Introduction
A brief overview of the case
Daksh is an Indian independent service provider in business process outsourcing (BPO). The Company was later on acquired by another multi-international corporation, IBM in a buyout that shows the coming of age of the BPO industry in India (Farhoomand, 2007, p.1).
Before the buyout, the global software business was going through a rapid transformation process which greatly impacted the way most Companies managed their economic activities. Relative to the unfolding events, IBM was out to strategize on ways of emerging tops in the business processes service provision including its acquisition of Daksh in July 2004 (Farhoomand, 2007, p.2).
This case study offers an elaborate description of the operations of the two Companies in India especially in the post-buyout era. The case also gives the post-buyout activities in IBM including the changes in industry dynamics from practicing BPO to accommodation of the Business Transformation Outsourcing strategy (BTO) within the Corporation (Farhoomand, 2007, p.6). The study also gives the missing link between the two market strategies (that is) BPO and BTO. Finally, the paper documents the post-acquisition integration activities within IBM (Farhoomand, 2007, p.9).
Aim
The report aims at analyzing and evaluating the Company’s situation in addition to identifying various pertinent issues as discussed in the study.
Scope
The report entails the analysis and evaluation of Daksh IBM’s business situation both externally and internally. Additionally, the report covers the identification of various pertinent issues that need to be addressed by the management in addition to providing an action plan and a set of recommendations that can be employed in correcting the problems and also in the realization of the goals and opportunities identified.
Analysis: Problems/Major Issues Identification
IBM was regarded as one of the largest computing service provider in the world especially through its effective service divisions such as IBM’s Global Services division also known as IGS (Farhoomand, 2007, p.2). The Company was also well known for selling solutions rather than products through its on-demand concept. However, the Company was faced with two major shortcomings. These were; lack of existence in the high-end consulting services and lack of strategies to develop technology-based service delivery.
The Company thus developed two more models to support IGS in service delivery. These were called the Global Technology Services (GTS) and Global Business services (GBS). Unfortunately, despite IGS being regarded as being strategic in helping IBM in provision of solutions to clients, it had failed in meeting the financial projections (Farhoomand, 2007, p.3). For instance, in 2004, it is documented that the strategy failed to meet the earnings and revenue marks. This prompted IBM to restructure some of its operations including the acquisition of Daksh.
What prompted Daksh to sell out to IBM instead of pursuing the much publicized IPO? IBM was being driven by its desire to expand its market advantages and thus it offered Daksh a handsome deal. Industry analyst’s document that IBM’s deal was potential big compared to the post-IPO market price that Daksh would have received.
But with the increasing customer demands and stiff competition, most Companies including IBM were struggling to acquire partnerships with other outsourcing Companies that would help in cutting the business cost on top of adding value to the business. This operation in cutting costs led to the birth of BTO. However, not all clients were comfortable with the transformation exercise and they preferred remaining with the more familiar BPO.
Discuss the issues that arise from M&A integration and evaluation. It can be noted that the criteria of organizational autonomy was observed during the integration of Daksh and IBM. It is documented that a light touch integration process is employed thereby allowing integration of the most necessary functions while leaving other operational units intact within the two Companies (Farhoomand, 2007, p.9). The preservation approach is also maintained through adaptation of Daksh’s original business values.
However, during the acquisition process, some workers found it hard to adapt some of the values of IBM especially the value of innovation. A symbiosis form of approach is also practiced in the integration process. Besides emerging as an important partner in the outsourcing industry, Daksh’s market abilities combined with the strengths of IBM has promised business transformations, cost efficiencies and business improvement (Farhoomand, 2007, p.10).
According to SWOT analysis the business should understand its strengths, weakness, opportunities and threats. Strengths refer to what the company is able to achieve effectively. After considering the strengths the business or company should evaluate its weaknesses so as to know how they can improve on them so that their not performance cannot be affected. The available opportunities to IBM should be analysed to that they can be utilised.
When opportunities are well analysed and understood help the company grow and expand. In addition, the company should be aware of their threat which is mostly caused by the competition in the market. Therefore SWOT analysis is very essential as it influences the performance of the business.
Alternative Approaches to Business Process Outsourcing
IBM Daksh should also try out other BPO thematic approaches other than the BTO approach in order to expand markets, lower costs and in shedding the non-core functions. These approaches include; successful offshore outsourcing, unsuccessful offshore outsourcing, reverse outsourcing and variable price outsourcing among others (Click & Duening, 2005, p.3).
Recommendations
As already mentioned in our previous discussion, the Company can employ a number of approaches with the aim of cost control, subcontracting non-core functions and market expansion. These include;
- Identifying and selecting the BPO opportunities before undertaking any projects
- Identifying and managing the costs of implementing BPOs
- Managing the BPO/BTO transition processes
- Management of business risks and mitigation strategies
What role should IBM Daksh play in IBM’s overall strategy? The overall strategy of IBM is to expand its market and enabling cost efficiency for its clients. Therefore, IBM Daksh provides an opportunity of working with a diversified range of clients.
Justification of Recommendations
Studies indicate that BPO is not necessary for every Company or process. Thus, it is the duty of the management to identify and select the most appropriate BPO approach for a given Company or process in order to minimize losses incurred on unnecessary BPO processes. Identification and management of BPO costs is very critical since cost is part of the BPO decision. One has to choose between making and buying a service.
Making involves utilization of the internal capabilities in service provision while buying involves outsourcing the service (Click & Duening, 2005, p.70). Management of BPO involves all the processes that are involved in the BPO project starting from the determination of the processes to be outsourced, developing contracts to selecting and identifying business partners. It also involves management of risks associated with the implementation of BPO (Click & Duening, 2005, p.135).
Conclusion
The report has given an elaborate analysis and evaluation of IBM Daksh Company’s current situation employing the SWOT analysis method. The analysis also identified some pertinent issues that need the attention of the management in order to control costs, expand market and to provide for customer satisfaction. Recommendations to these issues are also provided in addition to the importance of implementing these recommendations.
Reference List
Click, L.R. & Duening, T.N. (2005). Business process outsourcing: the competitive Advantage. New Jersey: John Wiley & Sons, Inc.
Farhoomand, A. (2007). Daksh and IBM: business process transformation in India. Part 2-Post-Buyout years. The University of Hong Kong: Case Research Centre.