Case Number: 5-107-013, Year Published: 2009
HBS Number: KEL308
Outsourcing, Information Technology, IT, Infrastructure, Return on Investment, ROI, Financial Engineering, Business Case, Strategy, Fixed Price
This case is designed to teach how to structure information technology (IT) infrastructure outsourcing deals from both the outsourcer and the client perspective. Office Supply Incorporated (OSI) is a company in crisis, with challenges in its cost structure and poor IT performance. Outsourcing to Technology Infrastructure Solutions is an opportunity to both reduce costs and complexity for the firm, but students first must consider whether outsourcing is a good strategic fit for OSI. Detailed spreadsheet templates are given that are based on a real outsourcing client engagement for a major infrastructure outsourcing company. The spreadsheets are complex but have been simplified so that they automatically calculate when populated, allowing the students to quickly move to answering the management challenge: how should TIS price and structure the outsourcing deal? Answering this question provides deep insights into the business case for IT outsourcing and how outsourcers financially engineer a deal structure to ensure a win-win outcome for both the client and outsource service provider.
Students will:—Understand the strategic context of IT outsourcing and when it will benefit a firm—Understand IT infrastructure outsourcing and management issues such as personnel reductions and organizational change—Learn which outsourcing pricing model is the best fit for a project—Create a rigorous cost-benefit financial analysis and ROI model for IT infrastructure outsourcing—Analyze the model and learn how to financially engineer the deal to be a win-win for the outsourcer and client
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