Paper Example on Benefits that Schaffer Hopes to Achieve from Outsourcing

Introduction

In the recent past, outsourcing has been considered a strategic move in which a company benefits from high-quality services and products without increasing its costs. Therefore, a company outsourcing its services benefits from cost saving, accessing skilled expertise, flexible staffing, reducing overhead, reducing turnaround time, increasing efficiency and ultimately generating more in profit. The case is not different for Schaffer. First, the company hopes to benefit from flexible staffing. Currently, the company is intending to achieve ambitious growth goals meaning that it will expand its operations. Expansion strategy requires the extraordinary support of information technologies which may require more staff to meet its needs. Staff needs may fluctuate requiring that the company hires and fires frequently. This is costly. So by outsourcing the information technology services, the company can achieve flexible staffing at convenience without incurring extra staffing costs. Moreover, outsourcing is expected to aid in the expansion strategy since sounding information technology systems have been reported to support growth and global expansion among companies (Schniederjans, Schniederjans & Schniederjans, 2015). For example, a robust information technology system can allow a company to collect and analyze market information so that it can target particular customers who can provide a market for the product or service offered or intended to be provided by the company.

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Second, the Schaffer hopes to benefit from well-trained and capable staff from the expert information technology company. An outsourcer specializes in information technology services, and it must have the expertise in the field. So by outsourcing services to such a company, Schaffer will benefit from that pool of experts for their present and future information technology needs. Third, an outsourcer has invested in redundant hardware and software services. Therefore, by seeking their services, Schaffer would be guaranteed of superfluous information technology machines that can meet their unforeseeable future needs without any difficulty. In fact, the company believes that it will easily manage its unforeseeable needs arising from global growth if it outsources information technology to an external expert company.

Fourth, Schaffer hopes to benefit from efficiency in information technology service provision for the firm. Efficiency has different dimensions including time, money, energy, efforts and resources. Schaffer is foreseeing a future situation whereby outsourcing information technology services, they will eliminate the need of committing a lot of resources to provide a service that would otherwise be cheaply acquired from an expert company. The company hopes to derive efficiency by not wasting more money in acquiring information technology machines and staff to provide support efforts for the growing need for information technology. Outsourcing is considered an efficient way of acquiring information technology services without resource wastage.

Fifth, Schaffer hopes to benefit from reduced turnaround time. By seeking the services of an established firm, the company can quickly attain the required level of information technology services that it requires to kick off its expansion strategy. It would take a long time to establish an information technology center, hire and train employees to attain the required level of expertise to run the information center, provide for business needs and develop necessary systems. Seeking expertise services would significantly reduce the time needed to adjust or scale up the existing information technology services at the firm and so the turnaround time would be greatly reduced.

Steps that Were Taken to Develop RFP and the Role of Outside Consultant

Request for Proposal (RFP) is a powerful tool for any company seeking to outsource a service or product. It allows the company seeking to outsource a chance to find the best expert at a friendly cost. However, the process of preparing the RFP is a complex and tough one needing the help of an external expert consultant to take through the entire stages. The first step in RFP generation is researching and defining what the company is seeking. At this stage, the expert consultant, Gartner, advised Schaffer to first understand in detail the services they currently provide; understand IT processes, what the employees are doing and every servicing currently provided concerning information technology services. So at this stage, Schaffer had to conduct a thorough study of its information technology services so that it could define what services they were seeking to outsource. It had to collect data about the local and wide area networks, the data center, the help desk and their voice communications. Also, it was at this stage that the company made a decision on which areas to outsource and which ones it did not. Gartner played another crucial role in serving the company with templates to help in data collection and determining services to be outsourced. This step was crucial given the fact that Schaffer would not be able to identify the best vendor that could meet the information technology needs that the company was seeking if it did not know exactly what it wanted.

The second step was specifying the bidders. After Schaffer had identified and defined exactly what they wanted, their next step was to spot the most appropriate vendor who could deliver their needs. This stage was thoughtful one on whom to accept bids from. While it may have been a challenging task for a company that had not outsourced such a service before, Gartner came to their rescue to provide advisory services on how to decide the best vendor. The company had decided that their local information technology center would be retained by the outsourcer. Considering this, Gartner advised Schaffer to go to a local vendor who could easily operate from their center and meet their needs.

The third step was organizing all the information regarding the services sought and consolidating it in an RFP report. The company took time to prepare detailed information on the organization, culture, nature of the project, scope of work, outcome and performance standards, deliverables, the terms of the contract, payments, incentives, penalties, timelines, contractual terms, and conditions. All these information was compiled into a 200-page RFP report. Gartner, at this stage, continued to guide the task force team regarding what ought to be included in the RFP report. The consultant advised the company to ensure that every piece of information necessary to the contract was included since any service that they might fail to provide would attract a service charge if it was to be included later.

The fourth step was then to invite the preferred bidders to meetings where introductions to the RFP were made. The company had to explain to the vendors what they were looking for and other important introductory details regarding the project. Crucial discussions were made before each vendor was served with the 200-page RFP report where they would take about two months to study it and make a response.

Perceived Disadvantages to Outsourcing Raised by the Managers

No matter how much a brilliant idea may be, it shall be objected at one point. Likewise, the managers at Schaffer had as many perceived disadvantages of outsourcing as the projected advantages. One of the main disadvantages raised was the costly and risky nature of the contract. According to Somjai (2017), there are so many hidden costs in the concept of outsourcing despite the fact that it may appear cost-effective at the beginning. There are additional costs when signing a contract across international borders. In the case of Schaffer, the managers perceive increased costs that may arise from various dimensions upon taking up the contract. First, Vivian D. Johnson perceives a future situation in which the company will have been "married" to ABC and lost their bargaining power. So in case a new situation arises, they have no option other than incurring an extra cost to meet their extra needs with ABC. Second, outsourcing the information technology services to ABC means eliminating the existing capabilities at Schaffer, therefore, if in future the relationship does not work out well with ABC, it will be costly for Schaffer to rebuild its information technology services. The company will have destroyed critical support for its growth dreams. It will have also underfunded the information technology area so it will lose all the resources that could be necessary for future.

Further, Carol J. Hanna believes that outsourcing information technology services will be putting Schaffer at risk paying more for any services that they may not have been captured in the RFP. She was quite sure that given any information technology services currently provided by the company's existing center may not have been captured in the RFP and they will be forced to pay more than what has been quoted. Moreover, Hanna is wary about the outsourcer's trick of downplaying the costs at the time of signing the contract only to escalate them later once the company has lost bargaining power and lead to expensive contract (Brown, Dehayes, Hoffer, Wainright & Perkins, 2011). Hanna proceeds to speculate future escalated costs given the fact that there would be unanticipated costs in administering the contract as well as managing the relationships with ABC. Therefore, the managers fear future costs and risk of losing their bargaining power and the capabilities they have already established yet they may be needed in future to support their growth and expansion strategy.

Another disadvantage raised by the managers is the possibility of working with strangers who are not familiar with the needs of the company. Johnson perceives a situation where the current people at ABC may find greener pastures within the company, and they will be forced to work with newcomers who have no idea about what the company needs. In such a situation, the company problems will not be easily resolved as it used to when working with familiar staff. The company will lose the staff that they have trusted to solve their problems for a long time. Establishing new working relationships with new people from time to time might cause irreparable inconvenience to the company (Brown et al., 2011).

It is also likely that outsourcing information technology services would lead decay of the staff morale and downfallen future commitment to the company. Johnson foresees a situation whereby the current loyal, dedicated and hard-working information technology staff will be fired from the company, a move likely to negatively impact on other staff. The remaining staff may perceive that the company does not value them and at one point they will also be fired the same way. They will then lose morale and will be less committed to the company.

Finally, Hanna perceives the outsourcing deal as a scheme that will only benefit Reitzel division while acting as an additional cost to the other two divisions. It is Reitzel that needs to expand into foreign countries, and it will need the expansion of its information technology services to support that expansion strategy (Brown et al., 2011). So it will benefit from the expansion of information technology services through outsourcing. However, for the other two divisions, their operations will remain unchanged, and there is no way that extrapolating the information technology services will earn them an extra income to compensate for the costs incurred in that outsourcing stra...