Swinburne Business School Faculty of Business and Law ASSIGNMENT AND PROJECT COVER SHEET Unit Code: INF80024 Unit Title: Managing IT Capability Assignment number and title: 2 - Case Study Assignment Due date: 07/05/2017 Lab/tute group: Tutor: Ian Burness Lecturer: Ian Burness Family name: Student no: Other names: To be completed if this is an individual assignment I declare that this assignment is my individual work. I have not worked collaboratively nor have I copied from any other student’s work or from any other source except where due acknowledgment is made explicitly in the text, nor has any part been written for me by another person. Signature: To be completed if this is a group assignment We declare that this is a group assignment and that no part of this submission has been copied from any other student's work or from any other source except where due acknowledgment is made explicitly in the text, nor has any part been written for us by another person. ID Number Name Signature 101030066 Ravikumar Hiralal Detroja Ravi Detroja 101006779 Chatura Hettiarachchi Chatura P. H. Marker's comments: Total Mark: Extension certification: This assignment has been given an extension and is now due on Reason for extension: Signature of Convener: Table of Contents List of Figures Figure 1: MIT functions 4 Figure 2: TOWS Matrix 6 Figure 3: Perceptual Map 1 8 Figure 4: Perceptual Map 2 (Revenue Growth) 9 Figure 5: JIT approach to MIT 11 Figure 6: Balanced scorecard for MIT 12  Company Background Millennium IT is electronic trading company and their system is used by numerical exchange businesses around the world mainly by London stock exchange and also including Johannesburg Stock exchange, Borsa Italiana, Turquoise, Oslo bars and a series of emerging capital markets. Established in 1996 as a systems integrator and Sun Microsystems approved affiliate, MIT entered the product configuration field the next year when it deciphered a systems incorporation contract from the Colombo Stock Trade (CSE) as a chance to plan and introduce a straight-through handling framework for the Trade. In 2002 MIT got the opportunity to launch its new software design as ETF trading system for American Stock Exchange by putting up offices in Nairobi and New York and moved their corporate headquarters in the Silicon Valley style software campus in Sri Lanka. After the acquisition made by London Stock Exchange in 2009 for their renowned Turquoise trading platform was effectively moved to MIT’s capital market programming. The organization is currently working on four continents and they have proceeded their operations on Canada, India and South Africa. MIT have now extended their operations in-Hong Kong trade, Singapore exchange and Argentinian Caja De Valores are among different partners. Currently MIT is operating over 40 countries around the globe and they are thriving for success on pursuing their vision on being the best capital markets software firm.  Outsourcing/Offshoring functions of MIT Outsourcing is a practice in which an individual or organization performs undertakings, gives administrations or makes items for another organization - capacities that could have been or is typically done in-house. Outsourcing is ordinarily utilized by organizations to spare expenses. Therefore, companies have found this method as a benchmarking tool to increase their performance through outsourcing the function that incur a lot of cost. Globalization is motivating multinational companies to outsource their products and services in order to reduce cost, enhance competitive advantage and satisfy shareholders. Basically, it is where the organization will handover part of the activities to another party. But before outsourcing the activities it is crucial to understand the effectiveness of outsourcing in organizational architecture and the global market. The functions being outsourced by the business are basically considered threshold competencies which are not making organization special or difference (Abramovsky and Griffith,2006) Currently at MIT the subsequent functions are outsourced. Figure 1: MIT functions Source: Authors work interview based on Weerakkody, (2017) From the above functions, it can be clearly seen that one of core functions have been outsourced to three companies and they made this contract in 2003. Initially, the testing contract was made with Virtusa which is one of the biggest global information systems provider. Through some cost beneficiary analysis company realized that the cost was relatively high since they have kept certain parts of the testing in-house during that time and realized that it should be outsourced to another company and gave the other remaining parts to APP labs in 2008 and Thinksoft in India. It can be argued that the global situation might have impact on this scenario. In the global market, most of the organizations try to obtain competitive advantage at the market that will help MIT to maintain and increase their market share and profits. Global outsourcing will help MIT to find new sources such as low cost and new market opportunities as well as encourage companies to continuously change in order to improve their flexibility. But it will create some problems such as loss of performance, therefore these outsourcing companies need to find a way to keep outsourcing advantage as well as increase their organizational performance. Currently lot of companies are operating in more than one country in which they cannot control all business activities by themselves and by hand over the part of the work to another, where company can look for other emerging trends.  Project Delivery Using TOWS Matrix at MIT Figure 2: TOWS Matrix Source: Authors work based on Weihrich, (1999); Weerakkody, (2017) At MIT the above-mentioned matrix shows how some of the factors which impact on the company positively; whilst the others negatively. However, this approach does not contract unlike the other frameworks since it is an easy model to be implemented. S-O Strategy (MAXI MAXI): Cost cutting has been used through outsourcing and it has enabled an opportunity to reduce more cost as the project matures. Once it opens up potential partnerships with testing companies it will assist in adding more testers and will be an added advantage of doing multitasking. Project time and the cost can be saved as the testing company is specialized on testing therefore testing automation can be implemented for MIT. S – T Strategy (MAXI MINI): It is an obvious factor that security issue will incur during this process therefore by adding more testers and do multitasking security breach can be minimized. Unlike company entitled work project failures can happen due to lack of communication. Therefore, this threat can be minimized with the same multitasking strength. Network failures also can be minimized with the same strength. Testing skills may differ in the other party therefore this threat cannot be minimized with the strengths mentioned above. W – O Strategy (MINI MAXI) – Capital markets are really hard to comprehend due to its complexity and it takes a lot of time to transfer the domain knowledge. Therefore, you need experienced people to grasp this knowledge. With the opportunity of project maturity, this can be minimized. Extensive cautions needed and communication is vital when a core function is outsourced. Thus, it can be minimized using potential partnerships and strengthening the relationships. Since capital market domain knowledge comes with maturity, extensive training requires however this cannot be minimized. But project cost can be minimized with the project maturity. With strengthening partnerships employee involvement and engagement can be minimized but the attitudes cannot be avoided because employee involvement is an emotional attachment with the company. Testing expectations of MIT could be high and then the suppliers cannot fulfil their requirements. However potential partnerships can be assistive in minimizing this weakness. Overall through the above analysis it can be argued that there are lot of weaknesses and threats when a core function is outsourced in a company. Especially for a capital market since you need to have staff with expertise and lot of experience as the domain knowledge is a bit tricky. Since there are less strengths and opportunities compared to weaknesses and threats it can be reasoned that the core functions should be kept in house as this is going with the capital market.  Financial Feasibility of Outsourcing At Millennium IT Mclvor (1996) provided a detailed description of the FMCG industry and the Outsourcing aspect of it. As it is mentioned at Mclvor (1996), outsourcing business operations from third parties are vital as well as an important issue to be discussed for the development of modern day business. Security and other important services such as IT, Business consultancy etc. for saving the time and the extra cost engages with the related business operations and to ensure the expected quality of it. Mclvor (1996) further elaborated that the corporate profitability including the cash flow of the organization has a direct link with an appropriate outsourcing. Financial feasibility has become a crucial element where companies are struggling to make decisions on generating more revenue or to cut down the extra incurred cost therefore Millennium IT mined that one of their core function should be outsources and this can be depicted in a perceptual map given here. Figure 3: Perceptual Map 1 Source: Authors work, (2017) At first Millennium IT made their first outsourcing contract for testing with Virtusa and they found that there is a slow growth in generating more profits for the company since they have kept some of the functions in house and it seems to be very costly. However in 2008 they made their decision on outsourcing the whole testing part for another two companies it gave them a 40% growth in their revenue. Figure 4: Perceptual Map 2 (Revenue Growth) Source: Authors Work, (2017) Millennium IT now enjoys their financial stability and the remarkable revenue generator after fully outsourcing the testing part. This has made a significant progress over the last few years since they have repositioned their business after the fully acquisition made by London stock exchange. However, many specialists in outsourcing have suggested that any organizations outsourcing choice was not affected by savings but rather still stayed to be inside judged by administration as a victory (Baldwin et.al, 2001). Therefore, it can be argued that not only the financial feasibility gives priority on outsourcing but the management itself plays a major role to being this project to a success since many of them think that outsourcing is done only for cost cutting. Apparently, it’s not the right answer for outsourcing sometimes they may don’t have proper human resources to do that particular task. Therefore, it can be argued that financial elements and other elements impact on taking decision to give outsourcing their some of the functions.  Management Control Systems and Millennium IT Outsourcing IT services has a positive relationship with the individual performances in an organization. Individual performances in including overall performance in process and overall performance in their project delivery. Overall performances in terms of process is regarding the performance level of each and every employee in terms of achieving targets regarding the process objectives, achieving the quality standards of the process and delivering time expectation of the projects. As per Mundy (2010) (MCS) have two corresponding and related parts. MCS are utilized to apply control over the accomplishment of hierarchical objectives and furthermore to empower workers to scan for circumstances and tackle issues. Many specialists have argued that MCS have positively impact on organizational performance as it has been regarded as another way of implementing control over employees via increased transparency of costs. When doing a project there are three things which are important to deliver the project in an efficient manner. ⦁ Time ⦁ Cost & Performance ⦁ Quality Need to adhere the above variables in the most effective manner and the subsequent variables can be recommended for an effective delivery ⦁ Just in Time Approach ⦁ Balanced Scorecard ⦁ TQM (Total quality management). The above management control systems are normally used in manufacturing companies and they have given many positive results and for maintenance service management these approaches are highly used.  Just in Time Approach (JIT): The "Just in Time" is a stock system where materials are just requested and received as they are required in the manufacturing procedure. The objective of this technique is to diminish costs by sparing cash flow on overhead stock costs. However, this method is only used in manufacturing companies but can be used for Information technology as well to boost the organizational performance. Figure 5: JIT approach to MIT Source: Authors work based on Tsai et. al. (2004) Once they implement Just in time approach to MIT it should be done in the above manner and they can minimize the overhead costs and it will help save time for both parties. Balanced Scorecard: The balanced scorecard is an administration framework used for deciphering company's key objectives into an arrangement of execution targets that, thusly, are measured, checked and changed if important to guarantee that the company's key objectives are met (Kaplan and Norton, 1995). Figure 6: Balanced scorecard for MIT Source: Authors work based on Papalexandris, (2004) The above MNC is a systematic performance metric to assess the KPIs of the company and check whether the targets are met accordingly. Moreover, this method will help to reduce the extra cost incurred and to determine the performance level of the outsourcing party and make them aware of the issues that need to be rectified.  Evaluation Criterion of Relationship for Outsourcing As business sectors develop, the advantages of outsourcing corporate administrations move toward becoming clearer. However, despite all the advantages that outsourcing bring to organisations, is it really necessary to sign a long-term contract with someone you have just cooperating with for the first time? Not all corporate outsourced contracts are the same crosswise over sub-areas. A progression of key execution markers will regularly have been incorporated with the agreement and are a decent method for following how the relationship is advancing, more often than not on a quarterly premise. Organizations manages neighbourhood, local and overall contracts and notes that once the geographic ambit of the agreement hosts been resolved the gatherings proceed onward to setting up the extent of administrations. It is imperative to keep the agreement current. Associations note there are a few parts of the agreement that may change from customer to customer through the span of a relationship. Clearly, the quantity of individuals that they are moving or working with may change as the organization responds to business conditions; however different more subtle factors incorporate exceedingly factor shipping expenses and money trade variances. There are many reasons that separations happen. Now and then, a customer may feel that the relationship has gone stale, or new blood might be required. Successful organisations say that on multiple occasions things that incite a change may again be connected to individual issues. In the case of MIT, it is significant to choose the right companies that you can trust to let them manage your information and your products. It is significant that services and reputation are two of the most significant aspects to clarify a good business partner for outsourcing (Quinn. 2000; Chen, et.al, 2013; Porter and Siggelkow, 2008) In contrast, short-term relationship for outsourcing, All IT outsourcing bargains require careful planning. Indeed, even with shorter contracts, outsourcing bargains require watchful arrangement and readiness. Organizations ought to consider explaining alternatives and rights in their fleeting contracts to help them keep pace and make use in case of moving the work starting with one supplier then onto the next. A couple of the more vital arrangements, incorporate market-based value assurances, innovation money and invigorate, and refreshing of administration and security models. Advertise based value securities permit outsourcing clients to benchmark their costs to current expenses in the market for significantly comparable administrations. Innovation money and revive statements commit the specialist co-op to refresh its innovation arrangements to keep pace with rivals in the commercial centre. Innovation is advancing quickly and inability to require the specialist co-op to keep pace with innovation may make the client less aggressive in its industry or committed to pay for updates that ought to be figured into every client's strategies for success and spending plans. Commitments for refreshing administration and security norms. Measures and necessities for consistence or cybersecurity are developing and can change significantly over even a short contract term. The client ought to expect and require the specialist co-op to keep pace at any rate with set up best practices in the business as a typical piece of the supplier's cost of working together. According to the case study of Millennium IT, short-term relationship for outsourcing might not be the better choice. Because they have been in a contract for outsourcing, and all their information are with them and if they broke this relationship then their core functions information will be with those companies therefore it is better to maintain the long-term relationship.  Reference List Abramovsky, L. and Griffith, R., (2006). Outsourcing and offshoring of business services: How important is ICT?. Journal of the European Economic Association 4(2‐3), pp.594-601. Baldwin, L.P., Irani, Z. and Love, P.E., 2001. Outsourcing information systems: drawing lessons from a banking case study. European Journal of Information Systems, 10(1), pp.15-24. Chen, J., Hong, H., Jiang, W. and Kubik, J.D., (2013). 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