Outsource or In-house

Outsource or In-house

I really had the hard time to decide if I should go on outsource or in-house the information systems functions of the school. So I had to search on-line to help me out with topic.
Before anything else let’s me first define in-source and out-source. And enumerate the advantages and disadvantages to help me to come to a decision.




What is Outsourcing?

Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.

Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.
In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.
Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.

Outsourcing is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.

What is Insourcing?

The opposite of outsourcing can be defined as insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.
Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally.

To make it shot, insourcing is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.

Below are the benefits we might gain from outsourcing:

• Outsourcing your non-core activities will give you more time to concentrate on your core business processes
• Offshoring can give you access to professional, expert and high-quality services
• With outsourcing your organization can experience increased efficiency and productivity in non-core business processes
• Outsourcing can help you streamline your business operations
• Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others
• Outsourcing can make your organization more flexible to change
• You can experience an increased control of your business with outsourcing
• Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these
• Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time
• Offshoring can help your organization save on capital expenditures
• By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work
• By outsourcing, you can cater to the new and challenging demands of your customers
• Outsourcing can help your organization to free up its cash flow
• Sharing your business risks is possible with outsourcing
• Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business
• Outsourcing can help your organization to cut is operational costs to more than half.
In addition to the above mentioned benefits on outsourcing, I have here some to take on consideration:
• Ability to focus on core competencies. By handing over noncore activities to a trusted third party, a company can concentrate on activities central to its value proposition and increase its competitive positioning.
• Faster and higher-quality service and improved efficiency. Vendors’ economies of scale, combined with service level guarantees, translate into increased operational efficiency for a company. For
example, outsourcing vendors typically offer service level agreements (SLAs) for availability of at least 99.9%, and many include financial penalties for downtime. Along with higher-quality service, many
outsourcers claim to reduce cost of management by up to 25%.
• Access to new skills and technology. Outsourcing gives a company access to resources not available internally, such as modern, up-todate technology and skilled human capital.
• Greater flexibility. The flexibility gained through outsourcing helps a company react quickly to changing market conditions, fluctuating demand cycles, and increased competition.
• Staff reallocation. Personnel whose job responsibilities are reduced or eliminated by outsourcing can be reassigned to other, more strategic tasks.
• Lower long-term capital investments. In a typical IS outsourcing contract, the vendor takes ownership of and responsibility for managing all or part of the client’s IS operations or infrastructure, thus eliminating the client’s ongoing investments in computer equipment. The capital funds previously allocated for computer equipment are freed for spending elsewhere.
• Improved predictability of costs. Outsourcing provides a company with predictable yearly costs for the management of all or part of the IS infrastructure.
• Assistance with organizational changes. A third-party IT service firm can help build new infrastructures or merge two existing infrastructures during or shortly after a merger, acquisition, or
joint venture.
• Assistance with globalization. A company looking to move into international markets can rely on a global outsourcer for assistance in broadening infrastructure and operational reach.

The Disadvantages of Outsourcing

• At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it
• While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing
• When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization
• Offshoring can create potential redundancies for your organization
• In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider
• The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work
• Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company
• By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced
• In outsourcing, you may lose your control over the process that is outsourced
• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed
• With outsourcing, your organization might suffer from a lack of customer focus
• There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.


Below are the benefits we might gain from intsourcing:

Low risk is perhaps the primary advantage of insourcing: Direct control over the resources doing the work permits better control over the results. An internal LPM directly coordinates and manages each activity with resources that can be in nearby offices. In this model, the people doing the work also directly coordinate it.

Direct control over the localization resources can produce noticeable cost savings. At one point when employing the total out-sourcing model, we discovered we were paying for as many as six levels of management and coordination on a project—the files, instructions, and other information passed through six other people on the supplier end before reaching the linguist
doing the translation. One can easily understand why messages were so different by the time the worker received them. Direct control of the resources also allows greater flexibility over such factors as resource utilization, staff selection, and labor cost. For example, paying a higher
wage to linguistic resources may result in lower workforce turn-over, higher quality, and a greater ROI (return on investment).



Factors to consider include:

• Reduce recurring costs associated with managing a Help Desk including staffing and training
• Improve service levels and increase professionalism among Help Desk staff
• Realign your staffing as necessary
• Take advantage of existing Help Desk infrastructure and recent call management software implementation
• Predictable monthly service charge for service

• Scalable
• Company retains control
• Company owns technology and data
• Direct knowledge transfer of best practices to your company
Pros
• Scalable
• Company retains control
• Company owns technology and data
• Direct knowledge transfer of best practices to your company
• Allows 2nd Level Support to focus on more difficult technical problems


The Disadvantages of In-housing

A potential major disadvantage is the sheer volume of personnel needed to meet the localization requirement. This model can be perfectly viable when localizing into
just a few languages but becomes less so—if not economically infeasible—when localizing products into many languages.

Factors to consider include:

• Work frequency in each language – in-house personnel must have enough work on a regular
basis to remain cost effective.
• Infrastructure – in-house personnel need offices, computers, telephones, office supplies, and so forth to function properly. The key to success is keeping these resources utilized on value-add activities. Under-utilization means excess capacity that can quickly consume the savings that insourcing provides over out-sourcing.

• Will require significant staff changes
• Must invest time in management of insourcing company
• Investment in technology and process
• Facility and technology must be provided and managed by your company

Cons
• Will require significant staff changes
• Must invest time in management of insourcing company
• Investment in technology and process
• Facility and technology must be provided and managed by your company

What is best for our organization or school?
Here are some tips for us to be able to decide on what to choose: insource or outsource.

• If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.

• If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.

• If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.

Hybrid Model

As I had doing my researches with this topic I had discover that we can do three approaches to project resourcing; out-sourcing (using external agencies), insourcing (using internal resources), or a combination of the two, we can called the hybrid model. Intel IT has adopted a hybrid model that combines the advantages of both out-sourcing and in-sourcing. But Intel IT uses this approach for large corporations whose documents require localization. This approach may not applicable to our school as it stated above it is used in large corporation or big organizations or companies. But I just want it to include to this topic.

Hybrid Model

Historically, large corporations often vacillate between total out-sourcing and total in-sourcing. While these shifts may seem appropriate based on changing economic factors, constant switching adds costs and delays the return on the investment each time it occurs. Intel IT has adopted a successful hybrid approach that has helped break this cycle. A hybrid model combines in-sourcing and out-sourcing and is configured to meet the localization project’s specific needs. We constructed the Intel Linguistic Services (ILS) as part of our localization effort. ILS consists of a large, worldwide network of freelance linguists covering over 30 languages. ILS also maintains a few in-house linguists for the core (high demand) languages. Translators, editors, desktop publishers, and so forth populate the freelance base according to language specific needs. Most freelancers reside in the target countries to ensure their work conforms to the latest vocabulary and cultural adaptations. The small number of in-house linguists provides overall direction, consistency, consulting, and advanced expertise in their respective languages.

Advantages

Advantages to this hybrid model include:

• High resource utilization – freelance base works on an as-needed basis, avoiding the possibility of large amounts of excess capacity sitting unused.
• Competitive cost – freelance base is PPV and allows us to directly contact the workforce, saving middle-man costs.
• Managed risk – direct access gives us greater control of the quality and timeliness of our deliverables. We use a simple database to track all of these efforts. Our LPMs use the database to access individual name, language, contact information, quality rating, and other data. For payroll issues, we hire individual freelancers through sponsoring suppliers that handle most of the payroll activities.

Disadvantages

Managing individual assignments for so many workers is certainly more effort for the project manager than under a total out-sourcing model. Internal localization teams are responsible for understanding and handling such factors as individual availability and the no-work holidays of specific countries. This duty requires a more intensive ability and overall discipline to organize and track data than out-sourcing requires. Managing a network of freelancers also requires in depth skills in mass communication and management. At times, style guides, encryption keys, and other kinds of non-project specific information must go out to the entire network. In a large corporate environment, a company has three models for completing its localization projects. Intel IT developed and adopted a hybrid model that combines in-house linguists with a worldwide network of freelance resources. This combination optimizes risk management, resource utilization, and cost savings. Depending on the scope of work and number of target languages, this model may be well suited for implementation at other large companies whose content requires localization.

Conclusion:

There is a big discussion or ponder going on at the moment and people are constantly arguing whether or not it is better to outsource or to insource. Even me I still get confuse with is best and preferable to apply in our school. We can mention a lot of good reasons and bad reasons for both (which I have enumerated above) but at the end of the day what is important stand in our own personal needs. If we have to look on the stated above, the biggest benefit that insourcing has stands in the fact that you get a very close contact with the person you are hiring. And our school has the faculties and staffs that can work it on. This can create a very good working environment but at the same time it does bring in some negative aspects that we have to think about. Unfortunately sometimes we can not find what we are looking for through insourcing. This basically means that what we want done can not be found locally. Such a fact shows us the biggest advantage why outsourcing is preferred in a comparison with insourcing which has a wider set of choices. We are basically moving everything towards a much larger scale. It is not necessary to choose outsourcing over insourcing or vice versa. Our school or organization can outsource and insource at the same time (if we can, if the school can be able to sustain that). By outsourcing and insourcing simultaneously, we can have the best of what both offers and our school can get a competitive advantage. But of course we need to take in consider the resources and budget if we have enough.

References:
http://www.cyfuture.com/pro-and-cons-of-outsourcing.htm
http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp
http://www.offshoringtimes.com/Pages/2007/offshore_news1444.html
http://www.webspacestation.com/it-outsourcing-news/articles/outsourcing.html
http://www.answers.com/topic/insourcing
http://dictionary.bnet.com/definition/insourcing.html

http://www.searchenginepanel.com/top-five-advantages-to-in-house-link-building/
http://www.outsource2india.com/why_outsource/articles/benefit_outsourcing.asp

State of the Nation Address (SONA) on July 27, 2009

State of the Nation Address

Investment and Trade

Investment. The investment climate created by the Arroyo Administration’s fiscal consolidation and establishment of strong macroeconomic fundamentals continued to support investment inflows in the country.

In 2001, the institution of the Investments Relations Office (IRO) under the Bangko Sentral ng Pilipinas (BSP) developed and improved a coordinated approach to the dissemination of timely and comprehensive economic information for the use of analysts and investors in making investment recommendations and decisions.

Additionally, the Administration’s policy to simplify investment registration procedures, such as the establishment of the National Economic Research and Business Assistance Centers (NERBACs), helped improve investment transactions in the country. From 2007 to May 2009, fifteen (15) NERBACs were established nationwide to facilitate investment promotion in the regions and assist Investment Promotion Units (IPUs). It also enhanced the system of linkages and networking between and among government agencies in tackling investment-related issues and concerns affecting foreign and local investors in the Philippines, among others.
As a crucial component to improve industry competitiveness and reduce cost of doing business, investors’ concerns on modernizing infrastructure facilities in the country were addressed by prioritizing projects in the construction and rehabilitation of toll roads (e.g. Daang Hari-SLEX Link Road Project), expressways, among others.


BOI-PEZA Approved Investments
(Board of Investments-Philippine Economic Zone Authority)

• Investments approved by the Board of Investments-Philippine-Export Zone Authority (BOI-PEZA) grew almost three-fold from PhP182.84 billion in 2001 PhP443.15 billion in 2008. Some of the top investors from 2001 to 2008 include GN Power Ltd. Co., Masinloc Power Partners Co. Ltd., Globe Telecom, Emerald Energy Corporation, PNOC Petrochemical Development, JG Summit, Smart Communications Inc., Global Business Power Corp., Cebu Air, and Texas Instruments Philippines. The Manufacturing Sector remained to be the leading source of employment opportunities.



• The telecommunications industry gained momentum in 2001 when telecom giants such as Globe Telecom, Smart Communications and Digitel Communications poured in their investments which ventured towards Short Message Service (SMS) or commonly known as text messaging.


• In 2007, Texas Instruments (TI), considered as the world’s biggest mobile chip maker, invested US$1 billion worth of expansion project in the country. Described as one of the single biggest investments in the Philippine’s economic history, this gave signal that the country had found its niche as one of the best investment destinations in Asia.


• The continued expansion of the services sector is largely due to the rising investments in the call/contact centers and business process outsourcing (BPO) particularly in the areas of Software Development, Animation, Medical Transcription, and outsourcing services in Human Resources, Customer Service and Procurement, among others.

• From four (4) call centers operations with 2,400 employees in 2000, the industry remarkably grew in 2008 to 191 call centers in major areas in the country, generating 227,000 in local employment. Top contact centers in the country include Sykes, Convergys, Ambergis, and People Support. Moreover, companies that have set-up internal BPO operations in the country include HSBC, AIG Business Processing Services, Chevron Texaco, Procter and Gamble Asia Pt. Ltd., Shell Services, among others.

• Being significant drivers to growth and employment, the BPO and information technology-enabled services (ITES) sectors were prioritized in the government’s Investment Priorities Plan (IPP). Under the IPP, investors enjoy fiscal incentives such as income-tax holidays, exemption from taxes and duties on spare parts, among others.

The government also provided non-fiscal incentives to ICT investors, which include employment of foreign nationals in supervisory, technical, or advisory positions; simplified customs procedures; and, duty-free importation of consigned equipment.

Reaction:
Through an investment strategy of the government, strengthening and sustaining our global competitiveness is among the priorities of the Arroyo Administration to open more economic opportunities and create more jobs for the benefit of the Filipino People. With this more investors had invested in our country which the country was able to cope with effects of the global crisis.
Many had invested that helps improve the quality of Filipinos lives. We had foreign direct Investment, foreign portfolio Investment, and investments approved by the Board of Investments-Philippine-Export Zone Authority (BOI-PEZA). Investments approved BOI-PEZA, many of the top investors came from the Telecommunication companies with were the source of employment opportunities.

Also, the worlds’ biggest mobile chip maker invested of billion of expansion project in the country which describe as one of the single biggest investment in the Philippine’s economic history. This gave our country a signal that we can be the best investment destination in Asia.

And because of the rising investment in call/contract centers and business process outsourcing, the industry of call centers operations grew remarkably from four number of call centers in 2000 it made 191 in 2008 which gave more opportunities and employment to more Filipinos.

Transportation and Communication Services

Communication Services

The Administration also improved the country’s competitive advantage in information and communications technology (ICT), which resulted to the robust economic activities in the ICT industry with gross revenue of US$17.934 Billion and total employment for 371,965 individuals from 2004 to 2008. Notably, it was during the Arroyo Administration that this significant growth in the ICT industry was realized. (Annexes D and E)

Centers of information technology and business processing outsourcing (IT-BPO) services all around the country have been connected. Aside from Metro Manila and Metro Cebu which have already been considered as “ICT Centers of Excellence”, the Administration has been promoting the top 10 “Next Wave Cities” to be the destinations of ICT industry outside Metro Manila and Metro Cebu:


• Metro Laguna (Sta. Rosa, Calamba, Los Banos, San Pablo)
• Metro Cavite (Dasmarinas, Bacoor, Imus, Cavite City)
• Iloilo City
• Davao City
• Bacolod City
• Pampanga Central (Angeles/Clark, Mabalacat, Dau)
• Bulacan Central (Baliuag, Marilao, Meycauyan)
• Cagayan de Oro City
• Bulacan South (Malolos, Calumpit)
• Lipa City

Policies were implemented promoting systematic and accelerated ICT advancement.

• Removed barriers and allow full competition in the provision of high-speed networks and connectivity.
• Allocated radio frequencies to allow broadband wireless access network.
• Liberalized the telecommunications environment/ industry to allow the entry of more players, ie, the telecommunication operators (TelCos).
• Authorized the retail-pricing for local telephone lines by allowing local exchange carriers to design price packages.


Reaction:

The administration had improved the information and communication technology, it increases the gross revenue and employment to our country. Many policies were implemented that gave advantages to us. One of this was the reduction of cost of local internet connection. If you could remember way back on 2000 you had to pay 30 php per hour in internet café which reduce to hour rate ranges to 5 – 15 php in 2008. It really gives us advantage most especially to us student, because we browse and search in internet most of our assignment, paper works, and researches and many more.

We can say communication services are really improved nowadays. Majority of the Filipinos are now mobile telephone subscribers who are connected to 14,506 cell sites nationwide. We have also 11 international gateway facilities operators who can provide international long distance calls for us to be able to contact our family and love ones outside the country.


Cyber Corridor

The Cyber Corridor, which aims to create an information and technology-based knowledge economy through facilities that enhance interconnectivity and research and development initiatives, traverses all four geographic super regions from Baguio to Cebu to Davao.
The Cyber Corridor is being developed through public and private investments in the areas of ICT, education, and training.
The pilot-testing of a major ICT project, the Bureau of Internal Revenue’s (BIR) Revenue Watch Dashboard prototype system, was completed in May 2009. This web-enabled revenue monitoring tool aims to provide real time collection figures from the national level down to the Revenue District Office level.

Aside from the priority infrastructure projects in the Cyber Corridor, the Government also pursued other Information and Communication Technology-related projects that supported the development theme of the Cyber Corridor. The Government has established public calling stations, telecenters and community e-centers to address the uneven distribution of fixed telephone lines in the regions.
By 2008, the Administration has installed facilities to areas without communication channels yet, such as 875 telegraph stations for telegraphic transfer and social telegram; digital telephone exchanges in 103 localities; 538 public calling stations which serves people who cannot afford to subscribe telephone services and areas not covered by fixed line facilities; 1,422 Telepono sa Barangay (TSB) stations; and a Regional Government Telephone Service in Cauayan, Isabela.


Reaction:

Cyber Corridor is one of the Administration’s priority projects in which under the super regional development strategy of the Administration. This aimed at linking up the nation’s countryside with its growth centers through Information and Communication Technology (ICT) and the knowledge economy.

The Administration has been harnessing information and communications technology through the Cyber Corridor to promote e-governance to simplify and expedite transaction of frontline services.


References:

http://www.gov.ph/sona/2006sonatechnicalreport.pdf
http://elitestv.com/pub/2009/07/philippines-reactions-to-the-9th-state-of-the-nation-address

Barriers in Implementation of Information System

Barriers in Implementation of Information System or Information Technology in the Organization


“One of the biggest mistakes you can make in life is to accept
the known and resist the unknown. You should, in fact, do exactly
the opposite. Challenge the known and embrace the unknown.”
Guy Kawasaki, Co-Founder Apple Computer, Inc., 1996

In the organization that I had visited and interviewed, most of them mentioned some barriers in implementing to their Information System or technology. And some mentioned risks in having their Information System changed.
Barriers are severe, unexpected and not planned for problems in Business Reengineering projects. Barriers increase the impact of project risk factors. For example increases middle management resistance against the objective of introducing self-directed work teams the political project risk.

Barriers hinder implementation efforts such that without intervention the project falters or may even fail altogether. There are other problems which are not considered barriers, because their impact on the project is not as dramatic. They may present obstacles to overcome on a day-to-day basis. These problems may surface in most other organizational projects as well. Among them are illness of project members, malfunction of computer equipment, etc. These problems are not further considered in this report.

Barriers have to be eliminated, because they take away much needed energy from the project team and the people affected. The energy for and against the barrier is not injected into the project steps and thus is lost to the project`s outcome. It is the author´s experience that endless meetings, and associated frustrations detriment the potential positive results of a Business Reengineering project. Therefore it is highly recommendable not to pitch success factors hard against barriers, but rather to prevent the development of barriers right from the beginning of a project. It is not advisable to perform a Business Reengineering project on high pro and contra energy consumption basis.

If we have to discuss barriers, we may categorize those as hard barriers and soft barriers.


Hard barriers are those, which have to do with things and regulations. Soft barriers are people problems.

Hard barriers can be further broken into Information Technology problems, resource problems and legal obstacles.

Information Technology software and hardware, which are not suited to support a process based organization can evolve as a barrier. This barrier is typical for organizations that want to keep their high investments in hardware and software, hoping that the existing legacy systems will serve the process requirements as well. The Information Technology suppliers on the other hand where overwhelmed by the run for process oriented solution and have only just recently directed their research and product development towards process based Information Technology solutions. A number of vendors though have not been able to protect their investments and faltered.

One typical resource problem is missing space for a work team to get together on a regular basis. Team-members, that are physically separated should have easy access to electronic communication equipment, such as teleconferencing.

On the other hand, soft barriers are people problems. People resist organizational changes. Resistance to Business Reengineering change can be further differentiated into internal individual resistance, internal group resistance and external resistance.


They had also included the risk in implementing IS project to their company. Below are risks they had enumerated:

• Financial Risks
The project does not yield the high Return-of-Investment expected.
• Technical Risks
Business process oriented Information Technology solutions either are not available or not working.
• General Project Risks
The organization is looking for solutions outside its competence or the project team is not performing.
• Functional Risks
The organization is confronted with a reorganization plan, which is not applicable to the kind of business the company is in.
• Political Risks
People confront the project (resistance), or the project gradually loses commitment by upper management



The following areas are suspicious of generating barriers to Business Reengineering implementation success:

1. Project Related Causes

The Business Reengineering project setup may lead to barriers, which have to be dealt with. Project contents and project management can be of such nature, that both hard and soft barriers evolve.

Project contents are represented by project objectives, the selected business processes and the introduction of new Information Technology. The project contents may lead to considerable resistance and hard barriers. The project contents are particularly the source of many barriers, when the haven't been properly and understandably defined.
Project management can be a source of severe barriers, if the road to travel by, remains unclear to the people affected. If confusion reigns, doubt and sometimes fear develops. Doubt and fear lead to failing projects, because people who doubt or fear, do not take action towards attaining the project objectives. Not recognizing people's issues in project management leads to project failure.


2. People Related Causes

People affected by the organizational change are the richest source of potential barriers. This is true for people on all levels in an organization. Managers may resist a change, which jeopardizes their job, workers may fear unemployment by being replaced through a computer system, etc. People's behavior is based on their personality and norms of the groups they belong to.

Some top-managers/owners believe that operative people are the worst resisters, yet this is mostly not the case. Managers often resist change more intensively, because sometimes having sacrificed their lives (and that of their family) to their jobs, they have a lot to loose. Thus, many managers in Business Reengineering situations pay lip service to the change, but behave in old autocratic ways, to not suffer any personal drawbacks from the change. Workers in contrast, mostly want to be told, what is exactly expected from them. They typically do not play with words, and do not engage in micropolitics, as opposed to many managers.

3. Organization Related Causes

The organizational structure may cause barriers by being inflexible towards a drastic change in operations. In particular large bureaucratic organizations tend to wither changes which potentially destroy the existing structure. The embedded culture of the organization is another reservoir for potential barriers, in that culture unconsciously influences the thinking, decisions and actions of people working in a given company. Thus culture may dictate inability to escape the past, and inability to invent the future A number of Business Reengineering efforts derail because the strategic context in which the project was positioned changed significantly - rendering the new process design worthless.
4. Environment Related Causes

The environment of an organization, which is undertaking a Business Reengineering project may yield barriers to implementation success, by withstanding through the means of laws, regulations, and public resistance. The organization's business partners , i.e. vendors and customers, may resist consciously or unconsciously the objectives and contents of a Business Reengineering project the organization undertakes. Lastly the environment may rapidly change in a way, that makes the Business Reengineering project redundant.



I had included here my research of some typical root causes to information technology barriers. It shows the relationships between potential barriers to Business Reengineering implementation success and areas, which hold causes of these barriers. The relationship between barrier and underlying cause are not one on one, but rather several root causes may yield one particular barrier. Vice versa, one root cause may yield several barriers of different nature. We will not cover all relationships between potential barriers and root causes. Using Information Technology barriers and individual resistance as examples, we will explore several root causes. The root cause analysis process presented can easily be applied to other barriers and the root cause domains of individual, groups, organization and environment.


Root Causes to Information Technology Barriers


Information Technology is an important enabler of Business Reengineering. Only through the introduction of Information Technology, innovative business processes become available. Consider the case of a virtual bookstore. Customer related processes would not be possible without using the capabilities of the world-wide-web. On the other hand, Information Technology can has the potential to evolve as a barrier to Business Reengineering implementation. Information Technology barriers represent severe problems with the Information Technology infrastructure (hardware, software and networking). These problems typically emerge in the implementation phase of Business Reengineering projects.



Barrier 1: Selected Software-Solutions are not Process-Oriented

Example Manufact Inc.

1. Situation
Manufact Inc. produces and sells custom plastic injection machines. The company starts a Business Reengineering project. The main objective is to increase customer satisfaction by setting up self-directed work teams. These work teams are responsible for the delivery of plastic injection machines of high quality, low cost and fast delivery speed. The teams are supplied with an application software package meant to help in performing the new processes better than in the past. The chief information officer of the company selected the package, based on recommendations of other manufacturing companies.

2. Barrier
The Team, being responsible for the whole process from customer inquiry to delivery, compares the software functionality with the process steps it has defined. The team finds out that processing an order from start to finish requires more than eighty terminal transactions. Filling out ten different screen templates alone are required for defining a new customer order. Additionally the team finds out that the software cannot be configured to support the whole process they are responsible for. The team concludes that the software must have been developed for a different than a process oriented environment.


Underlying causes can be looked for in the areas of project content, project management, and partner (supplier) responsibility:


Root Cause 1: Unsatisfactory Selection Process

The software selection process may involve errors of project content and project management. Content errors are given, if it had not been properly defined, what criteria the software should adhere to. Among the criteria for process oriented software are workgroup computing and database-integration requirements (Tapscott/Caston, 1993). A typical error in project management was, that the selection process was not properly performed. A proper selection would have required from the vendor to respond to the process related criteria. Instead the company purchased the software based on the recommendation of another company. This company's organization and requirements could have been different.

Root Cause 2: Delivery Problems

Depending on the correctness of the RFP (request for proposal) which the company send to the software supplier, the supplier eager to book a much needed new software order, could have promised software functionality which in reality was not there. The company lost time and money by concentrating on a software not suited to their process needs.


Barrier 2: Users Do not Accept System


Example Media Partners

1. Situation
Media Partners produce print-media clippings. They observe German and Swiss papers and magazines on a daily basis, using key words provided by their customers. The company employs ninety readers that scan the print media, as well as ten clippers, that clip the traced articles with scissors. Forty percent of their income is based on the number of clippings they produce monthly. All clippings are sent to the customers by mail on a daily or weekly basis. All business processes are done manually. Media Partners plan to change that. They plan to introduce Information Technology to support the reading process and replace the manual clipping process through an electronic clipping service. The company expects additional revenue by setting up an externally searchable clipping database.



2. Barrier
After the first training hours with the new Information Technology equipment the readers find that they will be less productive with the computer. They fear their income will decrease. The clippers fear to loose their jobs.




Underlying causes can be looked for in the areas of project content, project management, people, organization and public.


Root Cause 1:Wrong Information Technology Configuration

The Information Technology Configuration can be faulty. For example too large keyboards could hinder the process of fast reading papers and keying in at the same time. The terminal dialogue could be too slow or too cumbersome. The hardware and network processes could be too slow or not be able to handle the workload. The system might not allow all readers to work in parallel with the new system.

Root Cause 2: Not Enough Test-Runs

A completely new computer application system has to be tested thoroughly (Lullies/Bollinger/Weltz, 1990). Volume-tests, performance-tests and availability-tests have too be planned for carefully. It is necessary to test the entire process. It might well be, that the readers are not satisfied, yet other affected personnel are happy with the new system. The overall results are important.

Root Cause 3: Knowledge and Skill Level Too Low

Missing knowledge and skills regarding computers and computer applications might be severe reasons for non-acceptance. In particular older people might be afraid to touch the keyboard since the fear to demonstrate their missing computer skills to the younger ones. It is necessary to take away fear by thoroughly explaining the new system to all those affected. Also ample room should be given for unsupervised training sessions.

Root Cause 4: Resistance

Resistance may develop out of missing knowledge or skills. Some people believe that the introduction of new technology is always accompanied by resistance. This may or may not be true, since new technology is often accompanied by curiosity for the new. Connor/Lake trace people's resistance to a lack of understanding, a missing will to accept the change and missing skills (see root cause 3) or resources to carry out the change (Connor/Lake, 1994).

Root Cause 5: Micropolitics

Micpropolitics describe power-games in an organization. The introduction of a new information technology often changes the complex power structure in an organization (Lullies/Bollinger/Weltz, 1990). This is particularly true for organizations undertaking global Business Reengineering projects, such as Media Partners. Experienced readers may fear to lose the seniority status to younger, more efficient colleagues.

Root Cause 6: Mistrust

If the system is accessible from outside the organization, people within the organization may mistrust the system. Media Partners plan to have her customers to access the clipping database. Errors may immediately be traced back to the individual reader. There is a potential for mistrust.


Barrier 3: Decentralization not attainable

Example Trading Inc.

1. Situation
Trading Inc. plans to replace its centralized information management system by a decentral client/server solution. The objective is to give more responsibilities to their store managers. They are expected to operate as if they were owners of their stores. This is very different from current processes, where store managers receive direct orders and close supervision from Trading Inc. headquarters. For example did the central marketing department decide about local pricing by downloading article prices to the store PC`s. Now it is expected that store managers fix their own local prices and improve profitability at the same time.

2. Barrier
182 stores are switched over to the new decentralized system. It is planned to have the old centralized system in operation as long as the new client/server system is not up and running. During implementation a large number of store managers claim that the new system is not properly thought through. They maintain to having not enough time anymore to pursue their original job of increasing local sales. They express concerns that headquarters puts more pressure on them by assigning more clerical work to the stores. Trading Inc´s top management considers putting a hold to the project.

Underlying causes can be looked for in the areas of project content, people, and culture.





Root Cause 1: Vague Project Goals

The project has not been properly explained to the store managers. They believe to be forced to take additional load on to their daily work-load. Top management did not share the real intentions with the store-managers. These call for more individual freedom for decision-making, more opportunities for personal development, etc. If the store managers knew the real project objectives, they would actively pursue project activities on their part.

Root Cause 2: Missing Discipline

In the past, the store managers were always told what to do. Expect from keeping the store operations moving, keeping the store clean and care about personnel, they had no major decisions to take. The new decentralization concept requires more openness from them, more risk taking, more involvement, more training, and more teaching. Those store managers, who are not accustomed to organizational changes of that nature miss the discipline necessary to make the project a success.

Root Cause 3: Strong Control Culture

The Business Reengineering project requires a new culture within Trading Inc. Away from the strong centralized bureaucracy, with the virtue of efficient decisions and operations towards a more collaborative culture, with the virtue of situational decision making based on local customer care. There is a large difference between both types of culture (Schneider, 1994). The store managers may think that headquarters will not really make the move and will eventually return to law and order thinking and practices. So they may think it is not worth the effort to get too heavily involved in the project. It might even be dangerous for one's own career within the company, once the old control culture will be reestablished.


Some Root Causes of Internal Individual Resistance

The second area we are looking at is individual resistance (of type A) against project contents and project management. Next to Information Technology problems, this area is most often mentioned by practitioners when asked for Business Reengineering Implementation problems. It is also the area of most wrong decisions within a Business Reengineering project. When asked to give a reason for individual resistance, managers responsible for effective Business Reengineering, often act as lay psychologists by reading people´s character as being too rigid or too negative. On the other hand, affected people act the same: „This manager will never be able to change himself". often prevail misunderstandings and prejudices. There is ample room for improvement in changing the views of project teams and people affected in the organization regarding one another.

Firstly, individual resistance can be broadly differentiated into constructive and destructive resistance to Business Reengineering success. Constructive resistance is always positive towards the objectives of the project. Yet there is resistance against the ways and means, and sometimes people´s behavior, who run the project. Destructive resistance is meant to stop the project. Both types of resistance can be overt or covert. Open means, one can hear and see the resistance. Covert means, the resistance is not noticeable from the outside. Definitely dangerous for the success of a Business Reengineering project is covert destructive resistance, particularly in tense implementation situations.

Five Roles of Resisting Behavior

• The Behavior of the Critic

The critic communicates openly and demonstrates constructive behavior towards the project goals. She is not in line with various aspects of the project approach. She adds ideas to the project contents. Critics are valuable individuals for the projects successful outcome. It is important that the project initiator and the project team take the critic into close consideration.

• The Behavior of the Skeptic

The skeptic demonstrates a similar behavior to the critic. She does not tell everybody though. She is doubtful about various aspects of the project content and project management, yet talks only when asked. She is a valuable source of ideas towards the projects outcome.

• The Behavior of the Terrorist

The Terrorist seems to constantly warn everybody regarding a negative outcome of the project. She demonstrates openly her distaste of the project objectives and the way the project is run. Often the terrorist announces her own actions against the project. These should be taken seriously, since in all likelihood the terrorist makes her announcement true (Watzlawik, 1976).

• The Behavior of the Saboteur

The saboteur demonstrates an extremely negative behavior. Communication is overt. The project team has to carefully watch out for saboteurs. Saboteurs should have no chance to covertly destroy the outcome of the Business Reengineering project. Typically only very few people turn out to be saboteurs.

• The Behavior of the Undecided

The undecided does not show clear signals of being covert or overt, constructive or destructive. That makes this behavior dangerous to the projects outcome. When the project turns to the positive side though, the undecided tend to be constructive.

Examples of barrier:

Barrier 1: Constructive Resistance

Both overt and covert constructive resistance can be traced back to the domains of project management, the individual person and the culture of the organization.

Root Cause 1: Project Management Approach

Constructive behavior of affected people is very much based on the way, the project is being managed. If the project team asks for openness and behaves itself in a way that people can communicate without fear, than it may be expected that people freely discuss their thoughts about the projects content.

Root Cause 2: Personalities of People Affected by the Project

Well educated non-destructive personalities, mostly express themselves in ways that truly help a projects outcome. People are often known for their character. They seem to be not easy, yet valuable members of the organization.

Root Cause 3: Former Experiences

Former experiences with organizational projects forms the behavior of people. If the experience is negative, than the behavior towards the new Business Reengineering project may be negative. If the experience was positive, the behavior towards the project is positive. Thus the behavior of new people to the organization may collide with behavior of incumbents. Former success may breed resistance in a way that people believe there is no need for change.

Barrier 2: Destructive Behavior

Both overt and covert destructive resistance can be traced back to the domains of project content, project management, the individual person, the groups, and the structure of the organization, which affects the culture in turn, and the public.

Root Cause 1: Project Objectives

The approach the project team is taking, decides to a large extent about the development of destructive behavior. If the project objectives do not take the people side into consideration, and solely push the project towards technological goals, destructive behavior evolves as a consequence. Psychologically people resist against objectives they do not accept as their own. Therefore it is necessary to align personal goals with the project goals. This is particularly true for those Business Reengineering projects which are set up to downsize the organization.

Root Cause 2: Missing Change Momentum

A Business Reengineering project changes the way a company operates on a daily basis. This change forces everybody affected to change her working style. As long as the working style is considered new, management has to keep pressure, to keep the change momentum up. If this is not the case, there is a tendency to go back to the old style.

Root Cause 3:. Destructive Personality

Managers of Business Reengineering projects explain destructive behavior often with alleged destructive personality. Yet, as psychotherapist Erich Fromm pointed out, while on the one hand destructive behavior is increasing in the world of today, on the other hand, only a minority of people has a destructive personality. He claims it is the society, which for a large part is responsible for destructive actions, people take (Fromm, 1973). Society can allow destructive personalities under the „right" circumstances. Therefore, before a person is accused of having a destructive personality, it should be checked, whether circumstances in the organization support destructive behavior.



Root Cause 4: Group Pressure

Group pressure may yield destructive behavior. Group norms may force the group member to behave destructively, even if as an individual, the group member would have behaved otherwise.

Root Cause 5: Loss of Power over People

People, who lose power over people, may react with destructive actions. For example lost a supervisor power, with the introduction of self-directed work teams. He reacted by covertly sabotaging the team's working results. It is necessary to give the person a new role with a new responsibility, that is not to be identified with a loss of power.

Root Cause 6: Loss of Acceptance

Often the loss of power over people is a loss of status in the world outside the work-place. This feeling of loss by the affected person can influence her decisions and actions in destructive ways.

Conclusion


Business Reengineering is an approach to organizational renewal, that begins with customer needs and then moves to the work itself (Nadler/Shaw/Walton, 1995). As a result it tends to take a reductionist approach, in that proponents of Business Reengineering or IT/IS change may believe, everything else (structure, culture, people's behavior and motivation) will fall in place, once the reengineering has been done. This engineering mentality offers tremendous benefits through crisp and clear cut application of logic to the design of business processes, but also has a down side.

A large majority of Business Reengineering efforts begin with the redesign of processes and focus on the people side (members of the organization and customers likewise) only to the extent needed to ensure that the technical design can be implemented by humans.


The management of barriers, in particular regarding resistant behavior, is a new task that should complement the management of Business Reengineering implementation projects. The traditional approach to the management of barriers within Business Reengineering projects, masterminded by a top-down attitude to „people problems", has to give way to a Change Management oriented approach of recognizing people's valid concerns. Processes, systems, and structures can be adjusted mechanistically, but it`s people who are the critical success factor in making the new business processes work (Burlton, 1995).

Therefore it is necessary to review the people and culture oriented Change Management literature for intervention models, applicable to Business Reengineering projects. In Chapter 6 we will incorporate the findings in a framework of barrier management, that should be added to or replace the linear and technically oriented traditional approaches to Business Reengineering project management.

References:

http://informationr.net/tdw/publ/papers/1989ISstrat.html
http://74.6.146.127/search/cache?ei=UTF-8&p=Management+Information+System+Project+Management+for+the+Coral+Gables+Fire-Rescue+Department&vm=r&fr=yfp-t-152&fp_ip=PH&u=www.usfa.dhs.gov/pdf/efop/efo27900.PDF&w=management+information+system+project+management+coral+gables+fire+rescue+department&d=C1TQjd29TXFm&icp=1&.intl=us