Reference no: EM133388945

Case Study: Gorrs Limited is a multinational Indian company with headquarters in India that employs more than 32,000 personnel globally. It is located in Mumbai with about 10 offices in India and 25 other locations worldwide. The company manufactures and sells manufacturing machinery of various kinds, mainly in plastic molding, films, and allied products. The company provides its machinery to nearly 80,000 business customers in the plastic industry. In 2019, Gorrs generated revenues of around USD 4 billion and was comfortably placed with a profit after tax of 10%. On November 8, 2020, Rahul A., CIO at Gorrs, Mumbai, dropped off his wife, a frontline medical professional, at her work. As he returned home (where he worked remotely due to the COVID-19 pandemic) he logged into MS Teams for an emergency meeting with his CEO, Aniket G. Last year, the company had hired a consulting firm, Globe IT Consulting, and the studies done by the firm recommended several improvements in Gorrs IT. The assessment report suggested that the information technology (IT) processes needed strengthening and, due to the multiple platforms in use and aging information technologies, "a much-needed overhaul was required in IT." Aniket was concerned that IT needed to be improved and, in particular, made more secure to avoid outages and system failures, which was critical given that reliance on IT was increasing due to pandemic outbreak.

Industry Background

Plastics have become the ubiquitous workhorse material of the modern economy-combining unrivaled functional properties with low cost. Their use has increased twentyfold in the past half-century and is expected to double again in the next 20 years. Today, nearly everyone, everywhere, every day comes into contact with plastics-especially plastic packaging. While delivering many benefits, the current plastics economy has a few drawbacks. Chief among the drawbacks is the growing volume of plastic waste, which is due in large part to disposal after a short first use cycle. This drawback to the massive production of plastic is a serious cause of concern for business, environmentalists, and society as a whole. In the face of public awakening about global plastics pollution, the chemical industry is starting to mobilize on this issue. Industry leadership is moving beyond the use-once-and-discard approach-under which the plastics industry has developed during the last century-and is embracing an expanded definition of product stewardship that includes dealing with plastics waste. Gorrs Company Background The company had lately been experiencing slowing demand due to the change in consumer habits. To cater to the demand of the new plastics economy, the company had acquired an allied products company in 2018. The different IT infrastructure systems developed within these organizations had to be merged and integrated into one system. The IT infrastructure was under review and had to be reorganized. An assessment revealed that the workplace infrastructure, operating systems, and application infrastructure had become highly complex and needed upgrading. The provision and maintenance IT services was becoming a highly complex activity and consumed considerable time, human attention, and financial resources. Chief Financial Officer Ashwin J. believed that the company would be better off financially if IT services were outsourced. Overhead reductions had been one of the current year objectives of the finance department. Rahul was somewhat skeptical as he had seen examples in which outsourcing led to quality deterioration and subsequent low customer satisfaction. Furthermore, he also envisaged loss of the direct control of operations. There was a clear hesitation from his team to consider cloud-based services, although business heads were quite open to the idea. The company had three business heads: Shekhar P. was head of the plastic molding business, Anil D. was head of the films business, and Vikram G. was responsible for managing the allied products business vertical. Company employees had started to talk among themselves, fearing job losses due to the new technologies such as artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA) being adopted by the business world to be more responsive to customer needs. Internally, Gorrs employees had little knowledge of these new technologies and the value they could create. Aniket had intervened and decided to ask for proposals for outsourcing IT services. Since these IT services were not part of the core business of the company, but rather a necessity for effective working, Gorrs was exploring outsourcing these services to an external vendor. Based on the recommendations of the Gorrs executive board and CEO Aniket, CIO Rahul was requesting bids from IT vendors.

Gorrs IT Infrastructure The IT infrastructure at Gorrs was reasonably complex. The company had about 32,000 desktops and laptops. People with fixed job roles were using desktops. The mobile work force, which included the marketing and customer service teams, and company executives used laptops as they needed to connect and communicate from various locations. The total IT staff had about 300 employees. This included the application developers, application support, network management, data center management, and end user support teams. A breakdown of IT costs was as follows: • total IT costs-USD 120 million; • infrastructure costs-USD 80 million; • networks-USD 20 million; • data center-USD 20 million; • workplace services-USD 15 million; and • others-USD 25 million. The internal IT staff of 300 was being supported through certain levels of outsourcing; e.g., workplace services were outsourced to local parties in major locations. Six large data centers and ten smaller ones were in place. Currently, the IT department charged all services back to its users at a total cost of USD 120 million. However, this involved the major exercise of drafting and signing service-level agreements with all units and divisions around the world. Negotiations had traditionally centered on costs and quality of service. The outsourcing industry had seen a global trend. Every year, customers expected reductions in price while their requirements increase in every area, such as speed, frequency of data center access, and internet surfing. Currently, the global pandemic situation had put more stress on IT resources and there had been a growing demand to allow video communication on internal networks. The network, currently, had been deployed using leased private circuits. Rahul did not place much faith in virtual private network connections and hence had not invested in them. However, due to the pandemic and WFH requirements, users were demanding VPN connections to access data on the internal network. Rahul considered his options. Although he knew the benefits of outsourcing non-core parts of the business functions, he had some concerns. He was concerned about losing control and oversight of IT operations once the services were outsourced to a third party.

Apart from this, Rahul needed to address application support requirements for the SAP Finance and HR systems: should the IT organization continue to support these applications, or should they also outsource these to the external vendor? Finally, Rahul also needed to address the issues identified in the consulting reports, particularly the multiple hardware platforms, aging technology, data privacy concerns regarding customer information, and security concerns regarding reliable availability of the company applications. Could this be outsourced to a single vendor and then consolidated to a more manageable technology infrastructure? He also had to consider the perspectives of his internal IT managers for an overview of their concerns regarding outsourcing.

Questions

• As the CEO of the Gorrs, what are the outcomes you aim to achieve from outsourcing your IT services?
• Which services will you outsource and which will you retain internally? Explain your reasons.
• For each outsourced service, list the requirements that you would want the vendor to follow.
• Considering the different perspectives of company stakeholders (CEO, CFO, and the internal IT team), what will be the terms of outsourcing engagement?