As mentioned in the given case study, the Triad Insurance Company has grown at a rapid pace. The company was small when it was founded but later earned the status of a complete enterprise with over five hundred eighty four employees. Everything seems to be running smooth in the organization; there were no issues with financial side and human resources. However, the management of information systems is what has created hurdles in the smooth functioning of Triad Insurance Company. Previously, the management kept records in books and registers but as the expansion continued and competition strengthened, it adopted to technologically innovative methods. All the data provided was stored in the databank by regional offices so that headquarter could access whenever required. The amount of data continued to enlarge and it became rather difficult for the MIS department to manage it so it was decided by senior management that they need a Chief Information Officer (CIO) to take care of the department.
Since it was pointed out that re-organization is required in order to ensure that the information is stored and processed without any complexity, a suggestion for outsourcing was also kept in view. Sparrow (2003) defines the concept of outsourcing as letting a third party take responsibility of certain functions of the organization.
Outsourcing is seen as a great way to reduce costs. If Triad Insurance Company chooses to outsource its management information system, its cost structure will lower down. Although re-organization is also a good measure company can take up for managing its information systems and process but then again, it will be expensive as new systems purchases would be made, installation charges would count and most of all, training the concerned departmental members on the usage and implementation might increase the cost structure. In regional offices and headquarters, experts might also be required to manage the information systems who would certainly demand higher salary. This all signifies that the cost structure will rise up and the overall revenue generation might suffer which is not good for the company in long run.
Outsourcing is always a great option which Triad Insurance Company can make use of to organize and manage its information systems. There are several parties which provide outsourcing services to clients at global level. When the information unit is being dealt by a third party, it is held responsible for ensuring that the information gathered and processed is accurate and systems are efficient enough to give output with efficiency and effectiveness. The cost structure will lower down if the company decides on outsourcing. The cost required in acquiring new systems and training the employees on how to make optimal use of them plus providing increased salaries to the experts are all subtracted. The company would have to pay less than half the amount to the outsourcing party than it would bear by restructuring the entire department (Aasi, Nunes, Rusu, Hodosi, 2015).
Although outsourcing will lower cost structure and improve quality, there are some drawbacks too. The information data of Triad Insurance Company will be composed of personal details of clients and it is very important for the company to ensure that the privacy of its customers is maintained and in case, any part of the information leaks out, the company will lose trust of its customers and their relationship would be badly affected. If the external agents are unable to provide timely data of customers when requested by the company, delays would occur which might invite the displeasure of the customers and as a result, the reputation of Triad Insurance Company suffers. So choice of the agent who will manage the outsourced unit has to be done with proper measures-it is better to define a scale for qualification.
We understand that accepting change in an organization is not an easy task-people used to of one way of carrying out their daily operations find it hard to switch to new systems and processes. So when Triad Insurance Company will announce outsourcing, some employees will express support whereas the rest of the lot would feel devalued. The feeling that company does not trust their performance will make them feel de-motivated and some might even switch to other players in the industry. So educating the employees on outsourcing and the benefits it provides to the company must be done. Upon outsourcing, the employees working in the MIS department will lose their job which might create a wave of mistrust between employees and employer as they would no more enjoy benefits of job security.
Although re-organization is also a good way to improve the efficiency of MIS but the approach is expensive and requires ample amount of planning and research. When new systems are introduced, experts and knowledgeable employees are required to ensure smooth functioning of the department. When new or improved software solutions are offered to deal with managing of information system, all employees need special trainings to use it with proficiency which gets a little time consuming as all employees do not possess same learning caliber and take time to adopt to change.
Aasi, P., Nunes, I., Rusu, L., & Hodosi, G. (2015). Does Organizational Culture Matter in IT Outsourcing Relationships?. In System Sciences (HICSS), 2015 48th Hawaii International Conference on (pp. 4691-4699). IEEE.
Sparrow, E. (2003). Successful IT Outsourcing: From Choosing a Provider to Managing the Project. Surrey: Springer-Verlag. p1-15.