Factors driving Shipping companies to IT outsourcing

Transcription

1 International Forum on Shipping, Ports and Airports 2008 () Factors driving Shipping companies to IT outsourcing Nikitas Nikitakos and Vassilios Pirkatis University of the Aegean Department of Shipping Trade and Transport

2 Presentation Outline IT Outsourcing ICT Outsourcing in Shipping Developing a model of IT outsourcing in shipping The Analytic Hierarchy Process (A.H.P.) Use of A.H.P. in IT outsourcing decision making Conceptual model for IT outsourcing in Shipping. Conclusions

3 IT Outsourcing (I) In the 1970 s the outsourcing was implemented from underperforming corporations. In the 1980 s managers began to make vertical integrations in order to be self- sufficient. Throughout this period consultants suggested focus on the core competencies and outsourcing of the supporting activities In the 1990 s the dominant view was the focusing on core competencies and the implementation of re-engeneering in business process in order to achieve improvements in performance, in terms of cost, quality, service and speed. (A. and N. Kakabadse,2003). IT Outsourcing is : the significant contribution by external vendors in the physical and /or human resources associated with entire specific components of the IT infrastructure in the user s organization. (Lohn and Venkatraman,1992)

4 IT Outsourcing (II) The main reasons for IT outsourcing : focus on core competence flexibility access to specialized supplier access to new technologies Reduction of costs Decrease of investments Share risks

5 ICT Outsourcing in Shipping.(I) IT in Shipping Industry and especially IT in shipping companies includes hardware and software. IT outsourcing in shipping mainly refer to software. The role of communication in shipping industry is very significant because communication between ship and office is necessary and they need for emergency situations. The use of new technologies in communications between ship and office has driven in a large capacity of data interchange which requires specialized software.

6 ICT Outsourcing in Shipping(II) Large shipping companies prefer integrated IT solutions, which connect maritime operations with chartering and accounting,while small ones use isolated applications. The research of Stratakos,Nikitakos,Lambrou (2006) on Greekowned shipping companies indicated that most of the Greek shipping companies(77%) have specialized IT personnel or IT department while half of them(46%) have internal technical support, 31% have internal technical support of shipping software and the 82%have internal technical support of network.

7 Developing a model of IT outsourcing in shipping.(i) The proposed model for IT outsourcing in shipping is based on the models for IT outsourcing of Tamimi, 2006 and Yang-Huang (2000) and an adaptation in shipping is performed. According to the model,outsourcing decision is affected from three factors(criteria) : motives, risks and satisfaction from IT outsourcing. This three factors are affected from other factors (subcriteria).motives and risks from IT outsourcing: strategic,managerial, technological,economics and qualitative and satisfaction from outsourcing is affected from cost,reliability,performance and security.(sub-criteria)

8 Developing a model of IT outsourcing in shipping.(ii) For each sub-criterion there are sub-sub criteria. Finally taking in to account criteria,sub-criteria and sub-subcriteria we will decide which alternative type of ICT sourcing we will choice by using Analytic Hierarchy Process. After outsourcing decision making the next step is the vendor(s) selection which is based on selection and evaluation criteria. The first level of hierarchy is the goal we want to reach and the elements of lower levels are criteria,sub-criteria,sub-sub-criteria and in the lowest level are the alternatives..the AHP method encompasses three steps : First constructing the hierarchy ;second,computing the weight of criteria and sub-criteria ; and third, computing the weight of alternatives,evaluation the alternatives and decision making Hong Kong May 2008

9 Developing a model of IT outsourcing in shipping.(iii) MOTIVATION RISKS STRATEGIC MANAGERIAL TECHNOLOGICAL ECONOMIC QUALITATIVE STRATEGIC MANAGERIAL TECHNOLOGICAL ECONOMIC QUALITATIVE FACTORS THAT AFFECT IN OUTSOURCING DECISION 1. MOTIVATION 2.RISKS 3.SATISFACTION SATISFACTION COST RELIABILITY PERFORMANCE SECURITY SELECTION CRITERIA 1.PRICE 2.QUALITY OF SERVICES 3.RELIABILITY 4.CAPABILITY 5.OUTSOURCING EXPERIENCE 6.EXPERIENCE OF ISHIPPING IT 7.ECONOMIC FORCE 8.SIZE OF VENDORS FIRM 9.REPUTATION EVALLUATION CRITERIA 1.TRUSTWORHINESS 2.RESPONSIVNESS 3.RELIABILITY 4.CAPABILITY 5.INTEGRITY 6.PROBLEM SOLVING 7.STAFF ATITTUDES 8.COST EFFECTIVNESS 9.ACCESSIBILITY Hong Kong May 2008

10 Developing a model of IT outsourcing in shipping (IV) Motivation Strategic: 1. Focus on core competence,2.share risks. Managerial:1.Improve communication problems,2.increase the ability of management, 3.increased flexibility. Technological :1.Access to new technologies,2.access to specialized providers.. Economics: 1. Staff cost savings,2.technology cost savings,3.financial flexibility. Qualitative: 1.High performance of IS,reach,2. higher service level. Risks Strategic : 1. Loss of core competence,2.loss of internal technical knowledge. Managerial: 1. Dependence on providers,2.loss of control over providers,3.problems with vendors. Technological:1.Damaging the firm s innovating capability. Economic:1.Poor cost benefit ratio Qualitative: 1.Do not exist specialized providers. Hong Kong May 2008

11 The Analytic Hierarchy Process (A.H.P.) (I) AHP is a multicriteria method for decision making and priorities ranking developed by Saaty (1971;1980;1990) This method collects expertise of decision makers and uses a hierarchic structure to present a complex decision problem by decomposing it into sub problems. The AHP algorithm is based on matrix algebra.the judgments from the pair comparisons are made by experts or decisions makers and in combination with use of the AHP algorithm are the tools which produce the final combination.

12 The Analytic Hierarchy Process (A.H.P.) (II) The A.H.P method includes three steps: a) The construction of a hierarchy.a complex problem can be dealt with by decomposing it into sub problems within hierarchy b) Compute the weight of the elements in each level. Three steps can be describe this phase: Paired comparisons, computing a vector priorities and measuring consistency. c) The synthesis of the priorities and the measurement of the alternatives (if there exist )which will give outcome of the whole process.

13 Use of Analytic Hierarchy Process in IT outsourcing decision making.(i) Yang-Kim-Nam-Min (2006) exams the factors that affect the BPO decision and structures a decision model using AHP method. They did two surveys; the first survey is verifying the reasonable of the chosen determinants (questionnaire in experts) while the second survey is for computing the weight of settled factors through the first survey using AHP methodology (interviews of CEO s). Yang Huang (2000) was created a decision model for IS outsourcing take into account the factors that affect that decision.

14 Use of Analytic Hierarchy Process in IT outsourcing decision making (II) They proposed a model that was include five steps. 1.Establish the expert team 2.Choose the factors and attributes 3.Construct the analytical hierarchy 4.Compute the alternatives 5.Make decision The candidate systems for outsourcing (alternatives)are facilities management, maintenance of management Information System and new development. G.Udo (2000) proposed the used of Analytic Hierarchy Process to analyze the information technology outsourcing decision.

15 Use of Analytic Hierarchy Process in IT outsourcing decision making.(iii) Wang-Yang (2006) used a hybrid multicriteria decision aid method for information systems outsourcing. They proposed six factors (criteria) including economics,resource,strategy,risk,management and quality, should be considered for outsourcing decision. The Analytic Hierarchy Process is used to analyze the structure of the outsourcing problem and determine of weights of the criteria and PROMETHEE method is used for final ranking, together with changing weights for a sensitivity analysis.

16 Research Framework for applying AHP in ICT Outsourcing in Shipping.(I) The construction of hierarchy model. The research framework aims at the choice of ICT sourcing type that can be used by a shipping company using the AHP. This decision is based in 3 criteria and 5or 4 sub-criteria for each criterion, also each subcriterion is affected from 1to 3 sub-sub-criteria. The first step in research is the construction of hierarchy.the choice of ICT sourcing type designated as the ultimate goal(upper level).

17 Research Framework for applying AHP in ICT Outsourcing in Shipping.(II) In the middle levels of hierarchy there are 3criteria :motivation, risks,satisfaction and 5 sub-criteria for motivation and risks :strategic, managerial,technological,economic qualitative, also 4 subcriteria for satisfaction :cost,reliability, performance and security. For each sub criterion there 1 to 3 sub-sub-criteria. In the lowest level there are the alternatives :in house,total outsourcing, selective outsourcing.

18 GOAL IT OUTSOURCING DECISION MAKING CRITERIA MOTIVES RISKS SATISFACTION STRATEGIC STRATEGIC COSTS MANAGERIAL MANAGERIAL RELIABILITY SUB-CRITERIA TECHNOLOGICAL TECHNOLOGICAL PERFORMANCE ECONOMIC ECONOMIC SECURITY QUALITATIVE QUALITATIVE ALTERNATIVES IN HOUSE TOTAL OUTSOURCING SELECTIVE OUTSOURCING

19 Research Framework for applying AHP in ICT Outsourcing in Shipping (III) Interviews development and sample selection The criteria, sub criteria that can be taken into account for decision making of which type of IT sourcing can be used by Ship management companies, defined by interviews with ICT experts in Shipping (ICT managers in Ship management companies). A total sample of 20 experts was developed, they are ICT managers in Greek owned shipping companies. The second stage of AHP contains the computation the weight of the elements in each level, paired comparisons, computing a vector priorities and measuring consistency The third stage of research contains the synthesis of the priorities and the measurement of the alternatives. Hong Kong May 2008

20 Research Results Size of Fleet TYPE OF VESSELS -Bulk carriers -Crude oil tankers -Product tankers -Container ship -LNG -LPG -Chemical TOTAL No vessels ,3 54,4 6, ,12 0 0, % Total DWT

21 ICT Functions which are outsourced, in house or combination of both ICT functions in house, outsourced, or combination of both -Technical support of hardware -Software support -Technical support of enterprise network -Development software applications -Network management -Communication software -Support of communication software In house In house % Outs ourc ed Outs ource d % Inhouse/ outsourc ed Inhouse/ outsourc ed %

22 IT Outsourcing Motives Motivation % No comp. Strategic: Focus on core competence share risks Managerial: ability of management Increased IS department flexibility Improve communication problems Technological : Access to new technologies, Access to specialized providers. Economics: Staff cost savings technology cost savings Financial flexibility. Qualitative: Procure reliability and performance of IS higher service level 60% 45% 55% 55% 20% 65% 60% 65% 45% 45% 75% 75%

23 Risks of IT Outsourcing Risks % No comp. Strategic : Loss of core competence loss of internal technical knowledge. Managerial: Dependence on providers loss of control over providers problems with vendor Technological: Damaging the firm s innovating capability. Economic: Poor cost benefit ratio Qualitative: Superior providers to the existing internal unit do not exist. 75% 70% 60% 55% 60% 45% 25% 40%

24 Satisfaction of IT Outsourcing Satisfaction % No Cost Reliability Performance Security 70% 75% 80% 70% comp

25 IT department in Greek owned shipping companies The 100 % of Greekowned shipping companies engage in the IT departments experts. The number of IT personnel in shipping companies are from 1 to 9 employees and the average is 2,8 employees,15 companies have 1-3 employees in IT department.

26 Conclusions (I) It is proposed a new conceptual model for IT outsourcing in shipping which is based on the model for IT outsourcing of Tamimi, 2006 and an adaptation in shipping is performed.according to this model,outsourcing decision is affected from three factors : motives, risks and satisfaction from outsourcing. After the outsourcing decision the vendor s selection is examined based on specific selection and evaluation criteria. In according to field research the ICT functions which are outsourced from Greek owned shipping companies in large scale,are Communication software and Support of communication software (90%), also development of software applications and software support (70%) Hong Kong May 2008

27 Conclusions (II) The factors that affect IT outsourcing decision were recorded from the state of the art review in several IT sectors and a field research study. ( interviews, focus groups from IT professional experts, and shipping professionals). The criteria and subcriteria for IT outsourcing in shipping and their weight ranking were provided from the interviews. Finally, an IT outsourcing decision model is provided that can be implemented in shipping companies. In the future, this model after its pilot implementation in shipping,it will be used for vendor s selection which will be based on specific selection and evaluation criteria (Panayides 2002) and an IT vendor selection model will be developed. Hong Kong May 2008

28 International Forum on Shipping, Ports and Airports 2008 () Hong Kong May 2008 Thank you for your attention