BP was having a problem with the amount of contractors they were employing and the amount of money that was being funneled to these contractors. The extent in which BP was relying on contractors caused them to lose control over the projects that the contractors were completing. This in demonstrated with the company not even having a number of how many contractors they had employed, to the point where they had to stop counting (O 'Brien & Marakas, 2013). Having too many contractors puts projects out of the view of managers which can cause problems if the project goes overdue or over budget. Essentially, the dependence of PO’s IT organization on external contracts resulted in difficulties in maintaining control of the IT department due to the majority of them not actually belonging to BP.
When a company needs to focus on its core business it might be wise to use contractors to address IT issues not directly related to the business field in which they operate. For example, Albertson’s, a U.S. based grocery chain, outsources IT positions that allows them to spend more time and effort on business practices that benefit their corner of the market. Another benefit to using outside contractors for IT business solutions is the avoidance of adding more staff to BP’s payrolls. Upfront costs may be noticeable when hiring outside resources but certain cost of benefits that must be paid to BP’s regular employees are avoided. BP is not responsible to pay for expenses to contractors such as training, medical, dental, life insurance, paid vacation, and worker’s compensation. Finally, contractors provide a level of flexibility to a business through experience levels and the non-committal nature of the contract. If a project were to change or pause mid-development, contractors can be held off and called right back when a project is running again without laying off and then rehiring employees. In this vein, BP has the flexibility to sever ties with a contractor when they aren’t performing to BP’s expectations. Assuming that either a contractor or regular employee can do the work effectively, businesses should weigh these advantages with the disadvantages carefully before making a decision. Companies should avoid outsourcing to contractors when the process is a core business processes or any proprietary information could be shared. Cooper Tools is a manufacture of tools, as the name implies. It outsources tool manufacturing training to a training company called Vocational Rehabilitation (“VR Means”, n.d.). If they were to try to outsource the actual production of the tools as well, there would be no real reason for the company to exist. They would also do well to avoid outsourcing production methods that include proprietary tool specifications due to the possibility of their trade secrets being exposed because of the lack of control while using outside contractors. 2.) The culture of the IT organization is mentioned as an important issue. How do you think it changed throughout the period covered here? What did it look like when Deasy came on board? What does it look like now? Throughout the periods covered within the case study the culture of IT organization has noticeably changed. Before Deasy overhauled IT, there were around 4200 IT workers. Deasy recognized that the IT departments were bloated with too many workers. He also noticed that most of the 4200 IT workers were …show more content…
There were there too many contractors and they weren’t properly managed. Managers weren’t ensuring that the work that was contracted out was being done in a timely manner and that the work remained within budget. When Deasy was hired as BP’s new CIO in charge of restructuring the IT department, he cut the amount of contractors while centralizing the management of those that remained. The budget was found to be overinflated due to management not having an oversight of where the money went. The fact that Deasy was able to cut $1.5 billion shows that management did a poor job of evaluating where the money went and what it was used for. According to Flinders (2011), “BP spent 65% of its $3bn annual IT budget with 3000 suppliers in 2008 but now it outsources to only seven and has reduced its annual IT budget by $800m as a result.” The steps taken by Deasy was a direct catalyst that led to this amazing
When a company needs to focus on its core business it might be wise to use contractors to address IT issues not directly related to the business field in which they operate. For example, Albertson’s, a U.S. based grocery chain, outsources IT positions that allows them to spend more time and effort on business practices that benefit their corner of the market. Another benefit to using outside contractors for IT business solutions is the avoidance of adding more staff to BP’s payrolls. Upfront costs may be noticeable when hiring outside resources but certain cost of benefits that must be paid to BP’s regular employees are avoided. BP is not responsible to pay for expenses to contractors such as training, medical, dental, life insurance, paid vacation, and worker’s compensation. Finally, contractors provide a level of flexibility to a business through experience levels and the non-committal nature of the contract. If a project were to change or pause mid-development, contractors can be held off and called right back when a project is running again without laying off and then rehiring employees. In this vein, BP has the flexibility to sever ties with a contractor when they aren’t performing to BP’s expectations. Assuming that either a contractor or regular employee can do the work effectively, businesses should weigh these advantages with the disadvantages carefully before making a decision. Companies should avoid outsourcing to contractors when the process is a core business processes or any proprietary information could be shared. Cooper Tools is a manufacture of tools, as the name implies. It outsources tool manufacturing training to a training company called Vocational Rehabilitation (“VR Means”, n.d.). If they were to try to outsource the actual production of the tools as well, there would be no real reason for the company to exist. They would also do well to avoid outsourcing production methods that include proprietary tool specifications due to the possibility of their trade secrets being exposed because of the lack of control while using outside contractors. 2.) The culture of the IT organization is mentioned as an important issue. How do you think it changed throughout the period covered here? What did it look like when Deasy came on board? What does it look like now? Throughout the periods covered within the case study the culture of IT organization has noticeably changed. Before Deasy overhauled IT, there were around 4200 IT workers. Deasy recognized that the IT departments were bloated with too many workers. He also noticed that most of the 4200 IT workers were …show more content…
There were there too many contractors and they weren’t properly managed. Managers weren’t ensuring that the work that was contracted out was being done in a timely manner and that the work remained within budget. When Deasy was hired as BP’s new CIO in charge of restructuring the IT department, he cut the amount of contractors while centralizing the management of those that remained. The budget was found to be overinflated due to management not having an oversight of where the money went. The fact that Deasy was able to cut $1.5 billion shows that management did a poor job of evaluating where the money went and what it was used for. According to Flinders (2011), “BP spent 65% of its $3bn annual IT budget with 3000 suppliers in 2008 but now it outsources to only seven and has reduced its annual IT budget by $800m as a result.” The steps taken by Deasy was a direct catalyst that led to this amazing