Utsourcing Dilemma: a Composite Approach to the Make or Buy Decision

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Module 1: Business Decision in Project Management and Corporate Outsourcing Assignment 2
Date: 16-Nov-08

Subject: The outsourcing dilemma: a composite approach to the make or buy decision –case study in buy or make New Non-Air booking System of Cathay Holidays Limited (CHL)

Written by Group 3:

Executive Summary

This paper is trying to appraise a range and complexity of outsourcing decision issues which Cathay Pacific Holidays (CHL) is now facing for its new booking system development, by applying the Composite Outsourcing Decision Model (CODF). CODF is used as a framework to provide composite decision making elements such as contextual factors, costs, and strategy and structure. The analysis result shows a high score in favour to outsourcing as I.T. system development is not a core competency to CHL, and the system integration knowledge of internal staff is insufficient. Analysis insight, extra outsourcing considerations, and opportunities under current financial tsunami are also reviewed. Background of Case Study

Cathay Pacific Holidays (CHL) is a wholly-owned subsidiary of Cathay Pacific Airways. Headquartered in Hong Kong, it offers a wide range of all-in-one holiday and tailor-made packages targeted at free & independent travelers market. Its company mission is to solidify the position of market leader in this market and provides good quality and value-for-money to premium products & services to its customers.

Market Environment
In old days, most of the people prefer to join group tour in the large travel agents like Wing On Travel & Hong Thai. But nowadays more and more people will consider buying packages and planning their own itineraries. It is relatively easy to set up a travel agent and getting license in Hong Kong. Foreseeing the free & independent travelers market becomes more popular, many travel agents now enter to share this market and set up a section/ department to penetrate to the market. CHL is facing strong competitions in this fast growing market. Even its brand image from CPA can help to differentiate themselves from competitors, they must develop a competitive edge over rivalries e.g. create cost & product differentiation, increasing bargaining power with suppliers, better services to cope with customer’s need.

CHL Internal Situation
CHL have 2 types of customers, direct customer and travel agents. They receive booking via difference sales channels including call by phone, fax, email or website. Most of the bookings or enquiries are handled by call centre. However, monthly loss call rate is around 40-50%. The call time cannot be shortened as booking process is manual. Staff required inputting customer detail to make reservation and provided quotation by manual calculation. CHL also has its own online booking system to collect booking and allow instant booking, but it is not fully automated and has the capability limitation. For examples, it can make simple booking only and there is no handling of amendments/ changes/ cancellations, automated online payment and ticketing. Reservation staff still needs to follow up it at the backend.

New Vision
CHL leverages on information and internet technology to develop a new system, NABS. It helps to streamline its business process & daily operation and change most of manual works to automation. Staff productivity can be increased. With provision of self service automated online booking system to customers, CHL now can accept and handle more bookings via web without time and manpower limitation. Both direct customers and travel agents can access to the booking system via Business to Business and Business to customer platform in any time. The existing reservation staff will now focus on provision of services with higher profit or value-added to customer. The company can now provide better service with lower cost.

New Mission with NABS
Its system facilitates communication between...
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