University of Bahrain College of Information Technology Department of Management Information Systems

INFORMATION TECHNOLOGY OUTSOURCING IN BATELCO

A final report submitted in partial fulfillment of the Requirements of the senior project course: ITBIS 499

Prepared by: Ali Mohd Abbas Kamali (ID: 20017503)

Supervised by: Dr. Zaitoon Abubaker

April, 2006

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Abstract

Information Technology Outsourcing In Batelco

Outsourcing is contracting out some or all of an organization's IT or communications operations. Telecommunication Company, Batelco is practicing outsourcing. To what extend is successful? This research will focus on the outsourcing process in Batelco as the big telecommunications Company in Bahrain. The research was conducted by interviewing the decision makers in the Information Technology department in Batelco via structured and unstructured methods. The main finding that was achieved by the researcher is that Batelco is conducting a partial outsourcing in the IT departments for services that are being faced with the lack of experiences and for reducing costs. And there is no intention in the management level to expand this scope. This study examines the whole picture of the IT functions currently being implemented and the future trends in the managements level.

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Acknowladgement

I would like to thank to all those who willingly gave me their time to be interviewed, specially the IT department in Batelco. I am very grateful for the advice provided by my advisor Dr.Zaitoon Abubaker. The success of this project directly goes to her for her kind cooperation and guide throughout the project.

I would like also to thank the project committee for their continuous help and answering all my questions regarding the ITBIS499 project.

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Abbreviation

ITO IG IA IX IF IQ IR

Information Technology Outsourcing General Manager of Information Technology Information Application Department Information Operation Department Information Fraud Department Information Quality Department Information Risk Department

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Contents
Chapter 1 ................................................................................................................................ .1
Introduction ....................................................................................................................................................... 1 1.1 Introduction ...................................................................................................................................... 1 1.2 Theoretical Motivation of the study (Drivers) ..................................................................................... 2 1.3 Project Description ........................................................................................................................... 3 1.4 Basis of the study ............................................................................................................................. 3 1.4.1 Detail Basis of the problem........................................................................................................... 3 1.5 Research Validity ............................................................................................................................. 4 1.5.1 Internal Validity .............................................................................................................................. 5 1.5.2 External Validity.............................................................................................................................. 5 1.6 Delimitation ...................................................................................................................................... 6 1.7 Limitation ......................................................................................................................................... 7 1.8 Signifgant of the Study ..................................................................................................................... 7 1.9 Organisation of the Report ............................................................................................................... 7 Chapter 2 .................................................................................................................................................. 9 Literature Review .............................................................................................................................................. 9 2.1 Theoretical Framework of the study .................................................................................................10 2.2 Overview of outsourcing difinations and elements ..............................................................................11 2.2.1 What is Outsourcing: ...................................................................................................................11 2.2.2 History and Types of Outsourcing................................................................................................13 2.3 IT Outsourcing .....................................................................................................................................16 2.3.1 Development of IT outsourcing ....................................................................................................16 2.3.2 Risk of IT outsourcing .................................................................................................................18 2.3.3 What IT functions are currently considered for outsourcing ..........................................................18 2.3.4 What are going to be outsourced .................................................................................................18 2.3.5 Problems being raised in IT outsourcing ......................................................................................19 2.3.6 Advantages of IT Outsourcing .....................................................................................................19 2.3.7 Cost Consideration in IT Outsourcing ..........................................................................................20 2.3.8 Quality Service in IT Outsourcing ................................................................................................21 2.3.9 Management focusing on core business ......................................................................................22 2.3.10 Future of IT outsourcing ..........................................................................................................23 2.4 General Information on Bahrain .......................................................................................................24 2.4.1 General Information ....................................................................................................................24 2.4.2 Telecom Industry in Bahrain ........................................................................................................25 2.4.3 IT Community in Bahrain .............................................................................................................26 2.4.4 IT Outsourcing in Bahrain............................................................................................................32 2.5 Conclusion ......................................................................................................................................32 Chapter 3 ................................................................................................................................................ 33 Research Methodology ................................................................................................................................... 33 3.1 Research and Design ......................................................................................................................34 3.2 Method............................................................................................................................................34 3.2.1 Data Collection ...........................................................................................................................35 3.2.2 Data Collection ...........................................................................................................................37 3.2.3 Data Analysis ..............................................................................................................................38 3.2.4 Data Presentation .......................................................................................................................39 3.3 Conclusion ......................................................................................................................................39 Chapter 4 ................................................................................................................................................ 40 Case Study: Batelco ....................................................................................................................................... 40 4.1 Overview of Batelco ........................................................................................................................41 4.1.1 General Information ....................................................................................................................41 4.1.3 History of Batelco ........................................................................................................................42 4.1.4 Batelcos Products and Services..................................................................................................42 4.2 Overview of IT Departments in Batelco...43 4.2.2 4.2.3 The objectives of the IT department ...............................................................................................47 Policies and procedures ................................................................................................................48

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ITO is implemented partially in Batelco....48 Study Finding..... 53 Discussion and Conclusion.. 58

Chapter 5 ................................................................................................................................................ 59
Summary and Conclusion ............................................................................................................................... 59 5.1 Conclusion .............................................................................................................................................59 5.2 Lesson learned from the study ...............................................................................................................61 5.3 Recommendation ......61

REFERENCE....64 ...65 66

Appendix A : Questionnaires used in the interview.67 Appendix B : The Interviewees in Batelco IT Department... ..68

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Chapter 1 Introduction
This chapter introduces the overall project management aspects. Introduction, Project description, basis of the study, Research validity, Delimitation, Limitation, Significance of the study and Organisation of the report.

1.1 Introduction
Outsourcing is a new technique considered by many organizations in the world in order to remain competitive in the market. Many people think that outsourcing is used only to reduce costs on some parts of business since these parts will be looked after by a third party. The organization then does not need to care about the manpower required and the activities related to them. Outsourcing is more than this perception. It is a business approach that is forced on our market and requires a broad Business to get a deep understanding of its overall objectives. One of the reasons that led me to consider this topic for my senior project is my wide experience and knowledge over this core business philosophy. This came from my view over the implementation of the outsourcing policy in Batelco, the company I am working for. Batelco has been implementing this policy for some non-added profit departments, and from my minor investigation to uncover the differences between the process before achieving the outsourcing I reached to a conclusion that outsourcing is not always perfect and works to the organizations interests. And I will deeply focus on this part in my report whether in my company or other local organizations to know the real reasons of adopting this policy for some businesses and study the decisions makers knowledge over the real concept of the outsourcing. Outsourcing as mentioned above is not the matter of reducing costs but to improve the efficiency of business, and this will result to increase profits and then remaining in the market. I will focus on all steps related to outsourcing in this report from its real definition, history, implementations on the ground and consequences. Furthermore, the service providers or company who will run our business on behalf of us also will be considered, and to look at the criteria they must be having prior to grand our business to them. The local organizations will take the large part

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in this report , specially those who already implementing this policy for some or all of their businesses, and I try to get in touch with the decision makers in each of the organization in my list in order to get as much details as possible on this core aspect of business. One important part in my report will be assigned for possibility of IT outsourcing, as its known that most companies consider the IT department as a back business line, and therefore plays the role of supporting rather that gaining direct profit for the organization. This means that IT is one of nominated departments to be outsourced, which I believe is the simplest function that can be given to a third party to run if all the necessary requirements met between the two agreed companies. IT will take also a large of my research and I try to look for the companies who already outsourced their IT department to know the situations after the outsourcing in comparison with what was before. This is the overall points that I will focus on in my report, and each step will be done with full coordination from my project supervisor (i.e. Dr. Zaitoon) in order to gain her valuable advices which will help to achieve the real objective from this report.

1.2 Theoretical Motivation of the study (Drivers)

The study seeks to explore the advantages and effects of ITO on Bahrain industries specially on the telecommunications fields which is represented by Batelco, the largest telecommunications company in the kingdom as well as in the region. The aim of this research is to identify the drivers and processes that can influence the outsourcing process in the telecommunications industry. Telecommunication industry is very much depended on the computer element to run their business on an effective way in order to stay competitive in the market and to reach to a cost leadership target by acquiring the latest technology from different developed countries. Cost reduction and specialization are important reasons for considering the ITO policy by most companies around the globe. Accordingly, many specialized IT companies have been established recently to meet the high demands on their services. Batelco in the recent years and after several changes in its organizational and functional structures has made a tremendous change in terms of making computerising all their departments and businesses operations. Based on that, Batelco has dealt with.

considered the ITO policy for some of the IT functions which can be readily

Moreover, the ITO business is still in its infancy in the kingdom which means that not all ITs options are available to help the industries to consider its overall facilities.

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1.3 Project Description

The aim of this research is to identify the drivers and processes that can influence the outsourcing process in the telecommunications industry. This study will focus on all aspects and feasibility of applying the outsourcing policy in Batelco. The study will investigate the current status of Information Technology department in Batelco and focuses on the nature of the activities of the IT department. Moreover, we try to uncover which unit is already fully or partially outsourced and which ones are planned or under study to be outsourced in the future. We will also focus on the proposed benefits that are intended to be achieved by Batelco after the outsourcing and which the potential disadvantages and obstacles are expected to occur and encounters during and after outsourcing. Visit to Batelco and conducting personal interviews with the key persons in the Information Technology is the most helpful and ideal way to get all required information related to our study and research. Finally, all the information thereafter will be analyzed based on the furnished questions in the research.

1.4 Basis of the study

Based on the review of relevant literature and the drivers of the outsourcing study, the following items will be considered as sub-objectives for the study: Analyze the application feasibility of all types of Information Technology outsourcing (ITO) Clarify the different techniques and approaches of ITO Highlight the importance of the outsourcing approach to Batelco in terms of cost saving , speed of services and maintaining companys standard service level.

1.4.1 Detail Basis of the problem

1. 2. 3. 4. The study will aim to define different types and approaches of outsourcing. Choosing the best approach that fits the Telecommunication industry in the Kingdom of Bahrain. The costs that will be incurred after considering the ITO. Changes and effects of ITO on the services of Batelco.

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1.5 Research Validity

Validity is the extent to which a question or scale is measuring the concept, attribute or property it says it is. For example, in our study we try to measure an attribute of an Outsourcing and which is related to the Information Technology such as "ITO", how do we know that the question (or questions) used to measure ITO are valid? Usually, this is a result of what we know of the "perceived meaning" of the question from the previous times it has been used. Validity can also be optimised by careful pre-testing of alternative questions designed to measure the same concept. In the academic sphere, validity can take many forms. Construct validity for example refers to the ability of a measure to relate meaningfully to other similar measures used before. In commercial market research, many companies rely on "face validity" - the extent to which the respondent "knows" what is being measured and it seems sensible to them. Validity can be differentiated from Reliability, another property of "good" research. In practice, validity can also refer to the success of the project in retrieving "valid" results. There are many sources of error that can reduce the validity of a project including poor sample selection and resultant bias, simple coding errors, misunderstanding of management and research questions by the researchers and misunderstanding of the investigative questions by the respondents. Other errors include asking "leading questions", unconscious non-verbal prompts on "good answers", vindictive respondents, or inappropriate methodologies used to analyse the raw data. There are two types of study validity: internal (more applicable with experimental research) and external. This section covers external validity. In general, VALIDITY is an indication of how sound the research is. More specifically, validity applies to both the design and the methods of the research. Validity in data collection means that the findings truly represent the phenomenon the researcher is claiming to measure. The researcher Validated the research through approval on the data collected verified by the top-level management in Batelco.

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1.5.1 Internal Validity

A research study or experiment has internal validity if the outcome is a function of the variables that are measured, controlled or manipulated in the study. Internal validity is affected by flaws within the study itself such as not controlling some of the major variables (a design problem), or problems with the research instrument (a data collection problem). "Findings can be said to be internally invalid because they may have been affected by factors other than those thought to have caused them, or because the interpretation of the data by the researcher is not clearly supportable" (Seliger & Shohamy 1989, 95). Here are some factors which affect internal validity: o Subject variability o Size of subject population o Time given for the data collection or experimental treatment o History o Attrition o Maturation o Instrument/task sensitivity

1.5.2 External Validity

External validity involves the extent to which the results of a study can be generalized (applied) beyond the sample. In other words, can you apply what you found in your study to other people (population validity) or settings (ecological validity). External validity is the extent to which you can generalize your findings to a larger group or other contexts. If your research lacks external validity, the findings cannot be applied to contexts other than the one in which you carried out your research. For example, if the subjects are all males from one ethnic group, your findings might not apply to females or other ethnic groups. Or, if you conducted your research in a highly controlled laboratory environment, your findings may not faithfully represent what might happen in the real world.

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"Findings can be said to be externally invalid because [the result] cannot be extended or applied to contexts outside those in which the research took place" (Seliger & Shohamy 1989, 95). Here are seven important factors affect external validity: o Population characteristics (subjects) o Interaction of subject selection and research o Descriptive explicitness of the independent variable o The effect of the research environment o Researcher or experimenter effects o Data collection methodology o The effect of time With verification on the collected data from the top-level of the IT department in Batelco and the justifications that were convinced to the researcher, the external validity then can be said achieved in this research

1.5.2.1 The Assumption 1. The selected interviewee are well familiar with all aspects of the researchers objectives, they make decisions on any policy related to the Information Technology department in Batelco. 2. Close relation between the researcher and the selected sample of the participants will help to make the study easier and time saving.

1.6 DELIMITATION
The study falls within the following parameters: 1. Financial aspect of ITO is considered confidential therefore, it will not be discussed in this study. 2. Not all manager of the IT units are allowed and permitted to disclose the future plans of their units. 3. Analysis on this study is exclusively carried out by the researcher.

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4. Some research questions were not answered by the selected samples due to uncertainty of the accurate answers

1.7 LIMITATION
1. Unfamiliarity of future plans over the ITO policy by most of its managers in the Target Company. 2. 3. Insufficient time given for interview to collect more details for the research. Its assumed that due to the rapid changes in Batelco system to meet the latest market trend in the telecommunications field, they could change their plan regarding the ITO policy accordingly. 4. The number of participants will limit conclusions drawn from these data to the population studied and possibly similar populations. 5. Details reached in this study is exclusively done by the target company.

1.8 Significance of the study

The significance of this study is that its finding will help other companies in the kingdom to follow the footsteps of the target company and motivate them to open many specialized companies to provide quality services with less cost to the mother companies. Research attention is focused on background and intervening variables that may affect the ITO process in the telecommunication company in the kingdom.

1.9 Organization of the Report

In Chapter One the introduction is presented. The chapter includes the background of the study, the theoretical motivation of the study, project description, basis of the study, research validity, delimitation and limitation and significant of the study. In Chapter Two the review of the literature is presented and discusses the theoretical framework underpinning this study.

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Chapter Three documents the important features of the research design methodology which includes identification and criteria of the sample, data collection, instruments used to conduct the research, data analysis procedures and credibility issues. Chapter Four presents a case study on Batelco. It includes the research finding. Chapter Five includes the conclusion and the implication of the finding for the application of the ITO process in Batelco. It also includes the Authors view on the result of the study along with recommendations for future research.

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Chapter 2 Literiture Review

In this chapter we review the relevant literatures that are used to demonstrate the conceptual aspects of this study. The literature used to detail the outsourcing as a concept and all its various types being used or considered for current and future business. There are countless resources that a researcher can use to obtain the required details related to the topic based on the study requirements. However, the most efficient tool that most researchers will find is the Internet and scientific text books. Both sources are easily obtained compared to others. Newsletter, which is one of the one of regular updated news which highlights any development that takes place in the outsourcing field is also utilized as part of the literature. The chapter is divided into three parts as shown in Figure 2.1. The first part is assigned to illustrate the theoretical framework in which this study is achieved in term of the overall outsourcing activities. The second part shows an overview of all elements of outsourcing. The final part focuses on the selected industry as a brief overview on their activities in the kingdom.

Literature Review

Theoretical framework of the Study

Overview of Outsourcing activities and elements

Overview of Bahrains IT Communities and Outsourcing in Bahrain

Figure 2.1 Overview of the Literature Review

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2.1 Theoretical Framework of the study

The study investigates the practical implementation of Information Technology Outsourcing (ITO) in the telecommunication industry which is represented in the Kingdom by Batelco, the selected company for the study, and Voda-phone Bahrain. The study is deeply designed to evaluate the possibility of applying ITO through the selected company or whether there are future plans to consider this new business concept in the organization. Batelco is known for its efforts of developing computerized services along with highly educated staff who could handle any sophisticated systems inside the company. The ITO concept can only be applied to the company because their services are run thoroughly by the advanced systems. The existing conditions that are found within Batelco, help to prove the practical and theoretical ways of implementing ITO in the kingdom. Finally, a framework that links the phases of the entire outsourcing process to strategic planning is synthesized. The framework includes a logical sequence of key activities within the outsourcing features that can be applied in the Kingdom as a whole. The research methodology combines theoretical study with case study and action research in the telecommunications industries. Thereby, the research pursues both academic and industrial application. Outsourcing practices have been gaining importance among many organizations, especially organizations in the telecommunication industry (McIvor 2000). Both businesses, from technological and business process point of views, are fast evolving and definitions or business practices are still open to discussion. Information and communication technology industry and outsourcing businesses are thus often closely related topics. Today one of the most interesting and increasingly growing business area is ITO outsourcing. Outsourcing decisions are often seen as a major determinant of profitability making a significant contribution to the financial health of the company. Though outsourcing is often perceived as a method of decreasing an organization's operating costs it also offers various strategic, technological and economic advantages to the organization which haven't been realized until now (Grover et al., 1996; Lankford and Parsa, 1999).

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2.2 Overview of outsourcing definitions and elements

2.2.1 What is Outsourcing: o In one word, outsourcing is a policy to provide the part or all businesses to the third party to run on behalf of the original organization. This simple definition is not reached until many requirements and factors are achieved. There are many factors that must be considered prior to reaching the final agreement. There are various meaning for outsourcing that can be extracted from different sources. Outsourcing is the process of shifting/delegating/transferring a service/process/function to a third-parties/external service provider which would otherwise be an in-house

function/service/process. (Barthelemy,2001) Outsourcing happens for two types of services. One is ITO or IT Outsourcing that involves an external service provider to manage a specific application, including all related activities like server management, networks administration, and software development/upgrades. The other is BPO or Business Process Outsourcing which involves a third party who manages the entire business process, such as accounting, financing, customer support or human resources. Difference between Outsourcing and Contracting : Outsourcing is different from contracting in the sense that in contracting there is no transfer of control where as in outsourcing there is transfer of control. So to define outsourcing in the right way one has to compare it with contracting and sort out this important difference in the control transfer.(Bobrow,1995) A look at the labour outsourcing statistics would indicate that outsourcing of jobs has increased over the years. But many economists do not consider this as a negative effect of global outsourcing. Instead they are of the opinion that taxes from business process outsourcing will help improve the US economy in the long run. Many estimate that for every job outsourced a significant amount of returns gets back to the US economy. But speculations among the US workers seem to be growing by the minute. Recent outsourcing news like Internal business Machine (IBM) outsourcing IT , Offshore outsourcing, Bank of America outsourcing only add fuel to fire. Most workers demand amendment of bills

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restricting IT offshore outsourcing. Along with outsourcing to India other stories that hit the news are IT outsourcing to China, outsourcing Thailand, outsourcing in Romania and IT offshore outsourcing in Philippines. (Barthelemy, 2003) o The concept of taking internal company functions and paying an outside firm to handle them. Outsourcing is done to save money, improve quality, or free company resources for other activities. Outsourcing was first done in the data-processing industry and has spread to areas, including telemessaging and call centres. Outsourcing is the wave of the future. o Outsourcing must be done carefully, systematically, and with explicit goals. Companies that rush into outsourcing without fully understanding what they hope to gain may find themselves mired in a contractual battle with a chosen vendor or the recipient of services that worsen rather than improve. Sensible reasons to consider outsourcing include both strategic and tactical concerns on both the department and organizational level. Outsourcing might be justifiable for a department with high costs that cannot be reduced or a lack of competency in specific areas. Organizational needs that generate consideration of outsourcing include the ability to compete globally with global services or relief from financial pressures achieved through immediate cost savings. Outsourcing is not an excuse to wash management's hands of a poorly managed, costly, or misunderstood function. Understand the costs of a function and manage it effectively before evaluating its potential for outsourcing. Otherwise, you are probably deciding to outsource for the wrong reason, you may be giving the outsourcing vendor gains you could have reaped, and you may be starting a relationship that is destined to fail ( Fitzgerald, 1994) Organizations should consider (or reconsider) the overall merits of selective outsourcing every three to four years. Revisiting outsourcing may be particularly relevant under changing market conditions or when internal, industry, or technology changes have occurred. .(Grover, 1996) o "A contractual relationship where an external organisation takes responsibility for performing all or part of an agency's Information Technology functions. This can involve a partial or complete transfer of staff and/or resources.( Kilby, 1993). Actually, there is no strict distinction between outsourcing and IT outsourcing. In many cases, people use outsourcing as the alias IT outsourcing. IT outsourcing is always the

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biggest part of outsourcing. According to many IT experts and business analysts, outsourcing became a business concept when IT outsourcing appeared in 1970s. --

2.2.2 History and Types of Outsourcing There was a famous example in IT outsourcing history In 1989 Kodak started the business community by announcing it would farm out a large part of its information systems (IS) activities to three companies: IBM would operate the data centres and local data communications network; Digital Equipment Corporation would manage worldwide telecommunications; and Business Land would provide support for personal computing. Since then, the company has begun to look for alliance partners to develop and maintain some of its applications as well. The impact of the Kodak outsourcing contracts was such that one conference on the subject divided IT outsourcing into two eras -- one pre-Kodak and the other post-Kodak. Since then, the field has expanded significantly, so here is a glimpse of its history, based largely on the semi-annual conference of the Sourcing Interest Group, founded and led by Barry Wiegler since 1991. IT Outsourcing: IT outsourcing essentially began with big bang deals, or meagdeals, which consisted of outsourcing all of a companys data centre operation for up to 10 years. These deals involved selling existing equipment to the outsourcer, transferring all software licenses, moving significant numbers of in-house IS personnel to the outsourcers payroll, negotiating how the outsourcer would help in the transition and which party would carry which costs, establishing desired service levels and ways to measure performance, and specifying every single service to be provided because if it was not in the contract, it would be an added cost. In those early days, the goal of these large data centre contracts were purely financial. Companies wanted to remove the huge IT infrastructure investments from their books and shift those fixed costs to variable costs; and they wanted to save money, generally about 15 percent. The deals were front-loaded, with the outsourcers losing money or breaking even the first year or two, but then becoming profitable after that as the costs of technology dropped, as they leveraged licenses across clients, as they shared expertise across clients, and as they invested in productivity tools that made them more efficient.

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Transitional Outsourcing: In the early 1990s, a new type of computing arose: client-server computing. ITO had been around for a few years, so CIOs with their hands full supporting legacy system looked into using outsourcing to transition to client-server computing. They chose one of two routes. Either they outsourced maintenance of their legacy systems so their staff could concentrate on building new client-server systems or they outsourced client-server development to specialists and kept maintenance in-house. In either case, once the new systems were brought in, the legacy systems they replaced were shut down. Unlike traditional IT outsourcing, however, contracts were generally shorter and did not include operations.

Best of Breed Outsourcing: All through the 1990s, IT departments outsourced different pieces of their work; mainly infrastructure support, as noted in chapter 2 and IS Lite. However, CIOs learned that although selecting one outsourcer with broad capabilities might be easiest to manage, often no single company was best in class in all areas. Thus, selective outsourcing began, where one company handled desktop operations, other data centre operations, and a third network management. Even though the concept was good for getting the best-ofbreed providers, coordination among multiple providers became a nightmare.

Offshore Outsourcing: In the late 1990s, when labor markets were especially tight and IS organizations needed to retrofit their systems to make them Y2K complaint, the use of offshore outsourcers to do application maintenance grew dramatically. Offshore is, of course, relative. For U.S. companies near-shore means outsourcing to Canadian and Mexican companies, whereas offshore means Ireland, India, Philippines and other countries. Companies turn to offshore outsourcing because labor costs are lower and there is ample supply of qualified people.

Shared Services: When ITO began to gain credibility, executives wondered, Can we get the same economies of scale by pulling disparate non-core functions together into one services group? In many cases, they felt they could. So they in sourced to themselves, creating a shared services organisation to handle such functions as IT, Legal, Facilities management, real estate, mail room, finance, and so on. The goal was to improve efficiencies and save money. Generally, companies created a centre of expertise in each one, with all centres reporting to one shared services vice president. IT was not always included, but, it was some as executives believe having IT in shared services gives them the

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ability to leverage the IT underpinnings of the other services. Shared services also centralize the management of outsourced functions because, in many cases, the functions are centralized and then outsourced. Shared services groups have become adept at negotiating and managing contracts and supplier relationships because theses tasks are a main part of their job. Business Process outsourcing: As the ITO field matured, data centre outsourcing, desktop outsourcing, and other standard IT outsourcing areas became so well understood that they became like commodity services, hence profit margins dropped as the number of competitors rose. To move into higher-margin services, ESPs began specializing in specific functional areas, offering to handle specific business processes as well as their IT underpinnings. This business process outsourcing (BPO) is defined as outsourcing all or most of the reengineered process that has large IT components. BPO moves IT-based outsourcing out beyond the IS organization; it involves business units as well, BPO outsourcing is often quite a bit more complex than IT outsourcing because it requires clients to change their business processes to fit with the processes of the service provider. BPO has brought a mindset change to the field. Whereas IT outsourcing moves suppliers and customers closer to one another in terms of working together, the two parties still do not have the same goals. Clients want to save more money, whereas outsourcers want to make more money. In BPO, though, when providers take over an entire process, they can be measured and paid based on outcomes rather than transactions. Outcome-based outsourcing gives the two parties common goals. The client focuses on what needs to be done; the provider focuses on how to do it. E-business Outsourcing: with the arrival of business use of the Internet, outsourcing has been one way that companies can quickly get Websites up and handling business. In large companies, it started with marketing departments outsourcing the development of their corporate Website. Once developed, IS took over operations. However, in dot-coms and Internet-based operations, outsourcing all or most of the IS function has been the preferred mode of operation for several reasons. Even with the dot-coms crash, this is still a legitimate way to mobilize for e-business. Firstly, outsourcing allows a company to move fast. When a firm cannot spend a year developing a system, outsourcing the e-business infrastructure can help it get a site up and running within months perhaps weeks. Secondly, companies can remain flexible, which can mean staying small and focusing only on a few key functions. Generally, IT has not been

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seen as a core differentiating area when tailorable off-the-shelf products and services have been available. Thirdly, outsourcing does not tie up a firms funds in computer and networking equipment, which could become obsolete fairly soon. The company would much rather rent than buy. It also wants to draw on best-ofbreed as well as be able to change course quickly if need be, swapping out one External Service Provider (ESP) and swapping in another, to keep pace with the market. Major differences between e-business outsourcing and traditional IT outsourcing include no need to buy machines from the client, no personnel to move, and no software licenses to transfer in e-business outsourcing. The outsourcing starts from scratch. Some large companies have followed this route as well as get into e-business, for the same reasons. Thus, in 15 years time, IT outsourcing has expanded significantly from outsourcing data operations to outsourcing business processes (Hirschheim, 1993)

2.3 IT OUTSOURCING
2.3.1 Development of IT outsourcing Based on the first definition, outsourcing could have started as early as the first buyer/supplier relationship. Consider what manufacturing companies have been doing with their suppliers for hundreds of years. Given the previous definition, wouldnt a brake assembly company be an outsourcer? In the 1970s, IT outsourcing was used primarily to contract for data center services and facilities management. During the 1980s, IT outsourcing expanded to include the goal of using only external resources and services to develop and manage all IT activities. The primary motivations were cost savings, the desire to avoid or defer high risk capital investments in new technologies, and the need to focus on the core business processes of the organization. Now, the trend is towards fuller partnerships where the outsource supplier becomes a real partner. IT outsourcing can refer to any of the above options, as well as to highly defined contracts those out-task relatively small blocks of service, and to manage services contracts in which an organization monitors service provisions and alters their characteristics in real time. While experts disagree on exactly how many firms have chosen to outsource part or all of their IT functions, few dispute that the phenomenon is growing rapidly. Current estimates

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of the U.S. outsourcing market range from $3 billions to $26 billion , with projected annual growth rates of 15-20% pushing the total to as high as $50 billion by mid decade. If we take the broadest possible definition of outsourcing to include the use of third parties for some or all of a company's IT activities, then virtually all large firms have some outsourcing relationships. In fact, much of the variation in the estimates of IT outsourcing can be traced to differences in the definition of the term itself. The estimates at the low end of the range typically define IT outsourcing as a fairly narrow set of services, principally those involving the transfer of control over fixed assets in the contracted operation of data centres (commonly referred to as facilities management). At the upper end of the scale is the definition of IT outsourcing to include the full range of relationships that a company can have with providers of IT services. This definition includes not only facilities management, but also time sharing, network management, service bureaus (e.g., payroll processing), technology planning, IS management consulting, systems integration, application development, etc. This second, broader definition is the perspective from which this article is written. IT Outsourcing is thought to be a mechanism for acquiring new dialogue, ideas, creativity and potentiality. The supplier may have more freedom to get things done, to do them better and cheaper, and to give more customer satisfaction. Particularly, if information technology is not your company's core competency, you may find yourself spending more to achieve the same value that a dedicated information technology company can provide. In general, it takes more money to achieve the same level of substantive value working from outside your area of core competency. Plus there is the need to train personnel and retrain as staff turnover occurs.

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2.3.2 Risk of IT outsourcing There are so many IT functions which are outsourced, like data centers, mainframes and some systems development work. However outsourcing strategy, innovation and IT architectures; all probably should remain in-house. If a company outsourcing its strategy, innovation and architecture then obviously the vendor has quite a stronghold in terms of that company's IT, and that can be dangerous. If a company does outsource the systems development and architecture it would be wise to form a joint venture a partnership where there are joint risks and rewards. Client companies should remember that vendors are also entering vertical markets, so they could become competitors over time!" (Cash and Konsynski, 1985).

2.3.3 What IT functions are currently considered for outsourcing Maintenance/repair training applications development consulting and reengineering mainframe data centres

2.3.4 What are going to be outsourced client/server networks desktop systems end-user support full IT outsourcing

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2.3.5 Problems being raised in IT outsourcing According to a survey by IT expert Jurgen Selig, there are several managerial problems that companies face due to IT complexity. Firstly, there is the difficulty of recruiting qualified IT workers and then, once you have them, being able to afford them. Secondly, a corporation's inability to cover the rising costs of developing, operating and managing the IT function, and then keeping pace with evolving technology. Finally, a company must find ways to keep its workers motivated, and more specifically in European countries where there are strong unions, hope they won't strike if they become discontent (Oltman ,1990)

2.3.6 Advantages of IT Outsourcing Whenever a company produces something internally that others can buy or produce more efficiently and effectively, it sacrifices competitive advantage(Quinn, 1990) Many companies are choosing to outsource the set-up, operation, and maintenance of their computer systems and networks, accessing the equipment and expertise of a specialist provider. A survey of 162 European companies found that almost 50 per cent outsourced all or part of their information technology (IT) functions. These contracts represented, on average, 24 per cent of IT budgets, and this figure is expected to rise to an even higher percentage by 2000 (Willcocks (1995)) IT costs become more visible as all billable hours must be accounted for outsourced services are utilized as needed, and organizations pay only for what services are actually used. An outsourced IT department can reduce costs by utilizing its extensive knowledge base of various IT specialists, as opposed to an organization maintaining a comprehensive in-house staff Outsourced companies make performance reports and measurements available to their clients. Communications between business functions improve at all levels and ensure that IT resources are not being misused. Outsourced companies can provide 24x7 support at a fraction of the cost. Outsource staff tend to drive planning and budgeting improvements. Service Level Agreements (SLAs) can be established.

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Staffing levels can be adapted quickly to client requirements, thereby avoiding gaps due to attrition, business growth or economic downturns. IT consultants are fully trained on the latest technologies. Retention of technically qualified in-house personnel is more difficult when external job re rapidly changing. Continuous IT support coverage without having to rely on only one or two key people.

Outsourced services use established standards for equipment and software requirements, saving time and money. Outsourced services use approved lists of reliable vendors, which improves the quality of goods and services received.

Client management can concentrate on core competencies and revenue generating activities, while leaving technology management to IT professionals.

Management of non-essential core functions is transferred to the outsourcer. (Fitzgerald and Willcocks, 1994)

2.3.7 Cost Consideration in IT Outsourcing The reasons for outsourcing may vary with the type of activity being outsourced. Trying to reduce cost had always been one of the principal reasons for outsourcing. It is also probably true to say that in the early days of outsourcing, when ancillary services were the main candidates, it was not surprising that cost was the issue. This is because catering, cleaning, security, building maintenance etc. were seen as activities that should be undertaken at least cost. There was no suggestion that these activities were a key to business success. The skills required were generic and available in the market. Cost reduction is more prime incentive for other sectors while high value work is of more concern with IT outsourcing. In IT, the cost move into the variable column from the fixed column thereby lowering the cost base, because IT has high demand for capital expenditure, it allows resources to be released to other perhaps more important activities. International studies show that significant cost savings are achieved by contracting, on average of the order of 20%. It is reported that BPs IT costs have fallen from $350 million to $132 million due to outsourcing (Cross, 1995).

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2.3.8 Quality Service in IT Outsourcing Few would dispute the power of competition to drive prices down: you need only to observe what competition has done for personal computer prices in recent years to acknowledge its force. But the influence of competition on quality is less clear-cut, because quality is typically much harder to measure. Cost advantage is perhaps becoming less significant while the quality of service is more important. This is particularly true when more sensitive areas of work are being transferred, such as IT systems, the principal quality aspects in ITO are:

Access to specialist skills is unavailable to the client. As BP Explorations IT manager put it when talking about virtual reality technology, the most innovative technologists in this field want to work for small leading edge companies, not big oil companies (Cross, 1995).

Access to update the technology The client may not have the capability, in time, money or resources, to keep up to date with changing technology. This is especially true where high technology and high cost equipment is required.

Product or market knowledge The contractor (supplier) may have expert knowledge of a market unknown to the client.

Avoidance of internal controls The contractor may be able to improve on an in-house service if the latter is overly constrained by controls. These may be in terms of use of capital, the setting of wage rates, budgetary systems or headcount numbers. Outsourcing can escape these restraints. As a rule, efficiency gains need not lead to lower quality. Competition on a global scale means that there is less room for inefficient organizations. The search for greater efficiency leads to increased specialization and contracting is a central manifestation of this trend.(Williamson 1991)

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2.3.9 Management focusing on core business A couple of decades ago most organizations that made use of IT functions tended to provide them in-house. By the mid-1980s the contracting of IT functions was advancing rapidly, whereas by the 1990s it became a veritable flood. Forecasts by industry monitors like International Data Corporation (IDC) suggest that the explosive growth of IT contracting will persist into the new millennium. When involved in areas of new and complex technologies, managerial competence may be thin. An American Airlines executive said, We are not in the business to build computer systems to justify outsourcing IT (Lacity, 1993). If put negatively, outsourcing IT was decided so as to eliminate a troublesome function (Lacity, 1994) IT outsourcing free up managerial time from peripheral tasks and allow concentration on the key issues for the core business. There is recognition of the opportunity cost of investing time in unimportant activities. Thus senior managers may hope that it has to spend less on IT matters, while the IT manager may hope that with the service delivery in the hands of the contractor, they can concentrate on the more strategic issues. In the Kodak example, executives have continued to emphasize the fact that their primary goal is not to reduce costs, but to free up time and attention so that the company can focus on its strategic priorities. Similarly, after two years' experience with outsourcing data centre operations and a nationwide network, American Standard downplays the cost savings (though they exceed 25 percent) and emphasizes the value of being able to focus on more important business issues. The contractors have advantages over their clients in numerical, location and temporal flexibility. The contractor can achieve cost reduction through the benefits the can derive from having specialized in a service and the size of the operation. They can be flexible with their number of staff in line with the needs of the clients; staff can be redeployed from one organization to another to meet swings in demand; greater expertise, wider geographic coverage is possible.

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2.3.10 Future of IT outsourcing

2.3.10.1 Motivation for IT outsourcing is changed

Tony Macina, general manager for global service delivery for IBM Global Services, says that one of the most significant developments in the world of outsourcing for 2000 is that the motivation for IT outsourcing is changing. In the early 1990s IT was a mechanism to make business process more efficient. "In the mid 1990s, client/server had not really made good on its promise, and companies were in chaotic situations," he says. "The motivation for outsourcing then was for a partner to provide the service level and cut costs." When technology started moving fast with networks in the1997-1999 time frame, the motivation was acquiring skills and technology fast enough. IT was still seen as supporting a business. "Now the motivation has changed to wanting an IT partner to tell its customers how to use technology to remain competitive. IT is no longer just a business tool but, rather, IT is the business, for it is central to any business strategy he says. Macina thought that the typical outsourcing arrangement today handles a customer's environment or provides service to a customer out of a single location or, perhaps, multiple locations tied together but very centralized. With the advent of the Internet, extranets, business-to-business communication, more and more content is moving out of data centers into networks.
2.3.10.2 IT outsourcing is becoming the de facto strategy for companies

Cofoni, the vice president of CSC, says that those clients increasingly come to request assistance in helping them to understand technology and to determine how best to utilize technology for their businesses. "This is a shift away from traditional IT outsourcing and more toward restructuring parts of their business around e-business," he says (Willcocks,1994)

In fact, there is now a big emphasis on outsourcing processes along with the IT. Cofoni believes the increased interest in business process outsourcing (BPO) is due to the fact that outsourcing has entered a general acceptance phase and is becoming the de facto strategy for companies. "Our clients who have seen us make significant improvements in efficiency and process in the IT area asks us to take a look at doing the same thing in some of their

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administrative processes. Almost one of four clients now requests that we include the possibility of process outsourcing with IT outsourcing. That is a definite shift."
2.3.10.3 The Challenges of Total Outsourcing

Recently there were some interesting facts have been found regarding some of the large outsourcing vendors like EDS, CSC, Andersen and IBM. Large companies like these continue to expand their business by making inroads into vertical markets. Large vendors are buying up communications businesses, software companies, etc. to add to their portfolio. Also, systems houses and hardware vendors are moving into service integration, IT consultancy, knowledge management and business process outsourcing Total outsourcing continue to pose the highest risk of all forms of outsourcing.

2.4 General Information on Bahrain

2.4.1 General Information

The Kingdom of Bahrain is an archipelago of low lying island located in the Persian Gulf of the eastern shore of Saudi Arabia. Frequently called the Pearl of the Arabian Gulf, Bahrain has a history of more than 5,000 years of civilization. From the mists of time to a vibrant present under a stable and prosperous government. While relatively small in population, land area and resources, Bahrain has achieved a high level of social and economic development in a short period. The road network, international airport, telecommunications, public services, medical facilities and universities are all harmonious as being among the best in the world. Although great emphasis is naturally placed on the development of its own citizens, due to its large expatriate population Bahrain has a marvellous multi-national mix of nationalities, all living harmoniously together in a completely unique mix of cultures. Bahrain has emerged as the freest economy in the Arab world, ranking the fifteenth most liberalized economy on global level, according to the 2002 Index of Economic Freedom, published by The Wall Street Journal and the Heritage Foundation. Table 2.1 shows some demographic and economic information over Bahrain

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Table 2.1 Demographic and Economic information or Bahrain

The kingdom possesses most major elements conducive to the rise of an e-Government and a knowledge society. These include a healthy economy, a strong currency pegged to the US dollar, an advanced telecommunications infrastructure, and a government that is undertaking far-reaching political reforms. It also has a young population and a skilled workforce, a relatively high Internet penetration, and a leadership that is strong on the adoption of information and communications technology (ICT) so as to join the New Economy.

2.4.2 Telecom Industry in Bahrain Telecom Industry is run similar to other business industry in the Kingdom in terms of their function, organizations and roles. Since this study focuses on one of company which works in this field, it is worth to define the main roles performed in this sector. Table 2.2 describes the roles of the telecom industry.

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Table .2.2 Main roles in the Telecom industry

2.4.3 IT Community in Bahrain IT in the government is planned and implemented by the Central Informatics Organization (CIO). Traditionally, government of Bahrain has been in the forefront of IT developments as compared to other countries in the region. It was perhaps the first country in the region that introduced computer in the government ( CIO, 2005)

GOVERNMENT DATA NETWORK (GDN) After the introduction of the first computer back in 1978, the Government implemented a data communication network in 1981 for intra ministry communication. The network, called Government Data Network (GDN) connects various Government Ministries and Directorates and enables any government department which is connected to the GDN to access applications and data at any ministry, if authorised. The GDN presently has more than 150 remote sites with thousands of nodes linked to it. Currently, GDN is used to deliver the following applications: Immigration and Passport System, Central Population Registration

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System, Customs and Ports Systems, Traffic and Licensing System, Commercial Registrations System, Labour System, Financial Management Information Systems (FMIS), Human Resources Information System (HoRISon), Ministry of Health Applications, Government Wide Email and Portal, and Government Wide secure Internet access. The government has recently signed up with Batelco and Cisco to upgrade the GDN into the one-gigabit per second Ethernet connection. This will link all major government departments and their various applications on a unified platform that acts as the nervous system of the forthcoming e-Government( CIO, 2005)

CENTRAL POPULATION REGISTER In 1984 Kingdom of Bahrain achieved another milestone by implementing Central Population Register (CPR) Systems which included unique identifiers for People, Land and Establishments in central database that could be shared by all government ministries and establishments via Government Data Network. Thus the Government has started is move towards digital state way back in eighties ( CIO, 2005)

E-GOVERNMENT The Government of Bahrain is focusing on a national effort in leading the region in information technology. A significant part of this effort entails enabling all of its current and future computer systems to function over open networks such as the Internet and deploying them using new technology infrastructures( e-Systems). The transformation to e-Government is supported by an e-Government Strategy that maps out a blueprint for the transformation process and gives a high level direction to all communities of the (State, Regional and Municipal) public authorities. The e-Government strategy undertakes to implement a series of related projects, or program of projects, to improve the effectiveness of systems and technology within the Government of Bahrain. The Strategy is a conventional IT strategy which proposes technical solutions to a defined set of business and information needs. The business of government is too varied and complex, and the range of its dealings and contacts too great for it to be easily and quickly achieved. Instead the strategic direction is set for the way the Bahrain public sector will transform itself by implementing business models which exploit the possibilities of new technology. It is informed by the rapid development of new ways of doing business in the wider economy, in the public sector in other countries and by leading-edge practitioners in the Bahrain public sector. It identifies the respective roles of public sector bodies to deliver the benefits of a common approach. The strategy

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provides a framework for planning and action across the whole public sector, covering Bahrain local government and the executive agencies, non-departmental bodies and Statewide Government departments. In Ministries and Bahrain Government, the devolved administrations are responsible for delivering allotted functions and for the preparation of appropriate IT strategies that is converge with this main strategy. The overall Bahrain e-Government Program consist of an infrastructure phase and an applications phase, each lasting for two years and will focus on five areas of architecture: security, information, applications and management ( CIO, 2005)

E-VOTING Bahrain held the first Arab national referendum online when the Central Informatics Organization devised a solution based on technologies from PostNuke and Symbol and put it to test in February 2001. The e-referendum was successful in terms of its accuracy and time-saving hen polling more than 200,000 voters. This was partly due to the assignment of a unique number (Central Population Registration number) to every Bahraini and resident of Bahrain. The CPR was incorporated into a card with encrypted computerized information about the user in the form of a two-dimensional barcode. The CPR card, which was inspired by a Scandinavian model, allows its holder to swipe it at polling stations for instant identity verification. The card now facilitates all kinds of interaction between the electronic government and the people. The government is also looking into the use of the CPR number in smart cards to allow wider range of electronic use by cardholders ( CIO, 2005)

TELECOMMUNICATIONS Bahrain has a single telecommunications company which is Batelco. Batelco has a monopoly over virtually all telecommunications, data transmission and Internet services in Bahrain. The current level of Batelco services in Bahrain is adequate for the current needs of the country but major improvements must be introduced if Bahrain is to become a Information Society. A world-class telecommunications infrastructure is a key enabler to growth in IT, especially in the era of convergence of telecommunications and information technology. The telecommunications infrastructure in Bahrain is comparable in certain features to global standards, yet there are many aspects that lag global

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standards. The main features of the telecommunications services available in Bahrain include the following: o Total digital network including digital switches and inter-exchange fiber optical links o Digital international circuits to all business and financial centers in the world o Immediate provision of GSM mobile and Internet services, with roaming to over 50 countries o Mobile fax and data service through the GSM network The following are some of the areas where the current telecommunications infrastructure falls short of global standards: Limited bandwidth High prices Limitations of service Monopoly of provider Plans are underway to open the telecommunications market in Bahrain to competition. Government has recently set up a new autonomous body called Telecommunication Authority to regulate the telecom sector. A license to the second provider is expected to be granted by April 2003.This will allow specialized international telecommunications and IT companies to capitalize on a well-established infrastructure that will continue to develop as technology evolves. Furthermore, an e-Commerce Committee and a Telecommunications Committee have been created to ensure that all necessary aspects of these sectors are discussed, examined and implemented where appropriate ( CIO, 2005)

INTERNET, PC AND TELEPHONE PENETRATION o INTERNET PENETRATION Internet penetration in Bahrain is second highest in the Arab World. The number of Internet users in Bahrain is estimated at 195,000 users. According to 2005 Census Results Published by the Directorate of Statistics, Central Informatics Organisation,

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out of total 130,686 households in Bahrain 19191 households are connected with the internet. o PC PENETRATION Personal Computer penetration in Bahrain is the highest percentage-wise in the Arab world. According to the Census 2005 results, out of 130,686 households 65255 households had at least one PC at home. This accounted for a 33.36% of households having at least one PC at home. o MOBILE AND TELEPHONE PENETRATION More than 50% of households and 100% of businesses have a fixed-wire phone connection. The numbers of fixed line telephones are estimated to be 200,000. Mobile phone penetration is estimated as 50% ( CIO, 2005)

BANKING

Internet banking has made real headway in Bahrain, with an adoption rate standing at around 20percent of all Internet users equivalent to the rate in many Western countries. Several Bahraini, or partly Bahraini ,banks, are now offering e-Banking, while most other banks are planning or implementing online services. The Internet banking thrust, spearheaded by a number of national banks such as Ahli United Bank, the Bank of Bahrain and Kuwait (BBK), TAIB Bank, and ABC (a joint Libyan, Kuwaiti, Bahraini venture), has come at the right time. It will support e-Government efforts in establishing transaction channels and gateways so as to enable online payment of taxes, fees and other government charges. With government departments as main potential clients, BBK has just launched an online payment method based on a solution from ACI Worldwides Commerce Gateway. The Ministry of Commerce, Ministry of Traffic and Bahrain University are also considering using this gateway ( CIO, 2005)

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IT PLAYERS A key government policy is to attract major international and regional IT companies to play a bigger role in the Bahrain economy. Government consultants are looking for the best computer systems and e-Solutions in terms of costs and applicability. The general practice for government procurement is to offer tenders for public contracts. All major software and hardware companies have dealings with the government, and among the companies that are winning contracts related to e-Government and IT training of civil servants are Microsoft, IBM, Cisco and Oracle. Microsoft signed an enterprise agreement with the Central Informatics Organization to deploy its products and technologies. The agreement is intended to reduce the overall cost of technology acquisition, software asset management, deployment and ongoing upgrades for government departments. Last year, the Ministry of Labor and Social Affairs signed an agreement with IBM to develop local IT expertise in Bahrain. The agreement will see IBM training and graduating 2000 people in various IT domains such as e-business over a period of five years. IBM will also train and certify 40 Bahraini instructors as specialist IT trainers. The IT related companies, as per the commercial register; in Bahrain are approximately 282 companies. 36% deals with Internet, 38% deal with hardware, 9% deal with training, 9% provide consultancy, 8% deal with software ( CIO, 2005)

E-COMMERCE LAW A draft eCommerce law, which lays down the legal foundation for electronic transactions, has been approved recently by the Government there by providing the legal foundation for e-Commerce. The law follows the advanced law guidelines from North America, European Union, Hong Kong and Singapore and adapts them to the Bahraini environment. It will recognize digital signature and other means of electronic verification and identity authentication. It will also establish the framework for conducting e-Business and other forms of contracting and transacting over the Internet, while preserving contractual rights and obligations. The law, will build confidence and boost e-Commerce in Bahrain, and help speed up the e-Government process. Bahrain must ensure that its legislative system is on par with global standards in order to be able to attract foreign investors. Three areas of the

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Bahraini law must be updated to give foreign investors the confidence needed to encourage investment( CIO, 2005)

2.4.4 IT Outsourcing in Bahrain Bahrain is one of developing countries that getting grown in various business fields due to its outstanding location in the Persian Gulf. Most of the companies in the kingdom run their businesses in a very open business environment. This is possible due to the good and well developed infrastructures which are run by the latest computerized systems. Through random investigations over some companies operating in the country, we found out that most of them are concerned with outsourcing in fields that, in their view, will reduce manpower in their organization. This will result in the end to reduce the expenses and total costs. For instance, the focus on outsourcing is only directed toward the catering and transports services. The main concern that the IT aspect is still not considered widely refers to many reasons. The main one is confidentiality of information which must be covered from disclosure to the third party. Generally speaking, ITO still needs some times to be considered by many organizations and through the case study on Batelco many of these concerns will be uncovered either in pros or cons aspects ( CIO, 2005)

2.5 Conclusion
In this chapter the researcher covered the literature related to the outsourcing locally in Bahrain and overseas. The next chapter will cover the research methodology used by the researcher in this research.

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Chapter 3 Research Methodology

The chapter covers the research design and methods used in this study. There are different methods and tools that researchers consider to achieve to the targeted questions and solutions according to the research and environment of the selected samples. This chapter is divided into two parts as illustrated in the Figure 3.1. part one focuses on the Research Design conducted in this study. Part two explains the population and sample selection processes, the method that the data collected and the techniques used in data analysis.

Research Methodology

Research Design

Research Methods

Data Collection

Data Analysis

Figure 3.1. Structure of Research Methodology

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3.1 Research Design

With rapid technology developments, researchers find that it is much easier to find any information required comparing to ten or twenty years back. In addition to the traditional sources that can be avoided under any changing circumstances, emergence of the internet and multimedia make life much easier to reach to any specific information within moments by navigating through the internet. However, the developments of multi-sources will create another problem too. Choosing the appropriate research approach in order to reach to the desired and required qualitative data can play a helpful role in tackling the theme of this area. Research and analysis was carried out using information from a wide range of sources. Reports from key providers such as Batelco and the Chamber of Commerce in Bahrain. This provided an industry analyst based on the perspectives put forward. According to Friedman(2000), the main source of information for approach to researching are: Press release. It is based on research quoted from the press archives on company Websites and database of commercial vendor. Articles Reference References for researchers appear online and in publications. Quantitative research aggregators. Quantitative information aggregators that publish research done by firms. Universities, non-profit, and government agencies.

3.2 Method
This research uses a qualitative approach (Creswell, 2003) to explore issues related to IT outsourcing in a telecommunication environment. According to Leedy and Ormrod (2001), one purpose qualitative research can serve is to enable a researcher to gain insights about the nature of a particular phenomenon. Since this research does not aim to determine cause and affect relationships or to prescribe a particular course of action, but seeks instead to understand IT outsourcing as it applies to the telecommunication industry, it is well suited to the exploratory methods utilized in qualitative research. The overarching method used in this study is literature review. The purpose of the literature review is to describe theoretical perspectives related to the case at hand (Leedy and Ormrod, 2001). In the case of this particular research, the literature review helps to provide a

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context within which to raise questions for telecommunications executives as they engage in planning IT outsourcing arrangements. 3.2.1 Data Collection Data gathering has taken place through two ways: Unstructured and semi-structured. Both ways were practical for this study because of the natural circumstance in the selected company and the way the questions were set.
3.2.1.1 Unstructured Interviews

If a research has a clear plan, lots of time, will have future opportunities to continue on the topic with the same interviewee, and want to guide the interviewee as little as possible. The occasion is framed as an activity and it is not just conversation. The interviewees are expected to form their own responses according to the applied questions. Stress again, the researcher should have a plan for the interview, that is, a set of topics the researcher wants information about with a notion of the depth wanted to cover in each topic. If the researcher doesnt have a plan then he/her is unlikely to identify useful information.
3.2.1.2 Semi-structured Interviews

It is used when a researcher has limited time and/or will not have future opportunities to follow up your interview you should use semi-structured interviews. Similar to an unstructured interview, the researcher will have a written set of topics and questions and wants to ensure that each ones are covered, and in some cases in a particular order. Further, the researcher should have an interview guide, which specifies not only the questions, but the manner in which the questions should be asked. There is room for latitude, and following other topics, but there is a great deal of management. As Bernard (2001) indicates, the guide is very important, as it not only makes it possible to collect comparable qualitative data from one interview subject to another (something difficult with the earlier methods), it makes possible the use of translators or field workers with much greater reliability the researcher must give very explicit instructions to use other people in your research process.

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The internet search engine Google is also used to find relevant materials. The internet is specifically utilized to find very current information related to Information related to outsourcing and over the telecommunication industry. According to the web site, Search Engine Showdown (2004), Google indexed over 4 billion web pages, and its main strengths are its size, scope and the relevance of its results. Leedy and Ormrod (2001) have noted the importance of using the reference lists of important articles in order to find additional resources related to ones research. Leedy and Ormrod further advise the researcher to obtain any references seen to be cited by three or more authors. This strategy of using previously developed reference lists is utilized to the extent possible in order to find additional articles related to the purpose of this study. Articles found using this method are carefully examined to note any keywords not previously used in the search strategy. New terms are added to keywords used for searching the internet and electronic databases in order to improve the breadth, accuracy and relevance of the items retrieved. Data is selected for inclusion in this study based on a multistage sampling process (Krippendorff, 2004). In the first phase of sampling, broad key words are used to begin to assess the available data and locate relevant texts. Appropriate Library of Congress subject terms are used initially and then, as relevant articles are found, the key words associated with those articles are added to the search terms. The following key words are used in various combinations to search the databases listed above and for internet searches using Google: o o o o o o o Contracting Out Outsourcing 3rd Party IT Telecom IT Services Information Technology Telecommunications Batelco

The key words above are used as part of a relevance sampling (Krippendorff, 2004). According to Krippendorff, relevance sampling is a multistage process in which the the researcher begins with a general idea of what search terms might produce relevant search results and then progressively narrows the search terms until a manageable number of documents has been identified. At this point analysts proceed by actually examining the texts to be analyzed. Following the advice of Leedy and Ormond (2001), as articles are found, the bibliographies are reviewed to identify frequently referenced works related to the purpose of this study. Every effort is made to obtain relevant texts cited by three or more other researchers (Leedy and Ormrod, 2001). Many

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electronic databases are helpful in this regard because they allow the user to easily click a hyperlink which lists all the articles referenced in a particular work and sometimes even include a hyperlink to articles that cite the current article. Articles pertaining to the purpose of this study are collected in a two phase process. In phase one, articles are collected which overview about Batelco Company in terms of its background, history, mission and service provided. Then, defines the existing IT structure in Batelco and describes each section and department that report directly to IT departmental head. In phase two, the details derived through conducting semi-structured and unstructured interview over the outsourcing

activities in the company. 3.2.2 Data Collection Phase One In this phase the selected companys details are described through what is currently the official company website. The information quoted includes the companys history, mission and services provided. Then, the current IT department structure is described in order to know each section or unit and their activities and role within IT. After accomplishing this stage, an arrangement was made with the departmental head in the IT department to conduct an unstructured interview as well as to agree with him to free his staffs that are responsible over each unit to make semi-structured interview over the same topic.

Phase Two In this phase, the actual unstructured and semi-structured interview took place with the IT departmental GM and the Manger of units who report to him sequentially. Interview with the GM of IT department was conducted in person in his office at the companys Headquarters in Hamala. This helped the researcher to direct all the questions concerning the ITO policy to him without involving a third party. However, due to his limited time, not all questions could be answered in the interview but answered later via e-mails. The interview with the Managers of IT units took place via telephone calls in order to clear some specific points related to the ITO activities in their section. The IT sections are located in different areas in the kingdom and most of managers contributed to this study without any reluctance. Notes were taken down by the researcher to capture the participants answers.

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3.2.3

Data Analysis The data collected using the collection process described above is subjected to content analysis (Palmquist, 2004) in order to identify key themes as they relate to the purpose of this study. The specific methodology is conceptual analysis as described by Palmquist (2004). Conceptual analysis entails a systematic process of identifying text related to research questions and then coding the text in such a way that key categories and themes can be drawn from the selected texts in order to address the research question (2001). In keeping with the qualitative framework used in this study (Leedy and Ormrod, 2001), the conceptual analysis is not meant to support a hypothesis, but is instead meant to provide information regarding themes related to the purpose of this study. Analysis Phase One: Information involved the IT structure in Batelco is examined with a conceptual analysis process, in order to identify and describe trends related to IT activities in the company. In phase two, specific questions were asked by the researcher to achieve a required objective drawn for this study. According to Palmquist (2004) in order to perform a conceptual analysis it is necessary to identify specific research questions and then select a sample of text to be analyzed. The research questions addressed at this stage of the analysis are: o What are the reasons for outsourcing? o Which activities/tasks are being outsourced? o What types of outsourcing? Onshore/offshore/nearshore? o Are there any policies/regulations related to outsourcing? o How do they select outsourcing vendors? o Is outsourcing successful? o What are their critical success factors?

The benefits identified in the first phase of data analysis are then used to guide a conceptual analysis of literature selected for review in the second phase of analysis. Since the anticipated benefits will figure prominently in the decision of whether or not to outsource IT services it is important to examine the role these benefits have played in earlier outsourcing efforts.

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3.2.4 Data Presentation The conceptual analysis of the two sets described above results in a rich data set that includes key terms and concepts related to ITO along with contextual information regarding the experience of other organizations that have outsourced IT. The purpose of this study is to provide a broader context within which to engage in evaluation and planning efforts related to IT outsourcing, and whether the businesses in the kingdom are ready to consider it now or in the future. The discussion helps to achieve this purpose by comparing characteristics of ITO activities in Batelco with characteristics identified from a content analysis of surveys of other organizations that have outsourced IT.

3.3 Conclusion
Since this is qualitative research, the presentation does not attempt to assign probabilities of success or failure in ITO based on the experience of the other organizations studied. The hope is that identifying key relationships will help telecommunications executives ask intelligent questions and evaluate IT outsourcing in a more objective and thoughtful manner than might otherwise occur. While this is not a substitute for more rigorous research which examines IT outsourcing specifically within a telecommunications environment, it provides a solid conceptual foundation upon which to design such a study, and offers the necessary framework upon which to draw lessons learned by other industries in order to increase the likelihood of making good decisions related to IT outsourcing.

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Chapter 4 Case Study: Batelco

This chapter presents the case study covered by the researcher on the selected company, Bahrain Telecommunication Company (Batelco). All the analysis results achieved and the questions that were formed by the researcher and answered by the interviewee will be thoroughly discussed. The chapter is designed to investigate all activities related to ITO currently taking place in Batelco and to look for future trends over this policy in the company. The chapter is divided into three parts as shown in figure 4.1. Part one presents an overview of Batelco and their entire services in the kingdom. Part two describes the IT department in the selected company in terms of its organizational structure, roles and activities. Part three to concentrates on the results of the analysis based on the list of questions prepared by the researcher.

Study Finding

Overview of Batelco

Overview of IT department in Batelco

Interview Analysis

Figure 4.1 Overview of Study Finding

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4.1 Overview of Batelco

4.1.1 General Information Batelco (Bahrain Telecommunications Company) was established in 1981 as a Bahraini shareholding company. Over the years, Batelco has enjoyed a fine reputation for providing worldclass telecommunications and information services to the people of Bahrain and the region. Batelco shareholders include the Government of Bahrain, quasi-government institutions, leading financial and commercial organizations, and Bahraini and GCC citizens. Between them, they own 80 per cent of the shares with Cable and Wireless (U.K.) owning the remaining 20 per cent. The company enjoys a strong association with Cable and Wireless who provide appropriate support, advice and assistance as requested by Batelco. Their activities are not limited to the local market but also overseas through participation in key investment initiatives for developing regional and international telecommunications between GCC states and other countries. Batelco continuously seek to develop new growth opportunities in the exciting field of multimedia and telecommunications. Today, they have joint ventures in Bahrain, Kuwait, Saudi Arabia, Jordan and Egypt for the provision of Internet access and data communications services Excellence in service delivery is a constant Endeavour at Batelco. Batelcos aim is to meet the needs of customers on time, every time, with professionalism and efficiency. Their approach to service delivery was rewarded in October 1996 when Batelco became the first telecommunications company in the Middle East to receive the ISO9002 Certificate of Quality from the British Standards Institute. Since then, they have taken active steps to extend the scope of this award to all its activities. Batelco continues to build on its achievements and aim towards total excellence by constantly improving each area of operations. 4.1.2 History Of Batelco Batelco roots trail as far back as 1864 when the Indo-European undersea telegraph cable was installed, signalling the beginning of Bahrains telecommunications industry.

The new company operated as the Imperial and International Communications Company until another arm was created and came to be known as the Wireless Telegraph Company.

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Together, the two companies built up a range of international and national radio, telephony and telex services. On 1 July 1981, a new company came into being. Amiri Decree No. 4 established the terms under which the Bahrain Telecommunications Company would assume control of the

telecommunications network in Bahrain, as a Bahraini shareholding company. Backed by the visionary support of the Bahrain Government, Batelco has since expanded and developed into a leading regional player, delivering state-of-the-art products and services to businesses and consumers in Bahrain, Saudi Arabia, Jordan, Egypt and Kuwait. 4.1.3 Batelcos Vision To be familiar, trustworthy, confident and inspirational to our shareholders, customers, colleagues, suppliers, partners and the people of the communities we serve. 4.1.4 Batelcos Products and Services Batelco offers a variety of services and products for customers inside the country and overseas. And most of the companys services and products are depended on the latest technology being run in the company. Moreover, most of Batelcos senior staff have a remote access (Telecommuting ) to a system that run in their department in order to be with customers throughout the day to resolve their problem related to any service which is out of order. IT department plays a very crucial role to ensure that all system installed in staffs premises are run smoothly and resolve any emergency problem at any time of the day through the help desk department which is in service 24 hours a day. Batelco has made life very easy for its customers in terms of acquiring the companys products and services through the net and without the need to attend to the companys outlets. Also, the customers can pay bills remotely by accessing the companys website and processing the bill transactions. The following Figure 4.2 shows the companys services and products which are dividing to two segments. (I.e. Business and Residential) and each segment is divided further based on the type of customer. For example, in Business there are four areas for each group: Small and Medium Enterprise Corporate Government Business Solution

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Products Mobile Services Mobile Office Telephony Services Broadband E-Applications ISDN PABX Data Services

Services Value time Packages View/Pay bill Contact info Business Advisory Center Bahrain Investor Center Batelco Business Solutions

Table 4.2 Batelcos products and service

4.2 Overview of IT Department in Batelco

The IT department is like the backbone for Batelco due to the dependencies of all the companys department on their services and capability. The research focuses on the visibility of Information Technology Outsourcing (ITO) in Batelco, which motivated the researcher to look at the IT structure in the company and explains on the role of each unit and section under the IT umbrella. This therefore helps to read closely the practical aspect of applying the ITO concept in the company. By detailing each IT section in the company, the research therefore is able to advise which one should be considered for outsourcing and which sections should be served in-house.

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IG - 64000
Information Systems & Business Assurance Saleh Tarradah

Executive Secretary Mona F'naish

IGSC

IA - 64100
Snr. Mngr. Appl. Dev. & Sup.

IX1 - 64210
Manager Ops. & H.D

IX2 - 64220
Manager Data Systems

IX4 - 64230
Manager Desktop Support

IR - 64400
Manager Business Risk

IQ - 64300
Quality & Business Process

IF - 64500
Mngr. Fraud Management

Manager IP Billing

IA5 - 64

IA1

IR2 - 64410
Manager Safety

IA2 - 64110
Manager Billing Mobile

IR3
Security Information Systems

IA7 - 64
Mngr. Knowledge Systems

IA3 - 64120
IS Manager CRM

Mngr. Billing Fixed

IA8 -

IA4 - 63630
ERP, SAP & HRMS

Figure 4.3 IT Department structure in Batelco

4.2.1 Roles for each IT section in Batelco. IG - General Manager Information Systems and Business Assurance. Contributes to general business planning regarding technology and systems required to maintain company operations and competitiveness. Recognizes new developments in information systems technology, and anticipates organizational modifications. Establishes long-term needs for information systems, and plans strategy for developing systems and acquiring hardware to meet application needs. Ensures confidentiality and reliability of corporate data, proprietary information, and intellectual property. Functions as top level contact to assist end users in determining IS requirements and solutions. Reports to the Chief Operating Officer.

IA - Business Applications and Is Planning Oversees applications programming and analysis including developing, installing, and maintaining applications programs. Supervises the work of programmers. Conducts feasibility studies and assists in determining future hardware and software requirements.

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The section is also responsible to maintain all applications and ensure the postimplementation services, and assigns a front-line support team for each application throughout its running in the company. Oversees systems analysis and programming activities to establish and implement new or upgraded systems and programs. Manages time, cost, and feasibility studies, assists in forecasting hardware and software needs, and works with other information systems areas to develop policies and procedures and to resolve technical problems.

IX - Is Operations and Helpdesk Manages all activities related to the operations and maintenance of mainframe computer and peripheral equipment. Analyzes usage patterns and establishes schedules and procedures for maximum utilization of the system. Coordinates activities with other IS areas and other departments. Normally reports to the Information Systems Manager. Responds to inquiries and requests for assistance with the organization's computer systems or PC's. Identifies problems, troubleshoots and provides advice to assist users. Coordinates with other IS areas to resolve problems if necessary. May operate in a mainframe and/or microcomputer environment. Installs PC's and related hardware. Investigates hardware problems and performs minor system hardware and communication connection repairs. Performs basic diagnostic testing. Major problems or repairs are directed to outside vendors. This is an intermediate level position usually requiring comprehensive knowledge of PC hardware installation, repair, testing, and troubleshooting. Installs, configures, and maintains the organization's LAN server and workstations. Acts as primary organizational interface with vendor and provides internal analysis and support. Manages performance of a multiple hardware and software platform interface at the most complex level.

IX2- Database Systems Oversees the technical design, development and maintenance of databases and master files on large complex projects which use operating system such as Oracle and UNIX. Maintains database dictionaries, ensures database performance and resolves problems. Coordinates

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with other IS departments to ensure implementation and monitoring of databases. Analyzes and projects long-range space requirements. May supervise Database Analysts. Designs, implements, and maintains moderately complex databases. Maintains database dictionaries and ensures system integration. Coordinates with Database Administrators on complex projects. Manages the design and development of IS databases and related master files. Oversees contributions by Systems, Operations, and Technical Support to develop and improve databases and master files. Guarantees the performance integrity and quality of databases. Controls system capacity for existing requirements and plans for future needs. Sometimes will supervise or mentor Database Analysts.

IX4- Desktop/server and Messaging Manages the official email system in Batelco (i.e. Lotus Notes). Manages all PCs which work on Operating System of windows, and maintain all its activities. Update and maintain all users desktops and decide which icons should be provided to each one according to the staffs role in Batelco. Utilizes desktop, and spreadsheet software to create and print a variety of materials. Plans and devises layout of text, photos or illustrations for newsletters, flyers, brochures, posters, manuals, overheads, or other advertising or presentation materials.

IR - Business Risk and Insurance Their role is to introduce a structured approach to Risk Management at strategic level and assist in the incorporation into the core processes. Risk Management nowadays in Batelco is an integral part of successful organizations of all types and sizes. It is a systematic process to identify, analyse, control and treat risks that may impact on an organisation's or individual's objectives. They use IT in terms of assuring well-protected Batelcos assets and zero defective. Without proper Risk Management, organization's resources could diminish more quickly. One reason for this growing concern is the complexity of business relationships in this era of rapid change and demanding legal contracts.

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IF - Revenue Assurance & Fraud Management Examine the overall subject of Telecommunication Fraud Management, identify the many different areas and aspects of assurance, and review some of the industry best practices in fraud prevention. Effective fraud solutions are considered by them and it must accommodate such rapidly changing behaviour and provide continuous and complete coverage for growing carriersand during network spikes that can double or triple the amount of expected traffic. All staff in the section have access on all active system in the company in order to trace and expedite all information that are subjected to fraud.

IQ - Business Processes Support Their role for business processes is to map all Batelco Business Processes and create Performance `Measures for Business Processes. To transform Batelco from a functions to a processes based, customer focused, quality organization.

4.2.2

The objectives of the IT department Malcolm Baldrige Business Excellence Self-Assessment ISO 9000 Quality System Implementation and Maintenance Business Process Management Environmental Assessment Voice of Customer

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4.2.3

Policies and procedures

Each section and unit has its own objectives and procedures. The Manager in each unit sets the objective for his/her section in the beginning of each fiscal year and this is done in association with other sister units which report to the General Manager of IT department. The procedure of each unit should have common factors with IT units since they work less than one field. All units have a regular meeting to exchange their issues and the meeting in most of times is chaired by General Manager of IT (i.e. Saleh Taradah IG). In most of their meeting, as said by the GM, the idea of IT Outsourcing is discussed between all units managers and they always benchmark their services with counter-companies in the region in order to study the advantages and disadvantages of this policy.

4.3 ITO is implemented partially in Batelco

Batelco is implementing the ITO policy in some certain areas in the IT department. The company depends in outsourcing in the areas of the System Development and IS operations. 4.3.1 The System Developments Unit ( IA) IT development outsourcing isn't much different than any other kind of outsourcing. When the company faces an insistent need to start a new IT development project, they have to weigh their current in-house capacity first. If their experience and budget allow them to cope with the task without resorting to any outside expertise, they should probably take full advantage of their potential and do it yourself. However, if there's danger that they'll bite off more than they can chew, it's about time to consider the advantages and disadvantages of outsourcing. Outsourcing IT development is a most effective way to stretch the companys budget. When managers plan IT development outsourcing, they usually make it their aim to cut down the company's expenditures by 30%. This is a figure that speaks for itself. Of course, there's always the risk of failure, but if they outsource prudently, they'll afford to implement projects of such a scale that would be impossible for they to reach on their own. One of the advantages pointes that Batelco gained from outsourcing its IT development outsource is concentration on their core activities. They won't be able to completely forget

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all about the project or its part that they have chosen to outsource as soon as they sign a contract with an outsource service provider, but they won't have to get scattered, either.

Dealing with an experienced and highly qualified vendor, the company will be able to gain valuable expertise in support of their IT capacity. Almost any vendor will surely try to set a dependency trap for them, but it doesn't mean the company has to acquire the dependency pattern instead of learning everything they can derive from the vendor's expertise.

Batelco usually contracts out its services to some professional bodies either internally or overseas in order to develop new systems launched inside the company. Many projects for setting different Systems have been conducted in recent years through the outsourcing companies. However, they are the major systems in recent years launched in the company and all of them have been carried out by the outsourcing companies. In the following lines, there will be some details on the roles of each of the outsourcing companies contacted with to develop these systems in the company.

ERP system - SAP

The system is designed for Financial and Logistics departments in order to provide more business efficiency for new Batelco trend. The project was outsourced to the company wellknown for its quality services Atos. It is one of the best world-wide companies in Information Technology. The main purpose of Batelcos Financial and Logistics systems is to provide the underlying support for Batelcos day-to-day financial accounting, procurement, administrative and resource management functions. This Program aims to identify and implement an integrated information system solution to replace Batelcos existing suite of Finance and Logistics applications that have failed to provide the desired level of functionality and management information. Batelcos corporate objective is to improve efficiency, whilst delivering collateral benefits in support of the other corporate objectives. These include: o Focus on greater Customer satisfaction/Customer Mindset o Revenue Growth and Protection of existing revenue sources/markets o Enhanced Employee Satisfaction

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The primary objective of this project is to provide a fully integrated Financial and Logistics solution to enable Batelco to improve, support the business more efficiently & effectively and to produce timely and accurate information relevant to the competitive business environment. This will be achieved by replacing selected existing Chess applications with a fully integrated SAP R/3 package. The outsourcing role in this project was to carry out the system development methodology through the life cycle process. Figure 4.5 shows the methodology followed by the outsourcing company in developing the ERP system in Batelco

Figure 4.5 Methodology followed by the outsourcing company in developing the ERP system in Batelco Phase One: Initial Project Planning Project Procedures Training Project Kickoff Technical Requirements Quality Check

Phase Two: Project Management Organizational Change Management Training Develop System Environment Organizational Structure Definition Business Process Definition Quality Check

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Project Management Organizational Change Management Training Baseline Configuration and Confirmation System Management Final Configuration and Confirmation Develop Programs, Interfaces etc. Final Integration Test Quality Check

Phase Four Project Management Training System Management Detailed Project Planning Cutover Quality Check

Phase Five Project Support Project End Customer Relation Management CRM

The Company has contracted out this project with Oracle in order to carry out the system development life cycle. The CRM system has been launched in Batelco in order to integrate all the front line departments in one system for more customer services efficiency CRM (Customer Relationship Management) in Batelco is to make a strategy built around the concept of being customer-centric. The main goals are to optimize revenue through improved customer satisfaction via improved interactions at each customer touch point. This can be accomplished by a better understanding of customers, based on their purchasing patterns and demographics, and better information empowerment at all customer touch points, whether with employees or other media interfaces. The role of outsourcing (i.e. Oracle) was to develop the system and hand it over in a readiness status to Batelco. Moreover, the outsourcing company was responsible by developing cross-

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functional integration, supported by data warehousing and shared roles and responsibilities, organizations began to create a customized view of the customer. Support issues, Web hits, sales calls and marketing inquiries started building a deeper understanding of each customer and allowed aggressive organizations to adapt their tactics to fit individual needs. The System Development Methodology used by the outsourcing company was the same as it was followed with the SAP system.

Billing System Fixed and Mobile lines

This project was conducted to fix a new billing system for both fixed and mobile telephone lines. This system is launched tracks customer usage of services, and calculates the impact on a customer's account, based on the price of the services. Billing systems have come to include no core functionality such as customer management, integration with payment gateways, and statistical analysis. Company has contracted out with TBMS company to take the responsibility of its development. The outsourcing company applied its methodology in the development phases and on the same way that is usually applied in all system development life cycle in Batelco. 4.3.2 IS Operation Hard desk ( IX1) Another part in the current outsourcing process in Batelco is taking place for computer Hardware fixed for the staff and after the sale services. Batelco has made contract with two computer companies in the kingdom for fixing all kind of computer hardware for the staff and another company for taking the responsibility of the Hardware maintenance. MANTAQ is a company which provides the company with latest PCs and its accessories, and they responsible to fix each PC in each particular office as per the agreement made with Batelco. Additionally, they responsible to install the software used by all Batelcos staff and ensures that the fixed PC is working probably before they leave the office. For the Hardware services and maintenance, the company made a long-term contract for regular maintenance over all PCs fixed on the staff desks. Batelco has a contract with HI TECH company to perform this job on a regular bases and emergency cases. The outsourcing company is also responsible to update any new software agreed to install for the staff.

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Over the discussion with IS Operation manger, the main factor that motives Batelco to adopt it are to be able to snap together the fundamental building blocks of nature easily and inexpensively. Also, the success of that relation is depended on how well the company defines and communicates their technology needs to potential Outsourcing Computer Hardware contractors, and the quality of the relationship they develop with the outsourcer. The goal of hardware outsourcing in Batelco is to bring in experts to serve their technology needs more efficiently than they can on their own, freeing the company the company to dedicate more of their resources to the organizations mission.

Generally, it is cheaper to order computers directly from a hardware vendor, and have the on-site staff set up the computers when they arrive. However, there are advantages to using local vendors for this service, such as quick and reliable on-site support, more personalization, and the added support if this vendor also handles the companys hardware.

4.4 Study Finding

Reference to the questions listed in Appendix (A) 4.4.1 Answers to Question 1: How many times has your organization outsource IT tasks / projects? Many times Batelco has outsourced part of its IT services for some important tasks like system developments projects and long-term hardware maintenance. The company used the outsourcing methods in the field that encounters lack of experience. Projects of developing Enterprise Resource Systems (ERP) like SAP and CRM were the most important aspects for outsourcing in Batelco. Computer Hardware is another aspect for outsourcing in Batelco. In the interviewees point of view, outsourcing Computer Hardware is able to snap together the fundamental building blocks of nature easily, inexpensively. Success in outsourcing depends on how well the company defines and communicates their technology need to the contractors, and the quality of the relationship is developed with the outsourcer. The goal of infrastructure outsourcing is to bring in experts to serve Batelcos technology needs more efficiently than if they can on their own, freeing them to dedicate more of their resources to the companys organization's mission.

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4.4.2 Answers to Question 2: What is the organizational policy regarding IT outsourcing? In general, Batelco outsource areas and part of the work to vendors. Except for Kwickserve payment system, all other systems are either in-sourced or partially outsourced. E.g. SAP system or IP Billing, or HRMS systems, they do all the support and development work by their teams, but when they need to do a major upgrade or complex development, then they bring the owner or an integrator to do it, as they do not have the expertise or own the source code of the packaged system to do it.

4.4.3 Answers to Question 3: What are the reasons for IT outsourcing ? The following are the reasons for IT outsourcing in Batelco Lack of staff with required expertise The system development projects need expert people to work throughout the development life cycle, especially for Enterprise Resource Planning Systems (ERP). The contractors who were dealt with had enough experiences in those areas and vice versa with the local companies. Too many projects/tasks to handle In the last four years, Batelco developed many ERP systems in addition to some Transactional Process Systems (TPS). Based on that development in the companys business, they are forced to depend on some expertise companies to handle their projects with full guarantees. To enable staff to concentrate on other more challenging tasks-To avoid involving their staff to work in more than one areas which could affect on their performance on their core jobs. To save time To complete the projects according to the scheduled times. Cheaper to outsource The company found that outsourcing is cheaper than carrying out the projects by their resources

4.4.4 Answers to Question 4: Has IT outsourcing been successful in your organization? Batelco found that IT outsourcing was successful in their organization. This criteria is based on the systems performance that was developed by the outsourcing companies.

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4.4.5 Answers to Question 5: What type of jobs/tasks are being outsourced? The types of jobs/tasks are being outsourced are system developments and System Maintenance. The reasons for selecting these two tasks were justified by the company in the first question.

4.4.6 Answers to Question 6: Whom do you outsource to? Batelco usually outsourced its partial IT functions to foreign companies for system developments. However, System Maintenance is handled by the local companies.

4.4.7 Answers to Question 7: How much have been spent on IT outsourcing so far? Spending on IT outsourcing is though a part of financial aspect which is strictly considered confidential and was not announced by the interviewee. Questions regarding money are difficult to obtain from persons in charges in some companies. The answers either are positive or negative is reluctance to disclose in order to avoid the competitors to gain from the announced figures for future planning.

4.4.8 Answers to Question 8: How many tasks/projects have been outsourced so far? Batelco was able to outsourced at least seven projects in 2005 in the system development field. Most of the tasks were concentrated in developing the ERP systems. In the operation side, Batelco renewed the contract with local companies for supplying and maintenance the companys computer hardware (Details of the nature of this task is explained below).

4.4.9 Answers to Question 9: How did you select or appoint an outsourcing vendor? The policy of selecting the outsourcing vendors in Batelco is applied based on the following sequence criteria: Based on organizational policies: Refer to answer two. Name and reputation of the vendor Track record of the vendor

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4.4.10 Answers to Question 10: Are you satisfied with the output from the outsourcing vendor? There was not a fixed answer on the outsourcing vendors performance. The interviewee expressed that some times they feel satisfied from their output and sometimes the opposite. An outsourcing contract is the only way to ensure an equitable balance of power. Issues such as service level measures, provisions for business growth and penalties for non-compliance are stipulated in advance in Batelco. They have also stringent contract negotiation strategies to ensure that outsourcing expectations are realised.

4.4.11 Answers to Question 11: Are you satisfied with the service given? The same answer as in the previous question received from the interviewees regarding the satisfaction with the services given by the outsourcing vendors.

4.4.12 Answers to Question 12: Will you recommend/advice other organization to outsource? Yes/No Why? The following criteria are to be considered, as recommended by Batelcos IT managers, as the outsourcing strategy for companies who wants to adopt this policy for their IT functions:

Issues Personnel Economic

Advantages knowledge and expertise; Alternative to staff increases for short term projects Cost Savings; Increased return on Equity

Control

Share the risk; Elimination/reduction of the weakness of the IT department Outsourcing of the non-strategic activities; Focuses attention on the strategic aspects Eliminates/minimizes weakness in the MIS department (through outsourcing); Procedurally oriented organizations can derive substantial advantages

Data/segment

Organizational

Table 4.3 Recommended criteria to be followed for Outsourcing

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4.4.13 Answers to Question 13: What is the positive and negative impact of IT outsourcing to your organization from the following perspectives? Table 4.4 illustrated the positive and negative impact of IT outsourcing to Batelco from the following perspectives:

Positive

Negative

Organization as a whole
Helps if no expertise is a Cost is usually more available

Business Process
Not relevant Difficult to manage

Strategic
It is good to have a mixture. Multi-sourcing (in-source and out source, where it makes a good business case)

Employees/end users
Gives you the flexibility of The cost is usually higher. having resources, whenever you need them. The company is not under the mercy of an employee who knows the job Table 4.4 Shows the positive and negative impact of IT outsourcing

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4.5 Discussion and Conclusion

Batelco ,in general, is outsourcing some of its IT functions to overcome the expertise weakneses that the company encounters. The organization cannot be expected to have technically literate staff in all the relevant areas and in particular the IT function. Therefore, as the scope of information technology expands and continuous new ERP software occurs, it is difficult for them to have required skilled in the area that are currently subjected to outsourcing. Although the company is not fully satisfied from some outsourcing vendors, most of them, however, offer broad range of skills and technical knowledge to Batelco. In order for Batelco to eliminate the dissatisfaction factor as expressed by the interviewee, the company needs a careful study of the various issues involved in it. The key to a successful outsourcing arrangement is the relationship between Batelco and the outsourcing vendors. The relationships should be built to achieve the fully partnership and mutual benefits trends. Outsourcing involves complex contractual relationships that have to be developed. The next chapter will conclude this research, problem faced during the study, lesson learned from the study and presents some recommendations from the researchers prospective.

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Chapter 5 Summary and Conclusion

This chapter reviews the study results in the previous chapter. It includes on the study conclusion, problem faced during the study, lesson learned from the study, and future recommendation.

5.1 Conclusion
Outsourcing is not for the faint of heart, and does not fit most situations. However, in those cases where outsourcing fits, with proper supervision and careful attention to expectations and details, it can provide a significant business advantage. The aim of this analysis was to gain an understanding of the prevalence of Telecommunication IT outsourcing and also to identify the types of functions in IT department in Batelco being outsourced, the benefits Telecommunications hoped to achieve and any risks that might be involved in outsourcing. The analysis revealed that a number of systems have outsourced by Batelco and this advanced step could play a benchmarking point for others to consider the same in future. The analysis also showed that IT Hardware in Batelco is also being outsourced and that there are many anticipated benefits from outsourcing IT. Although the literature did describe some of the instability involved with outsourcing, the literature appeared heavily weighted towards discussing the potential benefits. The analysis also revealed that Telecommunications IT outsourcing in Bahrain is a relatively new phenomenon and there is little empirical research which analyzes the long-term impact of outsourcing in this environment. In order to provide a more balanced context within which to view Telecommunication IT outsourcing, the researcher collected and analyzed research conducted on the organization that have outsourced its partial IT services recently. A second goal was to synthesize key findings from the research which might be useful to the company executives as they consider IT outsourcing are most likely to result from IT outsourcing are: a) Access to best practices; b) Improved reliability and stability of systems c) bring more expert people to look after the IT system. Most of the other

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benefits identified however, seem far from guaranteed. While many examples of successful outsourcing relationships exist (Kern & Willcocks, 2001), there are even more examples of failed relationships (Kern & Willcocks, 2001). Outsourcing almost always involves a number of hidden costs and if organizations do not carefully consider these costs and seek ways to minimize them, these costs can wipe out any anticipated cost savings (Barthelemy, 2001). There is also some indication that the area that Batelco uses outsourcing especially in new systems development could increase the costs. Also, IS Operation in the Hardware side involved with managing the close relationship with the vendors in order to ensure the correct and quality services are provided? This study is not meant to prove that outsourcing IT services is the right or the wrong -thing for Telecommunication and Batelco in particular to do. The intention is to show that there is an organization in the kingdom has already tried this new trend for the sake of benefits and could be taken as a benchmarking point for other companies to assess the results of outsourcing for correct and precise future decisions. The organizations, which will think in outsourcing, that have been successful seem to share some common characteristics including: Only outsourcing functions that they understand and for which they can set clear requirements. Negotiating detailed contracts which provide flexibility for changes in technology or business environment. Carefully choosing a vendor that will be able to deliver the promised services.

Most importantly, the research shows that outsourcing should not be viewed as a way to get rid of a problem. Outsourcing may free up executive staff from having to manage the day to day operations of IT or to bring some expert and experience bodies to perform some jobs that are lack internally such in the Batelco case, but new management responsibilities related to the outsourcing relationship cannot be neglected or else the hoped for benefits will be less likely to materialize. In other words, the research is shown, outsourcing is a tool. If used wisely it can be a powerful way to reduce costs and improve performance. And, if not, then hidden costs and declining service quality could add to the many problems. For example, if the vendor who is contracted with does not perform the assigned job related to a system development then both tangible & intangible costs will be unbearable on Batelco. Outsourcing is not a decision to be made lightly; this study should give the executives the perspective they need to fully consider their options in regards to IT outsourcing.

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5.2 Lesson learned from the study

The study has given a countless information to the researcher over the the topic used in this research. Carrying out such a study will give and widening the idea and philosophy behind using the ITO in Batelco or other organizations in the kingdom in future. It is a good experience to work out with such a project individually, which let a new graduate to use his/her skills that definitely helps in handling bigger projects in future. As the researcher of this study, Im fully confident on my self that I have been able to work very hard on such a job that could be benefit for other organization which wants to boost their job quality and reduce costs.

5.3 Recommendation
Many organisations think while cost savings were important, the real value in outsourcing resides in its ability to quickly improve performance. The theory is that by providing access to experienced staff and state of the art technologies, outsourcing vendors can help implement sophisticated systems that the companies need. The idea that a third party will be able to come in and solve the companys information problems is no doubt attractive to harried the organisation executives, but the literature from earlier outsourcing experiences makes clear that this may be an unrealistic expectation. As Kern & Willcocks (2001) have noted, never outsource a problem Based on the experience of organizations that have outsourced, there seems to be a strong tendency to place the burden for improving processes on an outsourcing vendor. This might not necessarily be a problem, if not for the fact that too many organizations do this without negotiating a contract that properly defines this role. Although the research is not generally critical of outsourcing relationships, it seems that the selected company in our study ( Batelco ) has the policy of shortterm contract with the outsourcing for its systems development, and this might create some problem in term of instability relationship between the two parties ( i.e. Lack of partnership ). Organizations that leave the contract vague in the hopes that their outsourcing partner will live up to the intent of the agreement are often disappointed. If a partnership is truly what is desired then the contract needs to provide incentives that will allow the vendor to share in any profits (or other benefits) that result from the organizations improved performance. Strong Relationship Key to Success Perhaps most importantly, for organizations that want to use outsourcing to improve performance, management of the ongoing relationship appears crucial to success. Analysis of the

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literature reveals a strong consensus that to effectively manage an outsourcing relationship, it is necessary to have dedicated internal staff that can monitor vendor performance and act as liaisons between the vendor and the client. Also, management at all levels in both the client and vendor organizations must continually work to develop trust and effective mechanisms for communication. This becomes increasingly important if the activities being outsourced are complex. Finally, Outsourcing can be examined in other areas of IT department if its well studied by the company executives. For example, Fraud department (IF) that comes under the IT department can outsource their roles to the third party such as Auditing companies to take the full responsibilities of Fraud issues in the company, since they are many expert and professional companies in the kingdom already experienced in this field.

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References

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References

Quality Information for every one [On Line] Access on http://www.bizbrim.com/outsourcing/define-outsourcing.htm

Google Definition Dictionary [On Line] Retrieved in February 2006 from http://www.google.com/search?num=100&hl=en&lr=&newwindow=1&oi=defmore&defl=en&q= define:Outsourcing

Outsourcing Information Technology [On line] Retrieved in October 2006 from Access on http://www.businessforum.com/woj01.html

U Name IT [On Line} Retrieved in Dec 2006 from http://www.unameits.com/why_it/benefits_advantages_outsourcing_information_technology.jsp

Batelco Main WebSite {Online] Retrieved in Jan 2006 from www.Batelco.com

Barthelemy, J. (2001). The hidden costs of IT outsourcing. Sloan Management Review, 42, (3), 60-69.

Barthelemy, J. (2003). The seven deadly sins of outsourcing. Academy of Management Executive, 17, (2), 87-100.

BitSmith Software (Producer). (1998-2004). Personal Knowbase (Version 2.2.2) [Computer software]. Available: http://www.bitsmithsoft.com/?source=P22220310061501.

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Creswell, J. W. (2003). Research Design: Qualitative, quantitative, and mixed methods approaches (2nd ed). Thousand Oaks, CA: Sage Publications.

Grover, V., Cheon, M.J. & Teng, J.T. (1996). The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems, 12, (4), 89-117. Offshore Xpert.Com, The Source for Outsourcing [On Line], Retreived in October, 2005 from http://www.offshorexperts.com/index.cfm/fa/buyer.category/c/1600 Star, Why Outsourcing [On Line] , Retrieved in October 2005 from http://www.start.cz/index.php?pid=213&lang=en

Mulqueen, J. T. (1996). Industry trend toward outsourcing continues to grow strong. Communications Week, April 29, 1996, Issue: 608, 75.

Kaarst-Brown, M.L., & Robey, D. (1999). More on myth, magic and metaphor: Cultural insights into the management of information technology in organizations. Information Technology & People, 12, xx-yy.

Bobrow, E. (1995). Service outsourcing trend continues. Midrange Systems, 8(5), 10

McFarlan, F. W., & Nolan, R. L. (1995). How to manage an IT outsourcing alliance. Sloan Management Review, 36(2), 9-23.

The Outsourcing of Information Services: Transforming the Nature of Business in the Information

Industry, Journal of Information Technology, 10(4), 1995, 221-238 (with T. Clark and G. McCray)

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The Outsourcing of Information Services: Transforming the Nature of Business in the Information Industry, in L. Willcocks and M. Lacity (Eds.), Strategic Sourcing of Information Systems: Perspectives and Practices, 1998, John Wiley & Sons Ltd., 45-78 (with T. Clark and G. McCray)

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Appendix A
Questionnaires used in the interview
Q 1 - How many times has your organization outsource IT tasks/projects? Q 2 - What is the organizational policy regarding IT outsourcing? Q 3 - What are the reasons for IT outsourcing? Q 4 - Has IT outsourcing been successful in your organization? Q 5 - What type of jobs/tasks are being outsourced? Q 6 - Whom do you outsource to? Q 7 - How much have been spent on IT outsourcing so far? Q 8 - How many tasks/projects have been outsourced so far? Q 9 - How did you select or appoint an outsourcing vendor? Q 10- Are you satisfied with the output from the outsourcing vendor? Q 11- Are you satisfied with the service given? Q 12- Will you recommend/advice other organization to outsource? Yes/No Why? Q 13- What are the positive and negative impact of IT outsourcing to your organization from the following perspectives?

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Appendix B
The Interviewees in Batelco IT Department
Saleh Taradah Ali Soufi Manaf Khalaf A.Redha Khalaf General Manager in IT Senior Manager, IS Application Line Manager, IS Operation Line Manager, Information Fraud

Zuhair AL- Masakati Line Manager, Information Risk Salah Al-Modwab Safyia Al-SHehab Line Manager, ERP System Line manager, Billing System