Case Study

The Dependence Of Bps It Organization On External Contractors

The case mentions the dependence of BP’s IT organization on external contractors. Why would this be an issue? When is it a good idea for IT departments to hire contractors, and when is it not? Discuss some scenarios.

The dependence of BP’s IT organization on external contractors was succinctly described by Deasy of them having a very long tail due to their more than 2,000 IT vendors and over 2,200 suppliers. This has become an issue because it made the company less competitive and not delivering on its promise that experts predict it would only last four to five years in its present form. Its IT and its excessive outsourcing to external was one of the areas in the organization that kept the company less competitive.
It is a good idea for IT departments to hire contractors for them to save on cost and get an expertise that they needed. For example, if a certain organizational function would be more cost effective to outsource such as payroll, the organization may be better off to hire contractors for them to save on cost and focus on their core business. In the case of BP, it came to overdependence to contractors which composed almost half of their IT personnel (Only 55% of IT professionals were actually BP badged. The rest were contractors. This manifests heavy dependency on outside contractors.)

The culture of the IT organizations mentioned as an important issue. How do you think it changed throughout the period covered here? What did it look when Deasy came on board? What does it look like now?

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Before Deasy came on board BP, the organization was characterized as “bloated, passive, unfocused, and unconcerned with performance and accountability”. It became so overly dependent on outside contractors that it did not know it spent $3 billion in total on IT and that it had 4,200 people in IT. Deasy knew that he had to overhaul every facet of IT to get the organization in shape. Today, BP looked way better before the transformation process was initiated two years prior to his assumption as CIO. It is an organization that keeps on transforming itself through a never ending process of control even if the company is already delivering value. Its IT department is now an enabler that drives revenue for the business instead of being bloated and expensive as it used to be.

How did BP get to the situation mentioned at the beginning of the transformation process? Does it appear to be the result of a conscious decision? Use examples from the case to illustrate your answer.
The transformation begun when BP chief information came on board where he transformed BP into business driven and enabled the IT to become a strategic weapon. Realizing that IT had become bloated and decentralized that could fold the business in just four years, Deasy took the post as the CIO expecting a tough job ahead.

He strip out $800 million in expenses from the $3 billion dollars budget and cut more than half of the 2,000 IT vendors it had, rationalized it 4,200 IT employees and sought out the best applicants. He instituted a draconian control measure to ensure that the overhaul will take place in every facet of BP’s IT organization and not to keep the company complacent.

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