Case Study IV-4 IT Infrastructure Outsourcing at Schaeffer (B)
Teaching Note on Case Study IV-4
IT Infrastructure Outsourcing at Schaeffer (B):
Managing the Contract
Objectives
The purpose of both Schaeffer Case A and Schaeffer Case B are to illustrate some of the potential
advantages and disadvantages of IS outsourcing in general and outsourcing IT infrastructure
activities (data center operations, voice and data network operations, distributed computing
Overview
Four years have passed since Schaeffer signed a 7-year, $200 million outsourcing contract for IT
infrastructure services with a major vendor with an international presence: ABC Corporation. The
cost savings from a centralized IT services approach had already been realized by Schaeffer after
Some managers therefore were concerned that only the Reitzel division would benefit from the
outsourcing deal, as this was the division with the highest growth target and was the only division
tradeoff negotiated by ABC: Schaeffer avoided high termination costs by allowing ABC to move
offshore some of the other contracted support functions.
At the end of the case, another restructuring plan was announced by Schaeffer: the parent entity
would be dissolved, and the two remaining business divisions would become independent
entities. Given the unrelated businesses that these two divisions competed in, this change was
Case Study IV-4 IT Infrastructure Outsourcing at Schaeffer (B)
Questions for Discussion
1. Describe some of the features of the IT outsourcing contract that were negotiated by
Schaeffer to accommodate its anticipated needs over the life of the contract.
A key feature of the contract was the establishment of SLAs for all IT services. For example, for
2. Why was desktop support brought back in-house?
Several business users expressed frustration with the levels of service that ABC was providing.
3. What kinds of communications did Schaeffer have with the vendor, and how well did
they manage the relationship with ABC Corporation?
ABC was supporting multiple divisions at Schaeffer three at first, then two. One of the
4. Based on Schaeffe
companies should consider when negotiating an IT contract.
G
280
5. Do you recommend that the Reitzel and Colbert divisions continue to outsource their IT
infrastructure activities to ABC Corporation? Should it include desktop support? Why or
why not?
Given the very different business contexts of the two divisions, the Colbert division should