Procuring and Outsourcing IT contingent talent
workers in the digital era:
A Work System Lens
Information Technology Outsourcing
Said Saad
Department of Informatics IT Management
Magister’s Thesis 1-year level, 15 Credits SPM 2021.13
Abstract
Digital age is a challenging period for multinational companies resulting in a greater need for flexible organisational activities creating a huge demand for IT contingent talent workers. The purpose of this study is to examine the challenges associated with this growing phenomenon. Drawing on the work system theory as the theoretical lens governing this research and viewing organisational activities as work system is the central unit of analysis.
As a consequence of pragmatism world view, qualitative methodology is designated to answer the research question. A case study strategy was conducted from a multifaceted perspective and observation, as well as semi-structured interviews are selected as methods of investigation using the work system theory concept. The findings indicate some notable challenges associated with outsourcing IT activities and conclude with a strategic framework of how multinational companies ought to best manage IT contingent procurement process of talent workers. The proposed framework might be used as the foundation for managing IT contingent talent in global firms as well as for further research in the IS research community.
Keywords: IT Contingent Talent workers, Work System Theory, Digital Era, Procurement, IT Outsourcing
1. Introduction
According to the founder of one of the most successful organisations in modern time, Steve Jobs considered employing a manager's most important task. (Tatley, 2014). Managing Information Systems (IS) talent workers have continuously been valued as one of the most significant issues in the IS field's management. (Brancheau, Janz, & Wherbe, 1996). In today’s competitive and fast-changing digital age, organisations need to adapt and employ the best talent workers, general, and information technology talent workers. The digital age demands that organisations and people change more frequently than before (Hamel, 2009). The emerging global digital economy is forcing organisations to develop new strategies and new business models. The disruptive consequence of fast technological innovations redefines the core of today’s competitiveness.
Consequently, the traditional forms of organisations can no longer respond efficiently to the new business environment. Businesses can no longer compete with inflexible and outdated services. Across the organisation's landscape, we see the emergence of agile enterprises. To succeed, these firms set their core vision of adopting flexibilities and adaption to change (Pal,
& Pantaleo, 2005). One way to achieve this vision is to rely on information system workers to be employed on a contingent basis instead of employment traditionally. Technology allows people to work from any place and time. An agile enterprise or project essentially means hiring IT contingent talent workers to be strategic instead of operational matter. (Cummins,2010).
Nevertheless, organisations have traditionally outsourced the information system function in favour of cost-cutting.
When Kodak announced that it was outsourcing its information system function to IBM in
1989, it legitimised the IS function's outsourcing, contrary to previous beliefs where IS was considered a strategic asset (Applegate and Montealegre, 1991). Since then, organisations have found it satisfactory and indeed fashionable to outsource IT assets and staff to specialised vendors. (Hirschheim & Dibbern, 2002). According to Shipps & Zahedi (1999), when the global economy became more competitive and saturated, organisations headed towards information technology (IT) to differentiate themselves from the competition. In a similar vein, the IT atmosphere is characterised by the increasing swiftness of change and innovation. In such an environment, organisations need to have an agile staffing policy that keeps up with change and innovations. Interestingly, however, organisations that have outsourced the IT contingent talent element to third-party vendors have experienced the loss of knowledge and know-how.
(Aydin & Bakker, 2008).
Moreover, at the operational level, a new trend is also developing whereby companies move towards project-based work. They are looking for assistance to find and procure Information technology (IT) professionals to work on a short-term basis as opposed to an ongoing basis. A new type of service provider, the IT contingent workforce, are emerging to help companies fulfill their staffing needs. IT Contingent workforce is an important phenomenon for organisations overall success rate. Local and international firms leverage their expertise to help customers redesign the process of procuring IT contingent labour services and then implement their services via a network to allow customers to execute this process (Goals, & Chin, 2005).
According to Sharma & Yetton (2007), companies are moving towards using a contingent labour force because it is less costly than employing full-time staff. Full-time employees cost significantly more than contingent labour when benefits, training, and development costs are piled on top of salaries. Furthermore, top talent that is in high demand is difficult to retain.
(Quinn, 1999).
Conversely, IT contingent labour typically costs less and is easy to release when downsizing is in order. The company believes vendors who succeed in the contingent workforce market demonstrate their expertise in procuring IT professionals through a keen understanding of the dynamics among the participants in the process and can make recommendations on improving this process for all parties. It will also be essential for the contingent workforce to provide their customers with a dynamic list of potential candidates and their availability to work on upcoming projects. Contingent workforce strategies that treat people as commodities misunderstand the recruiting continuum's intersection with the procurement cycle necessary to differentiate their offering from pure e-procurement providers and survival in this market.
(Iberia & Shay, 2004).
Considering the above-stated research in the discussion, McLean, C. (2006) states that IT technology is imperative for improving organisational process, especially the IT procurement process. Thus, having an internal workforce is essential, but equally is the IT contingent talent element due to lack of skills and the fact that innovation does not necessarily come from the inside and outside the organisation, ideally in a partnership agreement rather than outsourcing. Additionally, one of the open innovation paradigms' principles explicitly suggests that “not all the smartest people work for us” (Chesbrough, and Vanlaere, 2006, p. 12), meaning that organisations should trust third-party organisations for an essential part of their core activities.
Having said that, the traditional outsourcing arrangements result in loss of organisational control. This is associated with the closed innovation paradigm rather than the open innovation paradigm. (Holmstrom, & Westergren, 2012). Therefore, the IT staffing strategy should include the IT contingent talent element and the organisation; the IT function should have more say in this process than just selecting the candidate. Thus, this study's objectives are twofold: first, the study aims to conceptualise these challenges associated with IT procurement of contingent talent. Second, this study will also attempt to provide a framework for multinational organisations to manage IT best contingent talent. Based on the research aims and objectives, the following research question has been implemented to conduct this research:
Research Question: What are the challenges associated with outsourcing and procuring IT contingent talent taking the digital era into account and how can such challenges be managed.
2. Related Section
2.1 Information Technology Outsourcing
Information technology outsourcing is broadly defined as the choice taken by “an organisation to contract out or sell the organisation’s IT assets, people and/or activities to a third-party provider, who in exchange providers and manage the assets and services for monetary returns over an agreed period”. (Goles & Chin, 2005, p.2). According to Hand and Mithas (2013), information technology outsourcing has been a significant gradual phenomenon in a recent period in the IT industries and across different industries. This is due to most non-IT based organisations see information technology as an enabler to their organisational ambitions and aims. Predominantly, the outsourcing phenomenon is least understood in the Oil & Gas industries. (Cross, Earl, & Sampler, 1997, p.4). The key reason for outsourcing in this sector is for saving cost and focusing on core competencies.
Besides, outsourcing IT is controversial because many argue that IT is not a support service and should not be outsourced because it is critical to the competitive position of many organisations. Lacity and Hirschheim (1993) raise the question of whether IT has quickly become a service commodity about to be better managed by large companies. The question comes from the fact that some professionals, academics, and executives outsource their IT services, even though the function can be key to companies' competitiveness, a concept adopted by Carr (2003). Concerning typology, some authors have classified the outsourcing of IT functions according to certain criteria.
According to Lacy, Willcocks, and Feeny (1995), IT outsourcing can be classified into total outsourcing, selective outsourcing, and internal supply. Outsourcing occurs when IT outsources all activities or those that represent at least 80% of the budget. Internal supply occurs when at least 80% of IT's area budget is spent on internal IT activities. Lastly, selective outsourcing is characterised in companies that use about 40% of their budget to purchase IT services in the market. Each of the models in question has advantages and disadvantages. For example, in the first example, given that companies need to achieve significant long-term volume, it is possible to attain high-cost reductions. Such characteristic makes the total
outsourcing model inflexible. On the other hand, selective outsourcing is quite flexible regarding suppliers and technological upgrades, and however, such flexibility generates costs and results in greater management of vendors.
Another way of classifying outsourcing in IT was proposed by De Loof (1996), according to which IT can be outsourced based on the information system’s components and activities.
Information systems can be classified into primary, which execute process-related activities of the firm, and secondary support services, those who predominantly support the process activities. The components elements can be classified as hardware, software, people, procedures, and data. The people aspect is the most underestimated element in the IT outsourcing phenomenon, and most successful organisations will say that their two greatest assets are people and the knowledge they possess, including tacit knowledge. (Trepper, 2000) According to DiRomualdo and Gurbaxani (1998), there are three types of intentions related to IT outsourcing decisions: improvement of information systems, impact on business, and commercial exploitation.
The objectives include, typically to improve service delivery and to reduce cost. IT outsourcing is a valuable strategy for corporations to use in order to achieve the desired goals, and whenever an establishment procures resources purely from an external source to accomplish a business objective, it engages in outsourcing.
However, outsourcing decision tends to focus entirely on the short-term benefit in the form of cost reduction, and therefore, improvements in service delivery often lack the strategic direction. (Walters, 2006). The decision to outsource an IT function within an organisation usually considers the risks involved during the contract agreement's period and validity. Often these risk factors directly influence the costs of outsourcing, reducing the expected results. On the other hand, empirical evidence proposes that cautiously created outsourcing strategies can increase the firm's overall performance. (Gilley & Rasheed, 2000).
Through outsourcing, firms can take advantage of the best vendors and focus on core competencies. Equally, not all businesses benefit from outsourcing IT, and the disadvantages can generate serious problems for firms. It is not rare for an IT outsourced arrangement to fail within the first 2-3 years being initiated, with massive cost overruns and poor service.
According to a study of nearly 200 IT outsourcing customers conducted by Diamond International, the number of clients that prematurely ended contracts went up from 21% in 2004 to 51 % in 2005. (Cohen, & Young, 2006). Moreover, even if the outsourced arrangements subsist initial testing, many firms fail to achieve the cost-benefit. Even if it begins with clearly expressed opportunities, the relationship can result in confusion of accountability, communications problems, and miss trust. (Cohen & Young, 2006; Holmstrom & Westergren, 2012).
2.2 Procurement Process of IT Contingent Talent
Information systems (IS) and Information Technologies (IT) are significant elements of successful corporations. (O’Brien, 2004). The definitions of both IS, and IT is near related;
however, they are different in their occasions. IT relates to the products and methods that are used to produce information.
It can also be expressed as “the preparation, collection, transport, retrieval, storage, access,
presentation, and transformation of information in all its forms (voice, graphic, text, video, and image). (Boar, 2002, p., 10). Information can take place between humans, machines and humans, and or/ between machines. On the other hand, information system in firms “consists of the information technology infrastructure, application systems, and personnel that employs information technology to deliver information and communications services for transaction processing/operations and administration/management of an organisation.” (Baskerville, Stage & DeGross, 2013, p. 67). Thus, an information system is a set of mechanisms that collaborate to produce information and include software, hardware, data, processes, and people. The five components' significance suggests that the information system is about computers and program devices and means that the information system is concerned with
communications between people. (Davies, 2009).
In today’s fasting changing business environment, IT is a vital factor from a strategic perspective. In addition, IT is the capability base on which an enterprise creates its corporate information system. Chan (2000) argues that IT's key roles include an initiator, an enabler, and a facilitator. As a result, IT is of strategic prerequisite, and competitive advantage can be enabled by embracing the correct information technology. Equally important is the management of information systems. Personnel issues are one of the most problematic issues in relation to the information system. (Kroenke, 2007). Relying on the internal workforce alone cannot manage this challenging part in the digital age. Conversely, organisations have traditionally outsourced the IT functions, including the procurement of IT contingent talent workers.
Conventionally, corporations have relied on specialised staffing companies like Kelly-OCG, Manpower, Randstad, and Adecco to manage the IT procurement process. In 2013, almost three out of four Fortune 1000 corporations were already adopting vendor management software and managed service providers to handle contingent workforce needs or plan to do so (Manpower, 2013; April, 2014). A majority of them were motivated by integrating business processes and gaining visibility, and improving efficiency. More crucially, the overwhelming drive is to reduce cost and increase flexibility resulting in outsourcing.
However, through outsourcing, firms can always cut costs since they are more likely to favour the cheapest provider. The cheapest and most economical way is not necessarily the most beneficial. Moreover, there is clear evidence to suggest that outsourcing leads to reduced innovation (Kotabe, 1992). As rightly predicted by Porter (2012), the cost reduction strategy for competitive advantage is creating disturbing competition, and if all organisations focus on cost, then there is no reasonable advantage left. According to Staffing Industry, Analyst (2012), employers worldwide spend over $3 trillion on the contingent staff of all types, and independent contractors account for nearly 67% of that, which is a massive amount by any measure. In a rapidly developing global economy, organisations must remain adaptable and responsive to change. In this regard, firms are increasingly using vendor management systems to manage contingent talent.
Mostly, procurement means obtaining goods or services from an outside source. (Schwalbe, 2015). The IT procurement process exists officially or unofficially in every organisation that acquires information technologies. Procurement includes all parts of IT acquisition, competitive bidding, purchasing equipment, and services. Part of IT procurement's difficulty
is that the acquisition of IT is not just about the purchase and use of hardware and software; it is also fundamentally tied to the purchase of a variety of other services, including support personnel and intellectual properties.
Moreover, the IT procurement process is indeed interdisciplinary, and most circumstances involve staff members from the whole organisation including IT staff, purchasing, legal and financial employees. IT procurement means more than just managing risk and managing contracts with service providers. As more IT services are supplied from outside the company, procurement becomes more critical.
IT Procurement Process is one of the critical strategic commercial processes within every association. More than half of total purchasing spending in large organisations is on services and thus, having firm control over this expense is extremely important to corporate competitiveness. (Vance & Paik, 2015). In a similar vein, the Aberdeen Group (2001, p.16) has found that indirect procurement or the purchasing of services not directly involved in the production such as labour cost, typically constitutes 30 t0 60 % of a firm’s total expenditure.
(Laudon & Traver, 2004). Likewise, the growth of non-standard employment arrangements has been articulated as a way to stay close to their core competencies (Hamel and Prahalad, 1994; Nesheim, 2003).
Moreover, strategists have argued that contingent workers enable firms to manage the flow of knowledge more effectively (Handy, 1989). Organisations operating in the technological fields are significantly more likely to employ contingent workers, bringing essential and useful knowledge gained elsewhere. A contingent labour force will be even more important in the digital age, where new kinds of skills will be inevitable, and in a period where we see ageing populations, particularly in Europe and Japan. Managed service programs (MSP) have increasingly been recognised as a prudent and strategic way of aligning the global workforce.
While MSPs have been leveraged quite significantly in the US, the international market now realises the benefit associated with this new approach.
The concept of e-business also has highlighted the importance of procurement resulting in what we know as e-procurement. E-procurement refers to the use of electronic methods in every part of the purchasing process, from identification to payment. (Davila, Gupta, & Palmer, 2003). The potential significance of online procurement is highlighted by Chris Degnan, a high-ranking analyst at the Aberdeen Group, who clarifies that purchased goods and services are often leading spending at many corporations; we estimate that for every dollar a company makes in sales, 50 to 55 cents is spent on indirect goods and services like wages or computer equipment. That half represents an opportunity to drive cost down, and eventually, firms can increase profits without any additional revenues. (Hildebrand, 2002).
To determine how organisations are managing the IT contingent procurement process, the six stages of the procurement process are discussed below:
1. Defining features/specifications (regarding quality and quantity) of the products and services the company intends to purchase.
2. Search of potential suppliers and their qualification.
3. Supplier selection and negotiation.
4. Issuing orders.
5. Monitoring and control of orders.
6. post-purchase and evaluation of suppliers.
These phases can be classified into two categories:
• strategic stages (supplier management, or, simply, 'Purchases') include activities with higher added value such as research and selection of suppliers, negotiation of the terms of purchase, the management of relationships with suppliers, rationalising the supplier base, etc.
• Operational phases (‘purchasing’ or 'supply'): are routine activities that include the issuance and monitoring of orders, reminders, billing, payment, the activities carried out after purchase (for example, the handling of complaints), and evaluation of suppliers.
It is necessary to determine each product and service's characteristics, taking the compliance and specifications requirements into account. This information is very important because it can be used in the process of selecting suppliers in the negotiation of the contract terms. The determination of the specifications is particularly important when the customer requires customised products or services. In this case, the components' designs and characteristics can be supplied by the customer, or the components can be designed using the service provider's technical expertise. Regarding the estimation of the needs and all-important information is summarised in a document called purchasing or requisition request.
The search for potential suppliers consists of the preparation of a list from a pre-selected supplier based on internal company information (e.g., the performance of a provider that already provides the company services) and external (for example, information collected during the fairs, the websites, or through business partners) advice. The pre-selection must be carried out by personnel who have the in-depth technical knowledge and can use their relationship to speed up the process. Based on the list of potential suppliers, the qualification process is activated. For example, a company might use the qualification of vendors on three levels. 'Level A' refers to suppliers in possession of the ISO 9001 quality certification that passed the assessment made by the customer's quality; managers use a questionnaire during an audit. Level B refers to suppliers not certified, but they still passed the evaluation. Level C refers to all other providers.
The company sends inquiries to suppliers, asking to specify the price of the product or the service, delivery time, the payment terms, the level of service that can be guaranteed, and so on. Based on the tenders received, the company started trading that allows clarification and defines the offers' content in detail. Now suppliers can be compared and selected. Among the variables used to compare and select suppliers is price, timing, and quality.
Furthermore, service providers can be evaluated by assigning each of them a score (Vendor Rating). It is rated the positioning of each supplier with respect to a set of criteria (for example, quality, delivery speed, reliability, etc.), which are considered to be relevant in the supply of services. In addition, each criterion is given a weight according to its importance in relation to other criteria. As a result, this thesis studies the procurement of IT contingent talent workers and how they manage this process. It is fair to say that technology has revolutionised how institutions operate, making information systems a critical success factor that needs to be managed internally while working with suppliers to achieve superior performance.
2.2.1 Research Gap
Historically, the information system discipline has not pursued the IT contingent talent management area to the researcher's best knowledge, despite the proven track record of
organisational-related research. Because the IS research is distinctively positioned between the technical and social worlds, it makes sense to study this phenomenon under the IS territory.
Additionally, a major problem is that multinational organisations are not well equipped to manage an essential part of their talent internally, and due to pressure for cost savings and to focus on core activities, the short-term solution has been to rely on managed service organisations to handle the contingent element of talent (Kunda 2002; Berr, 2008; Hoque and Kirkpatrick, 2011). While using managed services organisations to procure contingent talent is a prudent thing, major outsourcing activities will undoubtedly have long-term negative implications.
By far, the most significant effect will be on lost knowledge, resulting in deficits. One characteristic of information technology outsourcing absent in the literature and practice is the value of knowledge and learning associated with outsourced activities and processes. (Baxter, 2003). Therefore, IT outsourcing affects organisations' ability to learn and acquire new knowledge and loss of control. When firms mistakenly consider IT to be the entire commodity, they are more likely to fail. External IT talent workers are a source of strategic importance and can create a competitive advantage. (Lacity, & Willcocks, 1996). Consequently, some leading organisations now realise that outsourcing eventually leads to a knowledge gap, and organisations know less about their operations since they are not directly involved (Conelly &
Gallagher, 2004).
Thus, there is a literature gap that the current research has not addressed, and there is a need for alternative theoretical approaches to study IT contingent talent procurement process.
Although De Cuyper, Jong, and Isaksson (2008) argue there is no existing theoretical framework to analyse the effects of IT contingent work arrangements, the work system theory developed by Alter (2003; 2006; 2013) is an appropriate approach, as it recognises an improvement in processes and activities and above all considers all the necessary stakeholders, including customers and technology.
2.3 Theoretical Framework - Work System Theory
A work system lens is used in this study to guide empirical research as well as to develop a framework. Predominantly, the WST is used to analyse and design systems in organisations, but more crucially, it contains concepts, frameworks, and principles that can be used for explanation and forecast purposes. According to Davis (1971, p.15), “WST is interesting as a body of theory in the information system field because it links a well-defined big picture view of Information Technology systems in organisations with more detailed concepts and theories for analysis, explanation, prediction, and design and action.” Since enterprise consists of multiple work systems such as procuring IT contingent talent and selling products and services using various information systems, this study can be placed in the domain of IS and other related fields such as human resources since they are all ultimately accountable for IT contingent talent in organisational settings.
Virtually all major work systems in firms use IT, including HRM, Finance, and Project Management, and therefore should be within the IS discipline domain. Customarily most work systems have been viewed as information systems; however, most of them are not about IT or about processing information, just as work systems using electricity are not referred to as
electricity systems (Alter, 2006b). Conversely, one of the primary reasons there are numerous failures in IT-related projects is the focus on IT specification and design rather than improving processes and activities.
According to the Standish Group (2014, p.4), the overall project success rate was only 16.2%, defined as completed on-time and within budget with all the features and functions initially specified. The next crucial findings are 52.7% of all IT projects are challenged, meaning the project is completed, but over-budget and over the estimated time and with fewer features and functions scoped. Finally, 31.1% are cancelled at some point in the project life cycle. This clearly reveals that we have a long way to go as far as the IT project success rate is concerned.
Moreover, understanding the IT procurement process from a work system viewpoint is also consistent with the assertion by Brynjolfsson (2003, p.16) that “for every dollar of IT hardware capital that a company owns, there are up to $9 of IT-related intangible assets, such as human capital and business process.” Therefore, the IT-centric view of organisations is not viable, and clearly, the WST and associated concepts will be essential lenses for this study. In a nutshell, it is possible to view an entire organisation or even an industry as consisting of multiple work systems rather than a single large system (Alter, 2013). This thesis's work systems are ‘hiring of IT contingent talent’ and identifying improvement in the work system. The WST is an important approach for understanding and analysing systems in organisations to improve them. It would help determine the major problems concerning hiring contingent workers and how best to manage the process.
According to Alter and Wright (2010), WST is a theory about systems in organisations rather than exclusively about information technology consistent with this review. WST is chosen as the lens because it allows a systematic scholarly perspective and practical applications and provides a nontechnical approach to study organisations’ system-related problems and opportunities (Alter, 2006a). As a result, in this thesis, WST is defined as a system in which participants carry out work using information, technology, and other resources to produce products or services for customers.
3. Research Methodology
3.1 Qualitative research
Burns and Gove (2005, p.3) defined research as a “systematic investigation to discover answers to a research problem.” As a consequence of the researcher’s pragmatic world view and adopting the work system theory as the lens and following the mainstream research methodology in the literature, the most suitable research strategy for this study is qualitative (Bryman, & Bell, 2007).
First, and perhaps most significantly, the ultimate reason to choose a research strategy should be based on which approach can best help to answer the research question. Since the qualitative approach emphasises words rather than quantification in gathering and analysing data, it is appropriate to adopt this view. Realistically, the only way to solve organisational- related problems is to speak to people who qualitatively manage these processes and activities.
According to Bryman (2008), qualitative research can be very subjective, and it relies too much on the researcher’s unsystematic procedures and personal relationships with the
interviewees, which could create bias. To avoid this, a professional approach was adhered to by the researcher, and a semi-structured approach provides some structure to the interview.
Overall, the qualitative method has been beneficial for this study, but it can also be challenging and time-consuming to interpret the data. The qualitative research methodology is useful in exploring phenomena in-depth and provides answers to questions like ‘what, how, and why’
and support in theory building, which is another objective of this study.
3.2 Case Description
Gray (2013) confirmed that a case study approach might reveal valuable information about contemporary phenomena. Case study research is also concerned with investigating the phenomenon in context to generate insight into how phenomena occur in a practical setting.
For researchers, there are many advantages in looking at something within a particular company or department, and this approach is well suited to understanding a real organisational problem. The chosen organisation is a leading Oil & Gas company operating on a global scale. They employed over 73,000 workers in 2015, and the company is considered one of the world’s largest corporations. The company is one of the world’s biggest five or six publicly owned companies measured by revenue and assets (Statista, 2016). Its global nature and multinational presence are undisputed. Also, the company has many divisions and has had very successful acquisitions. It has three main operating divisions: Upstream, Downstream, and Chemical. Global Services is supported by Global Services, which comprises three different departments: Information Technology, Global Real Estate, and Procurement.
The Information Technology department works towards finding the right balance between maximising business value and workforce productivity by delivering speedy, innovative, and reliable IT services. Procurement is responsible for purchasing, contracting, and negotiating goods and services on a global scale. This includes managing supplier relations in a strategic way, both on the products and the service element. Since IT contingent talent is in the domain of procurement, the researcher has interviewed responsible personnel from this department.
Further, since procuring is also Human Resource Management’s responsibility, the local HR representative has also been interviewed. Adding to this, the external MSP provider and staffing supplier have also been interviewed since they play a critical role.
This study is multifaceted in nature and is concerned with challenges associated with procuring IT contingent talent workers and answering the research question adequately; it is sensible to study to the organisations and people responsible for this activity. Procurement of contingent talent is cross-functional in nature and involves several different stakeholders to make it a success. This includes both external and internal stakeholders in different departments, which is why multiple organisations are involved.
Additionally, this company recently adopted the MSP framework--approximately 12 months ago - to support them with their contingent talent management, which makes them an ideal company to understand some of the underlying principles for doing this and the challenges associated with the process. The third-party managed service provider and the staffing supplier and contractor, all play essential roles in making MSP a success. A managed services provider concerning temporary workers is the best practice approach adopted by many large multinational companies. In fact, three out of four Fortune 1000 companies
adopted an MSP or were planning to do so (Manpower, 2013; April 2014).
According to Staffing Industry Analyst (2016, p.16), managed service provider is defined as
“a service whereby a company takes on primary responsibility for managing an organisation’s contingent workforce program. Traditionally, this type of agreement is accompanied by a vendor management system provided by a third party to support the process and make it easy for all stakeholders to conduct critical processes and activities. A Vendor Management System is defined as “an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services.” (Staffing Industry Analyst, 2016, p.17).
Since the concerned company adopts an MSP and a VMS in support of the procurement section of contingent talent, which is the fastest-growing staffing industry, it makes this case relevant and appropriate for research purposes.
3.3 Data Collection
According to Mason (2002), triangulation aims to seek and corroborate one method with another. Therefore, this thesis used data triangulation as a strategy of different sources, and the richness and depth gained helped in answering the objective of the research (Denzin, 2006). There are major sources of evidence to systematically conduct a case study, including interviews, direct observation, document analysis, participant observation, archival records, and physical artefacts (Yen, 2009, p.82). This study selected observation in order to understand the process of sourcing candidates from the initial period when the requisition is requested until the candidate has been hired. In addition, this step was followed by semi- structured interviews.
Frey and Oshi (1995, p.1) define an interview as “a purposeful conversation in which one person asks prepared questions, and another answers them.” A semi-structured interview was the best method to address the research objectives. According to Kivits (2005), business managers are more likely to participate in an interview than a questionnaire. The researchers agree with that; in fact, a questionnaire is rarely taken seriously, and busy entrepreneurs are more likely to take an interview seriously. Furthermore, due to the researcher’s relatively weak experience and the fact that the interviewee can take over an interview, a semi-structured approach was adopted in order to create some control over the interview.
The interview approach provided a clear view of the challenges of procuring IT contingent talent workers taking the digital age into account and delivered rich data that cannot be secured using a questionnaire approach, as answers are recorded beforehand in that approach (Nichols
& Paul, 1991). The idea of combining interviews with observations is supported by Creswell (2009) and best addresses the research objective. Semi-structured interviews are based on the idea that data gathering takes place as an interactive dialogue between the researcher and respondents (Mason, 2012; Saunders, Lewis, & Thornhill, 2012). Due to the study's exploratory nature, a semi-structured approach has been an appropriate method since it allows flexibility and some structure.
More detailed questions were asked where necessary, and interview themes were modified to reflect the audience. Additionally, the researcher’s own experience of managing contingent talent made it easier to contact the responsible organisation for interviews. Initially, the researcher wanted to conduct the project with a leading MSP provider, but the researcher
decided to conduct this study separately due to time constraints. This study follows a purposive sampling technique, predominantly used in qualitative studies (Saunders, Lewis, & Thornhill, 2012). It allows the researcher to select samples of the most suitable interviewees who fulfil certain characteristics and help answer the research question (Bryman & Bell, 2007). As a result, this study interviewed vital personnel responsible for managing contingent talent, including the head of global supplier relations from a buyer perspective, hiring manager, MSP provider supplier, HR manager, VMS provider, and a contractor. Since this study is multifaceted in nature, it was imperative to speak to all the major stakeholders involved in contingent workers' procurement process.
To discover and confirm the research gap, which was confirmed as a lack of a theoretical framework examining IT contingent talent management and the fact that external workers are traditionally seen as isolated compared with permanent employees, this study involved a comprehensive literature review.
Most significantly, this study focused on contemporary research into the concern areas of procurement of IT contingent process and IT outsourcing. In particular, leading journals and books were utilised. This helped in shaping the interview questions, taking into account the theoretical framework governing this review. It was necessary to review leading industry practitioners’ own research, including the Staffing Industry Analyst and Ardent Partners, since they are considered, the leading independent organisations researching how major firms procure temporary workers.
3.4 Sample Size
The sample size of this research study 6 respondents that were head of procurement HR business partner, global implementation consultant, senior layout designer recruitment consultant, and functional Supervisor. These respondents are posted as procurement, buyer human resource manager, MSP provider, contractor, contractor, and buyer global services.
These respondents were interviewed through Skype, and the duration of the interview was at least 60 minutes. It was necessary to interview all stakeholders above as the IT procurement process is interdisciplinary and, in most circumstances, comprises diverse staff members across the organisation, including internal and external stakeholders.
Hence, it was necessary to study this phenomenon from a multifaceted perspective. In a nutshell, this study was concerned with identifying the major stakeholders involved in an IT contingent process, taking the work system method into account. Undoubtedly, the head of procurement was an important character from a strategic perception since they are ultimately responsible for overall planning issues. In a similar fashion, it was also necessary to capture all the necessary stakeholders from the study's observation section and then carry out in-depth interviews accordingly. The researcher’s own experience of managing and working in the IT contingent outscoring industry made it possible to contact all the relevant stakeholders and eventually carry out the study in a successful manner.
Interviewee Organisation/
Department Responsibilities Interview Type
Interview Duration
Head of
procurement
Buyer/
Procurement
Global supplier relations; also called the Global sponsor.
Looks after strategic issues. Cost focused,
Skype 90
Minutes
HR Business Partner
Buyer/Human Resource Manager
HR-related duties including success planning, workforce planning
Skype 60
Minutes
Global
Implementation Consultant
MSP
Provider/supplier
One of the leading MSP providers looking after the process of hiring contingent talent;
great knowledge of how various VMS systems work
Skype 85 Minutes
Senior Layout Designer
Contractor An experienced contractor
Skype 55 Minutes
Recruitment Consultant
Supplier Experienced
recruiter specialising in headhunting and recruitment of IT- related jobs
Skype 85 Minutes
Functional Supervisor
Buyer/ Global Services
A hiring manager with the authority of recruiting personnel on a global basis
Skype 90
Minutes
Table 1: Analysis of Respondents in Interview
3.5 Data Analysis
According to Alter (2010), the work system snapshot is a one-page summary of a working system regarding six central elements: customers, products and services, processes and activities, participants, information, and technologies. The observation is concerned with one recruitment cycle of a contractor; from the moment the requisition is placed until a candidate has been hired and paid. This would allow a greater understanding of all the stakeholders involved in the work system's process and activities section. Ideally, the requirements should not exceed one page, and despite the short summary, it requires rigorous thinking, and the rule for this model is followed. For instance, each of the processes and activities must be involved in at least one step in the processes and activities. Each informational entity listed under information must be created or used, and each customer must receive at least one product or
service. In this study, the work system snapshot has also been utilised to present the observation section's result and highlight significant challenges. These challenges have been translated to questions, so the senior management has an opportunity to answer them. Alter (2006b) argues that it is essentially a step-in work performed within the work system.
The goal is here to label and attain agreements about the work system boundaries. In particular, this allows highlighting problems associated with procuring contingent talent. The procurement of contingent talent is conducted as a process and activities recognised by the work system. According to Alter (2010), the framework outlines a work system’s procedure, purpose, and environment. It emphasises business rather than IT matters and covers areas where there are structured and non-structured business processes. The six elements highlighted by the work system snapshot include environment, infrastructure, and strategy, which are viewed predominantly outside the work system despite the fact that they play important roles in shaping the work system. According to Alter (2006), subsequent analysis observes all nine elements in more depth and eventually produce recommendations for improvements.
3.6 Limitations
The chosen theoretical framework governing the study is ‘the work system theory’, which was not implemented to its full capacity the work system method identified by Alter, which follows a three-step analysis procedure. However, to answer the research aims in the best possible way, it was unnecessary to follow the three-step analysis procedure; instead, this study followed a two-step analysis process. This was directed by how to answer the research question best and ultimately provide recommendations for change. Additionally, the credibility of this study can be assessed through the concept of validity and reliability. It can be argued that the validity of this study is remarkably high because observation and interviews provided the study with a thorough understanding of the phenomenon.
Conducting semi-structured interviews in combination with observation allowed this study to obtain an extensive picture of the phenomenon in practice. Interviews with different participants within the organisation as well as externally permitted the study to obtain a diverse set of points of view on how the organisation handles contingent talent management.
Adopting a case study approach with only six interviews may affect the generalisation of the study, but this study is exploratory in nature, and as opposed to generalisation, this study aims to understand the phenomenon in context.
According to Yen (2009), the case study strategy lacks rigour in the research procedure and offers a small basis for scientific credibility. To avoid these drawbacks, this study adopted multiple sources of evidence in the case study approach, followed by a theoretical framework combined with a comprehensive methodology approach. Initially, this study identified the research question in the frame of ‘what and how.’ Then this study chose to conduct observations to gain a greater understanding of the phenomenon. Further empirical evidence was collected from major stakeholders involved in the work system of procuring contingent talent. This study is also limited regarding the aspect of talent management observed. Since talent management includes recruiting, selection, planning, and succession planning, this study is restricted to the procurement section of contingent talent, which is primarily in the
domain of recruitment and selection. Another limitation is about recording interviews since some interviewees might feel intimidated or uncomfortable with a voice recording system, so this study decided not to record interviews, and instead, the researcher made notes of the answers.
4. Empirical Result
4.1 Work system Snapshot
Work system snapshot for a working system- procurement of contingent talent
Customers Products & Services
The organisation
● Functional supervisor- the hiring manager
● Admin supervisor-country based
● VMS provider
Contingent talent
● Job-offer
● The applicant
● Rejection document
Processes and activities (Work practices)
● Functional supervisor submits a request for a new hire using the VMS system
● The MSP provider schedules an intake call with the hiring manager to agree on role and rate
● The requisition goes through the approval chain supervisor’s manager and finance approval, all required before the role can be submitted to sourcing suppliers
● The MSP chases all the approvals for a speedy process, and email is sent out
● The MSP distributes the requisition to relevant and approved suppliers
● The suppliers submit CVs--limited to 3 each – first CV within an hour
● The MSP shortlists CVs so the functional supervisor and interviewers can view the CV in the VMS
● The functional supervisor and the admin supervisor not happy with CVs
● The MSP sets up conference calls with suppliers to source the right CVs
● The MSP suggests changes to the job requirements, accepted by the functional supervisor
● The update requisition is distributed to all relevant suppliers again
● The MSP schedules update calls with each supplier separately
● The supplier submits CVs to updated job requirements
● The functional supervisor or the admin supervisor selects candidates for interview stages
● The VMS system compares candidates, considering skills, and rates for supervisors to review
● The MSP arranges interviews by contacting relevant suppliers
● Suppliers contact contractors to advise of interviews or rejections
● The functional supervisor and admin supervisor schedule telephone interviews and face- to-face interviews
● The functional supervisor informs of the final decision, and the candidate is selected
● MSP informs decision information via VMS and creates a work order
● Successful applicants accept the offer, and the hiring process starts, including work order VMS
● Supplier offers training to the candidate on how to report hours on a weekly basis using the VMS
● The contractor reports hours on the system but paid by the supplier one week in lieu
Table 2 Work system snapshot for a working system- procurement of contingent talent
4.2 Work System framework- nine elements
4.2.1 IntroductionThe work system framework advocates customer and stakeholder focus, and in this work system, the buyer organisation is the beneficiary of the IT contingent talent worker offered.
The functional supervisor and admin supervisor are particularly noteworthy. First, the functional supervisor is a senior manager with the authority to procure IT, contingent workers, globally. This means the admin supervisor will be responsible for the contingent workers and approve the timesheets and see to country-specific compliance. The hiring manager is concerned with ensuring that the right candidate is available as quickly as possible.
4.2.2 WSF- processes & activities, customers, information, and participants
As per the functional supervisor, it is very evident that his concerns are finding the right talent and more importantly, that the IT contingent worker is providing important skills. The functional supervisor (2016) said “finding highly skilled talents in a short period is not easy these days, and temporary workers are highly skilled, which is valuable for our projects.”
Moreover, the functional supervisor finds the MSP framework very difficult since suppliers and contractors cannot contact him directly. According to the MSP framework, all communications concerning contingent talent need to go through the MSP; however, the functional supervisor welcomes the speedy hiring process associated with contingent workers instead of hiring full-time employees. It is further argued that since the company operates more on a project basis, it is not required to have people working all the time since there might not be enough work for them all the time.
According to the principle of WSF, customers are people who own or use the system or might benefit from the product or service. The recipient of processes and activities is the
Participants Information Technologies
● Hiring managers
● MSP provider
● Applicant
● Supplier
● Job description
● CV’s
● Applications
● Interview feedback
● Job offers/ rejection
● Invoices
● Schedule
● Market rate
● VMS system
● Telephones
● Sales force
organisation owning the central system used in the process. Therefore, the vendor management system provider was identified as an essential customer. Since the work system exists to produce products/services for the customers, an analysis of a working system ought to consider who the customers are, what they need, and how they use whatever the work system provides.
The vendor management system is a one-stop center for all the contingent working arrangements and recognises all significant aspects of contingent work, including IT related assignments. All the main participants, including the MSP, the hiring manager, the supplier, and the contractor, can use one system, which is critical and has improved procurement IT contingent talent workers' processes and activities.
Moreover, what is also unique is that most of them can only see the most relevant information. For instance, the contractor can only submit timesheets, and the hiring manager can only submit requisitions. However, the MSP has more tasks to do in the system, and above all, can impersonate other users. Moreover, the work system's major product/service is the applicant, resulting in a job offer or rejection. The contractor and the applicant found the MSP process a bit difficult since they could not directly contact the hiring manager, especially at the beginning of the process. The primary motivation for working as a contractor was predominantly flexibility.
“I have always worked as a contractor because I can work nine months a year and, in the end, I am better off financially.” (Senior layout designer- Contractor, 2016).
Furthermore, participants perform work regardless of whether usage in computing is high, low, or non-existent. According to Alter (2006a, p.15), “Being a work system participant is more important than being a computer user.” When evaluating a working system, it is more important to consider participants rather than technology users. It is identified that applicants, suppliers, MSP, and hiring managers are considered participants. The supplier was not happy with the MSP framework at all and reported serious issues in relation to communications; in particular, the recruitment consultant said, “With MSP job requirements are never clear since we do not have direct contact with the hiring manager and candidates are rejected without a valid explanation, making sourcing difficult under such a framework.” (Recruitment Consultant, Supplier, 2016).
Possibly the most significant aspect of this work system is the fact that the managed service provider (MSP) is without a doubt, the dominant player, managing the whole procurement cycle from start to finish. The head of procurement reports that prior to the MSP program framework, the organisations had a very decentralised process where all the hiring managers and the local procurement representatives had service level agreements with many different suppliers, resulting in difficulties knowing what types of contracts were signed and how much the company was spending on their contingent working arrangements. Head of Procurement- Global MSP sponsor (2016) revealed that “one of the major reasons for adopting MSP alongside cost savings initiative was to gain greater visibilities.”
As a result of the structured MSP framework and one VMS system, the processes and activities have improved as opposed to the direct hire approach. Processes and activities encompass both structured as well as semi-structured activities performed by participants. It is very evident that the MSP plays a very significant role in the processes and activities section
and the HR manager, when asked directly, argued that the company should focus on the core capabilities rather than managing all sections of talent management. This means that the HR would focus on the permanent talent while the MSP would be managing the contingent element, creating a clear separation of duties and responsibilities.
“Our priority is to ensure that we focus on our core capabilities, permanent employees while saving costs, and an MSP framework can provide us with this.” (HR Manager, 2016).
Also, another important area of the WSF is information, which includes codified and non- codified information. The information highlighted includes requisitions, invoices, schedule, market rate, CV, and job descriptions. The importance of information in the work system is not particularly relevant for understanding the work system itself and data/information that is created, used, and eventually processed. This may include information that is processed by computers and information that is never recorded and computerised, such as verbal communication and knowledge gained to perform processes and activities within the work system.
4.2.3 WSF- Technology- E-Procurement System
Another important part of the WSF is technology, and rightly so. In a nutshell, technologies are tools that help people perform the work more efficiently. Some technologies are general and widely used in work today, and some are tailored for specific work tasks. In terms of procurement of contingent talent, one technology was very dominant and was also very critical, namely the Vendor Management System. The technology was able to handle the recruitment cycle from start to finish and from payment to recognising cost per location and per hiring manager, and above all, greater visibility is gained by using one system. For instance, the MSP sends out intelligence reports to the senior manager to understand how much the company is spending on their contingency arrangement and what types of projects they are working on.
Most participants and the senior management welcomed this. Furthermore, the environment in which the processes and activities operate is also considered in the WSF and includes the organisational culture, competition, compliance, and the digital age.
Possibly, the most significant issue affecting the contingent working arrangement is the changing nature of work in a more digitised world. For instance, the functional supervisor who was based in the APAC region could clearly manage a team based in the EMEA region and was able to recruit with the support of a local admin manager. In addition, compliance issues concerning work, in general, were one of the major reasons for adopting an MSP framework to ensure that the company was compliant with all the regulations, which creates a burden on firms. The Head of Procurement reported that one of the most challenging aspects of contingent talent program was in relation to compliance. In fact, she said, “There were some regulations that we were not even aware of, such as Agency Working Directive.” (Head of Procurement, 2016)
4.2.4 WSF- Environment & Infrastructure
Moreover, Mintzberg (1990, p. 23) defines culture as “shared meaning, shared sense-making, and shared beliefs.” Organisational culture will influence the system and how they do things;
for example, some organisations with proven track records of working in a particular manner might be resistant to change in the processes and activities resulting from a new system. To a
certain extent, the functional supervisors ignored the implementation of a new MSP framework in the beginning and pursued business as usual with relationship suppliers, prompting internal conflicts. The global oil prices also mean no pay rises for the contingent workers, and this may create problems for sourcing the right candidates and candidates leaving their contracts for better-paying contract roles elsewhere. As a result, factors in the environment affect system performance even though the system does not rely on it to operate.
Similarly, most work systems function within a wider infrastructure necessitates effective integration among the respective systems. It includes human, information, and technical resources that the work system relies on even though these resources are managed outside its scope and shared with other work systems. Human infrastructure is the people and organisations that supply services shared by different work systems; for instance, internal consultants and HR departments are typically considered part of the human infrastructure.
The most crucial point about infrastructure is that HR has no responsibilities as far processes and activities are concerned but will provide crucial information to the MSP concerning equal pay. According to the agency working directive, after 13 weeks of employment, the contingent worker needs to be paid the same rate as a permanent employee, and this information is provided on the vendor management system, updated by the MSP and suppliers to ensure this pay rate is passed on to the contractors. In an MSP model, the buyer pays the MSP, and the MSP pays the suppliers, and they ensure that the contractor gets paid. “On average, our clients see a substantial saving on their contingent working arrangement as opposed to managing in- house. (Global Implementation Consultant- MSP provider, 2016).”
4.2.5 WSF-Strategies
Finally, the last element in the WSF is strategies, which consist of guiding rationales and high- level choices within the work systems. There is a different level of strategies that needs to be considered in relation to the work system. As far as the work system is concerned, the enterprise strategy, departmental strategy, and the work system strategy need to be aligned, and all major stakeholders need to be aware of the end goal. For instance, a working system designed to produce a high-quality product might not fit organisations operating under a cost leadership strategy. As far as the procurement of contingent talent is concerned, an MSP framework brings significant savings in terms of cost reduction for the clients.
First, and perhaps most significantly, the client does not have to worry about any system cost or implementation cost. The vendor management system and the managed service provider look after implementation and updates, resulting in the client only needing to pay for a small percentage based on the total spend amount going through the VMS system.
Similarly, the supplier and MSP provider are also responsible for paying for their contribution to using the system. This means that the company does not need to hire anyone for training purposes in relation to using the system or pay upgrade costs, for that matter. Second, the MSP framework operates on a competitive bidding approach like an auction, and suppliers are encouraged to submit a candidate with the below-market to ensure the hiring managers can see CVs; also, all market-rate data is normally up to 15 % below, resulting in cost savings. This is the driving force behind so many large multinational companies adopting an MSP framework. Eventually, this result in the organisation relying on MSP becomes a strategic concern not controlled internally within the firm, and bargaining power increases in favour of
the MSP supplier.
5. Discussion
Michael Porter (2012) claimed that “there is a fundamental distinction between strategy and operational effectiveness.” Hence, before implementing an IT contingent talent management program in an organisation, there must be clear program agreements and the overall strategy needs to be well-defined and, more importantly, correct. As far as this particular organisation is concerned, it is evident the main reason for adopting the MSP framework was the fact that the company was motivated by cost and continued to insist the significance of it. Strategies are concerned with the bigger picture and are about choices to ensure that the company gains a unique value proposition. A work system needs to operate under a clear strategic motive. The strategy at this level is concerned with operational effectiveness and should be incorporated from the overall strategy. If the primary strategy is cost leadership, then work practices should be done relatively inexpensive; conversely, if the overall strategy is high-quality products, then the work practices should reflect this. Turning to the work system again, which is an equally important element to consider, any improvements at this level are concerned with operational effectiveness. The result of operational improvements does not necessarily equal success in the long-term; the major issue here is that the competition is also embracing the concept of the MSP framework to streamline processes and eventually cut costs, resulting in no competitive advantage whatsoever. This view is also very consistent in the related literature section.
Sustainable competitiveness does not occur as result of an improved work system.
Nevertheless, operational effectiveness is necessary and apparently can be achieved considering a suitable technology and program framework governing operations. However, being able to procure contingent talent is of strategic importance and taking into account the appropriate motivation and climate are of a strategic rank. It is evident that this organisation is not well prepared for the digital age, and the talent gap so widely reported in the literature is rather absent. Therefore, improvements in the work system alone will not be enough for achieving success without the appropriate strategy governing the work system. DeFillippi &
Arthur (1998) also claimed that “how can a project-based enterprise accumulate its core competencies when it rents all the human capital?”
Specifically, how can an organisation be successful if it rents an important part of its talent, Steve Jobs, head of one of the most successful organisations in modern times, considered hiring the most important task of a manager. From the work system snapshot demonstrated in the previous section, it is apparent that an organisation relies on the third-party provider for virtually every single part of the procurement section. Most notably, the MSP is acting as the internal department leading and managing the procurement element of talent favouring cost savings, compliance issues, and above all, focusing on core capabilities. The suppliers have a relationship with contractors and place them where they choose, especially if another client is paying a higher rate. This will result in negative implications for the firm since ‘know-how’
becomes a real subject matter. It can also be said the company will lose explicit and tacit knowledge, contributing to increases in supplier bargaining power.
Another important issue that needs recognised is whether the IT procurement element of talent management is a core activity or not. Clearly, IT contingent talent provides important
