Assignment # 2



Make-or-Buy Decision at Baxter Manufacturing Company

What are the arguments in favor of Manufacturing Vice President Moore's proposal to purchase the manufacturing software from EMS?

Fir a number of corporations, IT Outsourcing has served as a rewarding corporate strategy as well as a means of competition. Due to the far reaching effects of IT outsourcing, Manufacturing Vice President's must be considered as an integral part of corporate policy rather than business strategy as this is the kind of decision that is not only involving and engaging top management, but will also modify Baxter Manufacturing Company's boundaries as legal entity. Purchasing of software will affect company-wide asset management practices and resource allocation policies at Baxter. If management of Baxter accept Manufacturing Vice President's proposal and purchase IT software, it can buy and implement it instantaneously and hedge itself against rapid technological change by having more flexibility in shifting from old technology to new technology. Technology, especially in software industry, is changing at a rapid pace. New software with improve performance and better options make their way into the market every year. Purchasing software will allow Baxter to shift to new and improved version every year, thus bring more efficiency and quality into its operations.

For manufacturing firm such as Baxter, technological consideration is number 1 factor that affects the make-or-buy decision and skew it towards buying. Software vendors such as Effective Management Systems now offer their software in a cloud, that is, companies such as Baxter do not need to store the data anywhere, it's storing on the servers of Effective Management Systems. This way Effective Management Systems maintain the performance of software at an optimum level by monitoring its performance constantly and fix issues instantaneously, sometimes even before they surfaces. This will bring down the cost on the part of Baxter as it do not need to keep IT professionals for maintenance and troubleshooting purposes, plus all the issues will be managed proactively by Effective Management Systems. It will also increase the efficiency and quality of all the operations that will involve usage of the software. By increasing its access to functional expertise, Baxter corporation will have “less sorrows” that will allow the company to give more thoughts to its strategic considerations by concentrating on its core business activities. By purchasing the software, Baxter Corporation can ameliorate competitive pressures by eliminating the need of investing in fixed infrastructure, thus increase its profits, save its resources and concentrate those resources on core business activities to gain a competitive edge. Purchasing software will also result in less internal administrative problems which will surely improve the area of quality and value by increasing the quality and efficiency of all the operations that will involve usage of software (Chamberland, 2003).

What are the arguments in favor of developing the needed systems internally?

Objectives of developing software in-house are different from the objective of developing software for sale. Software that Baxter Corporation will buy from Effective Management Systems is developed to fit in to the needs of as ...