Outsourcing Provides Indirect Support for Business Re-engineering

6 Pages·1994·0.65 MB·English

INPUT
R esearc*.
Bulletin
A Publication from INPUT’S Outsourcing Information Systems Programme - Europe
Vol. V, No. 13 July 1994
Outsourcing Provides Support
Indirect
Business Reengineering
for
IT outsourcing is frequently associated implementation of business
Many
with business reengineering. reengineering; in the second, it is
outsourcing contracts have apparently essentially a cost reduction tool for
been initiated by organisational organisations that place a low priority on
restructuring exercises and others by the their use of information technology.
need to rebuild critical information
systems and provide improved A key question is, "Which if either, of
,
information technology support for the the models applies to Europe?” Research
indicates that the majority of situations
business. Outsourcing is beginning to be
occupy a position between these two
seen as a real threat to the continued
growth of the systems integration extremes. In practice, executives within
organisations that have adopted IT
market, as large development projects
increasingly arise in an outsourcing outsourcing typically:
rather than a project context.
• Are enthusiastic about applying
However, there is an alternative model information technology to their
business
that states that outsourcing is primarily
concerned with improving an
• View information technology as an
On
organisation’s core business focus.
important source of reengineering
this basis, only secondary, non-core
initiatives
activities should be outsourced,
excluding, presumably, any activities
• Perceive outsourcing and
that make a major contribution to
reengineering to be culturally highly
business re-engineering initiatives.
compatible, but view IT outsourcing to
mainly provide indirect support for
In the first of these models, outsourcing
reengineering initiatives.
is a key instrument in the
©1994 by INPUT. Reproduction prohibited. OSPR-E
INPUT Research
Bulletin
*
Exhibit
1
Corporate IT Objectives
ln re
inn aapDpolTyinnag nIT'troatiheuT
4.5
business
Reduce IT expenditure
3.4
Outsourcing clients
0
3.5 Non-clients
Increase use of IT
5
1
Not at all Importance of objective Very
important
Sample of 30 executives within outsourcing clients and 60 within non-clients. Standard error =0.2 Source: INPUT
Outsourcing Clients are Enthusiastic significantly more committed to
about Information Technology increasing their use of IT than their
counterparts. However, these executives
Exhibit 1 provides evidence to refute the are simultaneously strongly committed to
suggestion that organisations that adopt
reducing their organisation’s IT
IT outsourcing are less enthusiastic
expenditure.
about the application of information
technology than organisations that retain In terms of overall objectives,
their entire IT function in-house. organisations that have adopted IT
outsourcing are as equally committed as
Approximately 60% of executives in both
other organisations to gaining business
types of organisation strongly perceive
benefit from information technology, and
the pro-active use of information
may be more likely to extend their use of
technology to be important. Similarly, the
information technology. However,
overwhelming majority of executives
executives in these organisations
strongly believe that it is important to
typically want to achieve these objectives
increase the effectiveness with which
while simultaneously reducing
costs.
information technology is applied to their
business. Perhaps surprisingly, IT Viewed as Important Source of
executives within organisations that Reengineering
Initiatives
already use IT outsourcing are
Exhibit 2 shows European executives’
perceptions of the role of information
technology within reengineering.
2 ©
1994 by INPUT. Reproduction prohibited.
—
1
INPUT Research
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Exhibit 2
Role of IT within Business Reengineering
55
Important source of A
reengineering initiatives
50
7
Supporting role once 20
new processes defined
50
0 Outsourcing clients
Minor contributor to
Q
business reengineering Non-clients
iliii 10
— —
F r~ T~ ~T~ —i -
0 10 20 30 40 50 60
Proportion of executives (%)
Sample of 30 Outsourcing clients and 60 non-clients. Standard error = 10% Source: INPUT
Proportion of executives giving a score of 4 or 5.
Contrary to their public image, European None of the executives in organisations
executives are often enthusiastic about already outsourcing regarded
the role of information technology within information technology to be only a minor
business reengineering initiatives. The contributor to reengineering and only
majority of executives in France and 20% of them strongly perceived
Germany, within organisations that have information technology to play primarily
not adopted IT outsourcing, strongly a supporting role rather than a pro-active
perceive information technology to be an one.
important source of reengineering
Outsourcing and Reengineering
initiatives. However, executives in the
Perceived to be Culturally Compatible
U.K. are more hostile to information
technology and only a quarter of
Exhibit 3 identifies the extent to which
executives share this view.
outsourcing is perceived to support
business reengineering by country.
Executives within organisations that
have already adopted IT outsourcing are
more enthusiastic about the role of
information technology than their
counterparts.
)
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1994 by INPUT. Reproduction prohibited.
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Exhibit 3 executives in the U.K. are almost
Outsourcing and Business Reengineering
unanimous in dismissing the relevance
of IT outsourcing in supporting business
reengineering. However, this negative
2^ perception of executives in the U.K. is not
3.2
Europe
limited to outsourcing. These executives
'//////
Outsourcing take a much more negative view of the
Clients
Germany relevance of information technology to
2-7 S3 Non-clients
reengineering than do their counterparts
^3.5
in France and Germany.
France
.4
Information technology is typically
U.K. perceived to play a pro-active role within
1.6
reengineering projects. However, while
2 4 5 executives within organisations using IT
1
Not at ail Very Strongly outsourcing exhibit high levels of
enthusiasm for the application of
Extent to which outsourcing supports
information technology, they
business re-engineering
characteristically perceive IT
outsourcing to provide indirect rather
Sample of 30 outsourcing Source: INPUT than direct support for reengineering
clients and 60 non-users. Standard error = 0.2. projects.
much
Overall, outsourcing clients take a In particular, outsourcing and
more favourable view of IS outsourcing s reengineering are perceived to share a
ability to support business reengineering similar management philosophy that
than do executives in general. The places a major emphasis on:
majority (55%) of executives, within
organisations that have already adopted • Cost reduction
IT outsourcing strongly perceive IT
• Core business focus
outsourcing to be supportive of business
reengineering. In contrast only a
• Increased organisational flexibility.
minority of executives (25%) in
organisations that have not adopted IT
Both outsourcing and reengineering aim
outsourcing perceive it to strongly to reduce the numbers of personnel
support reengineering.
directly employed in labour-intensive
activities. Indeed one of the outcomes
The views of executives in organisations
from business reengineering exercises
that have not adopted IT outsourcing
will often be the decision to outsource
differ significantly by country.
certain activities.
Approximately a third of executives
within this type of organisation in France
Outsourcing is also perceived to be
and Germany believes there to be strong
supportive of business reengineering by
links between outsourcing and business
removing management involvement
On
reengineering. the other hand,
4 ©
1994 by INPUT. Reproduction prohibited.
INPUT Research
Bulletin
removing management involvement one of the potential obstacles to change
from an area of day-to-day activity. This within the organisation, and, at the same
consequently frees management time, demonstrating to the rest of the
resources to concentrate on organisation that it is possible to
reengineering initiatives. successfully transfer an in-house activity
to an external vendor.
Finally IT outsourcing is viewed as
supporting reengineering by removing
—
This Research Bulletin is issued as part of INPUT'S Outsourcing Information Systems Programme
Europe. If you have questions or comments on this bulletin, please call your local INPUT organisation
W1X
or John Willmott at INPUT, 17 Hill Street, Mayfair, London 7FB, U.K. Tel:[phone].
5 ©
1994 by INPUT. Reproduction prohibited.
INPUT Research
Bulletin
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