IT Strategy of an Outsourcing Firm in the era of Multi Vendor Environment / Averil M. Rescober

Year : 2011
Number of Pages : 77 leaves
Adviser : Prof. Edison D. Cruz

Abstract

This project focuses on Hewlett Packard - Technology Solutions Group, one of the business units within the whole HP enterprise that provides outsourced IT services to other enterprise companies. First in the analysis is that of the present task environment which encompasses the company's customers, suppliers and competitors in which it was presented that the main customers of HP-TSG are the enterprise customers. It has established strong partnership with its suppliers and there are at least 2 other key players in the segment of the industry in which HP-TSG competes. For the analysis of the competitive environment, Porter's 5 Force Model of Competition framework is used where it was concluded that the threat of new entrant is high, threat of substitute product is low, bargaining power of consumers is high, bargaining power of suppliers is low and rivalry among competition is high.

The six segments of the macro environment were further analyzed in order to uncover potential changes in the macro environment that can affect the IT Outsourcing Industry. Some of the opportunities presented include increase in IT spending and growth of outsourcing business, good incentives of IT business from the government, technological innovations, establishment of IT institutions and advancements in infrastructure. On the other hand, some of the threats include the number of IT graduates is not sufficient to meet the demand for IT roles, decline in global economy, war and terrorism, and slow growth in servers and storage markets. In order to understand the structure of the industry and try to understand the differences in the performance of firms in the same industry, the framework on strategic map was used where it was found out that HP belongs to the same group as companies which lead in developing new technologies in the IT outsourcing industry.

Next in the analysis is the internal environment and the following were determined, HP's strengths include capabilities to partner with the leading software developers and infrastructure companies in the industry, provide quality IT service to the customers, deliver services to customers across the globe, offer end-to-end IT solutions and mission-critical, standard and/or customized services, build strong brand identity, win deals in the market by leveraging on established processes for deal pursuits and engagements, provide quality post-implementation support to customers, develop advanced and innovative IT tools and technologies, train employees and support its administrative processes through an integrated information system. Weaknesses include limited industry vertical and consulting focus, low institutional adoption and no large scale delivery hubs outside India despite high spread of global delivery portfolio.

Upon analysis of the external environment in which the company competes and internal analysis to determine the company's value chain, strengths and weaknesses, a number of objectives  have been proposed :

- To renew / extend the contract with HP-TSG's biggest enterprise account by 2013

- To grow the business in the white spaces and services held by other vendors in this huge enterprise account/client.

- To maintain and further improve operational excellence and customer satisfaction reflected in customer rated scores.

In order to attain these objectives, the following firm strategies are proposed using Porter's Strategy Formulation Framework. These strategies are created in consideration of both business and technology needs and opportunities :

- Increase the mix of services portfolio and deepen expertise by industry verticals

- Lower IT service delivery cost thru automation and shifting elements of work to lower cost models

- Technologically enable the client thru increased focus in innovation

In order to implement the strategies, the 7-S framework was used to evaluate what capabilities the company needs to develop in order to implement the recommendations. It involves looking at the strategies, structure, systems, style, staff, skills and superordinate goals to ensure over-all effective organizational change.

A number of written literatures have been found on the topic of multi vendor competition in the IT outsourcing industry and it was concluded that HP-TSG should continue to implement the proposed strategies in order for it to become the preferred supplier/vendor and the customer shall enjoy significant value in keeping them. All the proposed strategies in this project should be in HP-TSG's playbook in order for it to win in the market.