CHAPTER 15

CHAPTER 15

CHAPTER 15 : OUTSOURCING IN THE 21^ST 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.

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.

Factors driving outsourcing growth :

-Core competencies – many companies have recently begun to consider outsourcing as a means to fuel revenue growth rather than just a cost – cutting measure.

-Financial savings – it is typically cheaper to hire workers in China and India than similar workers in the United States.

-Rapid growth – an organization is able to acquire best practices process expertise. This facilitates the design , building, training and deployment of business processes or funtions.

-Industry changes – high levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies.

-The Internet – the pervasive nature of the internet as an effective sales channel has allowed clients to become more comfortable with outsourcing.

-Globalization – as markets open worldwide, competition heats up. Companies may engage outsourcing service providers to deliver international services.

Outsourcing Benefits :

-Increase quality and efficiency

-Reduced operating expenses

-Outsourcing non- core processes

-Reduce exposure to risk

-Economies of scale , expertise, and best practices

-Access to advanced technologies

-Increased flexibility

-Avoid costly outlay of capital funds

-Reduced headcount and associated overhead expenses

-Reduced time to market to products or services

Outsourcing Challenges :

-Contract length – most outsourcing contracts span several years and cause the issues discussed above.

1.Difficulties in getting out of a contract

2.Problems in foreseeing future needs

3.Problems in reforming an internat IT department after the contract is finished

-Competitive edge – effective and innovative use of IT can be lost when using an outsourcing service provider.

-Confidentiality – confidential information might be breached by an outsourcing service provider , especially one that provides services to competitors.

-Scope definition – scope creep is a common problem with outsourcing agreements.

Chapter 14 – Creating Collaborative Partnerships

Chapter 14 – Creating Collaborative Partnerships

Teams, Partnerships, and Alliances

Organizations create and use teams, partnerships and alliances to;

• Undertake new initiatives
• Address both minor and major problems
• 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 from alliance and partnerships with other organizations based on their core competency

• Core competency – An organization’s key strength, a business function that it does better than any of its competitors
• 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 partnerships – 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 alliance and partnerships

Collaboration System

• 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

• Unstructured collaboration (information collaboration) – includes document exchange, shared whiteboards, discussion forums, and email.
• Structured collaboration (process collaboration) – involves shared participation in business processes such as workflow in which knowledge is hard-coded as rules

Collaborative business functions

Collaboration systems include;

• Knowledge management systems
• Content management systems
• Workflow management systems
• 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;

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

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

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

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 assets management system (DAM)
• Web content management system (WCM)

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 allows 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 email 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

Web conferencing
Video conference – A set of interactive telecommunication technologies that allow two or more locations to interact via two-way video and audio transmissions simultaneously



Instant message

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

• Instant messaging – types 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

Chapter 13 E-Business

Chapter 13 E-Business

E Business

• The internet is a powerful channel that presents new opportunities for organization to;

• Touch customers
• Enrich products and services with information
• Reduce costs

• How do ecommerce and e business differ?

• Ecommerce – 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 Modal

•  E business model – An approach to conducting electronic business on the Internet

 




Business-to-Business (B2B)


Electronic marketplace (E market place) – 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 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

• Communities of interest – People interact with each other on specific topics, such as golfing and stamps 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-to-one with Michael Jordan

E Business benefits and challenge

• E business benefits include;

• Highly accessible
• Increased customer loyalty
• Improved information content
• Increased convenience
• Increased global reach
• Decreased cost

• E business challenges include;

• Protecting consumers
• Leveraging existing systems
• Increased liability
• Providing security

Chapter 12 - Integrating the Organization from End to End - Enterprise Resource Planning

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 

ERP systems automate business processes. For example, order fulfillment :

• When a CSR takes an order from a customer, he or she has all the information necessary to complete the order (the customer’s credit rating and order history, the company’s inventory levels, and the delivery schedule).
• Since the company is using an ERP, everyone else in the company will automatically see the information that the CSR types into the ERP system.
• When one department finishes with the order, it is automatically routed via the ERP system to the next department.
• To determine where an order is at any point in time, a user only needs to login to the ERP system and track it down.

Bringing the Organization Together

ERP – The organization before ERP

• In most organizations, information has traditionally been isolated within specific departments, whether on an individual database, in a file cabinet, or on an employee’s PC.

Disadvantages :

• Update issues
• Redundancy
• Inaccurate information across databases
• Different formats of information in the different databases
• Inability to access other department information and not being provided with a 360 degree view of the organization
• Different customer information in different databases
• Customer contact from multiple departments with different messages

ERP - bringing the organization together

• ERP enables employees across the organization to share information across a single, centralized database. 

Disadvantages :

• Not as flexible and far more difficult to change
• Might not meet all department needs as well as an individual specific system
• Multiple access levels increases security issues
• Ethical dilemmas from accessing different department information – such as payroll

The Evolution of ERP

Integrating SCM, CRM, and ERP

• SCM, CRM, and ERP are the backbone of e-business.
• Integration of these applications is the key to success for many companies.
• Integration allows the unlocking of information to make it available to any user, anywhere, anytime. 
• Many ERP vendors offer SCM and CRM components.
• These modules are typically not as functional or flexible as the modules offered by industry leaders who specialize in SCM and CRM.
• 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
• Middleware – several different types of software which sit in the middle of and provide connectivity between two or more software applications.
• Enterprise application integration (EAI) middleware – packages together commonly used functionality which reduced the time necessary to develop solutions that integrate applications from multiple vendors.
• Data points where SCM, CRM and ERP integrate.

Enterprise Resource Planning (ERP)

ERP system must integrate various organization processes and be :c

• Flexible – must be able to quickly respond to the changing needs of the organization
• 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. 
• Comprehensive – must be able to support a variety of organizational functions for a wide range of businesses.
• 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

Chapter 11

 Building a Customer-Centric Organization – Customer Relationship Management

Customer relationship management (CRM)

CRM enables an organization to;

•  Provide better customer service
•   Make call centers more efficient
•   Cross sell products more effectively
•   Helps sales staff close deals faster
•   Simplify marketing and sales processes
•   Discover new customers
•  Increase customer revenues

Recency, Frequency, and Monetary Value

An organization can find its most valuable customers by using a formula that industry insiders call FRM;

• How recently a customer purchased items (recency)
• How frequently a customer purchased items (frequency)
• How much a customer speeds on each purchased (monetary value)

The Evolution of CRM

• CRM reporting technologies help organizations identify their customers across other applications. 
• CRM analysis technologies help organizations segment their customers into categories such as best and worst customers. 
• CRM predicting technologies help organizations predict customer behavior, such as which customers are at risk of leaving. 

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 system that do not deal directly with the customers

Customer Relationship Management Success Factors

CRM success factors include;

• Clearly communicate the CRM strategy
• Define information needs and flows
• Build an integrated view of the customer
• Implement in iterations
• Scalability for organizational growth

Chapter 10 – Extending the Organization – Supply Chain Management

Chapter 10 – Extending the Organization – Supply Chain Management

BASICS OF SUPPLY CHAIN

SCM – the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

The supply chain has three main links.

1.       Materials flows from suppliers and their upstream suppliers at all levels

2.       Transformation of materials into semi-finished products, or the organization’s own production processes

3.       Distribution of products to customers and their downstream customers at all levels

INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN

 Information technology’s primary role in SCM is creating the integrations or tight process and information linkages between functions within a firm such as marketing, sales, finance, manufacturing, and distribution – and between firms, which allow the smooth, synchronized flow of both information and product between customers, suppliers and transportation providers across the supply chain

VISIBILITY 

·         Supply Chain Visibility is the ability to view all areas up and down the supply chain. Changing supply chains requires a comprehensive strategy buoyed by information technology. Organizations can use technology tools that help them integrate upstream and downstream, with both customers and suppliers.

·         The bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain.

CUSTOMER BEHAVIOR

·         The behavior of customers has changed the way businesses complete. Customers will leave if a company does not continually meet their expectations. They are more demanding because they have information readily available, they know exactly what they want, and they know when and how they want it.

·         Demand planning software generates demand forecasts using statistical tools and forecasting techniques. Companies can respond faster and more effectively to consumer demands through supply chain enhancements such as demand planning software.

·         Once an organization understands customer demand and its effect on the supply chain it can begin to estimate the impact that its supply chain will have on its customers and ultimately the organization’s performance.

COMPETITION

·         Supply chain planning (SCP) software uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory. SCP depends entirely on information for its accuracy.

·         Supply chain execution (SCE) software automates the different steps and stages of the supply chain. This could be as simple as electronically routing orders from a manufacturer to a supplier.

SPEED 

·         These systems raise the accuracy, frequency and speed of communication between suppliers and customers, as well as between internal users.

·         Another aspect of speed is the company’s ability to satisfy continually changing customer requirements efficiently, accurately and quickly.

SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS

·         To succeed in today’s competitive markets, companies must align their supply chain with the demands of the markets they serve.

·         Supply chain performance is now a distinct competitive advantage for companies proficient in the SCM area.

MAKE THE SALE TO SUPPLIERS

The hardest part of any SCM system is its complexity because a large part of the system extends beyond the company’s walls. Not only will the people in the organization need to change the way they work, but also the people from each supplier that is added to the network must change. Be sure suppliers are on board with the benefits that the SCM system will provide.

WEAN EMPLOYEES OFF TRADITIONAL BUSINESS PRACTICES

Operations people typically deal with phone calls, faxes and orders scrawled on paper and will most likely want to keep it that way. Unfortunately, an organization cannot disconnect the telephones and fax machines just because it is implementing a supply chain management system. If the organization cannot convince people that using the software will be worth their time, they will easily find ways to work around it, which will quickly decrease the changes of success for the SCM system.

ENSURE THE SCM SYSTEM SUPPORTS THE ORGANIZATION GOALS

It is important to select SCM software that gives organizations an advantage in the areas most crucial to their business success. If the organizational goals support highly efficient strategies, be sure the supply chain design has the same goals.

DEPLOY IN INCREMENTAL PHASE AND MEASURE AND COMMUNICATE SUCCESS

Design the development of the SCM system in incremental phases. For instance, instead of installing a complete supply chain management system across the company and all suppliers at once, start by getting it working with a few key suppliers, and then move on to the other suppliers. Along the way, make sure each step is adding value through improvements in the supply chain’s performance. While a big-picture perspective is vital to SCM success, the incremental approach means the SCM system should be implemented in digestible bites and also measured for success one step at a time.

BE FUTURE ORIENTED 

The supply chain design must anticipate the future state of the business. Because the SCM system likely will last for many more years than originally planned, managers need to explore how flexible the systems will be when (not if) changes are required in the future. The key is to be certain that the software will meet future needs, not only current needs. 

Chapter 9 – Enabling the Organization-Decision Making

Chapter 9 – Enabling the Organization-Decision Making

Decision Making 

Ø  Reasons for Growth of Decision Making Information System

-          People need to analyze large amounts of information – Improvements in technology itself, innovations in communication, and globalization have resulted in a dramatic increase in the alternatives and dimensions people need to consider when making a decision or appraising an opportunity

-          People must make decisions quickly – Time is of the essence and people simply do not have time to sift through all the information manually

-          People must apply sophisticated analysis techniques, such as modeling and forecasting, to  make good decisions – Information systems substantially reduce the time required to perform these sophisticated analysis techniques

-          People must protect the corporate asset of organizational information – Information systems offer the security required to ensure organizational information remains safe.

Ø  Model – A simplified representation or abstraction of reality

Ø  IT systems in an enterprise

Transaction Processing System

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

Ø  Transaction processing system – the basic business system that serves the operational level (analysis) in an organization

Ø  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

Ø  Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

Decision support systems

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

Ø  Three quantitative models used by DSSs include;

1.       Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model

2.       What-if analysis – checks the impact of a change in an assumption on the proposed solution

3.       Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of outputs

What-if analysis

Goal-seeking analysis

Executive information system 

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

Ø  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 information

-          Slice-and-dice – looks at information from different perspectives

Ø  Interaction between a TPS and an EIS

Ø  Interaction between a TPS and a DSS

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

Artificial intelligence (AI)

Ø  The ultimate goal of AI is the ability to build a system that can mimic human intelligence

Ø  Intelligent system – various commercial applications of artificial intelligence

Ø  Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

Ø  Four most common categories of AI include;

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

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

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

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

Data Mining

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