Eastman Kodak Co.: Managing Information Systems Through Strategic Alliances Harvard Case Solution & Analysis

1.     Factors Contributing to Outsourcing business activities

There are various factors associated with the decision to outsource business activities. The key decision of Hudson to outsource the data centre, telecommunication and PC services lies in the nature of activity. These activities serve as a support non-core activity therefore putting efforts in forms of human capital and capital funding results in diluting the firm’s activity in non value addition activities, which may have been directed towards value-driven core activities THAT that will ultimately result in increasing the organization’s worth and value through providing greater output. The net result of input versus output defines the need of outsourcing activities, as depicted in the given case as well.

Another important reason of outsourcing these activities to a strategic partner is the main benefit of strategic alliance by reaping the benefits of shared knowledge and expertise of the firms which will be held responsible for the stated activities. The shared knowledge and the expertise of the alliance firms enable the management in concentrating on its key activities without diluting the efforts of its human capital rather leveraging the entire workforce and the associated factors in delivering the core competency which in this case is divided amongst three differentiated industry.

The presence of three widely different industries being the focus of the management also remains one of the potential reasons of outsourcing the non-core activities to supporting partners. These partners excel in their respective industries and therefore they bring the ultimate value to the non-core activities of Kodak. The data centre consolidation is assigned to IBM, telecommunication to the DEC and personal computer unit to Business Land. All of these partners have been analyzed on grounds on the abilities to conduct the activities as stated by the cross functional teams from the Kodak management which takes into account the personnel as well as operational aspect of the units being assigned to these businesses. The partners possess the key skills that are desired to conduct the business in a desired manner.

Another reason of outsource is the cost consideration while keeping the activities in-house. It is analyzed that the decision to outsource is most beneficial for the organisation considering the fact that the cost associated with these activities in conducting them in house does not justifies. These activities bring least consideration to the core industries and therefore ranks lower than other potentially higher value. In addition, bringing activities has led the management to forgo conducting the activities with its high cost factor associated with operating them in-house in terms of the infrastructure needed as well as the human workforce and capital expenditure needed for the activities to perform. In conducting cost benefit analysis, it has been one of the few contributing factors that rank high in managerial consideration while deciding to outsource these activities.

2.     Philosophy and approach for outsourcing partners

Hudson and her team have gone through extensive list of criteria, which makes the outsourcing partners qualify for their activities. The selection of the outsourcing partners are based on their ability to perform the key activities in each unit as well as look into the human personnel workforce that is involved; which estimates about 600 human capitals. Hudson has emphasized control and authority over the entire step, which can result in mismanaging the entire process. This makes the process partially vulnerable to the discrepancies in management and certain guidelines can be followed; which will mitigate chances of miscommunication and barriers in implementing the outsourcing plan.

The philosophy of Hudson which includes stakeholders’ value, improvement in productivity of services and quality, emphasis on the quality of life of the employees and positioning of the Kodak’s IT development for the unforeseen future extensively includes each aspect of the organization effectiveness. This philosophy has helped as a guideline for the committee and team members however; the processes being followed resulted in creating a bottleneck.

The route taken by the team has been broken down into several steps that clearly indicate the key factors deliverable in the outsourcing partners. The selection process however is not the most desirable pattern. The major flaw lies in the ‘preferred partner criteria. Since the industry is rapidly changing and the Kodak belongs to a multitude of industries the industry norms cannot be equally justifiable to, which can be used as a criterion to shortlist any potential partner. This will result in potentially productive and high performance partners who have not yet delivered to the industry partners or possess the exactly stated experience pattern. This remains one bottleneck as high number of firms may have been reduced due to the preferences being given to known partnering firms.................................

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