Outsourcing strategies at Best Buy

Outsourcing @ Best Buy

In today's competitive environment only those organizations succeed that blaze the trail rather then being a mere follower of the path on which many have embarked before. Best Buy as retail outlet is trying to do the same by becoming a pioneer in achieving better results by out sourcing its IT operations. But before we ponder over what is unique about Bet Buy's deal we try to find a difference between outsourcing and sourcing out. Yes the two have difference, out sourcing is done to just carry forward a task or a series of task to an outsider while sourcing out is about getting the job done by best in class and best of the best. Most organizations fell in the trap of just giving their some of their activities or operations to anyone offering the cost benefit but very few aspire to get the best in the industry to improve their processes. Best Buy is not one of those companies that transfer some of their routine operations to other IT companies while retaining most of the control. That generally happens is that routine activities like data entry, data center operations, application maintenance and development, network management etc. are outsourced. In some cases only one or more of these activities are transferred. The concept of completely handing over the IT departments is an act not many have done before. Like for example, "in late 2000, London-based grocery chain J. Sainsbury PLC signed a seven-year deal to outsource its entire IT operation to Accenture and claimed it expects to save about $50 million per year" (Silwa, 2004). While transferring all of their IT operations to an outside vendor these companies retain just a few of senior IT people to help in the strategic management process of the company by forming a liaison between the two companies. Best Buy deal is not just about some aspects of IT rather a holistic outlook on outsourcing makes this deal unique.

What Best Buy is trying to do here is that they are not outsourcing to achieve cost advantages only rather they are trying to concentrate more on their core activity of dealing with customers. In order to be completely customer-centric they want to get the expertise of Accenture Products in handling IT operations. With this they are aiming to achieve competitive advantage and cost efficiency both, as the trend of outsourcing in the retail industry is fast catching up. The cost factor is only the part of the whole deal, " retailers are looking for innovation, better response time and ongoing process improvements when outsourcing" (McEachern, 2004). IT operations is one area where changes take place at a faster pace and catching up with innovations in IT while removing outdated modes of IIT operations requires substantial cost, planning and efforts. Though adopting innovations in IT area would definitely help the overall process but a successful company and in our case Best Buy must perform all functions efficiently and not just one. So in this scenario where customers require most attention, utilizing IT capabilities of an outside firm can help a great deal in concentrating on the core processes. Leaving the IT task to those who can handle it best because it is their area of concentration and expertise can bring many advantages and that was what Best Buy attempted to achieve with this outsourcing contract with Accenture Products.

Now coming to the opportunities and challenges of this venture, I would first deal with challenges. The major challenge in dealing with such a situation is change management. Letting go of entire operations and transferring staff requires adept handling by the top management.. In this particular case the issue is not just of transferring employees but it also involved lay offs. Many such ventures of mergers and out sourcing have failed in the past because of the resistance shown by the employees currently working in not just the department that is being outsourced but the whole of organization. In such a case, the culture of organization and top management's role becomes important. In many cases change is bulldozed in the organization where employees are just informed about the change and are asked to adapt to the new scenario. In ideal situation a consensus should be built in whole organization and at all levels while allowing the discussion on the pros and cons of change. That way, the transition is swift and smooth resulting in better adaptation by the employees while in any other case there could be many hurdles in the transition process and could cost company money and effort both. For example, in case of Best Buy the major challenge turned out to be dealing with the lay offs as some of the employees filed class action lawsuit for age discrimination. Whenever lay offs are done, they create problems in the form of lawsuits. The employees laid off by Best Buy were mostly 40 plus that give them a chance to file for discrimination charges. According to the lawsuit, 126 IT workers were terminated in June. 82 of those workers were at least 40 years old, the minimum age required to file an age-discrimination claim. Thirty-one of the plaintiffs were among the workers who were dismissed in June" (Silwa, 2004). It is problems like these that drain organizational resources and mar the reputation of the company. Adept handling of layoffs before transition and later a good PR job is required on part of top management. Even if proper change management and transition is done, later on maintaining a healthy and professional relationship with the vendors also requires expert handling. The task of liaison and further negotiation becomes a challenge later on and the professional role and management of both parties become important.