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Contract Management


How the EDS/Xerox relationship will look like in 5 years would depend on whether the outsourcing agreements runs smoothly or not, which involve the factors as discussed in the following sections.

Flexibility, standards and control, confidence

EDS and Xerox created a set of EDS/Xerox teams to focus on each of the culture, strategy, structure, people and process from a quality perspective.  Both parties understood that they would realise substantial economic value if they could achieve commitment to a high degree of integration.  This spirit of commitment enhanced the flexibility of works and changes, standards to be set jointly, as well as self-control.  As EDS recognised: ¡¥this is not a client/vendor relationship; this is not a supplier relationship; this is not a win/lose situation; this is a strategic relationship¡¦.  Trust could only be built with this confidence in commitment.

The CIO function

The heart of the CIO¡¦s job is planning ¡V ensuring IT resources are at the right level and appropriately distributed (Applegate et al, 1999).  Hence, the CIO must retain a strong, and active function at customer interface. 

The CIO of Xerox brought a sustained relevant stream of innovation in information technology to the company¡¦s operations.  For example, the identification of the four strategies: reduce/redirect, infrastructure management, leverage worldwide IM resources and business process driven solutions, moved the company towards the future quickly with clear IT direction.  The outsourcing decision focused itself on building the new solutions, while EDS was focused on supporting the legacy systems and the desktop infrastructure. 

Contract management

Laudon and Laudon (1998) and Statum-Howza et al (1998) suggest that the outsourcing contracts should be able to adjust if the nature of the business changes, with specific needs matched with the outsourcer¡¦s capabilities for shared vision.  Hence, EDS/Xerox had prepared two sets of contractual issues in maintaining the relationship: pricing issues and divorce issues, which were effective in this area. 

The pricing issue required the contract annual price benchmarking and therefore, the contract guaranteed both to Xerox and EDS that current prices would always be benchmark levels worldwide.

Divorce concerns were addressed by including clauses in the contract that would adequately protect each party if a split became necessary.  The contract had certain checkpoints and conditions along the way that provided the capability for moving out.   

Performance measurement

Laudon and Laudon (1998) suggest that the firm should establish criteria for evaluating the outsourcing vendor that include performance expectations and measurement methods for response time, transaction volumes, security, disaster recovery, backup in the event of a catastrophe.  There is insufficient information in how Xerox evaluated EDS¡¦s performance.

Management of mix and coordinated of tasks

The Scott-Morton model identified a number of factors that needed to be balance on the introduction of information system as part of business strategy (University of Warwick, 2002).  The EDS/Xerox addressed the management of mix and coordinated of tasks in the five dimensions: culture, strategy, structure, people, and process.  As these areas were interdependent, it was believed that the relationship would take many months to reach a stable form.  However, this was partially effective for its planning with the consideration of the five dimensions.

Customer-outsourcer interface

A shared approach to problem solving, similar values, and good personal chemistry among key staff people are critical determinants of long-term success (Applegate et al, 1999). 

The EDS/Xerox contract was not be used as an instrument to define organisational boundaries and limitations.  It was more of an integration of two separate businesses with best parts of each culture, structure, strategy, and people. 

Xerox created a global outsourcing team with members from a variety of decision-making levels across functional serve the customer-outsourcer interface.  On the other hand, EDS created a separate global strategic business unit dedicated solely to Xerox in a non-hierarchical way to foster cooperation.  Both parties understood that integration could only be achieved if they developed a high degree of cooperation.  The ¡¥fear of publication¡¦ approach was effective in sharing view and building trust.  The sense of partnership during implementation also enhanced the smoothness of the integration.

According to the analysis, the EDS/Xerox¡¦s relationship will look like positive in 5 years if they could maintain the above with proper performance measurements.


Reference Lists

Applegate, Lynda M; McFarlan, F Warren and McKenney, James L (1999), Corporate Information Systems Management: Text and Cases, International Edition, Irwin/McGraw-Hill MA

Galliers, Robert D; Leidner, Dorothy E and Baker, Bernadette S H (1999), Strategic Information Management: Challenges and Strategies in Managing Information Systems, 2nd Edition, Butterworth-Heinemann, MA

IMS Study Notes (2002), University of Warwick, Coventry

Laudon, Kenneth C and Laudon, Jane P (1998), Management Information Systems: New Approaches to Organisation & Technology, 5th Edition, Prentice Hall, New Jersey

Statum-Howza, Judith; Harris, Robert; Stanek, John and Forrest, Eric (1998), Outsourcing of Information Technology, The University of Michigan-Dearborn, [Online, accessed 15 May 2000]
URL:http://www-personal.umd.umich.edu/~eforrest/paper.html


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