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... pany is huge and well managed. Xerox would fall into the huge category but not the well managed. The Development Portfolio factor would also suggest outsourcing is a viable solution for Xerox. Most of Xerox IT functions can be described as high-structure projects therefore the benefit of going to outsourcing could realize itself in o Lower cost due to the a vendors access to high quality low cost labor pools in countries such as India o Specialized staff with leading edge technical skills The Organizational Learning Factor and Xerox's position in the market also leads to outsourcing. Xerox has not been able to transform the IT structure because of a lack of support among the division leaders.
A vendor would be more apt to get the attention and resources need for a complete transformation. Xerox has serious challenges in modernizing itself from the legacy systems it uses. The outsourcing vendor could not afford to keep the old system running; therefore they will force a change to a modern system. The vendor will have the expertise in transitioning the company to the new system so most issues can be avoided. The Current IT Organization factor does not lead to outsourcing as the logical choice. The IT unit is not stand alone and has not developed the fundamental integrating and control mechanisms necessary for an outsourcing contract.
Even though one of the five factors is not fulfilled, the other four shows such a strong bias towards outsourcing that Xerox made the right decision. Once the decision to outsource had been made Xerox needed to find a partner. The first step in the process was Fact Gathering which included literature search and request for information. The second phase was Request for Proposal and Data Gathering. Only two vendors and one vendor team formally responded to the request. The complexity of the project caused most companies to drop out.
The third phase, Feasibility and Management Approval, was passed leading to phase four, Baseline Building and Evaluation. The criteria Xerox used to evaluate the proposal were: Vendor Qualifications o Global Presence o Capability to" Manage Globally o Experience in large scale outsourcing o Core strengths in various frameworks o Desire to create a different outsourcing environment o Management Process and strengths Human Resources o Treatment of Xerox Employees o Human Resource Values Technical Solutions o Overall productivity commitment: percent and credibility o Support for existing Xerox divers environments o Capability to help migrate Financial o Translation of productivity savings to Xerox o Flexibility in meeting Xerox Financial requirements o Experience in "engineering" financial environments "Soft" Criteria o "Congruence" with positive Xerox cultural traits o Provide benchmark for desired Xerox cultural traits After review of the criteria one vendor was eliminated. The choice between the other two came down to a large global company with the right cost structure verse a smaller company with the right "cultural match." The final phase, Due Diligence and Contract Awarded had Xerox chose the company with the right "reach" and hoped the cultural issues would be an advantage to initiate change. Xerox took a large risk by choosing a company, EDS, with a different business culture. Sometimes a difference in culture can cause a relationship to strain and eventually fail, especially over a ten year period. The next step for Xerox was to structure the outsourcing relationship.
Xerox needed to create a shared vision, to do this they formed a team consisting of three Xerox employees and three EDS employees. Once trust was established, the strategic relationship could develop. The two contractual issues that presented the biggest challenge were divorce issues and pricing issues. Pricing issues were solved by using benchmark mechanisms. Divorce concerns were not adequately resolved. Xerox took a huge risk in not having a formal exit strategy.
Xerox should have negotiated the right to hire EDS employees working at Xerox if the relationship failed. Putting so much faith in one vendor without a backup plan could cause a company to commit business suicide. The final issue, Global Complexities, was solved by bringing in a new team member with international experience and making sure EDS would be compensated fairly. The implementation of the contract ran smoothly because of the partnership which was developed between the two companies. The outstanding issues were, the structure of the organization, the IM operating process, the management process and the human resource management issues.
The outsourcing decision looked good at this time but after doing further research some serious issues arose. 1996 - 1997 o Xerox Satisfaction was at the low end and dropping o 2000 employees transferred to EDS, 700 remain o After 2. 5 years 15 % of proprietary software replaced o 600 Novell LAN's installed o 1000 desktop replaced o 12 person Xerox management team established o Contract Amended in 1996 o Clarified Desktop and LAN Support o Established formal response metrics o Established "Management Rate Change" o Eliminated Billing Inconsistencies In 1999 EDS sued Xerox over stopped payments of $ 200 million dollars. The issue was billing disputes between the companies. The relationship seems to have weathered the storm and a new contract was signed to the year 2010. The lawsuit shows there were major issue in the relationship between the two companies.
Profits for EDS were lower than originally projected, therefore to make a profitable arrangement EDS cut back on services. These cutbacks eventually led to a malfunction of Xerox billing system which grounded the company to a halt. Xerox expected a company to clean up a mess they could not solve but did not cooperate fully. Both companies decided the pain of working without each other was greater than the pain of working together so they have made the partnership work. If EDS had walked out, Xerox could have been destroyed. The other vendor might have been a better choice due to the business culture issues that developed, but outsourcing IT services was the right decision.
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Research essay sample on Xerox Cultural Traits Pain Of Working Outsourcing