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Please make 4 pages PowerPoint about “ the in depth analysis of the situation & brief into of the case ” in introduction and background part – roughly 5 minutesplease write “Analysis of case” part on one pageAnalysis and Problem StatementsThe analysis section is the most important part of your paper, and it may constitute about half of your paper. The analysis should apply concepts from the course to understand why the problem you identify exists (what are its root causes and implications). A good analysis of the past or present situation will set a good foundation for your discussion in the next step. Here are more tips: The analysis should use the concepts we develop in class, but they need not be presented in the same language we use in class. Remember that you are writing to the decision-maker in the organisation that is the subject of the case, and he or she may not have taken our class! So, in most cases you will use the analytical techniques from class “off-line”, and then translate the results of that work into the body of your paper. State explicitly any assumptions you make in the analysis. Back up your analysis with quantitative support or other evidence where appropriate. Make sure your analysis clearly addresses the problem(s) you identified. Use business language and format. Be direct and precise. Keep in mind the audience of the paper, and always ask yourself if the sentence you just wrote will provide value to that audience. Make sure you get to the root causes of the problem. Keep asking if there is something underlying the cause you have arrived at. Ultimately, it is the root cause that you have to solve. SWOT analysis perhaps is the most frequently used tool in this section.There may be many issues in any given case but not all of them are equally important. Make sure it is clear why you think these issues are important, since these issues set the stage for how you plan to approach the case. Remember not to simply recount the facts of the case. Get the burning question and address it. You will probably need to devote most of your efforts to this section. This is the most difficult part of the assignment for most students because it involves theorising about why things have happened, rather than just describing what occurred. Although difficult, this section is essential because if you can figure out why the situation arose, then you can begin to pinpoint what aspects of the situation are going to be responsive to action. The goal is to figure out why the situation arose and what the implications are.Your discussion here should foreshadow where you intend to direct your management actions, because to effectively solve a problem you want to act to address its causes, not just its symptoms. Thus, the analysis should clearly correspond to the issues above, and clearly set the stage for the problem and actions below. It also is helpful to include brief examples from the case to support your conclusions about the causes of the problem.Given your analysis, how would you succinctly describe the key problem (or problems) to be addressed? The implicit question asked in a problem statement is “What do we want to change? The link to your analysis should be readily apparent. Problem statements should be free from both causes (which are identified in the analysis section) and solutions (which are presented in the management action section). For example, if you stated the “as is” part of the problem as: “Department employees don’t know how to fill out expense reports” then you have implied that the cause is a lack of skill or knowledge. This leads almost inevitably to a training solution. However, before collecting and analysing the case facts, it is impossible to know whether or not this is a training problem. A more appropriate statement can be “Department employees cannot fill out expense reports.” This statement shows the symptom, i.e., what can be observed. It does not indicate any cause. Potential causes can be the lack of skills of employees or the difficulty to use the system. Stating the “desired state” as “The expense forms need to be redesigned” implies a solution. Again, before collecting and analysing some data, it is difficult to know what solutions are appropriate.Here is a checklist to use to evaluate your problem statement: Is there a clear link from your analysis to the problem statement? Does everyone have a common understanding of the problem?Is the problem sufficiently limited in scope?Is the problem within management’s control or influence?Is the problem worth solving?Does/Do the objective(s) solve the problem(s)?

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J Info Technol Teach Cases (2018) 8:81–89
DOI 10.1057/s41266-017-0027-1
An IT outsourcing dilemma at Sick Kids Hospital
Ron Babin1 • Mohamed Shazadh Khan1 • Kyle Stewart1
Published online: 16 November 2017
Association for Information Technology Trust 2017
Abstract This teaching case is based on a true situation at
the Hospital for Sick Children, in Toronto Canada. The
case asks students to either assume the role of the CIO or to
advise the CIO in making a decision to outsource IT at Sick
Kids Hospital. The case requires students to understand
three important issues: First, while health care costs continue to increase, automation of information is an important
opportunity to streamline patient care and reduce costs in a
hospital environment. Second, IT outsourcing, relying on
external service providers to deliver complex technology
services, is a fundamental business strategy across all
industries and has great potential in the health care industry. Third, hospitals and health care have unique requirements for IT outsourcing, particularly the critical
importance of patient data security and privacy.
Keywords IT outsourcing Hospital information systems
Information systems security Data privacy
The Hospital for Sick Children (known as Sick Kids) is a
premier children’s hospital with a global reputation. It is a
tertiary institution, offering a large variety of specialist care
to children afflicted and affected by many serious medical
conditions. Founded in 1875, Sick Kids has grown from a
rented 11-room house to a 370-bed facility that carries out
leading edge pediatric medical research. Currently at Sick
Kids, the projected number of admissions per year is
16,500, treating over 100,000 patients per year and with an
annual budget of over $500 million.
Sarah began her term as CIO at Sick Kids in the
summer of 2015. After an initial review of the IT assets
including software applications, hardware, networks and
IT management, and professionals, she realized that a
number of critical IT services needed to be upgraded. Her
concerns were reinforced by a number of consulting
studies that had been commissioned prior to her arrival,
which recommended improvements in IT governance and
allocation of IT resources to support the existing systems.
One IT assessment report suggested that due to lack of
processes, multiple platforms, and aging information
technologies, ‘‘a much-needed overhaul is required in IT.’’
Another consulting study evaluated IT risk and concluded
that five out of seven areas were either medium or high
risk in terms of IT governance. Executive management at
Sick Kids were concerned that IT needed to be improved
and made more secure, to avoid outages and system
failures.1 The executive management team were interested
in the benefits and costs of outsourcing, and had recently
held a discussion with an external advisor on this topic.
Selected slides from the discussion document are provided
in Exhibit A.
Sarah launched two important IT initiatives late in 2015.
Firstly, requirements were defined in order to issue a
request for proposal (RFP) to replace the core Hospital
information systems (HIS). The RFP was released in
& Ron Babin
[email protected]
Ryerson University, 350 Victoria Street, Toronto, Canada
In May 2017, computer systems in most UK hospitals under the
National Health Services (NHS) were shut down by a malicious
software attack. The attack gained access through outdated software
running in most of the NHS hospitals. For more information see
December 2015. By May 2016, the executive team had
selected an external HIS vendor.
Secondly, a key component of the RFP was a request to
operate or host the HIS outside of Sick Kids, in other
words, to outsource the operation of the HIS to an external
service provider. Members of the executive team were
developing an appreciation for outsourcing. The PeopleSoft Financial and HR system had been installed by a
global consulting firm who had then proposed an outsourced application management service (see Exhibit B for
details). The HIS represents a healthcare-specific application, while the PeopleSoft application is a more general
purpose system that supports organizations in many
industries. Table 1 below provides an overview of the two
Patient information within the HIS is governed by the
Ontario Personal Health Information Protection Act, which
defines the rules for collection, use, and disclosure of
personal health information. Most jurisdictions have similar laws in place, such as the Health Information Portability
and Accountability Act in the US and the Data Protection
Act in the UK. Personal information within the HR system
is also protected under government legislation such as
Canada’s Personal Information Protection and Electronics
Document Act.
The executives at Sick Kids expected that outsourcing
would reduce IT costs and improve the overall IT services;
the consulting firm had certainly given the impression to
the executives that IT costs could be significantly reduced.
For these reasons, Sarah realized that she and her IT
management team required a better understanding of the
risks and benefits of outsourcing as well as outsourcing
trends in the hospital and health services industry. She
needed to improve IT’s capability in order to continue
supporting core services and to help the hospital continue
its growth while maintaining its excellent global reputation
as a pediatric hospital. At a time when other hospitals and
large organizations were discussing Digital Transformation, Sarah needed to improve Sick Kids capability to
simply provide reliable IT services and keep the lights on,
and to support Sick Kids core services as it continues to
R. Babin et al.
2011–2015 (CIHI 2015). Hospital spending growth rate is
at 0.9% as of 2015 which is the lowest it has been since the
1990s (Canadian Institute for Health Information 2015).
Hospital expenditure per capita in Canada has increased by
3.5% throughout the period of 2014–2015 which is putting
a strain on managers and CIOs and forcing them to find
new ways to reduce costs.
According to the Canadian Institute for Health Information (CIHI), total health expenditure was expected to
reach over $219 billion in 2015. This represents over
10.9% of Canada’s gross domestic product (GDP).2
Despite this share reducing since 2009, there are still rising
costs within the healthcare sector. Hospitals account for
29.5% of total health spending which is continuing to grow
each year although the pace has slowed down over the past
few years. In fact, hospitals account for the highest portion
of Canadian healthcare expenditures with Physicians and
Prescription Drugs following behind at 15.5 and 13.3%,
respectively. Healthcare spending is expected to account
for $1804 per person in 2015. It is believed by the Canadian government that ‘‘The possibility of technological
change could create cost savings due to process efficiency
or could generate cost increases due to new or expanded
diagnostic services and treatments’’ (Canadian Institute for
Health Information 2015).
The information systems support category increased
from 1.8% in 1999 to 2.4% in 2008 of hospital expenditures.3 A higher share for systems support may reflect the
increasing complexity and widespread adoption of electronic systems for clinical records, monitoring, and management of hospital functions.
The above literature shows that there is a slow increase
in healthcare spending and even in hospital spending itself.
With information support systems rising to 2.4% in 2008 of
hospital expenditures and 60% of the hospital spending
being used to compensate the hospital workforce, there lies
potential savings there are potential savings from labor cost
reductions for hospital IS support services. One suggestion
for cost savings and access to skilled information systems
support is the phenomenon of outsourcing.
Why outsourcing?
Healthcare spending growth
With the rising costs and budget restrictions to healthcare,
managers and CIOs of hospitals are always searching for
ways to reduce their costs and find a way to make their
organizations work more efficiently (Roberts 2001).
According to the Canadian Institutes for Health Information (CIHI), the ratio of Health expenditures to GDP has
declined from 11.6% to an estimated 10.9% in the period of
Executives typically expect outsourcing of IT services to
reduce costs and improve service through five enablers,
described below.
See Canadian Institute for Health Information (2015) National
Health Expenditure Trends, 1975 to 2015.
See Canadian Institute for Health Information (2012) Hospital Cost
Drivers Technical Report.
An IT outsourcing dilemma at Sick Kids Hospital
Table 1 An overview of HIS and Financial/HR systems
Hospital information system (HIS)
Financial and HR system
Single secure source of information for a patient’s medical
care history
Administration of financial and human information
Processes &
information sets
Patient information system
General ledger
Prescription history
Accounts receivable/payable
Operation history
Expense reimbursement
Laboratory information
Capital projects
Radiology information
Benefits management
Pension management
Principle users
Corporate managers and supervisors in Finance,
Accounting, HR
Nursing staff
Clinical staff (radiology, laboratory, pharmacy, etc.)
Economies of scale External service providers are
expected to have sufficient size that allows them to reap
the benefits of the economies of scale, for example in
running telecommunication networks or data centers or
software development centers. The economies of scale
allow a vendor to deliver the IT service at a lower cost
than an in-house IT organization.
Economies of skill Outsourcing vendors focus on a very
narrow range of services and concentrate their human
skill acquisition and development in those areas which
are their core competencies. Their core competencies, a
concept defined in 1990 by Pralahad and Hamel, will be
different than those required in a hospital, or any other
organization (Prahalad and Hamel 1990).
Technology exploitation Many outsourcing vendors are
also technology developers and manufacturers, and are
experts at exploiting ongoing technology innovation.
Moore’s Law typifies this innovation, which predicts
that the cost of computer processing continues to
decline by approximately 50% every 18 months.
Labor arbitrage Outsource providers are able to move
digital activities to global locations where labor costs
are lower. Thomas Friedman describes the IT labor
arbitrage model in his 2005 book ‘‘The World Is Flat.’’
(Friedman 2005)
Transaction cost economics Ronald Coase defined the
concept of transaction costs in his 1937 paper on ‘‘The
Nature of the Firm’’ where he proposed that when
market transaction costs for providing services are
lower than internal transaction costs, organizations will
choose to buy from external firms for those services.
Researchers have applied transaction cost economics
(TCE) to the field of outsourcing, notably Bahli and
Rivard (2003), Dibbern et al. (2004), and Ngwenyama
and Bryson (1999).
Departmental managers and supervisors throughout
the hospital
Outsourcing in health care
For years, healthcare organizations have outsourced noncore departments such as food service and housekeeping.
Now, managers and health professionals are attempting to
reduce healthcare costs and they are turning to outsourcing
in new ways to obtain high standards of care while keeping
costs low (Moschuris and Kondylis 2006).
Outsourcing can provide hospitals with the ability to
focus on the core competencies and customers. If the
hospitals partner with industry IT leaders, they can achieve
greater efficiencies (Roberts 2001). As outsourcing by
healthcare organizations increases, the potential market of
vendors that can provide these services will also increase
(Burmahl 2001). According to Lorence and Spink (2004), it
is believed that the less the healthcare organizations use
outsourcing, the slower will be the development of industry-wide standards and practices across vendors (p. 132).
Outsourcing can provide lower costs and risks, while
greatly expanding flexibility, innovative capabilities, and
opportunities for creating value-added shareholder returns
(Roberts 2001). Thouin et al. (2009) found under the
transaction cost perspective that IT activities that have
become commodities should be outsourced to improve a
firm’s financial performance. Kern and Willcocks (2000)
slightly agreed that outsourcing is driven by economic
action but that it is embedded within social relations and
organizational strategy. While in Menachemti et al.’s
(2007) findings, IT outsourcing was not a cost-lowering
strategy but instead a cost-neutral way hospitals would use
to implement an organizational strategy, Lorence and
Spink (2004) examined over 16,000 healthcare information
managers’ viewpoints on outsourcing and found that the
top two reasons why they purchase external information
resources were to improve patient care and to save money.
R. Babin et al.
Table 2 Simplified view of outsourcing levels
Business processes
Finance and accounting
Application software and data
General—office software such as email, word processing, spreadsheets
Industry related—Finance, accounting, payroll
Location specific—Hospital information system

Help desk
Device deployment and management (PCs, laptops, phones, tablets)
Another advantage is the cost efficiency associated with
outsourcing due to economies of scale and of experience.
Because the outsource provider specializes in IT management, it can provide good service levels at lower cost than
the internal IT department (Thouin et al. 2009).
A simplified view of different outsourcing layers or
levels is provided below in Table 2.
The experience of other hospital CIOs
Sarah had the results of an environmental scan which was
conducted in mid-2016 by a team of external consultants,
to understand current IT outsourcing trends in health care.
Semi-structured interviews were conducted with CIOs at
seven local hospitals. There was mixed reaction regarding
outsourcing of applications such as the HIS, which is the
core application at every hospital. Some hospitals maintain
and operate the HIS in-house and had retained staff who
were skilled at maintaining and operating the systems.
Others had outsourced the HIS and were convinced that
retaining current knowledge of the complex technology,
applications, and interfaces was beyond the ability of the
in-house staff.
CIO experiences: motivation for outsourcing
Across all seven interviews, the CIOs commented that
reduced operating cost was not the primary motivation for
outsourcing. The CIOS consistently identified three benefits of outsourcing: (1) quality and speed of service, (2)
access to skilled resources, and (3) focus human resources
on strategic activities. Each benefit is described in more
detail below.
Quality of service and speed of delivery were the
reasons most cited for outsourcing. One CIO mentioned that IT infrastructure, which was the most often
outsourced, is a commodity service that vendors have
focused on delivering with a high degree of reliability:
‘‘we plug-in and expect it to light up,’’ ‘‘we don’t
worry about it, it’s a generic resource.’’
Access to skilled resources. One CIO commented
regarding software outsourcing that it would be
‘‘impossible for my staff to support an immensely
complex software application of six million lines of
By outsourcing generic services, the CIOs are able to
focus their resources on strategic activities within the
hospital: ‘‘we didn’t want to be in that [IT] business…
We focus on strategy and architecture, and how to
improve the customer experience’’; ‘‘focus on developing relationships with the clinicians’’ and ‘‘new and
innovative use of technologies that are relevant to the
business’’; infrastructure ‘‘is not my role, my role is to
help the business transform and change.’’
CIO experiences: challenges of outsourcing
However, managing an outsourced service does have some
challenges: (1) outsourcing may cost more than in-house
services, (2) external service providers may not be strategic, and (3) additional time is required to manage and
govern the external relationship. These challenges are
described below.
Although a few CIOs mentioned that outsourcing will
avoid future costs, for new staff or additional IT
infrastructure, every CIO mentioned that outsourcing
typically costs more than delivering the same service
with in-house resources. One CIO cited a 30% cost
increase for outsourcing. A few CIOs have chosen
selective outsourcing for highly specialized services,
where the financial case can be demonstrated to the
hospital board or when in-house skills cannot be
readily hired.
An IT outsourcing dilemma at Sick Kids Hospital
Outsource providers may not be innovative or strategic, although they are very good at delivering a welldefined service such as IT infrastructure. ‘‘I have to tell
them what I want’’ said one CIO, suggesting that the
external service providers are unable to anticipate
future innovation in the hospital sector.
Approximately 30% of management time was identified for ongoing management and governance of the
external providers. One CIO mentioned an outsourcing
contract where the vendor has 16% of total revenue at
risk if it fails to perform. To manage this contract, the
CIO stated: ‘‘You have to hold the vendor’s feet to the
CIO experiences: lessons learned from outsourcing
In terms of lessons learned, three stand out. First, managing
outsourcing, both internally and externally, takes time and
improves after several generations of contract experience.
Second, the governance of outsourcing is important, and it
requires involvement of the hospital senior executives and
potentially board members. Third, IT Infrastructure is the
most common service to outsource because the services are
more industry generic (e.g. help desk, PC support, network
monitoring) and less specific to a hospital.
What to do?
Sick Kids Hospital is at a turning point. It has recently
decided to acquire and install a sophisticated Health
Information System. It is seriously considering opportunities to rely on external vendors and outsource some or
major portions of the IT infrastructure operations. The
senior executives are searching for opportunities to reduce
cost and improve IT services, which may be realized
through outsourcing.
Sarah considered her options. Although she knew the
HIS vendor would install and start up the new system, she
had concerns about the long-term support costs, for
example the costs of servers and network within the hospital as well as the costs of the failsafe mechanisms for
uninterrupted power supply and data redundancy that are
required in the hospital IT environment. She was concerned
about the ability of her staff to become knowledgeable and
capable of supporting and enhancing the software into the
future. This would become increasingly important as doctors relied more heavily on the HIS for patient information,
and as the HIS became the central repository for all electronic patient data. As well, patient health data were
extremely sensitive, and many laws and regulations were in
place to protect the privacy and security of that data. Sarah
was a doctor herself and understood completely the
importance of the accurate and available electronic pati …
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