1. What should be considered to make a decision between these two options?
One of the biggest challenge facing airlines is the decision to minimize operation costs by either upgrading the existing IT infrastructure using internal capacity or outsourcing some of its services. Companies would prefer outsourcing because is a cost-effective measure .Outsourcing means hiring someone with specific skills to perform a specific task for an agreed period. Outsourcing is effective and efficient because it allows the airline to provide services using skilled personnel, and appropriate infrastructure, and technology. When considering outsourcing, it is important to determine which activities are important including those operations that needs to be kept in-house. These are important activities that need to be closely managed. Although outsourcing might be ideal, critical operations should not be handed over to an outsider.
2. If the company chose to outsource the IT upgrading work, what topics should be included in the Service Level Agreement (SLA)?
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Service level agreement is an important IT vendor contract that ensures both parties have the same understanding of what is required. Service level agreement (SLA) defines the level of service to be provided including remedies or penalties if service levels are not achieved as agreed. The most important components of SLA include services and management. The service element should specifies the condition of service, standards including, time window for each level of service, responsibilities of each party, procedure, and costs. Management elements should include measurement of standards, methods and the reporting processes, dispute resolution processes and indemnification clause. An indemnification clause is an important provision to protect customers from breaches of warranties. Another important component of SLA is to specify some of the consequences of failing to meet the service levels, such as termination. Including both service and management elements in SLA is important in understanding the requirements and to monitor performance.
Reference
Bahli, B., & Rivard, S. (2017). The Information Technology Outsourcing Risk: A Transaction Cost and Agency Theory-Based Perspective. In Outsourcing and Offshoring
Business Services (pp. 53-77). Palgrave Macmillan, Cham.
