Chapter 8
Information Systems Management in Practice 8th Edition
Chapter 8
Why Talk About Operations? Solving Operational Problems: A Portfolio Approach Operational Measures The Importance of Good Management Whats New in Operations?
8-2
Chapter 8 contd
Outsourcing Functions
The Driving Forces Behind Outsourcing Changing Customer-Vendor Relationships Outsourcings History Managing Outsourcing Offshoring Insourcing
Conclusion
8-3
Introduction
8-4
8-5
Typical IT Budget:
Administrative and planning: 20% Technology, networks, PCs: 44% Maintenance: 11%
Systems development and enhancement: 25% Consistently apply best practices Involve all stakeholders in IT-related operations Adopt partnerships perspective
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-6
Slow response times Down networks Data unavailability and integrity compromise
Buy more equipment Regulate and prioritize computer workload and activities Implement operational measurements, set standards and benchmarks
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-7
Operational Measures
External Measures
System uptime (downtime) Response and turnaround time Program failures Computer usage as percentage of capacity Disk storage used Job queue length
Internal Measures
IS management must create an organizational culture that values good operations Key to managing operations is the same as in any management job
New options to develop cost-effective applications Managing information security becomes prevalent in organizations with the proliferation of insecure network-based systems Content management will be a critical daily operation
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-10
Enforcing Privacy
Striking the right balance when disseminating data within organization Retaining talented workers Constantly redefine job of IT professional Managing outsourcing e.g., Web hosting, headhunting for IT talents
Centralizing operations
8-11
Microsoft
Case Example: Offloading of Operations (Webcast)
Launch of new version of Windows included a private Webcast to original equipment manufacturers (OEM) in 83 countries
Handled by Akamai
Windows launch set a record for attendance, global reach and audience participation
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-12
Outsourcing IS Functions
8-13
Added value in products and services for the customer Based on the value proposition, focus on core competences and businesses
8-14
Consulting, training
Outsourcing (time-based)
8-15
Five-Option Continuum
8-16
Outsourcings History
Huge outsourcing contracts that involved almost entire IT operations Choice of outsourcing of maintenance of legacy systems or development of new client-server systems Outsource retrofitting of old systems for Y2K compliance
8-17
Best-of-Breed Outsourcing
Selective outsourcing based on vendor specialty Desktop support, data center operations, network management Coordination is a challenge here
Shared Services
Consolidate all non-core activities to one shared services functional group to be outsourced
Outsourcing all or most of a reengineered process (BPR) that has large IT component
8-18
Australian bank outsourced procurement function to improve service levels and increase scale of operations Lessons learned from experience
Be prepared to change the contract as your environment changes Make step changes in technology and processes to save time and money, focus on having an effective transition Do your best to make the outsourced group appear seamless to your employees Focus early on what you want and dont get sidetracked Keep incentive mechanism simple and transparent Be able to benchmark performance Understand, to a fair degree of detail, the value chain you plan to embrace
8-19
E-business Outsourcing
With arrival of business use of Internet, outsourcing has been one way that companies can quickly get Web sites up and handling business
Preferred mode of operations in Internet-based firms Allow a company to move fast, remain flexible and minimize fixed costs in computer hardware On-demand pricing model (pay for what you use)
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-20
Utility Computing
Managing Outsourcing
8-21
Organizational Structure
Outsourcing is a joint effort between parties that may not have the same goals Layers of joint teams typically established
Top-level team: Final word in conflict resolution Operational team: Oversees day-to-day operations Joint special purpose teams: Created periodically to solve pressing issues Committees: Oversee the use of formal change management Relationship manager(s): look after the relationship
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-22
8-23
Meets twice a year (strategic issues) Meets monthly (technical and operational issues) Manages long-term relationships and contracts Focal point between Kodak and supplier Deal with specific technology areas Sent out twice a year to 5,000 internal users
Relationship manager
Working groups
Client surveys
8-24
Governance
Can be tricky
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-25
Governance contd
8-26
Day-to-Day Working
Manage expectations, not staff Realize that informal ways of working may disappear Loss of informal ways adds to rigor and thus work quality Integration of two staffs require explicit actions
Grant outsourcing staff appropriate access Hold joint celebrations and social events Invite each other to meetings Communicate frequently
8-27
Supplier Development
Buying parts and services that go into ones own products and services
Assisting ones suppliers to improve their product and services by improving their processes
8-28
Offshoring
Companies turn to offshoring to tap lower labor costs and an ample supply of qualified people Offshore outsourcing differs from domestic outsourcing in a number of unique ways
Offshoring options are broadening Customer service, back-office processing, BPO etc. Cultural differences Address communication issues and provide cultural training Local country laws need to be followed
8-29
Hewitt Associates
Case Example: Offshoring Provides HR services to Global 500 companies Outsource maintenance of core HR computer systems to two Indian companies
Negotiating the deals Drew up contract and detailed SLAs Migration and ongoing management (workload and staff)
Hewitt had to adjust to Indian vendors high standards of maintenance and engineering discipline
Positive outcome
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-30
Offshoring contd
Understand customers Understand demographics Office end-to-end service Dominate the screen
Insourcing
Generally interpreted as the delegation or contracting of operations or jobs within a business to an internal, but mostly independent sub-contractor
Parent-subsidiary model
Maintain tight control of contract job execution Protect intellectual property and business knowhow
8-32
Conclusion
E-commerce Increasing use of outsourcing Information and computer security (viruses) Terrorism
Whether operations take place in-house or outsourced, the modus operandi is based on partnerships
2009 Pearson Education, Inc. Publishing as Prentice Hall
8-33
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
8-34