Office Supply

1499 Words Nov 28th, 2011 6 Pages
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Case #8: Outsourcing at Office Supply Inc.

Through the initial integration of information technology into its core business, Office Supply Incorporated (OSI) attained a large cost advantage over its competitors and reaped rewards in both profits and stock prices. Unfortunately, as Nicholas Carr outlines, IT is becoming more of a commodity for companies and less of a source for strategic differentiation. Moreover, lack of IT expertise within OSI has begun to inhibit the growth of business operations and rising IT costs are shrinking profits. Jim Anfield’s proposition for OSI to outsource its IT infrastructure to Technology Infrastructure Solutions (TIS) provides the opportunity to not only match the pace of business growth,
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In line with Carr’s second point, OSI was beginning to have trouble both managing and maintaining their IT infrastructure as increased server loads threatened “round-the-clock reliability”. This created a large risk to the business, as losing just one server for a few hours could mean the loss of millions of dollars in revenue and the alienation of loyal

Page 2 of 4 customers that rely on the consistent availability of OSI’s products. Therefore, the successful outsourcing of OSI’s IT infrastructure would not pose a threat to the fundamental business strategy and could even help reduce risks in their highly competitive market. In analyzing the factors that could make outsourcing IT infrastructure to TIS valuable to OSI, it’s useful to consider Carr’s three main “Rules for IT Management.” The first of these rules says to “spend less,” as more is not necessarily better when it comes to a commodity input such as IT. In outsourcing, TIS will provide cost savings to OSI in a few main ways. First, there would be a lower capital investment in hardware for OSI, as these costs could be diverted into operating expenses paid on a monthly basis to TIS. Moreover, these operating expenses could be based around a “per-transaction” model so that their costs could more closely follow fluctuations in the market. This means that if one month OSI saw a reduction in online sales and thus a corresponding reduction in server usage, OSI’s costs could scale with