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Case #8: Outsourcing at Office Supply Inc.

Through the initial integration of information technology into its core business, Office Supply Incorporated (OSI) attained a large cost advantage over its competitors and reaped rewards in both profits and stock prices. Unfortunately, as Nicholas Carr outlines, IT is becoming more of a commodity for companies and less of a source for strategic differentiation. Moreover, lack of IT expertise within OSI has begun to inhibit the growth of business operations and rising IT costs are shrinking profits. Jim Anfield’s proposition for OSI to outsource its IT infrastructure to Technology Infrastructure Solutions (TIS) provides the opportunity to not only match the pace of business growth, but to cut costs and increase the reliability of service to OSI customers. Anfield’s detailed and careful analysis indicates both cost savings and support for growth, however in moving forward from this point TIS will need to work closely with OSI to avoid what Thomas Kern refers to as the “Winner’s Curse.” As Carr suggests, “When a resource becomes essential to competition but inconsequential to strategy, the risks it creates becomes more important than the advantages it provides.” OSI’s IT infrastructure is clearly essential to their success as it provides their customers with easy access to their products, however this does not necessarily mean it is essential to their strategy. More specifically, we can say that IT infrastructure is vital to OSI’s operational effectiveness, but as Porter describes operational effectiveness is not the same as business strategy: “…strategic positioning means performing different activities from rivals’ or performing similar activities in different ways.” Since OSI had adopted their IT approach to their wholesale business in 1996, most competitors have followed in their footsteps. This means that