Information Technology Outsourcing for UK Retailers

Introduction

Introduction and background information

For the past years, retailers in the world have undergone tremendous transformation because of the market forces that direct them to adapt new business environments evolving now and then. The most influential force to the retailers is the growing competition among retailers as well as the wholesalers. As a result, businesses have ventured into different strategies and aspects likely to rise the functioning of the retailers. One of the widely adapted strategies currently is the utilization of information technology (IT) outsourcing. Most retailers have found it worth to assign third parties to carry out logistic that will make their performance to compete well in corporate world of vast competition.

Outsourcing partners are on the upper hand to strengthen their institutions for creating retailers loyalty. This has maintained the retailer’s loyalty to their outsourcing partners as revealed by the European IT Outsourcing Intelligence Report 2011 that based on 2010 reports, 60% of the outsourcing companies in United Kingdom were willing to continue delivering their services for another year. However, 17% found it tough hence; they were planning to terminate their contracts. This is an indication that there is high potential in IT outsourcing likely to grow over the years (Alex 2011).

The increased desire for IT outsourcing is evident in most parts of the world and UK is not an exception. Many studies have revealed the main drivers to IT outsourcing and it is evident that operational cost reduction forms the backbone for quest for IT outsourcing among the retailers in UK (Callender 2011).

Upon adoption of IT outsourcing by retailers in UK, there are many expectations in the retail market. Most IT outsourcing deals by retailers are advantageous although some retailers encounter hardships in enhancing productive outsourcing contracts. Many research studies revealed that outsourcing have more benefits than the disadvantages associated to it. Proper execution of this strategy will promote retailers to reach the global standards in terms of sales and after sale services because of the simplicity of the transaction process.

Specialisation and division of labour will improve the quality of products and services to consumers. Retailers have ample time to concentrate on their best area of business, whereas third party manages areas proving hard to them. Outsourcing improves the information efficiency that in turn maintains and validates data at high standards.

However, IT outsourcing proves a threat to workers laid off by retail business because the integration of such services leads to closure of some departments (Futurist 2011). Decision-making towards outsourcing has therefore placed some retailers in dilemma hence; wise decision-making is crucial for retailers intending to invest in IT outsourcing (Barthelemy 2003). Most of the retailers are not likely to enjoy the existing situation so as long as the strategy will maximise their profits because the main purpose for any firm or company is to maximise profitability of their business activities (Brown and Wilson 2005).

The new trend in IT outsourcing is likely to continue rising and some years to come, there will be solid outsourcing. Studies proves this situation for instance the study by Everest Group that predicts the UK’s outsourcing to increase by 600% by year 2021 (Morris 2011). This study is specifically going to address the effects of information technology outsourcing, the trends, and future among retail businesses in the United Kingdom.

The introduction of the Internet contributed to the revolution with remote sites able to connect over the Internet, exchange data, information, and currency. The businesses that pioneered information technology quickly included this technology in their business processes. These developed into showcase models in information technology. The cost of implementing these technologies increased over time.

As such, an opportunity gave itself in which information technology Service Providers would offer tailored and business-oriented services to willing businesses at a fee. This option was considerably less against the rising costs of setting up an IT department. Process of outsourcing has taken the information technology age to the next level. Outsourcing has enabled businesses in need of technologically knowledgeable processes but lack the technical and human capacity to outsource such services and processes to technological experts at a stipulated cost (Pinnington and Woolcook 1999; Stakes 1995).

Outsourcing has opened up frontiers in IT standardization, especially in the business world where these businesses can acquire IT services from third party organizations and as such benchmark their processes to the global standards.

No one can ignore the dissatisfactions among the retailers attributed to poor services by the service providers, but this is just a low percentage compared with the percentage of the satisfied with the services (Taylor 2008). Such failures are associated with retailer’s focus on short-term saving when looking for an outsourcing partner. The advice to Retailers is for them to seek long-term relationships between them and the outsourcing partners to reduce susceptibility to such dissatisfactions. Similarly, wise selection of the outsourcing partner will determine the success of retailers seeking the services (Dekhuijzen 2006).

To understand the research problem, the dissertation highlighted a case study of British steel, and later case of Sainsbury. During this period, the British Steel turned to Cap Gemini to outsource their central management service (CMS) unit. British Steel has a workforce of about 50,000 with a turnover of more than 7000 million UK pounds (Brown and Wilson 2005; Linder, Cole and Jacobson 2002).

This company runs a central management services unit to provide exceptional IT support for the company’s finance, payroll, and human resources. CMS also covers some processes within the company’s operational system. The British Steel case study is indicative that IT has brought with it special organizational need to ensure facility management. On acquiring new systems through business re-engineering, organizations often realize that they are not able to optimize these systems and therefore have minimal benefit. The main cause for this situation is the resistive organizational culture that offers little room for change to take place within the organization.

Such organizations or businesses turn to outsource such processes to ensure professional implementation as well as exceptional standards because IT has a global scope. Therefore, British Steel just like many retail businesses in the United Kingdom turned to Cap Gemini a world class IT Company that the steel manufacturer outsourced about one third of its processes covered within their CMS. British Steel intention to outsource was,

1. To gain competitive advantage by maintaining high quality standards with more than 99% for key indicators.
2. To establish perpetual improvement programs even through the British Steel business improvement program.
3. To ensure a smooth transition of IT responsibilities with minimal disruption to the existing IT system.
4. To safeguard the interests of its workforce.

Several years down the line, the British Steel management stated that it is about the right IT that can help a company gain competitive advantage in the global market and to this company, outsourcing was the key.

Research questions

This dissertation seeks to address other instances in which there is successful IT outsourcing as well as instances of IT outsourcing failures. The following main research questions guided the research:

• What are the factors that lead to IT outsourcing among retail companies?
• What are the advantages and disadvantages of IT outsourcing among retail companies?
• What are the general trends and the future of IT outsourcing among retail companies in the UK?
• Who among the retailers and the outsourcing vendor should take blame on failure of IT outsourcing?

However, there is a challenge in getting cases of IT outsourcing failures because the concerned retailers are reluctant in making such reports in public. Therefore, the dissertation will vividly address most of the successful instances, and few cases of failure as cited by different researchers.

Method outline

The dissertation will reflect on previous literatures done by researchers for literature review section. This part will make a thorough comparison of the past and the latest literature to determine the future trend of IT outsourcing. Secondary data and online surveys will offer the essential data required to determine the effects, extent and future trend of IT outsourcing.

Data Collection, sampling and analysis happened methodically and with much keenness (Veal 2005). There will be application of Both Inductive and deductive approaches in this dissertation because of mutual relationship in research (Hamel 2000). To accomplish data analysis for this dissertation, both qualitative and quantitative approaches are inevitable for this case.

There will be a conclusion on the relationship between IT outsourcing and retail companies. In addition, it will elaborate on benefits achieved through IT outsourcing in establishing competitive advantage as well as shortfalls experienced by retailers because of poor IT outsourcing. There will also be recommendations on ways to improve/strengthening IT outsourcing for existing and emerging retail business in the UK to avert future shortfalls.

Scope

The heart of this dissertation centrally focuses on IT outsourcing in retail in the UK. It will look into different retail companies in UK as well as their vendors who provide this significant service. However, because of inadequacy in required IT outsourcing infrastructure in UK, the dissertation also focused on service providers not within UK such as China and India. The significance of these two countries have basis on the availability of workforce and advancement in information technology.

There is a close relationship between UK and the Unites States hence in some instances this dissertation will compare and contrast the extent of IT outsourcing in both regions. Last, it will feature retailers whose attempts to venture into outsourcing have met hostility and the measures taken in those cases.

Limitation of dissertation

In most researching and dissertation writing, there are various limitations facing these practices. Below are the expected limitations for this dissertation,

To start with, some instances in this dissertation will paraphrase or quote facts derived from either biased or outdated secondary sources. Some vital information to help answer researcher’s questions may lack because of limited research on the topic. Similarly, the study will heavily rely on the information collected from respondents. Therefore, selfish or biased response may affect the results of the whole project rendering it inaccurate.

Due to financial constraint coupled with limited time, not all effects of IT outsourcing on retail companies may be adequately brought to light. The research may also suffer time constraints due to delayed approval by targeted study sample population, especially organisations. As a result, the dissertation writing will have a delay because of time wastage in the process of waiting.

The complexity of the whole process of theoretical study brings with it many processes that can lead to despise of some aspects of the topics. However, it will address this by being very careful to ensure adequate reflection on every aspect in the research questions and aims.

The limitation of using a descriptive survey research method is that a large descriptive survey may give superficial results. Alternatively, a small-scale descriptive survey with an emphasis on “qualitative” or “rich” detail has the limitation as poor generalization. Such small surveys complicate the applicability of the result achieved for other areas of study.

Literature review

Introduction

This chapter of the dissertation covered literature and documents based on IT outsourcing by retailers. For objectivity purpose of this paper, the chapter had to discuss the issues related to success and popularity of outsourcing among esteemed retailers. In addition, there was discussion on factors contributing to failure, and early termination of contracts that is slowing the growth of outsourcing among retailers in the UK.

Topics on IT outsourcing have become research item for many scholars, academicians, professionals, and business experts. This has resulted in a continual expanding knowledge base focusing on outsourcing and its effects on business processes. However, a review of most of these articles reveals that even though writers differ in some instances, but IT outsourcing has had a significant impact on retail companies all over the world (Jack 2009). This situation affects countries’ economies in many ways.

This study focused on this issue through deep literature review from the previous researchers. However, it is clear that most of the previous writers failed to focus some important aspects of concern to my area of study. This study will incorporate the success, failure, and trend of IT outsourcing in by the retailers in the UK. Some concentrated on one aspect without considering other aspects that is, some concentrated on the success of IT outsourcing without taking into consideration on its downfall.

Very Few researchers concentrated on the failure of IT outsourcing in the UK. It was therefore significant to review both the ancient as well as the current literature to know exactly how IT outsourcing have evolved over the years and to make some predictions of the possible trends likely to be in place in future of retailing. Studies revealed that the effects of IT outsourcing attracted different feelings from retailers because as much as it has become widely embraced, some retailers are slow to embrace the development (Hassan 2008).

The context of outsourcing among retailers

It is evident that IT outsourcing have become the next big issue for retailers to venture and use fully for minimizing cost and maximize profit. Retailers have been on alert over the changing business environment because the situation demands retailers to adhere to it in order to succeed within the region of operation and outside the boundaries. Retailers are left with no alternative other than employing competitive strategy to maintain their presence in business career.

As a result, retailers have invested into management strategies that are likely to promote this competitive advantage even if it meant involving outside parties to handle some of the functions or activities within the companies. The quest for the above conditions yields the need to look for a third party to take care of some activities in the retail businesses. As a result, outsourcing of noncore has become an important aspect for most of retailers.

According to Hammer (1992), in his article outsourcing and the value chain believed that outsourcing was capable of cutting down some operating costs among other benefits. In his opinion, retailers should outsource the noncore functions to achieve a competitive advantage over other companies. Apart from cost reduction, other reasons behind outsourcing include lack of enough expertise in the IT fields, time limitation to handle all the functions, core competence, and to facilitate a smooth working environment with improved service delivery to customers.

Different forms of outsourcing

Outsourcing is the transfer of components or large segments of an organizations internal IT infrastructure, staff, processes, or applications to an external resource such as an Application Service Provider. The IT outsourcing includes the delegation of all or part of the technical, human and management responsibilities.

The IT services that can be outsourced could be the systems development, hardware, network management, software applications, training, IS support, or the management of IS strategy – this could be in the form of selective outsourcing or total outsourcing. Outsourcing could be done with a single supplier, multiple suppliers or can be co-sourced this can then be taken place on-site, off-site (domestic) or offshore (global).

According to Quinn (1999), main services outsourced fall under two categories named technology and business process. In technology processes outsourced, they includes electronic commerce- termed as e-commerce, the infrastructure, software, development of websites as well as web hosting, and telecommunication services. Business process outsourcing encompasses “customer contacts (customer relations management), equipment, finance / accounting, human resources, logistics, procurement/supply chain management and security” (Quinn 1999, p. 19).

Information technology outsourcing (IT outsourcing) have been defined as a process in which retailers sign a contract with a third party vendors to carry out various IT activities that include “data entry, application maintenance and development, data centre operations, network management and operations as well as disaster recovery” (Antonucci 1998, p. 26 ). According to Antonucci, there can be different forms of the contracted vendors who ranges from individual IT experts, companies that provide employees on lease, consultants, certified public accountants, to even a well-accomplished service vendors.

The success of IT outsourcing in retailing in the UK

Since the introduction of IT outsourcing, retail companies, and other firms have developed high dependence to IT in operating their businesses as well as reaching a diverse customers. As a result, retailers have registered a high rate of IT assets, leasing, and staff transfer systems to outsourcing partners. Contrary to the past, retailers such as grocery and industrial supply chain have registered significant cost benefits associated with streamlined supply chains through consultations with the third parties. There is an increase in efficiency and response from the customers, which have saved billions of pounds for retailers with IT outsourcing (Domberger, 1998).

Requirements for a successive IT outsourcing among retailers in the UK

Fernie (1999) pinpoints some shortcomings experienced between the retailers and suppliers when the third party is not present in the supply chain activities. However, he appreciates the changes undergone in bettering the logistic networks in both UK and the United States through emergence of third-party logistics market in 1980s and early 1990s.

Fernie also insists on the requirements for successive outsourcing logistics, that is, “a theoretical perspective on the outsourcing decision, broad conceptual pieces on the relationship between contractors and the users of their services, and empirical research on the user’s perception of logistics service providers” (Fernie 1999, p. 85).

Through theoretical work, retailers increase their assets identity and integrity of their contracts through outsourcing services based on certain duration (contract-based outsourcing). In conceptual research, the purchasers and suppliers create an environment for successful long-term partnership as well as averting possibilities of conflicts between the two parties. At last, empirical work seeks to strengthen the logistic interaction between the service providers and the retailers.

It is a common phenomenon in UK researchers nowadays to shift to surveys performed by consultants or contactors. For insistence, Corporate Development Consultants and Applied Distribution that carries out surveys on Fernie’s exploratory activities based on buying and marketing of distribution in retail markets. The effectiveness of outsourcing have led to growth of logistic market where people have taken it as a professional and taking it to a higher level. Its services have not reflected only on minor services such as trucking but also major services such as inventory controls, warehousing, planning among others.

However, on addressing the PE international survey, Fernie (1999) explained the dissatisfaction of grocery sector toward their contractors. This is one area of interest and the failure of these contactors is likely to pull down the efforts of retailers as well as instilling fear to others planning to use the services.

Current trends in IT outsourcing

In the article, How Outsourcing Affects the U.S. Economy, Hassan (2008) agrees that indeed outsourcing has brought with it a mixture of effects. Some of the effects according to the articles have been beneficial, especially to retail business. He notes that the dynamitic advantage that outsourcing brings with it has benefited retail industry because of cheap imports and subsequently stronger exports. It has also saved money for these companies. Gordijn (2002) concurs that the outsourcing process is currently a positive contributor to any countries’ economy.

No one can deny the rising industrial changes in pace triggered by the consumers’ trends and competition, which is mounting pressure to retailers. Retailers have been on receiving end, and they are putting more efforts to recruit high skilled teams likely to deliver services required in business to cut down ambiguous spending. It has not been a smooth transition because there is division in opinions among different retailers on the cost effectiveness of IT outsourcing.

However, Callender (2011) put it clear that for achievement of any success through IT outsourcing, effortless measures should be in place as well as clarity in retailers’ aims and objectives. She insists that IT outsourcing should be a long-term solution that aims to strengthen the bonding between retailers and service providers.

There is fear by some retailers over the effectiveness of some IT outsourcing service providers that have led to early termination of contacts between the two parties (Taylor 2008). He reveals the current trend adopted by retailers.

Research has shown that service jobs generate less income as compared to manufacturing jobs. In fact, the latter receives support as those responsible for creating the wealth in any nation. On the contrary, service jobs consume this wealth. Research findings further indicate that more businesses are currently depending on IT to gain the needed competitive edge. However, it is also true that information technology implementation, especially for a business critical process has a high price tag. As such, IT outsourcing puts the country’s economy on the line (Stern and El-Ansary 1992). The trend is not any different with retail companies that must adhere to the state of economy.

Targeted businesses by outsourcing companies

The outsourcing practice can apply to nearly all types of business. Most business experts prefer this process because it has cost effectiveness. Statistically, outsourcing can result into reduced costs by between 50% and 60%. For instance, companies in Europe spend up to $19 trillion in outsourcing daily processes like sales and administration. Nevertheless, in Futurist (2011) review of literature, he states, “despite outsourcing being cost-effective, efficient, productive and strategic, it is also condemned as evil, money-grabbing, destructive, ruthless, exploiting the poor, destroying communities and nations” (Futurist 2011, p. 1).

Futurist (2011) further asserts that outsourcing has compromised low-cost nations. This is evident with the increased migration from the high-earning nations to the compromised ones. This has led to labour shortages. China and India are a perfect example in this context (Outsource mag 2011). These two nations, especially China, are experiencing close to 100% salary inflation, and India suffers an acute shortage of corporate leadership because of large-scale outsourcing.

Some of the typical business processes that qualify for outsourcing in IT-oriented companies are those involving electronic data interchange (EDI). According to Fernie (1999), sending financial information is a vital undertaking for any business. However, the process has high degree of sensitivity. Retail companies continue to focus on electronic automation of such processes as invoicing, order processing dispatch, and other routine processes.

Such processes will definitely require EDI to simplify trading cycles and accelerate transactions. However, based on the sensitive nature of the data and information handled by the EDI systems, the cost of their implementation remains high and beyond the reach of many retail companies in the UK and around the world. According to Pinnington and Woolcook (1999), e-commerce that fundamentally relies on EDI is quickly becoming standard based.

Accordingly, companies such as Microgen UK are seeing an opportunity to provide the EDI functions to small and medium enterprises who cannot afford to implement EDI full-scale. With companies such as Microgen UK, these retail companies have an opportunity to outsource their EDI processes and therefore compete effectively on the global market. Generally, there is much literature on the outsourcing process and the effect and benefits to the business or organization.

However, little is available in this domain, especially related to the effects of IT outsourcing among retail companies within the United Kingdom (Linder, Cole, and Jacobson 2002). This research focuses on this area of study and intends to draw vital important conclusions to professionals, academicians, and business people.

Geographical distribution of outsourcing services among retailers in UK and the rest of the world

The controversial instances on IT outsourcing have become rampant in North America as recorded by De Vaus (2002). This region has experienced the hard way in economy because of lack of this crucial service, and they are posing blame to IT companies based in India. Most of IT outsourcing companies contracted in North America have delivered dismal results lagging the economy of this region. With this trend, North America Region revealed diminishing interest for IT outsourcing. As a result, India has intercepted the situation as they try to invest into other neglected sectors existing globally. This move targeted service provision survival after poor performance by Indian service vendors in North America.

However, the IT outsourcing companies face challenges to venture Europe and Asia because of the dominance of Japanese IT outsourcing firms that have been very active. From the study by Pinnington and Woolcook (1999), it is evident that IT outsourcing have taken roots in UK as well as the rest of the world. Companies venturing to this field for the first time will face stiff competition from the already existing IT outsourcing service providers such as those from Japan. They further suggests possibilities of Indian IT companies to merge with IT outsourcing markets based in Japan for chances to increase their benefits.

Nowadays, there are high opportunities in Indian’s IT outsourcing market. The approximate total returns from IT services registered in 2009 were approximately $80-90 billion and surprisingly, an estimated $50 billion was from the exports made. This business opportunity have triggered interest by IT services provider companies as they try to invest in this growing market in exportation. High ranking of Japanese IT outsourcing market have not hindered the Indian quest to venture into the same field because they want to benefit from the same. Some companies have shown interest to work with Japanese IT companies, which is a clear indication of the tremendous competitiveness in the field.

One of the company that have benefited from such arrangements is the IBM India who have come in to execute some of the Japanese projects although it is venturing to the field at a slower speed as expected. Huge Japanese IT outsourcing is likely to be a wasted opportunity lest it undertake market analysis using tools such as Porter’s five forces and sushil’s SAP-LAP. In addition, flexibility of IT outsourcing have a huge role to play for companies targeting higher positions in future while considering the cost effectiveness.

The growth of information technology and outsourcing

Initially, the growth of information technology (IT) and business services outsourcing (BPO) had much dominance from Indian service providers. However, retailers have shifted to other areas such as “Philippines and Malaysia (call centres and other back-office BPO), China (embedded software, financial firm back-office BPO, some application development), Russia and Israel (high-end customized software and expert systems), and Ireland (package software and product development)” (Bardhan et al. 2003, p. 1).

Notably, Restaurants, and Retail (R&R) industry sector had started adapting outsourcing at the commencement of 2006 and an increased contacting to service providers exceeded more than half of the contracts. The increase in outsourcing for IT, human resources and finance accounting, and BOF gained momentum in both UK and the United States in 2004. As a result, retailers have benefited from this strategy through optimization of Service Delivery Operation Framework. More businesses have embraced Business Process Outsourcing (BPO) while other service providers have ventured into the same field of retail outsourcing (Gluckman 2006). The results revealed the growth of outsourcing in UK.

Table 1: Adoption of retail and restaurant outsourcing contracts in UK and United States in 1Q six.

Year 2010 recorded some amusing results in the trend taken by the online retail marketing. The field obtained boost by about 20% retailers embracing the services, but this trend have become a bit stable as time lapse. IT outsourcing will increase the number of consumers with interests to do shopping online. These consumers will get chances to interact with the retailers through editorials and interactive content posted online.

IT outsourcing will increase flexibility among the consumers because of the increased chances in purchasing and delivery of the transacted products. Success in many retailers’ sectors such as infrastructure support, field locations, and data centres is an achievement attributed to outsourcing services (Callender 2011).

Sony UK echoes the importance of IT outsourcing by retailers, but it further suggests integration of this service with digitalization. Through promotion of products in retail stores, there is possibility of increased customers’ purchases better even than that witnessed from the study by POPAI/ARF. This study revealed that only 74% of the consumers’ purchasing decision-making was in the store hence promotion of such products was likely to boost the sales. The rationale behind digital signage is the vast benefits over the other promotion methods. The advantages of digital signage are

• It is decision making-oriented based on the point of sale, which is the store.
• It comes with an entertaining package that can be influential to consumers toward purchasing a certain product.
• The flexibility – the contents are easily updatable, and manoeuvred to suit the targeted consumers.

The expectation to retailers is the possibility to embrace the technology based on its simplicity, effectiveness, and its blending nature of technology and advertisement to the targeted group of consumer at the right time and place (Sony UK 2011).

According to Sony UK (2011), retailers have found it worth to focus on the core functions while assigning the noncore functions to the third party experts to solve any problem. In their opinion, digitalization through combination of IT, audio-visual and market consultation will favour the retailers through cost-saving based on removal of up-front investment. Results from retail outsourcing have made them to focus only on core business while service providers who prove a positively through provision of the best in-class services do the peripheral functions and implementation.

The only caution to the service provider as put by this company is the significance to keep the pace in providing their services to retailers seeking to prosper in the world where competition in enormous and overwhelming. The future for IT outsourcing relies on the kind of services provided by the outsourcing companies (Sony UK 2011). This is a challenge as well as a good platform for service providers to perfect their service provision to their customers. There is no doubt that the growth of outsourcing will increase significantly in UK and other areas.

For any organization, targeting any future prosperity has no alternative other than embracing IT outsourcing to facilitate survival and excellence in a rapidly changing business arena. The quality of information system used by organizations will determine its future in an environment in which sustainable competitiveness is the order of the day.

Reasons why outsourcing have become popular among retailers

Study after another, have proved the importance and potential behind IT outsourcing in UK as of the study by the Outsource Mag (2011; Morris 2011) proved. Both researchers analysed survey data taken from UK retailers regarding the acceptance and adoption of IT outsourcing. There was no doubt that retailers have exponentially embraced the service. Morris (2011) revealed that, due to the trend witnessed through the study by the Everest Group, there is high possibility of the IT outsourcing in UK likely to hit a 600% mark within 10 years duration from when they carried the study.

According to the article Today’s UK Retail IT Outsourcing Outlook (2011), UK has emerged the country with the most enormous and evolved outsourcing market in Europe where it recorded a market increase by 36% from 2004 to 2009. The uncertainty in business environment proves to be source of the increased demand for outsourcing in the UK.

There are many possibilities for businesses to undergo downfall and the quest for income generation and cost saving by retailers has led to investment into IT outsourcing to continue fitting into the world of a competitive market. However, IT outsourcing may not be an easy task as one may think, but the benefits accrued to it leaves the retailers with no option other than to invest into it (Domberger 1998). As a result, this article suggests that retailers should choose IT outsourcing for these 10 reasons.

Advantages of outsourcing to retailers

1. IT outsourcing can control partially or wholly the operating costs incurred by the retailers within departments.
2. It can reduce burden to retailers because it narrow business in outsourcing functions far from retailers’ core functions.
3. It steer ahead the future trend and growth of the business structure through expansion of resources pools vital to retailers through the contacts.
4. It minimizes the operational risks because the third party takes such risks who accesses to larger pool of business success.
5. There is an increase in utilisation of the internal resources that could be unprofitable to the retailers if just left to remain to them.
6. Scarce and unavailable internal resources are availed to the retailers without incurring additional costs from recruiting new experts.
7. The business growth gets a boost in its re-engineering processes.
8. There is improvement in functions that may prove unmanageable to retailers because such function goes to the third party.
9. There is an increase in investment in information technology environmental management.
10. The IT director gets new ideas on daily basis in operational management that improves the strategic role.

Similar sentiments on the desire for IT outsourcing among the retailers in UK have a similar backup in the Alex’s article IT Outsourcing-the trends posted on September 12, 2011. He echoed the main drivers to the IT outsourcing in UK. Among the main drivers cited from the European IT Outsourcing Intelligence Report 2011 were quest to cut down the operating costs, the unavailability of domestic IT skills, and resources as well as the necessity for retailers to focus on the area of specialisation based on the core competences.

The main driver was the desire to minimize the operating costs, which the survey revealed to rise to about 38% based on the 2010 reports (Alex 2011). It is therefore evident that among other benefits associated with outsourcing, retailers have increased their quest for this service.

In his article outsourcing in the retail industry, Berke appreciated the significance of IT outsourcing as an effective cost-cutting tool (Berke 2010). The competitiveness of the economic environment leaves the retail companies without any other option other than to invest in this service. Among the area of interest for these retailers are the possibilities of reducing the number of staff. However, this may pose a threat to workforce, especially in semi-skilled and non-skilled labour as he suggests, “any job that mostly involves sitting at a desk, talking on the phone and working on a computer is a job under potential threat” (Berke 2010, p. 2).

He also highlights the rising trend in the IT outsourcing as indicated in the Economic Intelligence Unit. The reports from this unit revealed that approximately one-third of the firm had embraced IT outsourcing by 1997, but this significantly increased by 2010 when an estimated 58% of the firms embraced the idea. Surprisingly in some instances during implementation of the IT outsourcing have faced enormous challenges, but the retailers have tried to keep it as secret for the interest of safeguarding the company’s reputation among the investors, current, and potential customers as well as end-users.

A key driver to the investment into the IT outsourcing as indicated by Berke (2010) is the mobility, literacy, and increased demand from the customer. As a result, retailers have to utilize the service for maintaining profits reaped from the growing market surrounded by immense competition.

According to Fernie (1999), implementation of logistics recently has gained momentum in the retailers’ corporate strategies. This emanates from the continued competition experienced by retailers in both the United States and Europe. As a result, these companies have improvised new trading formats targeting cost minimization and profits enhancement. Retailers have tried to make products available to customers on time to reduce loss possibilities that emanates from inventory and other costs.

Dobler and Burt (1996) had similar thoughts on the importance of retailers to embrace an outsourcing strategy. For effectiveness of this strategy, retailers should consider core behaviours, knowledge pool as well as skills and abilities adaptive to the business for later development. The importance of such considerations is the ability to sense and spotting possibilities of strategic risks that may include technology obsolesce while other sectors such as employment opportunities will undergo evaluation for beneficial decision-making in a company. The purpose for such evaluation is to reduce costs as lowest as possible to maximize profits.

A good example is the Indian information technology enabled services (ITES) that acts as main destination for outsourcing for western countries. This have created employment opportunities for more than 200,000 people who contributes to approximately $2.3 billion worth exportation in which more than 70% are exports from the United States (Bardhan et al. 2003).

Outsourcing related hardships encountered by retailers and their solutions

Following an expansive discussion on the advantages of outsourcing, Antonucci (1998) must have observed that this not always the case to all retailers applying outsourcing in their companies. Indeed, he questioned the possibility of all retailers indulging into outsourcing given that some of them do not qualify for outsourcing. Outsourcing some of them may raise concern on credibility and efficacy hence; the success maybe dimmed for wrong decision. As a result, there were some possible negative consequences likely to be incurred because of outsourcing as discussed below.

Cost incurred through media hype publicity

This emanates from most of the business managers tendencies to report how outsourcing has benefited the company. In that case, there can be a raised hope and projections between the retailer and the service vendor on the success of the contract. At the end of the day, most managers concentrate on reporting the projected savings achieved leaving out other cost incurred such as amendment fees. Probably, this is attributed by companies’

Difficulties in outsourcing IT

Unlike the legal services, advertisement of securities, and raw material purchases, IT proves different in terms of outsourcing. Most of companies had a successful outsourcing of those resources, but retailers have had hardship in outsourcing their IT services because of the rapid evolution in IT. The future in IT is unpredictable hence; retailers planning to have outsourcing contracts in long term might be risky.

High cost of transition to Outsourcing

During the process of outsourcing, there are Shakeout problem that arise among outsourcing partners, with takeovers and mergers. The possibility of the survival of the suppliers in future has been limited, especially in choosing a friendly price.

Loss of Control

Different research studies revealed a different service provision between the in-house sourcing and third party in terms of the level of the services and response to certain demand. The difference emanates from management regulation because in in-house sourcing the employees work under the same management, whereas in outsourcing there are external employees. Retailers seeking to outsource have much concern on data confidentiality, and response to disaster when the third party is involved.

Interference with employees’ morale

In some instances, outsourcing among retailers may involve laying off or transfer of workers to the outsourcing partners. As a result, the morale among employees is likely to feel insecure in their position of employment.

Reduced flexibility to computer-based functions

IT outsourcing have much to do with computer platforms in delivering the services. This may be a problem to retailers not involved with much computer work hence; the degree of flexibility is likely to be reduced during this shift.

Probability of retailers under hostage

After signing of outsourcing contacts, the service vendor becomes the main controller of the retailers. The former technical staffs are left out during this contact with the retailers denied access to software and hardware. The service vendor gains an advantage over the retailers in long run because of their dominance in the company’s operations.

Expenses

According to many retailers presumptions, outsourcing have an advantage to retailers because of the economies of scale perceived as way to reduce cost. The perception to retailers is that there are mass production and specialisation in large companies that help them to reduce the average cost. However, most of Certified Public Accountants perceive the other way in which they prefer small companies as better placed because of good wages and modern technology.

In general, the impact of outsourcing worldwide is divided into two, and that is either outsourcing is a success or a failure. While these effects are based on various factors within the outsourcing, parties involved.

IT outsourcing have become crucial for most retailers, but to some retailers it is not a smooth transition. Retailers have involved their IT outsourcing companies in a tussle to some extent that there is termination of contracts between the two parties before time is due. This should send a signal to retailers looking forward to sign contracts on IT outsourcing because there are possibilities of failures as witnessed in some cases in UK. Retailers should consider various factors before involving an IT outsourcing companies to avert possible downfalls at early stages. Otherwise, unscrupulous service providers in market can taint the significance and benefits associated to outsourcing.

Factors to consider when choosing an outsourcing partner

The complexity of this scenario is the challenges likely to face the retailers in their search for outsourcing partner because it is rare to find a service provider with rich professional background on both IT and retailing field (Morris 2011). Retailers seeking the IT outsourcing should therefore consider the following points for a successful service provider.

• The service provider should have demographic knowledge-based experience for them to match the marketing technologies with the population’s culture and values.
• They should express both national and international high standards through possession of highly ranked supportive staff with excellent records of support.
• Outsourcing partner should work hand-in-hand with retailers through a long-term partnership so that it can oversee the future growth strategies.
• It should express high agility, sensitivity, and flexibility to steer ahead the business in case of changes.
• Last, it should be supportive and oriented to Return on Interest (ROI) maximisation as well as maintaining the retailers’ legacy systems and its competitiveness without any recorded decline due to technology adoption.

Risks facing retailers in outsourcing

There are various instances cited in UK where IT outsourcing have failed or faced numerous challenges. The results of such instance are the immature contract termination and downfall of some companies.

Sainsbury is a victim of poor IT outsourcing that has contributed to difficulties in its operations. At one time, Accenture had mandate to outsource IT transformation to Sainsbury’s, but termination of this contract happened before the stipulated time. The two parties signed a contract in 2000 for a cost of £1.7 billion that initially was to last for seven year before the negotiation on 2003 to extend it until 2010.

A distinct risk associated with Sainsbury’s outsourcing their IS services to Accenture is that they had a lack of experience in IT infrastructure management and the same can be said of a number of other retailers. The only previous retailer company that Accenture have supported was a retailing company called Sears, which took place in the year 2000. This was a risk to Sainsbury’s as their whole IT infrastructure was to be outsourced, which could lead to the project being unsuccessful. Accenture clients are mainly financial and stock exchange companies thus have vast amount of experience and would provide a good and reliable service to other similar companies.

Cultural incompatibility is another risk identified. Accenture is an “engineering perfectionist” and they mainly focus on building industrial-strength infrastructure and are chosen by the stock exchange and financial services companies. Sainsbury’s require operators that are “fleet-of-foot that can work off the back of a cigarette packet and produce solutions that cut costs to an eighth of previous levels on the fly – hardly Anderson’s (Accenture) strength” (Knights 2005, p. 1).

Another distinct risk that was exposed was that the seven-year contract with Accenture means that Sainsbury’s would be risking them financially and would need to abide to the agreed contract. On average, a contract between two companies would last for about 2-4 years so agreeing on a contract, which lasts for seven-years, is a big risk. According to Knights (2005), the contract seemed to go astray by 2005 when Accenture’s staff and IT services went back to Sainsbury. Reports revealed by the chief executive, Justin King showed that ever since Accenture signed the contract, Sainsbury faced challenges in IT systems because of insufficient investments and developments.

However, Sainsbury’s had appreciated the contribution of Accenture as cited by the author of the article Sainsbury’s calls time on IT outsourcing contract who recorded that, “Accenture has provided our business with system reliability and stability that we would not have been able to provide ourselves. We believe the time is now right to develop further our IT capability in house” (Knight 2005, p. 1).

Regardless of this statement, Sainsbury had internal issues that faced its relationship with their customers. As a result, the company had to terminate the contract with Accenture to save them from shortage of customers. Sainsbury realized the customers’ complaints on poor services delivered by the service vendor. As a result, Sainsbury associated the poor services to poor outsourcing services provided by Accenture. Luckily enough, Sainsbury regained its financial position soon after the termination of contract.

There are possibilities the cost for putting an IT outsourcing by Sainsbury was overwhelming. “The IT cost is a greater proportion of sales than they were three years ago,” (Computing 2005, p. 1) during an interview with the chief executive. The company had to stick into in-house IT to cut down the costs. On a different occasion, Hayward expressed his opinion that, “I also think that early on, Accenture’s fearsome sales and marketing machine over-played its role in the business (as opposed to technology) transformation, making it a convenient scapegoat when the revenue and profit growth didn’t arrive” (Knight 2005, p. 1).

This situation worsened on 27^th November 2005 when Sainsbury declared the termination of the contract to embark on in-house IT for six to 12 months after this termination. According to Ranger in the article, Sainsbury’s scraps outsourcing deal with Accenture, this move targeted on rebuilding expertise back to the company. The initial projection of Sainsbury was to reduce its previous £200 million per year spending on IT to £35 million per year, but this was an unattainable dream in the near future (Ranger 2005).

Consequences of Poor contracting processes to both parties

According to Dekhuijzen (2006), various international surveys reveals unfriendly outsourcing contracts results because most of them had termination within first two to four years after signing the contract. Surprisingly, the terminations of these contracts are “amicable” and confidential between the retailers and vendor for safeguarding the reputation. He came up with five key factors that led to failure of IT outsourcing.

1. To start with, failure emanates from a mismatch in the expectations of both retailer and the vendor. Client – supplier relationship leads to the misunderstanding hence, a status quo is vital at the commencement of such relationship.
2. When both parties express financial opportunism, there are possibilities toward failure of IT outsourcing. It is known that initially the purpose for outsourcing was money-driven, but later this changed into quality-driven strategy. Money plays an important role when selecting a logistic service supplier hence, selection of such supplier determines the success of the strategy. For instance, the litigation between Sprint and IBM filed in US court back in 2006 when IBM failed to deliver quality services.
3. Another cause of such failure is the success of a contract, but the client incurs damages due to unproductive performance of the outsourcing. A good example is the Litigation between Vertex and Powergen. Vertex declared that services provided by Powergen were unsatisfactory soon after the meeting held in 2005 is a good example.
4. In addition, failure can result from inadequate retailer organisations by the client after signing the contract. Clients should maintain the organization role for cementing the contact between the client and the IT supplier, especially in instances in which changes occurs within the company.

Similar scenario can was evident in the contract between Sainsbury and Accenture. The following are the IT management practices that should be adopted before, during and/or after negotiations with a supplier to mitigate against each of the risks identified between the two parties. The contract termination had concern on both the retailer and the service vendor.

Feasible measures that retailers should take to avoid failure of outsourcing

Firstly, before Sainsbury’s decision to outsource all of their IT services to Accenture, they should have carried out some research on a number of companies who have previous experience in IT infrastructure management with retailers. Sainsbury’s chief executive should have at least come up with a selection of companies before rushing into a decision based on his own knowledge of Accenture.

The chief executive and the board of directors should discuss the possibilities of outsourcing to another company before agreeing to sign a long-term contract with Accenture. During the negotiations, the chief executive should ask for a potential management strategic plan on how Accenture will manage and implement their IT services and how it will help the company overcome their competitors in the end. After negotiations, the supplier should brief the chief executive about how much it will cost the company and how it will benefit the company. All the management decisions, which I have discussed, will solve the risk.

The cultural incompatibility between Sainsbury’s and Accenture lead to the project being unsuccessful, this could have been simply avoided by Sainsbury’s choosing a company that focuses on drastic cost cutting rather than a company that is focused on building industrial-strength infrastructure. Sainsbury’s was financially declining and falling behind the top supermarkets in the UK thus needed a company that would cut its cost and produce a stable IT infrastructure for its services.

There should have been input and communication from Sainsbury’s side as Accenture had little knowledge of Sainsbury’s processes that were involved and what Sainsbury required from their new IT infrastructure. As Sainsbury had little knowledge of IT, this made the outsourcing difficult for Accenture – they needed some involvement from Sainsbury.

Before Sainsbury negotiated a long-term contract, they should have shopped around before deciding to agree outsourcing terms with Accenture. A strong team of negotiators should be in place by Sainsbury. They should also ensure that all board of directors have a say in the final contract decision and identify any hidden costs. In addition, they should have tested the outsourcer with a little bit of work over a short period.

During the negotiations, a long-term contract should be only agreed if there was a prior relationship between companies. The chief executive should only agree a short-term contract with Accenture as many contracts begin with at least two to four years. In addition, Sainsbury should clearly state how much they would pay Accenture for their IT services. After the final negotiations, the contract should be in place and Sainsbury’s should then demand regular meetings to see the development of their future IT services.

If the supplier does not meet deadlines then Sainsbury’s should confront the supplier and fine them. Therefore, it is clear that both the retailer and service vendor have a tough duty to oversee implementation of the IT outsourcing contact. Indeed, the retailer should play a vital role in deciding the perfect vendor as well as the activities to outsource.

Clients should arm themselves on the exit strategy in case of litigation case that may emanate from failure to adhere to agreement at the beginning of the contract. Most of IT outsourcing agreements has complicated escalation procedures that prevent parties to terminate contracts unless attainment of certain stipulated time (Dekhuijzen 2006).Currently it is evident that, there is readdressing of most IT outsourcing contracts signed in 1990s for renewal.

The motivating factor to retailers seeking the service is manifested by the desire to minimise the operating costs. However, according to Gill, an outsourcing specialist at law firm Osborne Clarke “past experience of outsourcing failed to match expectations. As a result, companies are looking at ways to renegotiate future contracts to give them the desired results.” (Gill 2011, p. 1). Results proved a scenario in which at least 50% of the outsourcing contracts failed to delivers required results.

A further 80% deals on information technology sourcing suffered a major blow because the results on performance were insufficient. Gill therefore advises retailers planning to increase productivity after the renewal of contracts should be keen on reflecting past mistake to offer a platform for legal and commercial bargaining. The article Renegotiating and outsourcing contracts: How to get the service you want continues to establish reasons why retailers involved in first outsourcing contract failed.

The source of the blunders emanated from insufficiency of significant remedies geared toward performance efficiency and lack of pre-contract due diligence to facilitate proper benchmarking. Retailers failed to carry out enough internal analysis on services that required outsourcing before involving the service vendor. As a result, quality and cost effectiveness of outsourcing in relation to in-house provision was indistinguishable. In summary, first round of outsourcing faced problem such as failure to meet economic expectation, lack of well-defined outsourcing service that intensifies renegotiation of second round deals, and there was no contractual remedies to facilitate ethical supplier performance (Gill 2011).

According to some researchers and experts on IT outsourcing, it goes beyond the advantages achieved by this service because some instances there are risks associated with it. IT outsourcing have risks that leads to unproductive consequences as opposed to projected results. Based on the insights revealed from transaction cost theory, three major risk factors on IT outsourcing are evident. These risk factors for IT outsourcing are “the transaction, the client, and the supplier” (Bahli & Rivard 2004, p. i)

The move by Somerfield to assign its IT outsourcing to Tata may be good initiative. This company runs a series of supermarkets in India, but they signed a seven-year contract with Tata consultancy services (TCS). The move came when the retailer was under pressure to consolidate savings after venture capital consortium took over. However, a stunning warning came from Richard Hyman, a retail analyst in Verdict Research. He pointed out that although the move by Somerfield had fortunes behind it, there were possible risks besides the benefits. He said that, “IT represents a substantial flow of money and it is very tempting to think India represents a fantastic opportunity to save, but there are risks involved and you do lose a bit of control” (computer weekly 2006, p. 1).

According to McCue (2004), there are high chances for retailers to indulge into IT outsourcing without conducting a thorough evaluation of their business as well as their potential suppliers. According to research conducted by the Benchmark Research Study, about 28% of senior executives interviewed had not evaluated their IT outsourcing vendors before signing the contract. To make the matter worse, more than 34% did not bother to conduct complete risk analysis.

In comparison, the contracts signed before 2000 had better results than those signed after 2000 (McCue 2004a). This emanates from poor performance by service vendors who take an advantage of the retailers’ quest to secure their business competitiveness through IT outsourcing. Similarly, retailers have become lazy in perfecting their roles after contracts signing, which make the vendors to be reluctant.

On a sad note, JP Morgan chase bank had to terminate a $5 billion IT outsourcing contract against IBM Company to bring back the services to an in-house outsourcing. IBM had to surrender the investment banks data centre, help desks, computer networking system, as well as data and voice networks on January 2005. IBM transferred Four thousand workers and contractors previously based in IBM offices to the bank’s offices.

However, this was management’s decision after there were possibilities to merge JP Morgan Chase and One Bank in 2006. This move is a clear indication of turbulent future of IT outsourcing as perceived by Anthony Miller, Ovum Holway’s analyst. The move to bring in-house IT sourcing was a hard decision given the importance of IT outsourcing in financial service sector. He suggested that, “The cancellation of the JP Morgan Chase deal could stem the tide of future banking megadeals, a sector we had expected to be one of the major drivers for outsourcing in coming years” (McCue 2004b, p.1).

Inability of retailers to distinguish between the core and noncore functions mounts to a confusion during the IT outsourcing process. According to Jenster and Pedersen (2000), the definition of the core functions may take three dimensions whereas kakabadse (2005) raise a debate if a difference existed between core competency and core function. Outsourcing of these key activities may sometimes prove risky to retailers because they leave the company’s excellence in the hands of the vendor. Consequences arises when a problem arise because they may take long to regain normalcy (Hussey and Jenster 2003).

A case study on 1997 UK passport agency outsourcing proved the implications of relying on third party when a critical problem arise. The service vendor failed to adhere to the objectives laid by the agency in which by June 1999 there were over 500,000 passports waiting the processing. Long queues were normal occurrence outside the London passport offices in which they waited in desperation. Cost incurred from outsourcing failure can be categorised into creation of customers’ dissatisfactions, compensations, and overspending on staff paid for duties performed overtime that amounted to 12.6 million pounds (Hussey and Jenster 2003).

Reasons why outsourcing can fail to deliver viable results

Views expressed by a senior analyst at researcher Ovum, Douglas Hayward, summarise the shortcomings faced by retailers. Reflecting on Sainsbury, below are some reasons for why outsourcing can registers dismal results.

1. Sainsbury executives could have attributed poor decision making that led to poor performance after signing contract with Accenture.
2. Accenture Company could have exercised outsourcing governance that was not strong enough.
3. The Political wrangling between retailers and their service vendors
4. The risk of “big-bang” approach via numerous assumptions overwhelmed both parties.

In conclusion, he said;

“It is a warning that business benefits don’t necessarily follow from IT

infrastructure renewal unless the business itself is well run and the two

sides are properly connected. New IT infrastructure cannot compensate

for poor business management. In that sense, Sainsbury shows us the

limits of transformational outsourcing.” (Ranger 2005, p. 1)

On the same note, there are reasons for why outsourcing may fail as cited in the seven deadly sins of outsourcing. The author understood the effectiveness of outsourcing as powerful tool aimed at reducing cost, improving performance, and granting a chance to focus on core activities. However, surveys conducted in Europe and the United States revealed why outsourcing initiatives delivers dismal results below the management’s expectations. According to Barthelemy (2003), below are the seven “deadly sins” that may pull down IT outsourcing efforts.

1. If a retailer outsource functions that do not need outsourcing.
2. If a retailer choose a wrong vendor as a service provider.
3. If the contact is poor.
4. If the retailers overlooks personal issues alone.
5. If there is lost control on the outsourced function.
6. If the cost of outsourcing is overlooked.
7. Failure to plan a strategy to exit from vendors.

To surprise of many, there are few cases or reported outsourcing failure because retailers are reluctant to publicise such reports (Barthelemy 2003). The reasons behind this have close association with efforts to safeguard the company’s image and maintenance of current customers.

Research method

Overview

This dissertation section discusses the methods applied for its success. It elaborates details step-by-step on how I conducted the study until the completion of the study. These steps included the data collection procedures significant for completion of this purposeful dissertation. It reveals the process of the data collection and application in the study as well as how the dissertation achieves its mandate to address the aims and objectives initially set for conclusion and recommendation making.

On the same token, this chapter will justify the study performance methodology. It strengthens its usefulness through utilization of scientific methodologies vastly embraced worldwide. These methods used in this dissertation will help in making a substantive conclusion.

Based on the aims and objectives set of this study, the dissertation has intension of determining if retailers in the UK benefits from IT outsourcing or they can do without it and succeed in a market faced by stiff competition. In addition, it will indentify the difficulties facing adoption of IT outsourcing among retailers, the hitches between the service providers and the retailers, as well as the future of IT outsourcing by retailers in the UK. It was in best decision to address this question through a methodology that focused on primary and secondary data collection from-related literature dissertations as well as conducting online surveys.

Given that the dissertation intends to study the opinion of retailers in the UK regarding contribution IT outsourcing in their line of duty, the immediate dissertation methodology will adopt a descriptive dissertation design. Various results and literatures from previous researchers provided secondary data sources significant in indentifying the effects of IT outsourcing by retailers in the UK and how well the service is doing in terms of success in the UK.

Dissertation design

As the researcher, I opted to use descriptive method based on the simplicity and clarity in the illustration of the study. Use of Descriptive method eased the research study because the objectives were easily fulfilled by the end of the study. It also assists in description of the nature of particular condition existing during the study as well as gaining experience on the cause of these conditions. Most important, the researcher has assurance of a good dissertation because firsthand data (primary data) are easily accessible from the online respondents to facilitate formulation of rational and clear conclusions as well as recommendation reflecting on this study.

The reason behind Descriptive method of dissertation is the achievement of data on the current phenomenon of IT outsourcing by retailers in the UK (Creswell 1994). The significance of descriptive dissertation is evident in its ability to develop a more elaborative scenario in details easy to comprehend. According to Kuhn (1970), descriptive studies fulfil the first two aims required for normal science.

The two aims are, “attempts to increase the accuracy and scope with which facts are known” or “determination of those facts that can be compared directly with the predictions from theory” (Kuhn 1970, pp. 25-26). Therefore, descriptive dissertation aims at clarifying the nature of a situation in a more specific, and fixed perspective rather than a static context. Similarly, this design seeks to make a phenomenon to be clearer through focusing on what is happening instead of focusing on why this situation is happening.

This dissertation used the primary data from me the researcher, and the secondary data from-related literature. The researcher obtained the primary data from opinions or answers offered by online respondents in surveys. The online survey took place in www.kwiksurveys.com website and it constituted a ten-question survey. Respondents required few minutes to answer the questions to make one complete set of data.

Similarly, there was information from interviews that contributed to primary data. Some employees from retail companies utilising outsourcing as well as top executives were interviewed. Main question was the profitability of IT outsourcing to the retailers and if the service vendor met the company’s expectations as recorded in contract form. On the other hand, there was collection of secondary data based on the findings elaborated in published books as well as literatures based on the dissertation problem. To be Precise, I preferred recent literatures focusing on situation of IT outsourcing by retailers in the UK.

According to Veal (2005), researchers should be very keen in the data Collection, sampling, and analysis of data as well as employing the appropriate techniques. There are number of research approaches applied in this study. In the article, The Research Process, Bouma (2004) states that the researcher during the inductive approach makes specific observations from the collected data and arrives at a new theory by observation and hypotheses (Stakes 1995; Yin 2008). The deductive approach starts by reviewing and gathering theory, collecting data, and drawing conclusions. However, these two research approaches are not mutually exclusive hence; a research study may have elements of both (Hamel 2000).

This research will also take a quantitative research approach. In this approach the problem to be addressed will require an in depth explanation (Saunders 2009). Additionally, this approach will identify the variables within the problem and establish a correlation between these variables. This dissertation is mainly literature-based where the researcher relied on “scholarly evidence to justify the research problem” (Saunders 2009, p. 58).

There were deliberate attempt to address the inadequate knowledge that existed in this field of research. The research approach tried to quantify the data collected. According to Kumar (2005), the quantitative approach examines and interprets data quantifiable, measurable, and finite. Acquiring quantitative data can be by experimentation, testing, and calculation. A statistical format displays the results obtained in this approach (Neuman 2006).

The study used both the qualitative and quantitative approaches just like many dissertations utilises same approaches. To start with, the quantitative approach employed numerical findings through survey method. Online users were requested to respond on some issues related to IT outsourcing posted in my account in www.kwiksurveys.com. The few cases of interview contributed to qualitative approach of the study because there was expression of personal observations, descriptions, insights, and opinions. The necessity for utilization of combined approach intended to eliminate limitations associated to both approaches.

However, for the success of this study, the researcher utilised quantitative approach (Mays and Pope 2000). Quantitative data used gives the scope of the whole topic that helped me to acquire a better comprehension of the objectives of the study (Creswell 1994).

For the purpose of this research design, data collection approach encompassed thorough literature review of relevant to discussion on the possible consideration for retailers planning to embrace IT outsourcing, the views from retailers already using this service, and sentiments aired by retailers on their dissatisfactory on outsourcing. The researcher managed to obtain data from reliable sources of studies and incorporated it quantitatively via content analysis.

Secondary documents were significant to me because they attributed to study’s goal and objectives. These sources included journals on research methods as well as reports on the status of IT outsourcing among the retailers based in the UK. This approach is more flexible and any adjustment or refinement of research facts is possible as execution proceed. There is no data collection restriction in this approach as opposed to opinions on the qualitative approach by some researchers. It also focuses on categorical frameworks as well as hypothesis specific to the researcher (Cassell and Symon 1994).

Participants

The respondents for this study responded online via survey questions posted in a supportive and reliable www.kwiksurveys.com. Few interviewees also participated regardless of interviews proving to be time consuming and expensive considering the area of study is huge. To be precise, interviews were mainly done through telephone to save time as well as expenses such as transport. Online respondents included retailers, analysts, and customers expressing their views on questions posted in certain websites blogs such as www.kwiksurveys.com.

Data collected from this survey will be include in the appendices section These respondents expressed their opinions independently and randomly because the voting or opinion polling was not restricted to gender, race, or time span. The advantage of random sampling is that each member in the population expresses equal opportunity in the sample. Random sampling becomes the most efficient sampling technique because the member of the polling population has equal participation in the dissertation compilation.

In this sampling strategy, the researcher made it open for population without restricting who to poll or who not poll in the online surveys. The researcher posted these surveys questions in website blogs in which the respondents visiting the site had a chance to express their views on the questions posted by the researcher. The blogs included www.kwiksurveys.com. Ten questions reflecting different areas of IT outsourcing by the retailers in the UK were posted in this website.

For instance, the researcher requested respondents to assess IT outsourcing by retailer in the UK if it had a positive influence to retailers in terms of profitability and what could have contributed to failure of IT outsourcing by some retailers. In addition, the researcher sought to evaluate both the retailers and the service vendors to clarify their roles and contributions toward success of IT outsourcing or failure of the same. Some questions required further details to support the opinions expressed by the respondents. Others required just ticking the desirable answer perceived by the respondents.

Dissertation instruments

This study used the survey questionnaire method as a dissertation instrument. These survey questions aimed at assessing retail IT outsourcing strategy in the UK and indentifying effectiveness of retail IT outsourcing in UK. Self-administered questionnaires and online survey questionnaires were important in this case. Retailers and consumers were involved in completing the questionnaires because they were the most affected from IT outsourcing.

There was also the evaluation of the advantages and disadvantages of retail IT outsourcing in UK through perception of the respondents. The researcher preferred Questionnaires because the respondents have freedom to answer the questions freely and voluntarily hence; averting instances of biasing as in most cases of interviews. Retailers and consumers are the direct recipients of IT outsourcing hence; their views reflected in questionnaires are likely to have strong basis. There was simplification of the survey questions to enable respondents to answer the questions with ease.

Instrumentation

Content analysis

This was vital for the dissertation because it analysed communication to facilitate answering of the two level question mentioned earlier, that is, the descriptive, and the interpretive. In comparison, descriptive questions sought to obtain the content of the communication while interpretive questions sought reflect on the right meaning of the content. Not all the information provided by the respondents could be used in research result analysis because possibilities of biasing in some cases could arise.

Communication between the respondents and the researcher was effective but based on the knowledge of the researcher, more sources among different stakeholders was significant. It is for that reason the process involved more than one communication sources to answer questions researched by the investigator/researcher (Brubaker and Thomas, 2000). Therefore, the purpose of content analysis is the analysis and interpretation of the interview and the online survey done through questionnaire. There were multiple responses to increase the accuracy and credibility of the data under analysis. The responses to the questionnaire and interview were independent to avoid biasing of the results that could result to misleading research results.

Statistical Treatment

There was utilization of weighted mean in calculation of general response obtained from survey samples. Researcher required the respondents to agree or decline a given statement. There was use of Tables to represent Results obtained from the surveys. In addition, there was inclusion of essential literature in the support of findings as well as analysis of the survey data. Statistical analysis of the gathered data was simple because the researcher used powerful software packages in statistics such word processor (MS excel), and in one instance there was use of Statistical Package for the Social Sciences (SPSS).

The importance of this software is to summarise of data through for instance, the computation of standard deviation, examination of relationship among variable through, for example, multiple regression, and graphing the data.

Ethical Considerations

Although the study utilised online survey questions, the researcher understood the importance of confidentiality, consent, and data protection to curb future problems to this dissertation. Drafting of the questions posted for surveying were transparent and unbiased to avert conflicts with the respondents. The researcher managed time properly to enable enough responses from the respondents within the stipulated time for the dissertation. Withholding of respondents names eliminated any occurrences of victimisation. Names of service providers companies mentioned by respondents that failed to offer proper IT outsourcing remained a secret to safeguard the reputation of these companies. I used my industry sources to ensure we had a quality response of a variety of different sources.

Results presentation and analysis

This chapter represents data collected from various respondents from different regions and distinct knowledge on IT outsourcing among retailers. The researcher discussed the results of the structured survey questionnaire posted over the Internet in which 60 respondents and the result of the survey process that initiated 60 Internet respondents in this chapter. In addition, 32 interviewees participated through face-to-face, telephone calling, or Internet interview to offer other sets of primary data on the four major interview questions.

Only seven out of 32 turned up for face-to-face interview and transcripts recorded, whereas results from phone and Internet interview had to be analysed in percentages for simplicity. Prior to the initiation of the survey process, respondents got an overview of the purpose, the importance, and objectives of the study.

Researcher presented the results achieved from this study in form of written word document. The study used the diagrammatic and graphical figure for better presentation. Graphs used are easy to interpret and making comparisons.

Demographic characteristics of the respondents

This part revealed the general overview of social and economic characteristics of the respondent who contributed to this research study. The sample population used in online survey was not limited to age, gender, occupation, or marital status hence the results achieved from the survey assumed total presentation of the aspects stated above. However, the interviewed population considered gender, age, and working experience.

Age

The aged population was higher than the youths who either turned up for interview or responded through phone calls. Approximately, three-quarters (78%) of the interviewees were people aged 30-59 years, participants aged between 20 and 29 years was almost a fifth (18%), and the rest were below 20 years (4%). The pie chart below represents age distribution of interviewees. This should be attributed to long time in service among the aged population on the industry. The elderly people were source of beneficial information based on long career experience.

Gender

The results revealed that more than half of the interviewees (65%) were male whereas the rest of the participants were female (35%). Males were more than willing to disclose strong opinions on this issue. This emanated from dominance of males in information technology as opposed to women who showed less interest in IT-related activities.

Years of employment in the company

The largest population (50%) of the interviewed managers and employees had six to ten years of working experience in retail companies that contracted IT outsourcing services. Participants with 11 to 15 years of working experience in retail businesses were second with more than a third (36%) while the rest of the participants (14%) had not as many five years working experience. The reason why the most of interviewed population had working experience ranging from 11 to 15 was an indication of reliability of information they were likely to provide. They had endured hardships and best moments in the retail companies, which placed them in a better position to give opinion on the questions.

Perception of Respondents

A total of 32 employees from different retail companies in the UK responded to interview questions either through face-to-face interview or through telephone call because of time and financial limitation. Fortunately, crucial questions posed by the researcher got answers from these respondents. The results from the interviews revealed the following scenarios.

Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing?

To start with, more than three quarters of the respondents (79%) commended outsourcing some activities to third party, almost a fifth of respondents (18%) recommended in-house sourcing, and the rest (3%) had an intertwined decision in whether to adopt outsourcing or in-house sourcing.

Most of the respondents who supported IT outsourcing from third parties believed that there were high hopes for cost reduction and improvement in service delivery to customers. However, there was worry over the effects of outsourcing in terms of local development and its contribution to home economy. Almost 50% worried those countries with outsourcing companies benefited their countries through jobs creation and taxations made by their governments. Therefore, caution should be taken to create a balance between the benefits and implications emanating from outsourcing.

Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

There was a variation on why a retailing company should outsource some of its function to the third party. This was one of the hardest questions to the employee because of the closeness of these driving forces. However, 40% of the respondent attributed outsourcing to the need of cost reduction, 32% believed that quest for better service delivery was the factor, 13% cited core competence as the cause.

There was an overlap of opinions among the rest of the respondent (15%) in which some of them cited more than two reasons whereas others had different reasons for outsourcing. There are possibilities that these driving forces likely to interchange given the growth of the industry. In mean time, retailers expressed their satisfaction on cost reduction as a major driver to their quest for outsourcing. This can be related to objective of most businesses to maximise profit and minimising cost of operation.

Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

On an opinion if IT outsourcing had succeed in UK and its future among retailer, 66% were optimistic and satisfied by the current trend while 34% experienced outsourcing dissatisfaction hence recommending termination of some contracts. This emanated from most of the retailers expressing their satisfaction from their outsourcing partners. Similarly, customers had noticed improvements in services provided by the retailers. For instance, customers got quick response to their enquiries, all the transactions were quickened, and customer handling practices were up to required standards for customers, satisfaction.

Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

Opinion on who was to blame on contracts failure had divided opinions in which approximately 34% blamed both the retailers and the service vendor, 47% blamed the retailers, 15% blamed the service provider, and 4% attributed the failure from external factors such as government policies. There were some mismatches in expectations among the retailers, and outsourcing partners. Both must have contributed to contracts failure, but retailers contributed to most of these failures because of their negligence.

The second part of this dissertation represented results collected from online survey using techniques such as Likert, yes or no answers, among others. The results emanated from 10 different questions posted over the Internet in which 60 respondents participated. Surprisingly, respondent had different opinions while others had similar opinions on matter concerning IT outsourcing, different stakeholders, and the trend of IT outsourcing in the UK. The following subsections illustrate the opinions given by the respondents on the 10 questions.

Below are results from the online survey question based on the online respondents’ opinions.

Do you think IT outsourcing is successful in the Retail market in the UK?

Most of the respondent had confidence in IT outsourcing (65%) by retailers in the UK but even though some declined any possibilities of success, there was opinion divide among this category. Some required more time to assess the retail market situation while others were not familiar with UK market. This revealed a possible growth of IT outsourcing by retailers once the barriers between retailers and outsourcing partners were eliminated. From this response, there was a standard deviation of 21.2132034

Who do you think is to blame for IT Outsourcing failures? Retailers or the service vendors?

Some respondents were very sure on factors undermining IT outsourcing in the UK. However, others (13%) raised other concerns that attributed to poor contracts among the retailer and the service vendor. Some blamed government for its murmur on funding in this sectors and unavailability of effective policies on IT resources to implement the plan. At one instance, one respondent attributed the failure of IT outsourcing to poor attitude toward switching from the current company’s operation to outsourcing some activities with the third party. Outsourcing has been demonised over its possibility to bring benefits by various retailers. Such issues can pose fear to retailers on possibility of success after incurring many costs in contracting a third party.

Is IT Outsourcing from third parties better than in-house sourcing? If yes, why?

Almost two thirds of the respondents (63.33) believed that in-house sourcing was better off than outsourcing. However, the rest of the respondents (36.67%) strongly defended their opinions as well as suggesting requirements for effective outsourcing. For instance, some respondents confessed that there were benefits attached to outsourcing such as the widening of specialised knowledge base, full time service delivery, integration of new skills to retail team, and improved innovation through incorporation of advanced technology.

What is your view on IT Outsourcing by Retailers in the UK compared to the rest of the world? Has there been better progress in the UK?

From this distribution of opinions, it was correct to forecast a better situation of outsourcing in the UK. Only less than 10% believed that the retail industry had not embraced outsourcing, whereas the rest had a varied agreement on the progress. Therefore, there was a bright future for outsourcing in the UK.

This was one of the Likert questions posed to respondents to express their degree of either acceptance or rejection toward the opinion on whether IT outsourcing had achieved its objectives among retailers situated in the UK compared to other retailers in the world. The percentage of those respondents who agreed or strongly agreed was higher than those who either disagreed or strongly disagreed. Indeed approximately a third of the respondents (33.33%) were convinced that there was a successful trend of outsourcing in the UK whereas a dismal 8.35% believed that there was no progress in outsourcing. However, more than half of the respondents (58.33%) were neutral on the issue but it can be projected that there was probability that to a certain degree they were likely to confess that outsourcing was successful.

What are the possible hindrances of IT outsourcing in the UK?

This question attracted attention of very few respondents with only 15 respondents responding to this question. The diversity of the respondents led to poor response to this question in which one confessed that he had inadequate knowledge on retail market in UK compared to the rest of the world. However, approximately half (53.33%) considered poor relationship between retailers and service vendor as the main hindrance to IT outsourcing.

Cost factor followed this in which more than quarter of respondents (26.67%) perceived as another major hindrance. Poor organizational culture and quality delivery had similar weight on their effects to IT outsourcing that is, both had 6.67% response. Proper measure should happen in retail industry to reverse the bad reputation of outsourcing among retailers to address these hindrances for energized growth of outsourcing. So long as these hindrances exist, the progress of outsourcing remains handcuffed in UK.

What is the most important aspect of a service contract to retailers?

From this question, response was substantive on two major aspects that retailers consider vital when signing an outsourcing contact. Quality of service became the major (50%), followed by cost reduction (46.67%), the rest 1.67% depending on the location of service provider, and 1.67% had opinion that both service quality and cost are the major aspects. The much support for improvement of service delivery among the respondents was attributed to the services customers received in the retail companies. Customers were in a better position to judge the advantage of outsourcing based on the services they received after the retailers contracted outsourcing companies.

Do you think Retailers lose control over IT development by Outsourcing IT?

Most of the respondents had much concern on the retailers’ behaviours soon after signing these contracts. The high percentage (63.33%) of the respondents believed that there were negligence among retailers after mandating some activities to outsourcing partners. Retailers should understand that outsourcing could be successful only under a close cooperation between the two parties.

Soon after signing contacts to third parties, most of retailers leave the outsourcing partner on their own in handling the outsourced functions. On the other hand, third parties may perform their duties at their own pace that retailers take long to realise. As a result, retailers end up criticising the outsourcing partners on the failure of their companies yet, they could have worked together to realise the anomalies likely to affect the company.

Do you feel IT Outsourcing has a detrimental effect on Retailer’s home economy? E.g. on jobs and development of local economy

This question had almost equal response among the respondents in which more than half (52.54%) believed that IT outsourcing would not harm the retailer’s home economy in terms of unemployment and development. 47.46% believed that IT outsourcing posed danger to local economy. For instance, some respondent had a deep concern on the future of local graduates and school leavers in the employment field once outsourcing becomes rampant in the UK. In addition, outsourcing from other countries could deny the government from getting revenue through taxation because the service vendors from outside would be paying taxes to their respective countries.

Do you think IT Outsourcing in Retail improves the end user service when compared to an in-house service?

In this question, there was measurement of the degree of either acceptance or agreement on if service outsourced can produce between results that in-house sourcing. However, it seemed that opinion between the two was not clear because the percentage of those who either strongly agreed or strongly disagreed was almost the same that is, 6.67% and 5% respectively. Similarly, the percentages of respondents who either agreed or disagreed were also very close that is, 33.33% and 30% respectively.

The rest of the respondents (25%) were neutral on this question because there was no clear divide between the two services or maybe some did not see any difference between the two. Lack of a very clear response on if outsourcing had made an influence emanates from wrangling between the retailers and outsourcing partner that slow the progress.

The divided opinion on this question can be closely associated with diversity of the outsourcing companies in their service delivery and terms of operations. Some respondents believed that outsourcing had a negative effect to the employees’ working morale. those supporting in-house sourcing believed that there were chances that the workers monotonous habit may negatively affect the customers’’ service satisfaction. However, on different perspectives, respondents remained loyal to either outsourcing or in-house sourcing because of their experience in the two services.

Do you think the trend in IT Outsourcing in the next five years among Retailers in the UK will attribute to further increase in IT Outsourcing contracts?

More than three quarters of the respondents, (78%) were optimistic that IT outsourcing would be a major shift by retailers in the UK. The rest (21.67%) believed that contracts termination witnessed currently will ruin the growth of IT outsourcing between service vendors and retailers. This should be capitalised by outsourcing partners to renegotiate their contracts or signing new contracts.

Results from the case study of Sainsbury

The following graph revealed how management decision on IT outsourcing led to financial hardship to the company.

From this graph, it was clear that Sainsbury suffered a turbulent economic situation from 1990 to 2010. Remarkably on 2006 when they decided to terminate IT outsourcing contract with Accenture when the profits and earning reduced significantly regardless of increasing turnover. There was turnover increment of £ 6.9 billion to £ 21.4 billion between 1990 and 2010 in Sainsbury although there was a small dip in 2005. This led to restructuring of the business after this decrease realised by the retailer.

There were no stable profits recorded during this period because they kept on changing in which pre-tax profits varied from £ 500 to £ 700 million and the profits varied from £ 300 to £ 500 million. In 2005, there was an exceptional £ 100 million cost incurred by Sainsbury. In addition, earnings per share in most years registered a decline of between 14% and 33% except in 1994, 2005, 2006 (Sainsbury 2011). This decision led to the recovery of this company as well as its projection to improve because of the efforts of the current management.

IT Trends in the Retail Industry and the future of Outsourcing among retailers

This part used secondary data retrieved from previous studies, surveys, and case studies performed by other researchers. Different research reflected on the current trend witnessed in outsourcing whereas other others predicted the future of IT outsourcing in different retail business levels.

According to Elix-IRR (2010) research, most researchers have dedicated a larger part of their budget to IT infrastructure maintenance. In fact, most of them have allocated more than 50% of the budget to facilitate proper information technology. As a result, there is a remarkable growth of IT industry through “software-as-service” in form currently referred to as cloud computing. In terms of the future of outsourcing among different retail levels, “40% of mid-tiered retailers say there is a strong probability they will outsource, compared to 18% of small retailers and 14% of large retailers” (Elix-IRR 2010, p. 11).

There was a survey conducted by European IT outsourcing Intelligence in 2011. The survey report revealed factors that retailers tend to consider before signing an outsourcing contract. Outsourcing providers located within the same country with the retailers or a near shore had better chance to be considered as better outsourcing destinations. Reasons to why retailers preferred outsourcing were very clear although the report concentrated on the top three reasons driving decision making toward either IT outsourcing or software development.

Decisions to outsource some activities increased year after year and this report reviewed the change witnessed between 2010 and 2011. Desire to reduce operating cost attracted more retailers in which there were an increase of 38% from the statistics of 2010. Unavailability of adequate IT skilled personnel and resources within the same country of Retail Company was the second driving force for this quest registering a 19% increase from 2010 reports. Lastly, the desire for concentration on core function/ competences increased by 16% from the previous year.

There was another survey conducted by Deloitte Consulting Group in 2005. Among the respondents surveyed, 70% perceived cost savings as the major reason for outsourcing. In addition, results from other surveys from special areas of services ranks cost reduction as the highest priority for client’s outsourcing decision-making.

For instance, the annual survey on business process outsourcing carried out by Capgemini and IDC (2006) revealed that 41.2% of the business executives cited cost reduction as the major driving force to outsourcing in a corporate strategy. Other driving forces were the intension to drive innovation in which 35.3% of the executives supported, and core competence scored 14.7% support. Outsourcing Effectiveness Study conducted by Towers Perrin’s 2005 Human Resource (HR) revealed that human resource managers focus on three major objectives when planning to outsource

(Zemke 2005). Among these objective ,37% of the respondents cited reduction of the overall service delivery costs as the major one, 23% believed that freeing HR could enhance core competence, and 14% believed that outsourcing was capable of improving service quality.

According to Outsourcing Journal, April 2002, there were different interests in outsourcing as illustrated in the table below.

Results revealed the closeness between cost reduction and core competence as the major driving forces to outsourcing. However there were other reasons such as staffing insufficiency and averting uncecessary investments that cannot be ignored.

Although there has been a blame game between service vendors or outsourcing partners, the same report also revealed the expected trend in contracts. Outsourcing partners are on the upper hand to strengthen their institutions for creating retailers’ loyalty. This has maintained the retailer’s reliance to their outsourcing services as revealed by the European IT Outsourcing Intelligence Report 2011. Based on 2010 reports, 60% of the outsourcing companies in United Kingdom were willing to continue delivering their services for another year. However, 17% found it tough hence; they were planning to terminate their contracts. This is an indication that there is high potential in IT outsourcing likely to grow over the years (Alex 2011).

Based on different studies, there is great future in IT outsourcing in the UK. The new trend in the IT outsourcing is likely to continue rising and some years to come, there will be solid outsourcing among the retailers. Studies proves this situation for instance the study by Everest Group that predicts the UK’s outsourcing to increase by 600% by year 2021 (Morris 2011). According to Berke (2010), there was much of significance of IT outsourcing as an effective cost-cutting tool.

The competitiveness of the economic environment leaves the retail companies without any other option other than to invest in the service. He also highlights the rising trend in the IT outsourcing as indicated in the Economic Intelligence Unit. The reports from this unit revealed that approximately one-third of the firm had embraced IT outsourcing by 1997, but this significantly increased by 2010 when an estimated 58% of the firms embraced the idea.

Although the idea for outsourcing received much appreciation for its contribution toward reducing operating costs and improved service provision, there has been bad news in this field. According to Gill who worked as an outsourcing specialist in Osborne Clarke law firm, previous experience of outsourcing failed to deliver the results expected by retailers. As a result, companies had to seek ways to renegotiate future contracts to deliver better results to the retailers (Gill 2011). Results proved a scenario in which at least 50% of the outsourcing contracts failed to delivers required results. A further 80% deals on information technology sourcing suffered were intolerable because the results on performance were inadequate.

On a different study, retailers’ top executives were to blame for poor outsourcing results. A research study by McCue (2004) revealed the existence of high chances for retailers to indulge into IT outsourcing without conducting a thorough evaluation of their business as well as their potential suppliers. According to the Benchmark Research Study, more than a quarter (28%) of senior executives interviewed had not evaluated their IT outsourcing vendors before signing the contract.

To make the matter worse, more than 34% did not bother to conduct complete risk analysis. In comparison, the contracts signed before 2000 had better results than those signed after 2000 (McCue 2004a).

Table 2: Ranking of vendors who entered or renewed contracts from 2007 by contract size.

Table 3: top 20 Contracts signed/renewed with start date from 2007 onwards.

Data analysis

It was very clear that the main driving force to outsourcing were mainly reduction of operating costs, improvement in service delivery, concentration to core function, and others. The analysis below represented the median, mode, standard deviations, and variances among data presented by different researches.

Table 4: data analysis for various research results.

From this analysis, it was clear that cost reduction led in terms of factors that triggers outsourcing among the retailers in the UK in which the means from three research results revealed so. The weighted mean for cost reduction was 41%, which was 7% higher than the immediate factor, service delivery improvement. Quest for competence in core function trailed third with a mean of 10%.

The high standard deviation and range on the service delivery as a key factor can reflect this factor a potential factor. This showed that if the relationship between retailers and outsourcing companies is enhanced there are probabilities of even higher satisfaction level on the services delivered to customers. Closing the gap between these results could reduce the standard deviation, which can be a good indicator of well-established service delivery levels among various retailers.

The increased range between the reports can reveal how some outsourcing partners in various regions have met retailers’ expectation, whereas in other areas retailers are yet to feel the effect of outsourcing. The low variance (0.12%) in cost reduction as a factor was an indication of dominance of this factor hence; it remained the key factor. The results from various reports revealed minimal variations on the contribution of outsourcing to retailers. This can be a good indication of how outsourcing has been consistent in helping retailer to reduce operating costs.

From the results, there was a very close relationship among the factors most of the retailers seek to fulfil when outsourcing some activities. Therefore, most of the retailers have focused on either benefiting from all the reasons or benefit from a well-blended strategy. IT outsourcing have been taken by retailers as a competitive strategy to maintain their dominance in the market. Issues on economic scale have always been a concern to retailers who has extended risk through opening many stores or chain of stores at various outlets. Therefore, cost reduction quest in the operations has played a major role among them. Retailers believe they can achieve mass sales through IT outsourcing given the benefits from minimising their operating.

However, retailers have for a long period failed to take a good transition from the former working conditions to the newly computer based platforms. This has slowed the success of outsourcing. More so, there are many other hindrances to outsourcing addressed in some chapters of this dissertation, which through effective measures can contribute a successful growth of outsourcing in the UK.

Discussion

This chapter concluded the major intention of the research study on IT outsourcing among retailers in the UK. It brought the ideas achieved from the introduction and background information together up to the results presentation and analysis. This chapter focused on each bit presented in this dissertation, but much emphasis on the results presented in this paper.

In my introductory chapter, there were different areas set for this research study of which drove the dissertation up to this chapter. The research objectives, scope, problem, limitations, and ethical consideration were very crucial for defining the flow of this dissertation. The dissertation ensured that Research objectives were adhered to the fullest to fulfil the research mandate. Part after part of this dissertation had to stick to these objectives to maintain its importance.

The data collection method used in this dissertation was mainly the online survey although there was integration of interviews and results from secondary sources such as journals, previous research studies, organisational surveys, and other publications. The online survey and interviews were main source of primary data because other methods like focus group and group discussion proved more expensive. On the other hand, there was need to refer to previous work done by other researchers on the same topic. Therefore, the dissertation had to use secondary data to support the effort in studying this topic.

Researchers should have adequate knowledge on the use of this software to avoid backfiring of the whole process. Once the researcher manage to operate the software, good selection of websites and blogs to post the surveys are equally significant. Visitors should visit frequently the blogs and the websites so that the survey completion uses a short period. In addition, the researcher had to make visitors request to the survey website to increase the number of respondents. Last, there was proper recording of the information collected from this survey for further data analysis that revealed the difference in responses toward different research questions.

There was the use of interviews to solicit primary data helpful for this dissertation. However, interviews tend to be tedious, time consuming, and expensive hence, there was a need to settle on a strategy that could not complicate the whole interview process. Interviews may take different forms that include face-to-face, telephoning, and Internet interviews. Therefore, this dissertation sought to use telephone and internet interviews given the several constraints surrounding face-to-face interview such as expenses to organise and to hold the interview.

Most important, telephoning and Internet interviews provided information within a short time although this had its implication because the condition requires a shortened interview. As a result, there were very few questions asked to the respondents hence; the dissertation had to put more emphasis on online survey. However, there were other techniques for acquiring primary data not used by this dissertation. Some of these methods included the formation of focus groups, discussion groups, and market test among others.

On the other hand, the dissertation used secondary data collected from previous publications (Steppingstones 2004). This dissertation had to acknowledge the work done previously by researchers to avoid instance of reinventing the wheel. Similarly, to evade eventualities such as repeating some blunders made by the previous research studies, it was worth doing literature review. Fortunately, there were numerous secondary sources spotted by this dissertation that strengthened the objectives of this dissertation. There was a need to perform data comparisons, contrasting, and reviewing before incorporation of any information into this dissertation.

Most important, the research study avoided incorporation of outdated, doped, and biased research results to maintain the focus of the dissertation. Possibilities of outdated or altered data are likely to doom objective achievement even after the dedication of much time to the dissertation writing. This dissertation keenly maximised use of current journals, research studies, and current surveys in line with the mandate of this dissertation.

Research studies have tendencies of using either the inductive and deductive approaches to acquire the required data. However, the ultimate linkages between these methods make them inseparable and most dissertations result to use of both approaches. More so quantitative research approach formed the basis for this dissertation. The reason the dissertation settled on this approach emanated from that the researcher had an interest in measuring the effect in terms of variable that were measurable. Therefore, data collected was analysed using mathematical software to give results in percentages and distribution by use of graphs. Apart from quantitative research approach, there is qualitative research approach that instead gives results in immeasurable variables.

This chapter applied various sections that reflected on various issues associated with IT outsourcing among retailers in the UK. The discussion looked into the advantages and disadvantages of outsourcing, major driving forces to outsourcing, the current trend, and the future of outsourcing, and the contracting process between retailers and service vendors. It is worth noting that the above aspects were the main issues that formed the research question. After answering these questions, the discussion chapter led to the formulation of conclusions and recommendations.

Advantages and disadvantages of outsourcing

A thorough literature review and data collection from various sources revealed more advantages of outsourcing than the disadvantages. Most of these disadvantages emanated from bad reputation given to outsourcing by people. It was very clear that IT outsourcing had been the focus of many retailers because of the competitiveness nature of the market. The advantages of outsourcing have definitely outdone the shortcomings in all levels of the retailing industry.

Advantages of IT outsourcing

In all those data collected, IT outsourcing scored high in its contribution to retailers among all the stakeholders and related sources consulted in this dissertation. Results revealed the benefits that retailers were likely to enjoy upon accepting IT outsourcing in their premises. There is no doubt that outsourcing played a significant role in the retail industry, a situation that attracted other retailers hence increasing the number of outsourcing contacts.

In fact, the results revealed a positive trend in outsourcing among the retailer as later discussed by this dissertation. Retail companies in the UK continually have reaped benefits from indulging into the outsourcing contacts with third parties. The success of outsourcing contracts has raised quest for retailers without these services, whereas retailers already using outsourcing have considered renewing their contracts with their service vendors. From a close analysis of the data collected and analysed, the following are the main advantages derived from outsourcing by the retailers.

It was not easy to establish the main advantage of outsourcing directly from the results. Cost reduction and improvement of services benefits were very close in their degree of response from the respondents. Apart from the results produced from the online survey, others revealed that the main advantage gained by retailers for outsourcing was the reduction of operating costs. From some of the analysed data, 46% of the online survey respondents, 38% of the European IT Outsourcing intelligence respondents, and 40% of the interviewed respondents believed there were probabilities of reducing cost through outsourcing. This is a high degree of acceptance compared to other benefits brought to a retail company.

After a weighted mean, the three results revealed that cost reduction advantage led with a 7% more than the respondents who believed that improvement of service delivery was the main benefit. In average, cost reduction scored a mean of 41%, improvement of service delivery scored 34%; core competence scored a 10%, whereas the rest 13% presented other advantages of outsourcing. The consistency in the results from the three analysed result were useful in concluding the importance of outsourcing in cost reduction (Li and Kouvelis 1999). Indeed, there was the reduction of operating cost because some activities such as training new staff, funding some of unprofitable projects, and purchasing of some new equipment required for progress of retail companies was left to a third party (Bettis et al. 1992)

The second advantage of outsourcing from the analysis of different reports and survey was an improvement of service delivery. One of the research surveys included in this dissertation had most of the respondents supporting this advantage although the others favoured cost reduction advantage (Jiang et al. 2006). Half of the online survey respondents (50%) believed that IT outsourcing had contributed to the improvement of service delivery.

For instance, the argument among most of the retailers was that the third parties were in a position to specialise on information technology. Perhaps with the modern technologies, and current equipments, which are automatic and digitalised (Lei and Hitt 1995). This in turn had a positive attribute on the time taken to offer a certain service, or transaction between the retailers, and their customers. Some respondents believed that outsourcing some activities would facilitate the establishment of customer care unit to facilitate effective communication (Ren and Zhou 2008).

Nineteen percent of the European IT Outsourcing intelligence respondents, and 32% of the interviewed people supported improvement of service delivery advantage. On average, it had 34% of the respondents’ supporting. This was 7% lesser than respondents supporting cost reduction advantage, but 24% more than those who believed on core competence as the major benefit.

In addition, outsourcing of some of noncore activities within the retail companies has much benefit from concentrating on the core activities. Most of researchers regard this advantage as core competence. Activities handled by most retail companies falls under two categories either core or noncore functions (Quinn 2000). Core functions are the major activities that these retailers should handle in a very sensitive manner.

On the other hand, noncore functions tend to be less sensitive to retailers although still important to retailers. However, many retailers have ended up investing a lot in some non-core function that in turn has reduced the productivity and reputation of these retailers. Retailers were susceptible in investing and outsourcing of functions that did not add value to the companies’ incomes. Retail companies have lost the consumers loyalty because of the poor service delivery, which have tarnished the reputation of such companies. Fortunately, the growth of IT outsourcing in most parts of the world have relieved retailers the burden of handling these noncore activities.

Outsourcing companies handle these noncore functions, whereas the retailers have the mandate to meet the requirements of core functions. As a result, core competence results from retailers’ ability to focus properly on these core activities to create perfection in this field

On average, core competence had 10% of the respondents from the three analysed results believing that it was the major focus when outsourcing. The percentage increase of those in support on core competence and improvement of service delivery from 2010 to 2011 as revealed by the European IT Outsourcing intelligence report was almost equal. The percentage increase varied by a 3% only with improvement of service delivery respondents recording a 19% increase, whereas core competence trailed by a 16% increase from 2010 report. Most of the support for core competence came from interviewed respondent, but there was a high possibility of appreciation of the core competence by more retailers from the report released by the European IT Outsourcing intelligence that showed a 16% increase from 2010.

In conclusion, the advantages discussed above were the focus for most retailers. However, respondents cited other advantages as significant to retailers. On average, 13% of the respondents from the three analysed reports believed that the above three advantage were not the main advantage or the drive forces to outsourcing. However, they had a conviction that outsourcing has benefits such as complementing the absence of highly skilled IT experts. They perceived Outsourcing as the solution to the inadequacy of highly skilled labour. Others believed that outsourcing could improve the retail company’s reputation as well as winning the customers’ loyalty (Weidenbaum 2005).

Disadvantages of IT outsourcing among retailers in the UK

After a lengthy discussion on advantages of outsourcing, it was important to discover some of the disadvantages of outsourcing that according to the respondents and related literature they had less influence. These disadvantages are manageable, and alleviation may be possible if addressed in early stages of the outsourcing process. However, the negative attitude by some retailers either used to in-house sourcing or had earlier terminated an outsourcing contract has demonised the entire outsourcing service.

This negative attitude by these retailers has led to debates that have brought the disadvantages in outsourcing. Unfortunately, demonization of outsourcing and unproductive interactions between the two parties has led to early termination of some outsourcing contracts. The disadvantages listed below reflected the perception by some respondents from interview, online survey, and critics documented by other researchers.

1. According to the online survey conducted for this dissertation, 47.46% of the respondents had a concern on the detrimental effect to the local country’s development and economic status when outsourcing occurred in other countries. These respondents claimed that governments were to lose much money if only the foreign countries were to carry out outsourcing services. The government cannot claim revenue on taxation because this benefits ends up with the foreign country. In addition, there was a great concern on the rate of unemployment of local graduates upon outsourcing some activities. The situation became even more critical when foreigners compose the outsourcing team.
2. Once the contract retailers signed a contract with a service vendor, there was a loss of control in running the business because retailers tend to leave the outsourcing company in the control. Unfortunately, some of the outsourcing companies may be untrustworthy hence; retailers had some fear toward company failure when a third party fails to deliver as agreed in the contract. However, this can be manageable if the retailers selected their outsourcing partners wisely.
3. Sometimes it may prove hectic in times when there is boom period. The number of customers, depending on the service outsourced may be overwhelming, which may lead to slow response. This may turn to a frustrating moment for clients hence losing the loyalty given to a company.
4. Another disadvantage of outsourcing emanated from the language barrier between the retailers and the service vendors involved. This often creates misunderstanding between parties in the process. Mostly, this results from offshore outsourcing. This is likely to create a communication breakdown that makes transactions impossible. As a result, there is a decrease in product sales and the market share.
5. Last, a high percentage of respondents believed that outsourcing contracts were likely to terminate immaturely because of misunderstanding between retailers and the service contractors. Some outsourcing services fail to meet the retailers and customers expectations that result to irritation among them. The retailers end up losing customers because of poor outsourcing services.

The effects of IT outsourcing in the UK

This one issue triggered the research study for this dissertation. The researcher had to take a keen interest on it because without answering the question of the popularity of outsourcing among retailers, and the clients could have made this dissertation less useful. Therefore, the online survey conducted had some provisions for this and for sure, the results were amazing. A 65% of the online survey questionnaire respondents had a strong conviction that outsourcing had gained the popularity required among the retailers in the UK.

More so, 79% of the interviewed respondent recommended outsourcing against 18% in favour of in-house sourcing. In addition, 66% of the interviewees were very optimistic on success of outsourcing in the UK. Measurements from a Likert scale presented different perceptions of outsourcing among different respondents. More than half of the respondents (53.33%) were neutral on progressiveness of outsourcing in the UK compared to the rest of the world.

Only 8.35% of the respondents either disagreed or strongly disagreed on the possibility of retail outsourcing in the UK outdoing the rest of the world. The rest of the online survey respondents (35%) were not totally opposed to outsourcing. Among them, there were those who preferred in-house sourcing to outsourcing, whereas some believed that lack of perfection and poor contract processes must have demonised outsourcing (Harland et al. 2005). Therefore, it was clear that although there were hindrances to smooth outsourcing, there were possibilities to manage them to increase the effect of this precious service among the retailers (Gilley and Rasheed 2000).

Hindrances to effective outsourcing process among the retailers

Outsourcing involves two main parties regarded to as the retailing company and the service vendor/outsourcing partner who sign contract. However, some occurrences are likely to occur during the contract period, which negatively may affect the relationship between the retailer and the outsourcing partner.

Poor relationship between retailers and the service vendors

The revelation from two perspectives at the online survey showed how these two parties either contributed to early termination of contract or acted as a hindrance to success of outsourcing in the UK. A 53.33% of respondents believed that poor relationship between the two parties was a great hindrance to success of outsourcing. This was because of negligence by either party on an assumption that the other party should be aware of it (Gurnani and Shi 2006). For instance, 63.33% of the online survey respondents believed that retailers lost control after signing of outsourcing contracts. Retailers had a mandate to work closely with the service vendors for success of outsourcing (Kern, Willcocks, and van Heck 2002).

Mismatching of contract expectation among the retailers and the service vendors

Retailers had much expectation after the signing of the contact but sometimes these expectation or dreams were not achievable even before the contract was agreed. A 45% of the online survey respondents believed that retailers were to blame for expectations beyond the scope of agreement of service. After some years, the retailers expressed their dissatisfaction of outsourcing services because their business failed to register the results they expected. On the other hand, service vendor may withhold some services with the expectation that the retailers can extend the contract (Jiang, Frazier, and Prater 2006).

Inefficiency in services delivered by the service vendor

Inefficiency in service provision was a great concern to retailers because they were at the receiving end whenever customers complained of poor service. Some outsourcing services fail to deliver the mandated function hence, slowing down the progress of IT outsourcing in the region. For instance, the incidence that occurred in Sainsbury in 2005, which led to termination of its contract with Accenture. Poor services cost the retail company in a manner that the company suffered economic hardship (Plambeck and Taylor 2005). Service provision of inadequate standards irritated a 20% of the respondents.

Poor contracting process

Some retailers were to take the blame on the failure of outsourcing in the UK for not taking right steps when choosing services to outsource, the right service vendor, and lack of the cooperation after signing the contract. Some retailers were very poor in highlighting the services to outsource, which may have contributed to low outcomes. In addition, retailers had to consider the service vendor contracted in terms of history, geographical location, cost, and terms and conditions made by the service provider. In addition, the two parties should work together after signing of the contract to implement effectively (Luehrman 1998).

The nature of outsourcing contracts in the UK

From a wide view, Contracts between retailers and service vendors remained as the common factor between them. Mostly, it all starts from the intention of the managers in retail companies to outsource some of the activities (Kamien and Li 1990). However, most of them find themselves in a dilemma in deciding the right time to do it, the right outsourcing contract, and the negotiation procedural process.

This is very important given that outsourcing contacts are mainly irreversible investments, and sometimes they are uncertain toward later production and cost of this service. According to (Yao, Jiang, Young and Talluric 2009), there are three major categories of contracts in outsourcing namely “fixed-price, gain sharing, and cost-plus” (p. 305). There is none of the above perceived as better than the rest because it depends on the parties agreement. However, cost-plus and fixed-price contracts are very common with most of the outsourcing contracts (lacity and Wilcocks 1998; Oudot 2006).

Therefore, contracting process should have the attention it requires and proper decision-making is worth for implementation of these contracts (Cachon 2003). In some instances, early termination of contacts contributed to failure in growth of IT outsourcing among retailers in the UK. Cancellation of some contracts among the respondents remained unsolved puzzle in which both retailers and the service vendors were responsible for such incidences (Kamrad and Siddique 2004).

However, most of the respondent interviewed (47%) directed the blame to retailers who failed to make wise decisions before contracting. A 13% of the online respondents had a problem with retailers for illegal contracting process hence slowing down growth of outsourcing in the UK. Fortunately, there was confidence among the respondent on better progress of contracts and 78.33% of the online survey respondents were positive on the progress of contracts even for five some years to come.

Some data released by Elix-IRR Partners LLP revealed that out of the top 20 signed or renewed from 2007, only two were not in effect by the time the presentation of this dissertation occurred. Eighteen out of these 20 contracts were still in effect with some ending by as late as 2018. A good example of the top contracts still in progress included IBM contract to Bharti retail supposed to end on 25^th august 2018 after signing on 25^th august 2008 as revealed in the table above.

Depending on the worth of contracts signed or renewed by 2007, HP led the list of most popular outsourcing vendor with a total value of all contracts amounting to $2712 million. Some of their clients included Royal Ahold NV, Guthy-Renker, 7-Eleven among others. The other most popular outsourcing vendors topping the best five included IBM, Wipro, cable & wireless, and Patni in that order.

The future of outsourcing in the UK

After a very close analysis and literature reviews from other researcher, there was light at the end on the tunnel in efforts to drive retailers from in-house sourcing to outsourcing. Regardless of the negative attitude from some of the retailers, this initiative continually has attracted the attention of most retailers (Johnstone 2002). This was attributed by the many benefits a retailer was about to achieve upon signing an outsourcing contracts.

There was discussion on these benefits in the previous sub-sections of this chapter hence there is no need to elaborate them again. However in a very brief manner the dissertation revealed that cost reduction, core competence, improvement of service delivery, improvement of companies standards were main advantages a retailer had a quest of achieving (Alvarez and Stenbacka 2006). As a result, those retailers already having outsourcing for noncore functions have considered extending their contracts with their outsourcing partners.

It was very clear that some outsourcing companies such as IBM, HP, and Wipro had ventured into outsourcing for many retail companies in both UK and the rest of the world. Some of the contacts signed by these outsourcing partners were lengthy because some were to end in 10 years. One of these contracts cited was IBM contract to Bharti retail that will end on 25^th august 2018 after signing on 25^th august 2008. This can be a good example to illustrate the future of outsourcing among retailers.

From other sources, various reports revealed a bright future in outsourcing. For instance, report from Economic Intelligence Unit revealed that approximately one-third of the firm had embraced IT outsourcing by 1997, which significantly increased by 2010 in which an estimated 58% of the firms embraced the idea. From the article by Outsource Mag (2011), it cited a study by the Everest Group in which there was a high possibility of the IT outsourcing in UK likely to hit a 600% mark within 10 years duration from when they carried the study.

According to the article Today’s UK Retail IT Outsourcing Outlook, Morris (2011), UK emerged the country with the most enormous and evolved outsourcing market in Europe with a record of 36% increase of the market increase from 2004 to 2009. The uncertainty in the business environment proves to be a source of the increased demand for outsourcing in the UK (Dixit, 1989; Dixit and Pindyck 1994). Retailers have taken caution as earliest as possible to curb any shortcomings in their operation in the future. Maybe, such a move is likely to make more retailers to opt for outsourcing to avert future risks (Abel and Eberly 1994; Aron, Clemons, and Reddi 2005).

From the online survey, more than three quarters of the respondents (78.33%) believed that outsourcing would be a huge initiative for retailers in some years to come. However, the rest of the respondents (21.67%) declined to create any possibilities of any future progress because of some problems that need to be addressed for a substantial growth of outsourcing. They were negative about future growth of outsourcing based on the current immature termination of contracts. Therefore, the percentage of those respondents optimistic on the future growth of outsourcing in the UK was likely to rise if there were disputes resolutions between retailers and service vendor in an amicable way, settled in time, and in the proper avenue (McGrath 1997).

Recommendations and Conclusion

Recommendations

After successfully completing this dissertation, different issues were very clear on IT outsourcing among the retailers in the UK. Both theoretical and experimental results contained in the study either supported or revoked outsourcing, whereas some explained the current and future of this significant service. The results and literature presented in this dissertation form the basis for IT outsourcing among the retailers in the UK hence more studies may reveal more and developments in outsourcing. More researchers should study this topic because of the importance of this field of study. Below are the recommendations toward the retailers, researchers, students, academicians, and business experts on outsourcing.

1. Researchers, academicians, and business experts should carry out more research on the factors contributing to immature contract termination because the there is no clear revelation on who to blame for this as shown by this study.
2. Retailers should not sign contracts with service providers without a proper plan procedure. Retailers should indulge into a proper study on which functions to outsource and the company to assign the mandate to avoid future misunderstandings.
3. Retailers and the service providers should work closely after signing the contract for best results. The retailers should not leave all the activities to the service provider to implement. The retailer should continue supporting the service vendors even after signing the contract.
4. There should be more research study on how retailers should improve their performance during the contracting process. We may blame the retailers for the failure of these contracts, but there may be other independent forces contributing to the early termination of contracts.

Conclusions

The research study was a success and the dissertation writing commenced within the stipulated time. The major objectives leading to this dissertation emanated from the urge to expound and to elaborate IT outsourcing among the retailers companies in the UK. On the same token, to study the problems and challenges associated with this activity. Other areas discussed by this dissertation included the progress in terms of the current trend and the future of IT outsourcing among retailers in the UK.

The dissertation involved an extensive evaluation of several related literature gathered from different journals, books, Internet materials among others that complemented the topic under the study. Literature from these sources formed the basis for the secondary data that was vital for partial completion of this dissertation. However, this study was incomplete without collection of primary data hence; I conducted an online survey and interviewed employees working with IT outsourced retail companies. This produced firsthand information that was an important tool for this dissertation.

As cited above, this dissertation stated the situation of IT outsourcing in by the retailers in the UK region. Notably, the retailers continuously have embraced this service because of the benefits accrued to it. As a result, there have been many contracts between retailers and service vendors although some terminated immaturely. Lack of sufficient workforce experience in IT outsourcing in the UK have led retailers to outsource these services from other areas such as India and China where there are highly skilled; labour force. Cheap labour and fluency in English-speaking from India and China have made them the main destination for outsourcing for retailers from the UK. However, there still some service vendors within UK such as Accenture.

There are many reasons behind outsourcing some of the function to the third party as noted above. The main driving force for outsourcing among the retailers have been to reduce cost although various researches revealed that competitiveness of businesses has raised doubt on the importance of this in the current market (Nagrajan and Sosic 2008). High percentage of the online respondents and interviewed employees supported cost reduction as the main reason for outsourcing. Among other reasons behind the decision toward outsourcing included improvement in responsiveness, improvement of goods and services, and increased punctuality by retailers.

In The UK, retailers opted to carry out IT outsourcing because of the following advantages offered to the companies.

1. Retailers can concentrate more to core competencies;
2. It creates chances for new expertise as well as incorporation of new and modern technology and skills;
3. Cost reduction;
4. Retailers forego hardships in recruiting, offering training, and retention of employees assigned to noncore functions of the company.
5. There is a reduced investment of capital.

Decision-making toward IT outsourcing remains one major concern among the retailers mostly when thinking of the functions to outsource, the location of the service vendor, the contracting process, and the importance of outsourcing. Therefore, retailers should think of using and integrating numerous internal and external factors to have a successful outsourcing contract (Nembhard, Shi, and Aktan 2003). To sum up on advantages of outsourcing, companies that outsource its noncore functions gains and maintain the market competitive advantage. Therefore, this clearly this means retailers are successfully executing the corporate strategies set out.

Undoubtedly, companies tend to outsource the noncore activities or functions, whereas there is retention and maintenance of the core functions within the company to create a competitive environment. However, it is not always possible to outsource some functions to third parties because some logistics such as the location of the service vendor. As a result, some companies opt for in-house sourcing, especially in instances when there are immature contracts terminations.

There are various disadvantages associated with outsourcing including lack of competent services or poor service delivery; services may fail to meet retailers’ expectations among others. As a result, there are many possibilities for contracts terminations after which retailers decide to adopt an in-house sourcing. Regardless of these disadvantages in IT outsourcing, it remains a favourite option for retailers planning to maintain competitiveness among their rivals. Outsourcing service vendors have increased over the past few decades with researchers projecting a sporadic growth of this industry.

All the research questions posed by the researchers were answered after an in-depth literature review, and discussion of the results. For instance, on research question 1 “What are the factors that lead to IT outsourcing among retail companies?”, both the interview and online survey had almost same results. Both results revealed cost reduction, core competence, and improvement of service delivery, among others as the major driver of outsourcing among retailers. Indeed, the research helped in meeting the objectives, testing the hypothesis, as well as answering the research problems.

This was mainly successful due to results tabulated in chapter four of this dissertation. Primary data collection involved 32 interviewees and 60 online respondents who answered a ten-question survey posted in www.kwiksurveys.com. Simplification of the online survey helped in completion of the survey in time. However, interviews were somehow difficult because of limiting time and finance hence the researcher utilised phone call and Internet interviews. There was the use of tables and graphs to present the Results from the data collection for better comparison and interpretation.

Appendices

Appendix 1: IT Outsourcing Retail MBA Dissertation Survey

• Do you think IT outsourcing is successful in the Retail market in the UK???

  • Yes
  • No
• Who do you think is to blame for IT Outsourcing failures?

  • retailers……….
  • service vendors……..

• If Other selected Please Specify??
• Is IT Outsourcing from third parties better than in-house sourcing?

  • Yes
  • No
  • If Yes Why???
• What is your view on IT Outsourcing by Retailers in the UK compared to the rest of the world?
• Has there been better progress in the UK?

• What are the possible hindrances of IT outsourcing in the UK?
• What is the most important aspect of a Service contract to Retailers????

• Do you feel Retailers lose control over IT development by Outsourcing IT ???

• Do you feel IT Outsourcing has a detrimental effect on Retailer’s home economy?? eg on jobs and development of local economy.

• If Answer is Yes Advise why???
• Do you feel IT Outsourcing in Retail improves the end user service???? When compared to having a in-house service???

• Do you feel the trend in IT Outsourcing in the next five years among Retailers in the UK will attribute to further increase in IT Outsourcing contracts???

Appendix 2: interview

Interview 1

• Gender:

  • male
  • female
• What is the Company background – nature of business, years in business, turnover, and number of employees, etc?

  • Our company deals with product development, design, sales and maintenance of the brands Corklifter, KitchenTools, and Brown Bear. It presents one of the modern and young company in this business. Profits received in the company depends on trading hence, turnover does not make much sense in our operations. Currently we have 7 employees.
• Which post do you hold in the company and for how long have you been in the company?

  • I hold a position of sales advisor for two years now, but my contract duration is five years.
• Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing? Why?

  • Currently, our company is yet to determine which way to take, but we are operating under an in-house sourcing. Plans are underway to facilitate outsourcing some of our function because we do not have experts in Information Technology. I think outsourcing is the better option for retailers because of improved service delivery and core competence.
• Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

  • Core competence and improved service delivery are the key drivers.
• Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

  • Basically, it will depend with the relationship between the retailers and the service vendor after signing contract. There is a very future of outsourcing given the competitive nature of retailers.
• Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

  • Both retailers and service vendor are major determinant of the success or failure of the contracts depending on the efforts put by either of the parties. However, retailers are likely to undermine the efforts by service vendor for developing a high expectation yet they put little efforts to the success.

Thanking you very much for your patience and co-operation.

Interview 2

• Gender

  • male
  • female
• What is the Company background – nature of business, years in business, turnover, and number of employees, etc?

  • I work in a manufacturing and retailing company based in London. It has been active since 2000 with an approximately 8.5 million turnover. We currently have 17 employees committed in various areas.
• Which post do you hold in the company and for how long have you been in the company?

  • I have been the purchase manager for eight years now.
• Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing? Why?

  • Our company have since its establishment relied on the outsourcing partner Wipro for all noncore functions. There are many benefits associated with outsourcing and our company have been successful since its establishment. There core competence and our clients are fully satisfied with the services we offer them.
• Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

  • Core competence is the major although; outsourcing can improve service delivery and reduce operating costs.
• Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

  • The current status of retailers signing contracts and renewing contacts is a clear indication of the success and a better future in outsourcing.
• Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

  • Retailers are the trouble-shooters in most contracts that have immaturely terminated because they leave their outsourcing partner to work alone after signing contracts.

Thanking you very much for your patience and co-operation.

Interview 3

• Gender:

  • male
  • female
• What is the Company background – nature of business, years in business, turnover, and number of employees, etc?

  • The company was established in 1869 as a grocery retailer. As time passed, the company has expanded to multinational company dealing with chain of supermarkets and banks. The number of employees cannot be approximated because they many both locally and internationally. The turnover achieved in 2010 was 21.4 billion US dollars.
• Which post do you hold in the company and for how long have you been in the company?

  • I have been a bank manager for 12 years in one of our branches situated in Scotland.
• Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing? Why?

  • I recommend an in-house sourcing as opposed to outsourcing because our company suffered a turbulent financial time between 1990s and 2010 when we decided to embark on in-house sourcing. The company suffered a financial crisis in the hands of an outsourcing company.
• Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

  • Cost reduction is the major driving force to outsourcing.
• Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

  • The probability of future success is on average (0.5) because retailers have not fully accepted outsourcing.
• Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

  • Service vendors are sometimes stubborn in service delivery, which discourage clients. This can reduce the sales made by the company hence; reduction in profits and turnovers.

Thanking you very much for your patience and co-operation.

Interview 4

• Gender:

  • male
  • female
• What is the Company background – nature of business, years in business, turnover, and number of employees, etc?

  • We deal with a wide variety of women wares for all social classes and ages. It is a multinational company with outlets in America, Europe, and Asia. Our turnovers were approximately 1.2 billion Euros in by 2011. The number of employee is several thousand both locally and internationally.
• Which post do you hold in the company and for how long have you been in the company?

  • I am a designer with seven-year working experience in this company.
• Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing? Why?

  • Outsourcing of our noncore activities have enabled the company to concentrate on functions that have continued attracting more customers.
• Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

  • Core competence and cost reduction are the major drivers to outsourcing although, service delivery has been enhance in that process.
• Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

  • Yes.
• Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

  • Some retailers are very stubborn and harsh to their outsourcing companies. As a result, the outsourcing companies are forced to terminate the contracts.

Thanking you very much for your patience and co-operation.

Interview 5

• Gender

  • male
  • female
• What is the Company background – nature of business, years in business, turnover, and number of employees, etc?

  • We manufacture and export embroidered fabrics and leather products to our European clients in Germany, Spain, Italy, and France among others. Mostly the company deals with retailers owing chain shops in UK directly without intervention of intermediaries. Company’s turnover has been ranging from 1.0- 1.5 million Euros annually and a workforce of 43 employees.
• Which post do you hold in the company and for how long have you been in the company?

  • I have been a firm’s partner for 20 years having been an active manager for 10 years until 1991.
• Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing? Why?

  • I recommend in-house sourcing because since our shift from outsourcing to in-house in mid 1990s we have significantly cut down operating costs and improved services to our clients.
• Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

  • Cost reduction and core competence have been the major driving forces. However, this is not always the case because retailers are posed to poor services to their customers leading to reduced profits.
• Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

  • I think the success is on average, but inputs from both retailers and outsourcing partners can elevate the standards in future.
• Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

  • Both retailers and outsourcing partner contribute to early termination of contracts, but retailers are more likely to contribute to such situation because of high expectations.

Thanking you very much for your patience and co-operation.

Interview 6

• Gender

  • male
  • female
• What is the Company background – nature of business, years in business, turnover, and number of employees, etc?

  • Our company is a major manufacturer and exporter of embroidered fabrics and leather products. The major clients are based in European counties such as Spain, Italy, and France. Our clients have designers’ shops, whereas others have established various chains of shops in UK. The company had a turnover of approximately 1.5 million Euros in mid 2011, with a help of 43 employees.
• Which post do you hold in the company and for how long have you been in the company?

  • I served as a technician for five years until 2000 when I was appointed the senior technician until today.
• Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing? Why?

  • Since mid 1990s we relied on outsourcing partner based in India. However, the company realised that some functions had become lethal to our clients because of inconveniences. As a result, we had to embark on in-house sourcing under my expertise.
• Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

  • The purpose for outsourcing was mainly reduction of cost and core competence, but we came to realise that our clients were complaining over the services they received.
• Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

  • The future of outsourcing is currently dimmed given the support they are offering to retailers comparing with the previous outsourcing partners in 1980s.
• Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

  • Poor service delivery by the outsourcing partners have contributed to the early termination of the contracts.

Thanking you very much for your patience and co-operation.

Interview 7

• Gender

  • male
  • female
• What is the Company background – nature of business, years in business, turnover, and number of employees, etc?

  • My company has been in existence since 1981 in which we have been dealing with small leather goods. We do import them and sell in both wholesale and retail price but mostly we make wholesales. Currently we have five employees in various departments.
• Which post do you hold in the company and for how long have you been in the company?

  • I have been the C.E.O since its establishment in 1981
• Which of the following services would you recommend to retailers? Outsourcing or in-house sourcing? Why?

  • Initially, we had an in-house sourcing, but with time we found that we were making many expenses. Since 2001 we embarked on outsourcing with IBM and the results have been amazing.
• Which desire do you refer as the main driving force to IT outsourcing by retailers in the UK?

  • Cost reduction served as the major driver, but with time we realised we managed to offer better services to our customers at lower costs.
• Do you think IT outsourcing have succeeded in UK and do you see a bright future of outsourcing contracts?

  • Absolutely yes, since we signed a contract with IBM, we have not looked back. In fact there was a contract renewal in 2006 after the five year contract was about to end. The new contract will be ending in 2016 when we may reconsider a renewal.
• Among the retailers, service vendors, and other stakeholders, who contributes to immature contracts termination?

  • The people to blame are the retailers for immature contract termination. They take a slumber soon after signing contract without knowing the dangers they are likely to create. That is why we have insisted a close relationship with our outsourcing partner.

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