Background of the research
Lacity and Willcocks (2013) stated that business process outsourcing is a process of contracting of operations and responsibilities of a business unit to other business service provider. Business people also prefer to outsource some of their business unit to a third party service provider in order to make the work process easier to handle. Moreover, Hossain and Ahmed (2014) also portray that one of the prime reasons due to which an organization desires to adapt outsourcing is focusing more on core business operations. Lacity and Willcocks (2017) furthermore depict that outsourcing saves money on labor and operational costs. In this research report, the process of IT outsourcing of a retail industry is focused and also comprised of the research aim, objectives and questions will be illustrated.
Background of the company
Wesfarmers is the leading conglomerate industry in Australia and their retails department also leads the retail market of the concerned nation. The organization has incurred an annual profit of $65,981 million and $62,447 million in the year 2016 and 2015 respectively (Wesfarmers.com.au 2017). In recent times, Information Technology grows to such an extent that almost all the retail operations can be accomplished through this approach (Gerbl et al. 2016). In context, of the retail industry, starting from maintaining inventory, tracking supply chain, advertising brand’s facility to communicate with the customers can be completed effectively. Throughout many years, Wesfarmers have used information technology for established themselves in social media, incorporate supply chain process for effective delivery system and maintaining their staff’s details without any redundancy of information.
The major aim of this research is to evaluate the IT system that is outsourced by retail, organization, Wesfarmers through a third party service provider. Moreover, the research will also focus on the advantages and disadvantages of this IT service outsourcing.
- To evaluate the IT services that are outsources by a retail organization.
- To find out the advantage of outsourcing of IT services in a retail organization like Wesfarmers
- To investigate potential disadvantage that retail industry can face by outsourcing IT services
- To recommend strategies to diminish the challenges raised by outsourcing IT services
- What are the major IT services that are outsourced by a retail organization?
- What are the advantages of outsourcing of IT services in retail organization like Wesfarmers?
- What are the potential disadvantages that retail industry can face by outsourcing IT services?
Overview of outsourcing
Gerbl et al. (2015) portrays that Business process outsourcing (BPO) is a process of giving the liability of handing a specific work processes to a third party provider so that that particular department can be maintained well. Jeston and Nelis (2014) in this context mentioned that usually an organization offers this liability to other external, group as they do not have much expertise in that field. The usual processes or business operations that can be outsourced are- payroll system, accounting systems, telemarketing, social media marketing and customer support (Ahmed and Javed 2015). There are three different factions and an organization uses the appropriate faction that is best suitable for their business.
Khan and Fitzgerald (2016) stated that in this type of outsourcing, an organization selects vendors that do not reside in the same country to which the organization belongs. This outsourcing of business operations can be witnessed when an organization desires for an expansion. The benefits that a businessperson can attain through this outsourcing are higher cost savings and access to highly skilled labor.
This outsourcing resembles a situation in which a businessperson collaborates with an external third party service provider having similar culture and language skills (Gerbl et al. 2014).
Lacity et al. (2016) mentioned that onshore outsourcing illustrates that an organization collaborates with a vendor that reside in their territories and handle a department of the business
IT services that retail industry outsourced
In recent times, retail organization can cultivate loyal customers through different innovative options like- customer-oriented merchandising and marketing solutions (Lacity and Willcocks 2017). Moreover an organization also has to maintain digital customer engagement solutions and a customer care solutions so that every query of the customers can be solved through a customized solution. Thus, allowing an IT firm to perform the digital customer engagement process through customer data integration (CDI) strategy (Fisher et al. 2014). Through this method, the IT professional automate the reconciliation and integration of corporate data in order to fulfill both operational and analytical needs. This strategy also resembles data warehousing.
Image: Customer Data Integration (CDI) Framework
(Source: Fisher et al. 2014)
The framework “Customer- Centric stages of excellence (SOE)” can also be incorporated within the organization along with the master data management (MDA) credentials (Lacity and Willcocks 2013) (See Appendix, Figure 2). These frameworks help the organization to consider all the data and customer’s concern for developing effective organizational strategies.
Maintaining data of the organization
Retails organization have to maintain details of the inventory, staffs and employees. In conventional time these details are maintained manually in files and have to cross checked in a regular interval of time. This process not only needs much time but risk for inaccurate scrutiny is also high (Jeston and Nelis 2014). Thus, it can be said that, if a retail organization collaborates an IT service provider and they on their behalf formulate a relational database management systems for managing all the data so that redundancy among the stored data and information can be avoided. Moreover, the company also uses latest technology like cloud computing technology and big data concept so that more data can be stored and manipulated (Khan and Fitzgerald 2016). This incorporation of cloud computing technology allows organization to store all their important details with appropriate protection.
Supply Chain services through IT service
In conventional days, the orders have been placed through telephones or by physically visiting to the store and organization’s transportation services were used to deliver the order. However, in recent times, this process is incorporated with IT facility. Starting from the maintenance of all the details of the suppler, manufacturer, distributors, retails and customers is handled by these IT professionals. This incorporation helps the organization to accomplish the delivery system more accurate and fast (Ravichandran 2015).
The third party can take full responsibility of implementing technology like RFID technology; track all the details of the products. The technology that they formulate also allows the organization to monitor the stock of their inventory and automatically generates a message when their stocks need to be filled again (Brooks et al. 2016). Moreover, these third parties also manage Advanced Weighing Technology that allows seamless operations in managing and tracking trucks. Lastly, implementing Transport Management Software is also a supply chain management technology that helps to integrate all operations from one panel for organizing inventory data, manage shipping and monitor distribution along with bill (Su et al. 2016). This technology also allows the organization to take booking that is ordered by the customers, distance management, formulation of manifest, fleet management and cash flow management.
Image : Transport Management Software
(Source: Su et al. 2016)
In this era of modernization, online presence has become crucial as more people are using internet and businesspeople must target website presence. The third party also maintains the brand reputation in the community (Ravichandran 2015). The party is liable to maintain all the product details, relevant images and copyright content of the organization along with the management of social extensions, call extensions, location tracking and extensions, keyword matching and sitelinks. This technique is majorly accomplished through the management of pay per click.
Moreover, these party will effectively calculates all the ROI and internet traffic so that they can identify the effectiveness of the organization. Moreover, these It specialist service provides can also handle the social media marketing through Facebook, YouTube and Twitter (Su et al. 2016). The comments post by consumers and their respective feedback are also marinated by this third party. These providers are also liable for conducting cost/benefit analysis.
Advantages of IT outsourcing in retail industry
Schniederjans et al. (2015) stated that outsourc9ong the IT service to another party allows them to reduce the cost in inventing in giving training to their employees. An employee is capable of doing the organizational work most effectively but they might not equally gain expertise in information technology. Thus, giving training to them will result in loss of financial resources. Thus, hiring an IT third party provider, an organization can focus on their core business functions and improve their productivity (Pearce 2014). Moreover, the IT experts, who also maintain the customer loyalty and management, also carry out the database creation and management by leveraging information technology expertise. These providers also formulate a customized IT system for their organization that can work according to the set organizational goals and objectives (Graf et al. 2013). Outsourcing the IT services also help in obtaining data security and deliver effective analytical process so that they can identify the position of the organization in the community.
Disadvantages of IT outsourcing in retail industry
Event though outsourcing a business operation to third party enhance the effectiveness and consistencies of the business performances but this process also suffers from some challenges (Schniederjans, Schniederjansand Schniederjans 2015). One of the most crucial challenges is the risk of confliction. It is evident that not all service providers’ works with same goals and it is hence importance to align all of their business procedure in order to satisfy the organizational goals. However, absence of this creases misunderstanding and conflict. Moreover, another challenge is risk of losing sensitive data and the loss of confidentiality.
Moreover, there is another risk that is lack of control in handling operations and deliverables of activities that they outsource. This is one of the major reasons of conflicts. Thus process also disallows the organization to monitor the actual; data and progress of their business (Chua et al. 2015). Lastly, problems with quality can arise if the selected service providers are not ethical. Furthermore, their competencies regarding the recent technology are also difficult to identify.
In this research work, positivism research philosophy is taken into consideration. There are three kinds of research philosophies- positivism, realism and interpretivisim (Mackey and Gass 2015). Positivism research philosophy offer factual knowledge regarding the research topic and provide quantifiable observations. Thus, accurate research results can be obtained. In context of this research, positivism philosophy helps to evaluate the advantage and disadvantage of the IT outsourcing.
In this research, the deductive research approach is selected. Taylor, Bogdan and DeVault (2015) stated that there are two type of research approaches- deductive and inductive. Inductive approach signifies the formulation of new theories and models regarding the research topic and helps to assess all the research objectives. Thus, it can be said that deductive research approach will be used so that all the research objectives can be evaluated through previously developed theories and model.
Among all the three research purposes that are explanatory, exploratory and descriptive research purposes, deductive purpose will be used. The reason behind selecting this process is to find out advantages and disadvantages of IT services outsourcing that can be obtained through descriptive study of the literature obtained.
The process of collecting data for the research can be done through two ways- primary and secondary data collection methods (Mackey and Gass 2015). In this research study, the data will be primarily collected from the employees and managers of the Wesfarmers. The employee will be presented a questionnaire of 15 questions through which oit can be determined what advantages and challenges they are facing through IT outsourcing. Moreover, some question will also be asked from the managers so that most effective advantages and disadvantage of IT outsourcing system in their retail business can be best evaluated.
Silverman (2016) mentioned that data is analyzed through two ways- quantitatively and qualitatively. In quantitative data analysis, the data obtained from questionnaire will be analyzed. These data will be analyzed through finding out the central tendency by evaluating mean, median, mode and standard deviation. The tool that will be used is Microsoft Excel. Moreover, the answers given by the managers will be evaluated qualitatively. This process is selected because in this way, accurate aspects of the IT outsourcing for Wesfarmers can be evaluated.
The research will be conducted by following all the research ethics. All the research respondents are provided with a concert form, which can be considered as a proof that they will be participated at their own will. The data obtained in the research will be protected by following the legislation of Data Protection Act 1998. It will also be noted that all the obtained research data will only be used for this research purpose and not for any other business benefits. Moreover, no respondents will be verbally harassed and their thoughts will not be imposed on any respondents.
It is expected that the research result will show that outsourcing the IT services of the Wesfarmers is beneficial as it allows them to focus more on the core business operations. Moreover, some of the business adversities that can be raised for outsourcing IT functions can be expected to overcome through effective employee training and regular communication with the IT service provider. It is expected to find that conflict arising is the most agreed reason regarding the disadvantage of the IT outsourcing. The gap that is identified in this research is that no probable solution is suggested for overcoming the disadvantage in terms of IT services outsourcing. Thus, in future it is expected that incorporation of potential solution for overcome this adversity will also be suggested in this research.
Thus, it can be said that the entire research will be conducted to find the advantage and disadvantage of the research. The data will be collected primarily so that accurate details of the research can be obtained. The business operation that is selected to outsource is Information Technology. These obtained data will be cross checked in terms of Wesfarmers.
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