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Enterprise Architecture: Outsourcing Opportunities

Ralph’s Ribs Outsourcing Opportunities Recommendations

As Ralph’s Ribs moves into the standardized technology phase, outsourcing must be considered. Outsourcing can lower costs, provide greater flexibility, and will give Ralphs the opportunity to concentrate on core processes while leaving the noncore activities to experts in their field.

Recommended Activities for Outsourcing

Of the three types of outsourcing; strategic partnership, co-sourcing alliance or transaction relationship, a strategic partnership would be the most beneficial for the time being. Ross, Weill and Robertson (2006) tell us that, “In a strategic partnership, vendors provide an integrated set of operational services.” By outsourcing noncore activities, Ralphs can benefit from the expertise readily available, and can avoid reinventing procedures that already exist.

The biggest benefit for Ralphs will come from outsourcing the IT infrastructure management. Without even an IT support team available, Ralphs is sorely lacking in computer expertise. Outsourcing here will provide Ralphs with the IT proficiency they require, and will free them to concentrate on sales, marketing, distribution, and retail execution. In order to remain consistent with Ralph’s plans to move towards more standardized technology we would like to recommend an IS Lite organization model similar to the one implemented by Campbell in 2002. According to Ross, Weill, and Robertson (2006), “In an IS Lite model many traditional IT services (applications development, maintenance, and computer operations) are outsourced.” (Ross, Weill, and Robertson, 2006)

It makes sense for Ralph’s Ribs to outsource their IT infrastructure management because they currently lack the capability of running their own IT department. To get the IT infrastructure under control, Ralphs would be forced to hire an entire team to oversee the necessary IT improvements. This team would need to be trained, and not only would it be time consuming, but it would also create an unnecessary fixed cost. XYZ Corp already has people in place who know how to run this type of operation. Working closely with top management at Ralphs, this team can quickly and efficiently bring the IT infrastructure up to speed. Outsourcing to the team from XYZ Corp will turn the IT infrastructure from a fixed cost to a variable cost while improving IT services and support. (All Business, 2008)

Financial Impact

Although the financial impact from outsourcing the IT infrastructure management will be incredible, cost savings alone are not the only benefit Ralphs will derive from entering a strategic partnership with XYZ Corp.  Strategic planning and the speed with which changes can be implemented also provide excellent financial benefits. Doreen Wright, the CIO for Campbell, is quoted in the book Enterprise Architecture as Strategy as saying, “if you can find someone who can to it is well or better at an equal or lower cost, why would you not do that?” At this juncture, it is essential that management be allowed to concentrate on core practices that differentiate the company from their competition. Outsourcing the IT infrastructure management can provide the cost savings that will allow this to happen. (Ross, Weill, and Robertson, 2006)

Legal Considerations

There are several legal considerations to keep in mind as Ralph’s Ribs considers outsourcing their IT department. First and foremost is the matter of ownership. Who will own and control the technology and intellectual property that are created for this project? What is the partner company allowed to do with the technology once it has been produced, and what actions will be restricted? What milestones have been agreed upon, and what will happen if milestones are not met on time? Other legal considerations may include foreign regulations, export control regulations, and privacy issues. These and other ownership, development and implementation questions including liability issues, dispute resolution, and infringement enforcement will need to be agreed upon before production can begin. (Patel & Pais, 2004)

Projected Benefits from Outsourcing

In conclusion, the benefits Ralph’s will gain from outsourcing their IT infrastructure management include cost savings, flexibility, and the ability for management to concentrate on core processes while noncore processes are handled by a team far better suited to the task. Management does not need to be overwhelmed by the inner workings of the IT infrastructure. It is far more important for these people to be involved with introducing the new standardized technology, and in leading their teams through the expected adjustment period.

Sources

All Business, (2008). The benefits of outsourcing for small business. All Business A D&B Company, Retrieved August 24, 2008

Patel, R. P. & Pais, R. M. (2004). Software outsourcing offshore - Business and legal issues checklist. Retrieved August 24, 2008, from Fenwick & West LLP Web site

Ross, J., Weill, P., & Robertson, D. (2006). Enterprise architecture as strategy. Boston, Mass: Harvard Business School Press.