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Harvard Case - Building Innovation into the Outsourcing Relationship: A Case Study

"Building Innovation into the Outsourcing Relationship: A Case Study" Harvard business case study is written by Ron Babin, Cheryl Schuster. It deals with the challenges in the field of Information Technology. The case study is 6 page(s) long and it was first published on : Oct 23, 2012

At Fern Fort University, we recommend a strategic approach to building innovation into the outsourcing relationship with Infosys. This approach focuses on fostering a collaborative environment, leveraging technology for continuous improvement, and aligning incentives for mutual success. This will involve a multi-pronged strategy encompassing organizational change, process optimization, and technology adoption.

2. Background

This case study revolves around Fern Fort University, a mid-sized private university facing increasing pressure to innovate and improve its IT infrastructure. To address this challenge, the university decides to outsource its IT operations to Infosys, a leading global IT services provider. The case study highlights the initial challenges faced by the university in managing the outsourcing relationship, particularly in fostering innovation and ensuring seamless integration.

The main protagonists are:

  • Fern Fort University: A mid-sized private university seeking to modernize its IT infrastructure and improve its competitive position.
  • Infosys: A global IT services provider tasked with managing Fern Fort University's IT operations.
  • The IT Steering Committee: A group of university leaders tasked with overseeing the outsourcing relationship and driving innovation.

3. Analysis of the Case Study

The case study reveals several key challenges that hinder the successful integration of innovation within the outsourcing relationship:

1. Lack of Collaborative Culture: The initial relationship between Fern Fort University and Infosys is characterized by a transactional approach, with limited collaboration and knowledge sharing. This hinders the identification and implementation of innovative solutions.

2. Siloed Operations: The university's IT department operates in silos, with limited communication and integration with other departments. This hinders the adoption of cross-functional solutions and limits the potential for innovation.

3. Limited Use of Technology: The university's IT infrastructure is outdated and lacks the capabilities to support innovative solutions. This hinders the adoption of emerging technologies like AI and machine learning, cloud computing, and data analytics.

4. Misaligned Incentives: The outsourcing contract lacks clear incentives for Infosys to prioritize innovation and align its efforts with the university's strategic goals. This leads to a focus on cost optimization rather than value creation.

5. Lack of Change Management: The university fails to adequately prepare its employees for the transition to outsourcing and the adoption of new technologies. This creates resistance to change and hinders the successful implementation of innovative solutions.

4. Recommendations

To address these challenges, Fern Fort University should implement the following recommendations:

1. Foster a Collaborative Culture:

  • Joint Innovation Workshops: Organize regular workshops involving both university and Infosys personnel to brainstorm ideas, share best practices, and identify opportunities for innovation.
  • Knowledge Sharing Platforms: Establish online platforms for knowledge sharing, including case studies, success stories, and technical documentation.
  • Cross-Functional Teams: Create cross-functional teams involving IT personnel, faculty, and students to develop and implement innovative solutions.

2. Leverage Technology for Continuous Improvement:

  • Cloud Migration: Migrate critical IT infrastructure to the cloud to improve scalability, agility, and cost efficiency.
  • Data Analytics Platform: Implement a data analytics platform to gain insights from university data and identify areas for improvement.
  • AI and Machine Learning: Explore the use of AI and machine learning to automate tasks, personalize learning experiences, and improve operational efficiency.

3. Align Incentives for Mutual Success:

  • Performance Metrics: Define clear performance metrics that align with the university's strategic goals and incentivize Infosys to prioritize innovation.
  • Value-Based Pricing: Move away from a purely cost-based pricing model to a value-based model that rewards Infosys for delivering innovative solutions.
  • Shared Risk and Reward: Establish a framework for sharing both the risks and rewards associated with innovation initiatives.

4. Implement Effective Change Management:

  • Communication Strategy: Develop a comprehensive communication strategy to keep all stakeholders informed about the outsourcing transition and the benefits of innovation.
  • Training and Development: Provide training and development opportunities for university employees to enhance their digital skills and prepare them for the new IT environment.
  • Employee Engagement: Foster employee engagement through regular feedback mechanisms and opportunities for participation in innovation initiatives.

5. Establish an IT Governance Framework:

  • IT Steering Committee: Strengthen the role of the IT Steering Committee to provide strategic oversight and ensure alignment between the outsourcing relationship and the university's strategic goals.
  • Service Level Agreements (SLAs): Develop comprehensive SLAs that clearly define the scope of services, performance expectations, and innovation targets.
  • Regular Reviews: Conduct regular reviews of the outsourcing relationship to assess progress, identify areas for improvement, and ensure that both parties are meeting their commitments.

5. Basis of Recommendations

These recommendations are based on the following key considerations:

1. Core Competencies and Consistency with Mission: The recommendations align with the university's mission to provide a high-quality education and promote innovation. By leveraging Infosys's expertise in IT services, the university can focus on its core competencies while driving innovation in its IT infrastructure.

2. External Customers and Internal Clients: The recommendations aim to improve the experience of external customers, such as students, faculty, and alumni, by providing a more reliable and user-friendly IT environment. The recommendations also aim to enhance the experience of internal clients, such as university staff, by providing them with the tools and resources they need to perform their jobs effectively.

3. Competitors: The recommendations help the university stay competitive by adopting emerging technologies and improving its IT infrastructure. This will enable the university to offer innovative learning experiences and attract top students and faculty.

4. Attractiveness ' Quantitative Measures: The recommendations are expected to generate significant benefits for the university, including:

  • Improved IT Infrastructure: A more reliable and efficient IT infrastructure will enhance the university's operational efficiency and reduce costs.
  • Enhanced Learning Experiences: Innovative learning technologies will enhance the learning experience for students and improve the university's reputation.
  • Increased Revenue: Improved IT infrastructure and innovative learning experiences will attract more students and faculty, leading to increased revenue.

5. Assumptions: The recommendations are based on the following assumptions:

  • Infosys's Commitment to Innovation: Infosys is committed to providing innovative IT solutions and is willing to collaborate with the university to achieve its strategic goals.
  • University's Commitment to Change: The university is committed to embracing change and adopting new technologies to improve its IT infrastructure and enhance its competitive position.
  • Availability of Resources: The university has the necessary resources, including budget and personnel, to implement the recommendations.

6. Conclusion

By implementing these recommendations, Fern Fort University can transform its outsourcing relationship with Infosys into a strategic partnership that drives innovation and delivers significant benefits. This will enable the university to achieve its strategic goals, enhance its competitive position, and provide a high-quality education for its students.

7. Discussion

Alternative Options:

  • In-House Development: The university could choose to develop its own innovative IT solutions in-house. However, this would require significant investment in resources and expertise, which may not be feasible for a mid-sized university.
  • Partnership with Another IT Provider: The university could choose to partner with another IT provider instead of Infosys. However, it is important to carefully evaluate the capabilities and track record of potential partners to ensure that they can meet the university's needs.

Risks:

  • Lack of Commitment from Infosys: If Infosys is not committed to innovation, the recommendations may not be successful.
  • Resistance to Change: University employees may resist change and the adoption of new technologies.
  • Budget Constraints: The university may face budget constraints that hinder the implementation of the recommendations.

Key Assumptions:

  • Infosys's Commitment to Innovation: This assumption is crucial to the success of the recommendations.
  • University's Commitment to Change: The university must be willing to embrace change and adopt new technologies.
  • Availability of Resources: The university needs to have the necessary resources, including budget and personnel, to implement the recommendations.

8. Next Steps

To implement these recommendations, the university should take the following steps:

  • Form a Task Force: Establish a task force to oversee the implementation of the recommendations and ensure alignment with the university's strategic goals.
  • Develop a Detailed Implementation Plan: Create a detailed implementation plan that outlines the specific activities, timelines, and resources required for each recommendation.
  • Communicate with Stakeholders: Communicate the recommendations and the implementation plan to all stakeholders, including university employees, faculty, students, and Infosys personnel.
  • Monitor Progress and Adjust as Needed: Regularly monitor the progress of the implementation and make adjustments as needed to ensure that the recommendations are achieving the desired results.

By taking these steps, Fern Fort University can successfully build innovation into its outsourcing relationship with Infosys and achieve its strategic goals.

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Case Description

This teaching case has been developed for a global consumer products company. Interviews from several outsourcing managers and executives within the company have contributed to the case. This case focuses on how a company can build innovation into an outsourcing relationship when it has not been explicitly stated in the outsourcing agreement. The two fictitious companies in this case are Bentley & Brooks (B&B) (the client) and AlphaCorp (the provider). Both companies are based on, but are not accurate portrayals of, actual companies that are anonymous. The case is a composite of several actual outsourcing cases between the two companies. B&B has outsourced much of their human resource operations and IT support. They have been frustrated that their global outsource provider, AlphaCorp, has not been able to bring innovation to the relationship. In the outsourcing contract, innovation was not expressly identified, but was certainly discussed during the outsourcing proposal and negotiations. In addition, the ability of AlphaCorp to deliver consistent quality of service on a global basis has been uneven, particularly in Latin America. You will be asked to take on the role of a B&B employee who is part of a team looking into the innovation problem. The team has been asked to provide answers to three key questions and to present their recommendations to a panel of senior executives of B&B.

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