Outsourcing

Outsourcing

In the article entitled, “Continental’s Outsourcing Eye-Opener,” in Business Week Continental’s CIO Ron Anderson-Lehman discusses how Continental has remained competitive though outsourcing. Continental was in trouble financially because of high fuel costs, the treat of terrorism, and lost-cost competition from other air lines. An estimated $42 million increase in fuel per year set the company back (2006). Continental had to make changes to keep from filing Chapter 11. The company implemented a plan that would cut costs by $1.1 billion. The plan consists mostly in relying on an outside company, EDS, to handle jobs in the technology field. EDS has been an outsourcing partner for more 15 years and allowed Continental to outsource IT work to Brazil and India. India is mostly managing the developmental work while Brazil is managing the financial side. Continental outsourced all but 10 technology jobs. The 10 jobs that were left in-house were left to monitor and manage EDS employees. Anderson-Lehman describes the price as the reason for outsourcing at Continental. Continental is renegotiating it’s contract with EDS right now and plans to continue using EDS if the price is right. Overall, EDS has been a major contributor to keeping Continental out of Chapter 11 and even helped Continental return to profitability in the two most recent quarters.

In the article, “A New Tide in Offshore Outsourcing,” by David E. Gumpert outsourcing to India may not be the best idea. Ryan Kinzy is the founder of K3 Group, a company that sells software to induce productivity for sales people. Kinzy needed ways to save money with his start up company. He immediately thought of the benefits of outsourcing computer programs. Kinzy decided to try India because every industry leader he knew of was practicing outsourcing to save money. The results were not as expected. “There were to many headaches in dealing with India,” Kinzy stated (2004, ¶ 5). He describes the work in India as “spaghetti code” that was functional, but did not allow for growth. Kinzy also talked about how the time difference impacted business. The programmers in India told Kinzy that they programmed while we were asleep. This led to work getting done the following day. Delivery was also an issue. The programmers in India would always promise a deadline and rarely deliver. Kinzy describes being four months behind schedule when he finally had enough. He chose to outsource to South America. The cost for a managed developer was in India was $3,200 per month, vs. $1,000 per month in Columbia (2004). Columbia has managed to create quality programming since K3 Group has switched over. Columbia is also on the same time scale which allows for open communication. Overall, K3 Group has found success in Columbia that it couldn’t find in India.

Compare and Contrast: Global Communications vs. Outsourcing

The telecommunications industry is on a decline. Global Communications is experiencing stock downfall and needs to consider options to cut costs. If Global Communications plans to stay in business, something has to be done about the costs of the Union. The company is under tremendous pressure to find a partner with a wireless provider in an international