Smolik, Petr (2003). Outsourcing Systems Management. Hershey, PA, USA: Idea Group Inc., 2003.