Outsourcing is a way in which organizations allocate some of their activities and departments to outside firms. Business organizations usually give out some of their departments that are not the main line of their business to be managed by other firms.
This is done to relieve these organizations off some duties and activities to facilitate their effective fuctioning without having a lot of side activities to run. This case study will look into how Continental Airplane outsourced its Information Technology department to the Electronic Data System (EDS) in the 1990s. This agreement between the two organizations came out with both positive and negative impacts.
What to do
Janet Wejman, the Chief Information Officer of Continental Airlines at one point questioned the agreement between Electronic Data System (EDS) and the Continental Airline. There were a lot of changes taking phase at Continental, and the changes led to some strains in the agreement between the two organizations.
After passing through a lot of different situations when changes were taking place in both Continental and Electronic Data System, Wejman should now approach Electronic Data System differently. Wejman earlier believed that information and data management in a company is too sensitive to be outsourced. She should now view EDS as a partner to work with in boosting the company using information and technology. Therefore, she ought to see the importance of outsourcing and also consider EDS’ goals in the agreement too.
Approach and Changes
Over the years, Continental Airline has been experiencing changes in its management, financial base and customer relations. This series of changes necessitated changing needs for Continental Airline. For instance, looking at the changes in the management of Continental in the year 1995, it is noted that a new goal for the airline was realized. This change in management that entailed replacing more than half of the existing vice presidents led to making of huge profits after a long period of little gains.
As a result, this caused the airline to change from seeking to cut on their cost of business to viewing the importance of information and technology. To meet this new need of Continental, there must be a change in the initial agreement. Initially, Electronic Data System had a main role of data processing, system development and integration. This has to change to a view where IT will be discussed and its importance to the airline outlined too. EDS has to move from just building and maintaining systems to the consulting part.
Another issue that came out from the change in management is the broken relationship between EDS and Continental. Most of the personnel and managers that were present during the signing in of the contract dropped out after the management changes in 1995 implying that only a few people had firsthand knowledge. Both Continental and EDS will have a new need of maintaining their relationship. To meet this, it would be necessary to create more partnerships and discussions between the two companies.
Original Agreement
EDS insists on complying with some terms of the original agreement even though it is evident that some changes have to be introduced. Therefore, Wejman has to be flexible when dealing in things involving the agreement between EDS and Continental. It becomes easier for her when she learns that the management is so much willing to use IT in solving its problems, and it is also ready to invest in that.
his shows that the management of Continental is going to allow new technology in and therefore, Wejman can introduce such technologies when trying to be flexible. (Sparrow, 2003)
In the original agreement, the two were not so much closed to each other. None of them was restricted to go ahead and have a similar contract with another party. Continental was free to seek other service providers for circumstances that are special. On the other hand, EDS was also allowed to provide its services to other customers.
EDS persisted in this term of the agreement until it coordinated a large number of activities having seven airline clients in the United States. This makes Continental Airlines to be a small portion of the business, a state it did not want to be in. Wejman as the Chief Information Officer should be able to get other partnerships or making new deals with EDS to help out in this scenario.
Failing to fit into the agreement might see Continental Ailrines going through tough times since it did not have the fundamentals to manage all the required programs, software and hardware then. There is much need for well managed programs and technological information in a business.
Through IT user friendly, systems are developed and there is also enhanced speed for customer processes (Sparrow, 2003). Therefore, Wejman should be flexible in a way to make sure these terms of agreement that EDS complies to are considered or a better alternative is taken in cases of impossibilities.
Continental relies so much on EDS for its technological dealings. This is not bad, but it has to be kept on check always (Brown, 2005). Janet Wejman as the head of information has the duty of managing this reliance of Continental on EDS for technological needs. For example, Continental had to rely on EDS again in implementation of technical changes in the Go Forward Plan.
This ended up with some managers complaining that EDS did not play its role in the implementation. The ASAP system is another example to prove the problems caused by Continental’s over-reliance on EDS. This system was an initiative to help the customers’ experience to be efficient and better. There was a delay in bringing out ASAP, and the blame was on EDS once again.
Wejman should ensure that when technological duties are assigned to EDS, they are followed up to avoid the inconveniences. With this, she would have helped reduce the consequences of relying on EDS so much. She can also manage the reliance of Continental on EDS for technological needs by seeking other service providers for some services. Wejman should also manage this by checking at the levels of interaction between the personnel of Continental and those of EDS.
When we have some managers passing their technical needs to Wejman’s staff before reaching out to the EDS, we might have the needs solved at that level. This is possible for technical needs that are less urgent and severe. In this way, the reliance on EDS would have been managed a bit.
Outsourcing is very crucial and at the same time important to an organization. Therefore, there is no need to avoid it but to manage its extent. Outsourcing helps the client business to focus on other important areas that comprise the firm’s core activities. It also gives the business an opportunity to get some services from qualified personnel (Mclvor, 2005).
References
Brown, D. (2005). The Black Book of Outsourcing. Chicago: Wiley Publishers.
Earl, M. J. (1998). Information Management: The Organizational Dimension. Oxford: Oxford University Press.
Mclvor, R. (2005). The Outsourcing Process: Strategies for EEvaluation Management. Cambridge: Cambridge University Press.
Sparrow, E. (2003). Successful IT Outsourcing. London: Springer Publishers.