Chapter 19 : Outsourcing in the 21st Century

OUTSOURCING PROJECTS

Insourcing (in-house-development) – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems

Outsourcing – an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house



Reasons companies outsource



Onshore outsourcing – engaging another company within the same country for services

Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country

Offshore outsourcing – using organizations from developing countries to write code and develop systems



Big selling point for offshore outsourcing “inexpensive good work”



Factors driving outsourcing growth include:

1)Core competencies
2)Financial savings
3)Rapid growth
4)Industry changes
5)The Internet
6)Globalization

According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not”

Most organizations outsource their noncore business functions, such as payroll and IT



Outsourcing Benefits:

Outsourcing benefits include:

1)Increased quality and efficiency
2)Reduced operating expenses
3)Outsourcing non-core processes
4)Reduced exposure to risk
5)Economies of scale, expertise, and best practices
6)Access to advanced technologies
7)Increased flexibility
8)Avoid costly outlay of capital funds
9)Reduced headcount and associated overhead expense
10)Reduced time to market for products or services

Outsourcing Challenges

Outsourcing challenges include:

-Contract length
1)Difficulties in getting out of a contract
2)Problems in foreseeing future needs
3)Problems in reforming an internal IT department after the contract is finished

-Competitive edge
-Confidentiality
-Scope definition

Chapter 15 : Creating Collaborative Partnerships

Teams, Partnerships, and Alliances

Organizations create and use teams, partnerships, and alliances to:
1)Undertake new initiatives
2)Address both minor and major problems
3)Capitalize on significant opportunities

Organizations create teams, partnerships, and alliances both internally with employees and externally with other organizations.

Collaboration system :supports the work of teams by facilitating the sharing and flow of information.



Organizations form alliances and partnerships with other organizations based on their core competency :

1)Core competency – an organization’s key strength, a business function that it does better than any of its competitors
2)Core competency strategy – organization chooses to focus specifically on its core competency and forms partnerships with other organizations to handle nonstrategic business processes.

Information technology can make a business partnership easier to establish and manage:

*Information partnership – occurs when two or more organizations cooperate by integrating their IT systems, thereby providing customers with the best of what each can offer

The Internet has dramatically increased the ease and availability for IT-enabled organizational alliances and partnerships

~Collaboration Systems~

Collaboration solves specific business tasks such as telecommuting, online meetings, deploying applications, and remote project and sales management

Collaboration system – an IT-based set of tools that supports the work of teams by facilitating the sharing and flow of information



Two categories of collaboration:

1)Unstructured collaboration (information collaboration) - includes document exchange, shared whiteboards, discussion forums, and e-mail

2)Structured collaboration (process collaboration) - involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules

~Collaborative business functions~



Collaboration systems include:

1)Knowledge management systems
2)Content management systems
3)Workflow management systems
4)Groupware systems

~Knowledge Management Systems~

Knowledge management (KM) – involves capturing, classifying, evaluating, retrieving, and sharing information assets in a way that provides context for effective decisions and actions

Knowledge management system – supports the capturing and use of an organization’s “know-how”

~Explicit and Tacit Knowledge~

Intellectual and knowledge-based assets fall into two categories:

1)Explicit knowledge – consists of anything that can be documented, archived, and codified, often with the help of IT
2)Tacit knowledge - knowledge contained in people’s heads

The following are two best practices for transferring or recreating tacit knowledge:

1)Shadowing – less experienced staff observe more experienced staff to learn how their more experienced counterparts approach their work
2)Joint problem solving – a novice and expert work together on a project

Reasons why organizations launch knowledge management programs


~KM Technologies~

Knowledge management systems include:

1)Knowledge repositories (databases)
2)Expertise tools
3)E-learning applications
4)Discussion and chat technologies
5)Search and data mining tools

~KM and Social Networking~

Finding out how information flows through an organization:

Social networking analysis (SNA) – a process of mapping a group’s contacts (whether personal or professional) to identify who knows whom and who works with whom

SNA provides a clear picture of how employees and divisions work together and can help identify key experts

~Content Management~

Content management system (CMS) – provides tools to manage the creation, storage, editing, and publication of information in a collaborative environment

CMS marketplace includes:
Document management system (DMS)
Digital asset management system (DAM)
Web content management system (WCM)

Content management system vendor overview


~WORKING WIKIS~

Wikis - Web-based tools that make it easy for users to add, remove, and change online content

Business wikis - collaborative Web pages that allow users to edit documents, share ideas, or monitor the status of a project

~Workflow Management Systems~

Work activities can be performed in series or in parallel that involves people and automated computer systems

Workflow – defines all the steps or business rules, from beginning to end, required for a business process

Workflow management system – facilitates the automation and management of business processes and controls the movement of work through the business process

Messaging-based workflow system – sends work assignments through an e-mail system

Database-based workflow system – stores documents in a central location and automatically asks the team members to access the document when it is their turn to edit the document

~Groupware Systems~

Groupware technologies



Groupware – software that supports team interaction and dynamics including calendaring, scheduling, and videoconferencing



~VIDEOCONFERENCING~

Videoconference - a set of interactive telecommunication technologies that allow two or more locations to interact via two-way video and audio transmissions simultaneously


~WEB CONFERENCING~

Web conferencing - blends audio, video, and document-sharing technologies to create virtual meeting rooms where people “gather” at a password-protected Web site



~INSTANT MESSAGING~

E-mail is the dominant form of collaboration application, but real-time collaboration tools like instant messaging are creating a new communication dynamic

Instant messaging - type of communications service that enables someone to create a kind of private chat room with another individual to communicate in real-time over the Internet

Instant messaging application

Chapter 14: E-Business

E-Business

The Internet is a powerful channel that presents new opportunities for an organization to:

1)Touch customers
2)Enrich products and services with information
3)Reduce costs

How do e-commerce and e-business differ?

E-commerce – the buying and selling of goods and services over the Internet
E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners

Industries Using E-Business



E-Business Models

E-business model – an approach to conducting electronic business on the Internet







Business-to-Business (B2B)

Electronic marketplace (e-marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities



Business-to-Consumer (B2C)

Common B2C e-business models include:
e-shop – a version of a retail store where customers can shop at any hour of the day without leaving their home or office
e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops

Business types:
Brick-and-mortar business
Pure-play business
Click-and-mortar business

Consumer-to-Business (C2B)

Priceline.com is an example of a C2B e-business model

The demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower prices

Consumer-to-Consumer (C2C)

Online auctions
Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically
Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins
Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid

C2C communities include:
Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting
Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts
Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan

E-Business Benefits and Challenges

E-Business benefits include:

1)Highly accessible
2)Increased customer loyalty
3)Improved information content
4)Increased convenience
5)Increased global reach
6)Decreased cost

E-business challenges include:

1)Protecting consumers
2)Leveraging existing systems
3)Increasing liability
4)Providing security
5)Adhering to taxation rules

There are numerous advantages and limitations in e-business revenue models including:

1)Transaction fees
2)License fees
3)Subscription fees
4)Value-added fees
5)Advertising fees

Mashups

Web mashup - a Web site or Web application that uses content from more than one source to create a completely new service

Application programming interface (API) - a set of routines, protocols, and tools for building software applications
Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups

Chapter 12 :Integrating the Organization from End to End – Enterprise Resource Planning

Enterprise Resource Planning (ERP)

At the heart of all ERP systems is a database, when a user enters or updates information in one module, it is immediately and automatically updated throughout the entire system



ERP systems automate business processes


Bringing the Organization Together

ERP – The organization before ERP


ERP – bringing the organization together


The Evolution of ERP


Integrating SCM, CRM, and ERP

1)SCM, CRM, and ERP are the backbone of e-business

2)Integration of these applications is the key to success for many companies

3)Integration allows the unlocking of information to make it available to any user, anywhere, anytime

SCM and CRM market overviews




General audience and purpose of SCM, CRM and ERP


Integration Tools

Many companies purchase modules from an ERP vendor, an SCM vendor, and a CRM vendor and must integrate the different modules together

1)Middleware – several different types of software which sit in the middle of and provide connectivity between two or more software applications

2)Enterprise application integration (EAI) middleware – packages together commonly used functionality which reduced the time necessary to develop solutions that integrate applications from multiple vendors

Integration Tools

Data points where SCM, CRM, and ERP integrate


Enterprise Resource Planning (ERP)

ERP systems must integrate various organization processes and be:

1)Flexible- must be able to quickly respond to the changing needs of the organization

2)Modular and open-must have an open system architecture, meaning that any module can be interface, with or detached whenever required without affecting the other modules.

3)Comprehensive- must be able to support a variety of organizational functions for a wide range of businesses

4)Beyond the company- must support external partnerships and collaboration efforts


Enterprise Resource Planning’s Explosive Growth:

SAP boasts 20,000 installations and 10 million users worldwide

ERP solutions are growing because:

-ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses
-ERP addresses the need for global information sharing and reporting
-ERP is used to avoid the pain and expense of fixing legacy systems

Chapter 11 : Building a Customer-Centric Organization – Customer Relationship Management

Customer Relationship Management (CRM) :

CRM enables an organization to:

1)Provide better customer service
2)Make call centers more efficient
3)Cross sell products more effectively
4)Help sales staff close deals faster
5)Simplify marketing and sales processes
6)Discover new customers
7)Increase customer revenues

Recency, Frequency, and Monetary Value :

Organizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary value
How recently a customer purchased items (Recency)
How frequently a customer purchased items (Frequency)
How much a customer spends on each purchase (Monetary Value)

The Evolution of CRM:

CRM reporting technology – help organizations identify their customers across other applications

CRM analysis technologies – help organization segment their customers into categories such as best and worst customers

CRM predicting technologies – help organizations make predictions regarding customer behavior such as which customers are at risk of leaving

Three phases in the evolution of CRM include reporting, analyzing, and predicting





The Ugly Side of CRM


Customer Relationship Management’s Explosive Growth

CRM Business Drivers


Customer Relationship Management’s Explosive Growth

Forecasts for CRM Spending (in billions)


Using Analytical CRM to Enhance Decisions

Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers

Analytical CRM – supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers

The primary difference between the two is the direct interaction between the organization and its customer.

Operational CRM and analytical CRM


Customer Relationship Management Success Factors :

CRM success factors include:

1)Clearly communicate the CRM strategy
2)Define information needs and flows
3)Build an integrated view of the customer
4)Implement in iterations
5)Scalability for organizational growth

Chapter 10 : Extending the Organization – Supply Chain Management

Supply Chain Management :

1) The average company spends nearly half of every dollar that it earns on production

2) In the past, companies focused primarily on manufacturing and quality improvements to influence their supply chains

Basics of Supply Chain :

The supply chain has three main links:

1)Materials flow from suppliers and their “upstream” suppliers at all levels
2)Transformation of materials into semifinished and finished products through the organization’s own production process
3)Distribution of products to customers and their “downstream” customers at all levels

Organizations must embrace technologies that can effectively manage supply chains





PLAN

1)Aim:plan for managing all the resources that go toward meeting customer demand for products or services.

2)Activity: develope a set of metrics to monitor the supply chain so that it is efficient, costs less, and delivers high quality and value to customers.

SOURCE

Aims:
choose reliable suppliers that will deliver goods and services required for making products.
develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships.

MAKE

Activity: include scheduling the activities necessary for production, testing, packaging, and preparing for delivery.

DELIVER

commonly referred to as logistics.
Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers.
Activity: companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.

RETURN

Activity: create a network for receiving defective and excess products and support customers who have problems with delivered products.

Information Technology’s Role in the Supply Chain:

IT’s primary role is to create integrations or tight process and information linkages between functions within a firm





Visibility

1)Supply chain visibility – the ability to view all areas up and down the supply chain

2)Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain

Consumer Behavior

1)Companies can respond faster and more effectively to consumer demands through supply chain enhances

2)Demand planning software – generates demand forecasts using statistical tools and forecasting techniques

Competition

1)Supply chain planning (SCP) software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain

2)Supply chain execution (SCE) software – automates the different steps and stages of the supply chain

SCP and SCE in the supply chain


Speed

Three factors fostering speed


Supply Chain Management Success Factors



Supply Chain Management Success Factors

SCM industry best practices include:

1)Make the sale to suppliers
2)Wean employees off traditional business practices
3)Ensure the SCM system supports the organizational goals
4)Deploy in incremental phases and measure and communicate success
5)Be future oriented

SCM Success Stories

Top reasons why more and more executives are turning to SCM to manage their extended enterprises


Numerous decision support systems (DSSs) are being built to assist decision makers in the design and operation of integrated supply chains

DSSs allow managers to examine performance and relationships over the supply chain and among:
1)Suppliers
2)Manufacturers
3)Distributors
4)Other factors that optimize supply chain performance

Chapter 9 : Enabling the Organization Decision Making

Decision-enabling, problem-solving, and opportunity-seizing systems



The reasons for the growth of decision-making information systems :

1)People need to analyze large amounts of information
2)People must make decisions quickly
3)People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions
4)People must protect the corporate asset of organizational information

DECISION MAKING

Model – a simplified representation or abstraction of reality
IT systems in an enterprise



Transaction Processing Systems

Moving up through the organizational pyramid users move from requiring transactional information to analytical information



1) Transaction processing system : the basic business system that serves the operational level (analysts) in an organization

2) Online transaction processing (OLTP): the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information

3) Online analytical processing (OLAP : The manipulation of information to create business intelligence in support of strategic decision making

Example of TPS
Types of TPS are used at your college:

Payroll system (Tracking hourly employees)
Accounts Payable system
Accounts Receivable system
Course registration system
Human resources systems (tracking vacation, sick days)

Decision Support Systems :

Decision support system (DSS) – models information to support managers and business professionals during the decision-making process

Three quantitative models used by DSSs include:
Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model
What-if analysis – checks the impact of a change in an assumption on the proposed solution
Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

What-if analysis


Goal-seeking analysis


Decision Support Systems

Interaction between a TPS and a DSS


Executive Information Systems:

Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization

Most EISs offering the following capabilities:
Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information
Drill-down – enables users to get details, and details of details, of information
Slice-and-dice – looks at information from different perspectives

Interaction between a TPS and an EIS


Digital dashboard – integrates information from multiple components and presents it in a unified display


Artificial Intelligence (AI):

Intelligent system :various commercial applications of artificial intelligence
Artificial intelligence (AI): simulates human intelligence such as the ability to reason and learn

Four most common categories of AI :



1)Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems

2)Neural Network – attempts to emulate the way the human brain works

3)Fuzzy logic – a mathematical method of handling imprecise or subjective information

4)Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem

5)Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

6)Multi-agent systems

7)Agent-based modeling

DATA MINING

Data-mining software includes many forms of AI such as neural networks and expert systems


Common forms of data-mining analysis capabilities include:
-Cluster analysis
-Association detection
-Statistical analysis

Cluster Analysis


Association Detection


Statistical Analysis