SYSTEMS DEVELOPMENT AND PROJECT MANAGEMENT: CORPORATE RESPONSIBILITY

SYSTEMS DEVELOPMENT AND PROJECT MANAGEMENT: CORPORATE RESPONSIBILITY
CHAPTER NINE SYSTEMS DEVELOPMENT AND PROJECT MANAGEMENT: CORPORATE RESPONSIBILITY Death March: The Complete Software Developer’s Guide to Surviving “Mission Impossible” Projects, by Edward Yourdon Today, IT projects are expected to achieve the impossible, overcome numerous constraints, deal with elevated stress levels and imperfect working conditions. Yourdon takes direct aim at the projects that are “doomed to fail” presenting specific techniques for: Managing people and teams. Choosing the right processes. Making decisions about tools and technologies. Getting the flexibility you need to succeed. y software developer Edward Yourdon comes to the rescue.

CHAPTER OVERVIEW SECTION 9.1 – Developing Enterprise Applications
Developing Software The Systems Development Life Cycle Traditional Software Development Methodology: Waterfall Agile Software Development Methodologies Developing Successful Software SECTION 9.2 – Project Management Managing Software Development Projects Choosing Strategic Projects Understanding Project Planning Managing Projects Outsourcing Projects

SECTION 9.1 DEVELOPING ENTERPRISE APPLICATIONS
A Survival Guide for Working with Humans, by Gini Graham Scott To succeed in the workplace, good work relationships must be carefully developed and maintained. Although difficult people, back stabbers, whiners, know-it-alls, and others can make it hard to get through the workweek, many coping mechanisms can be put into place that can improve work relationships and improve productivity and communications. In A Survival Guide for Working with Humans, author and consultant Gini Graham Scott offers dozens of practical tools and examples that can help others resolve everyday conflicts and survive their jobs. A Survival Guide for Working with Humans offers an eye-opening approach for coping with the idiosyncrasies and difficulties other people can present in the workplace. By focusing on specific work issues and providing relevant vignettes that describe the work issues involved, as well as a list of instructions to follow in similar circumstances, Scott takes the struggle out of conflicts and replaces it with strategy.

LEARNING OUTCOMES Explain the business benefits associated with successful software development Describe the seven phases of the systems development life cycle Summarize the different software development methodologies A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

DEVELOPING SOFTWARE Software that is built correctly can transform as the organization and its business transforms Software that effectively meets employee needs will help an organization become more productive and enhance decision making Software that does not meet employee needs may have a damaging effect on productivity and can even cause a business to fail Discuss the famous Nike SCM failure Organizations must learn how to build and implement disruptive technologies, such as software for wireless devices, to remain competitive Software that is built correctly can support agile organizations and can transform as the organization and its business transforms Software that effectively meets employee needs will help an organization become more productive and enhance decision making Software that does not meet employee needs may have a damaging effect on productivity and can even cause a business to fail

DEVELOPING SOFTWARE As organizations’ reliance on software grows, so do the business-related consequences of software successes and failures including: Increase or decrease revenue Repair or damage to brand reputation Prevent or incur liabilities Increase or decrease productivity Increase or decrease revenue – Discuss Nike’s poorly designed SCM software that delayed orders, increased excess inventories, and caused third quarter earnings to fall 24% below expectations Repair or damage to brand reputation – H&R Block customers were furious when the company accidentally posted passwords and social security numbers to its Web site Prevent or incur liabilities – FoxMeyer sued SAP for $500 million for an ERP failure Increase or decrease productivity – Defective software accounts for 45% of computer downtime and cost U.S. businesses $100 billion in 2003 CLASSROOM EXERCISE SDLC Break your students into groups and ask them to find examples of each of the above not mentioned in the text Have your students present their findings to the class

THE SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC)
Systems development life cycle (SDLC) – The overall process for developing information systems from planning and analysis through implementation and maintenance CLASSROOM EXERCISE Around SDLC Break your students into groups and have them correlate the SDLC to building a house. This activity helps students understand the different types of activities that occur during each phase of the systems development life cycle Have your students present their answers to the entire class CLASSROOM VIDEO Windows Errors This is a short video clip spoofing Windows Error Reporting - scroll down on the website to view the video clip! It's old but funny!

Planning phase – Establishes a high-level plan of the intended project and determines project goals Analysis phase – Involves analyzing end- user business requirements and refining project goals into defined functions and operations of the intended system Business requirement – Specific business requests the system must meet to be successful CLASSROOM EXERCISE Space Needle Exercise Break your students into groups and give them equal materials from a Tinker Toy set, a Zome set, or a product of your choice. Give them each the following instructions and observe the groups as they build their prototypes. Review the IM for details on the project

Design phase – Establishes descriptions of the desired features and operations of the system including screen layouts, business rules, process diagrams, pseudo code, and other documentation Development phase – Involves taking all of the detailed design documents from the design phase and transforming them into the actual system CLASSROOM EXERCISE Campus of the Future A $61 million dorm development project at the University of Hawai'i-Manoa is being called an example of "the future of residence halls" at a local gathering of national higher education officials. As the demolition of Frear Hall began yesterday on the UH-Manoa campus, plans for its replacement received praise from some members of the Association of College and University Housing Officers, made up of campus housing officials from across the nation, for its sustainable and student-friendly design. For the rest of the article follow this link:

Testing phase – Involves bringing all the project pieces together into a special testing environment to eliminate errors and bugs, and verify that the system meets all of the business requirements defined in the analysis phase Implementation phase – Involves placing the system into production so users can begin to perform actual business operations with it CLASSROOM EXERCISE Space Needle Exercise Break your students into groups and give them equal materials from a Tinker Toy set, a Zome set, or a product of your choice. Give them each the following instructions and observe the groups as they build their prototypes. Read the IM for more details on the Space Needle Exercise

Maintenance phase – Involves performing changes, corrections, additions, and upgrades to ensure the system continues to meet its business goals

SOFTWARE DEVELOPMENT METHODOLOGIES
There are a number of different software development methodologies including Waterfall Agile Rapid application development (RAD) Extreme programming Rational unified process (RUP) Scrum Waterfall methodology – a sequential, activity-based process in which each phase in the SDLC is performed sequentially from planning through implementation and maintenance Rapid application development methodology (RAD) – emphasizes extensive user involvement in the rapid and evolutionary construction of working prototypes of a system to accelerate the systems development process Extreme programming (XP) methodology – breaks a project into tiny phases, and developers cannot continue on to the next phase until the first phase is complete Agile methodology – a form of XP, aims for customer satisfaction through early and continuous delivery of useful software components CLASSROOM VIDEO If Programmers Made Planes Excellent video: If Programmers Made Planes

WATERFALL METHODOLOGY
Waterfall methodology – A sequence of phases in which the output of each phase becomes the input for the next The waterfall methodology is one of the oldest software development methods and has been around for over 30 years The success rate for software development projects that follow this approach is only about 10 percent, or 1 in 10 The biggest problem with the waterfall methodology is that it assumes users can specify all business requirements in advance Ask your students to define another issue with the waterfall methodology Ans: It also assumes that business requirements do not change over time Stress to your students that if they ever find themselves on a software development project that is using the waterfall methodology they should do everything they can to change the methodology CLASSROOM VIDEO Testing – or perhaps not! I love to show this clip prior to the SDLC class. Makes you wonder how much testing the manufacturer did on this vehicle.

AGILE METHODOLOGY Iterative development – Consists of a series of tiny projects Agile methodology – Aims for customer satisfaction through early and continuous delivery of useful software components developed by an iterative process using the bare minimum requirements The Aglie Alliance is a group of software developers whose mission is to improve software development processes and whose manifesto includes the following: Satisfy the customer through early and continuous delivery of valuable software Welcome changing requirements, even late in development Business people and developers must work together daily throughout the project Build projects around motivated individuals The best architectures, requirements, and designs emerge from self-organizing teams At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly

RAPID APPLICATION DEVELOPMENT METHODOLOGY (RAD)
Rapid application development methodology– Emphasizes extensive user involvement in the rapid and evolutionary construction of working prototypes of a system to accelerate the systems development process Prototype – A smaller-scale representation or working model of the users’ requirements or a proposed design for an information system The prototype is an essential part of the analysis phase when using a RAD methodology RAD is a more popular route for system development projects The fundamentals of RAD include: Focus initially on creating a prototype that looks and acts like the desired system Actively involve system users in the analysis, design, and development phases Accelerate collecting the business requirements through an interactive and iterative construction approach

EXTREME PROGRAMMING METHODOLOGY
Extreme programming (XP) methodology – Breaks a project into tiny phases, and developers cannot continue on to the next phase until the first phase is complete The primary difference between the waterfall and XP methodologies is that XP divides its phases into iterations with user feedback CLASSROOM DEBATE Open-Source on Company Time This article offers an interesting dilemma - how do you handle employees that want to develop open-source code to help with a business problem, and then post it back to the community? The Enterprise Committer: When Your Employee Develops Open-Source Code on the Company Payroll

RATIONAL UNIFIED PROCESS (RUP) METHODOLOGY
Rational Unified Process (RUP) – Provides a framework for breaking down the development of software into four gates Gate One: Inception Gate Two: Elaboration Gate Three: Construction Gate Four: Transition Because RUP is an iterative methodology, the user can reject the product and force the developers to go back to gate one. Approximately 500,000 developers have used RUP in software projects of varying sizes in the 20 years it’s been available, according to IBM. RUP helps developers avoid reinventing the wheel and focuses on rapidly adding or removing reusable chunks of processes addressing common problems.

SCRUM METHODOLOGY SCRUM – Uses small teams to produce small pieces of deliverable software using sprints, or 30-day intervals, to achieve an appointed goal Under this methodology, each day ends or begins with a stand-up meeting to monitor and control the development effort Primavera Systems, Inc., a software solutions company was finding it increasingly difficult to use the traditional waterfall methodology for development so it moved to an agile methodology. Scrum’s insistence on delivering complete increments of business value in 30-day learning cycles helped the teams learn rapidly. It forced teams to test and integrate experiments and encouraged them to release them into production. Primavera’s shift resulted in highly satisfied customers and a highly motivated, energetic development environment. Dick Faris, CTO of Primavera, said, “Agile programming is very different and new. It is a different feel to the way programming happens. Instead of mindlessly cranking out code, the process is one of team dialogue, negotiation around priorities and time and talents. The entire company commits to a 30-day sprint and delivery of finished, tested software. Maybe it is just one specific piece of functionality but it’s the real thing, including delivery and client review against needs and requirements. Those needs and requirements, by the way, change. That is the strength we saw in the Scrum process.”

DEVELOPING SUCCESSFUL SOFTWARE
Primary reasons for project failure Unclear or missing business requirements Skipping SDLC phases Failure to manage project scope Scope creep Feature creep Failure to manage project plan Changing technology Scope creep – occurs when the scope increases Feature creep – occurs when extra features are added Provide an example of scope creep We added a new type of discount to our marketing plan Provide an example of feature creep We would like a new logo placed on the top corner of every screen and it should play a song when clicked

DEVELOPING SUCCESSFUL SOFTWARE
The later in the SDLC an error is found the more expensive it is to fix! Explain to your students that the cost of finding errors grows exponentially the later the error is found in the systems development life cycle An error found during the analysis and design phase is relatively inexpensive to fix All that is typically required is a change to a Word document However, exactly the same error found during the testing or implementation phase is going to cost the organization an enormous amount to fix because it has to change the actual system Find errors early: the later in the SDLC an error is found - the more expensive it is to fix

SECTION 9.2 PROJECT MANAGEMENT

LEARNING OUTCOMES Explain project management, the triple constraint, and project stakeholder and executive sponsor’s roles in choosing strategic projects Explain how project stakeholder’s choose strategic projects Describe the two primary diagrams most frequently used in project planning A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

LEARNING OUTCOMES Identify the three primary areas a project manager must focus on managing to ensure success Explain the three different types of outsourcing along with their benefits and challenges A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

MANAGING SOFTWARE DEVELOPMENT PROJECTS
Analysts predict investment in MIS projects worldwide is over $1 trillion 70 percent will be lost due to failed projects The consequences of failed projects include Damaged brand Lost goodwill Dissolution of partnerships Lost investment opportunities Low morale Analysts predict investment in IT projects worldwide through 2010 will be over $1 trillion. This is a staggering amount, and even more staggering is that nearly 70 percent of it will be merely washed down the drain as a result of failed projects! In addition to lost earnings, companies from Nestlé to Nike have experienced additional consequences of failed projects—a damaged brand, lost goodwill, the dissolution of partnerships, lost investment opportunities, and the effects of low morale. According to the Standish Group, just 29 percent of IT projects were completed on time, within budget, and with features and functions originally specified by the customer to deliver business value. With so many skilled and knowledgeable IT professionals at the helm of IT projects, how can this happen? Every day, organizations adopt projects that do not align with mission-critical initiatives; they overcommit financial and human capital; they sign off on low-value projects that consume valuable and scarce resources; and they agree to support projects that are poorly defined from requirements to planning.

The Project Management Institute (PMI) develops procedures and concepts necessary to support the profession of project management ( and has three areas of focus The distinguishing characteristics of a practicing professional (ethics) The content and structure of the profession’s body of knowledge (standards) Recognition of professional attainment (accreditation) Ask your students how many of them are currently involved in projects or are project mangers Ask them which types of technologies they use to manage projects Microsoft Project Primavera Excel

Project – Temporary activities undertaken to create a unique product or service Project management – The application of knowledge, skills, tools, and techniques to project activities to meet project requirements Project manager – An individual who is an expert in project planning and management, defines and develops the project plan, and tracks the plan to ensure the project is completed on time and on budget Project management offers a strategic framework for coordinating the numerous activities associated with organizational projects Have you ever worked on a project? What worked well What went wrong What could you have done to ensure the success of the project? Project management

Project deliverable – Any measurable, tangible, verifiable outcome, result, or item that is produced to complete a project or part of a project Project milestone – Represents key dates when a certain group of activities must be performed Project management office (PMO) – An internal department that oversees all organizational projects What is the relationship between project deliverables, project milestones, and project managers? Project deliverables are usually project milestones Project milestones and project deliverables defined and monitored by the project manager

THE TRIPLE CONSTRAINT Project Management Interdependent Variables
These three variables are interdependent You cannot change one without changing the others For example, decreasing a project’s timeframe means either increasing the cost of the project or decreasing the scope of the project to meet the new deadline Increasing a project’s scope means either increasing the project’s timeframe or increasing the project’s cost – or both – to meet the increased scope changes Project management is the science of making intelligent trade-offs among time, cost, and scope

THE TRIPLE CONSTRAINT Benjamin Franklin’s timeless advice - by failing to prepare, you prepare to fail - applies to software development projects The Hackett Group analyzed 2,000 companies and discovered Three in 10 major IT projects fail 21 percent of the companies state that they cannot adjust rapidly to market changes One in four validates a business case for IT projects after completion A successful project is typically on time, within budget, meets the business’s requirements, and fulfills the customer’s needs. The Hackett Group, an Atlanta-based consultancy, analyzed its client database, which includes 2,000 companies, including 81 Fortune 100 companies, and discovered: Three in 10 major IT projects fail 21 percent of the companies state that they cannot adjust rapidly to market changes One in four validates a business case for IT projects after completion

PROJECT PARTICIPANTS Project stakeholder - Individuals and organizations actively involved in the project or whose interests might be affected as a result of project execution or project completion Executive sponsor - The person or group who provides the financial resources for the project That person is the executive sponsor. PMI defines the executive sponsor as the person or group who provides the financial resources for the project. However, research has shown that the leadership strength of the executive sponsor has more do to with the success or failure of a project than any other critical success factor. In fact, the executive sponsor should be accountable to the project team for much more than the financial backing. The executive sponsor communicates up the chain on behalf of the project; he or she supports the project manager by championing the project to others sharing the vision and benefit of the successfully completed project; and the executive sponsor demonstrates the commitment and accountability necessary to survive a project! If a team has a hands-off sponsor who merely reviews invoices and inquires as to the status of a project, then that project surely is in trouble from the start Ask your students why an executive sponsor is important to a project? Who would be a good executive sponsor? How can you recruit individuals with power in the organization to support your projects?

Project Management Role
PROJECT PARTICIPANTS Project Management Role Project managers must take all of the activities above and ensure they flow smoothly to develop and deliver a successful project Which activity listed above is the most important? Which activity listed above is the least important?

CHOOSING STRATEGIC PROJECTS
Three common techniques for selecting projects Focus on organizational goals Categorize projects Perform a financial analysis Given the following list of projects, how would you prioritize them? Implementation of a(n): Accounting system Marketing system Sales system Logistics system Knowledge management system Each of the above projects would need to be prioritized based on the business goals, which could change for each business Which technique is the most important when choosing strategic projects? Techniques for Choosing Strategic Projects Focus on organizational goals—Managers are finding tremendous value in choosing projects that align with the organization’s goals. Projects that address organizational goals tend to have a higher success rate since they are important to the entire organization. Categorize projects—There are various categories that an organization can group projects into to determine a project’s priority. One type of categorization includes problem, opportunity, and directives. Problems are undesirable situations that prevent an organization from achieving its goals. Opportunities are chances to improve the organization. Directives are new requirements imposed by management, government, or some other external influence. It is often easier to obtain approval for projects that address problems or directives because the organization must respond to these categories to avoid financial losses. Perform a financial analysis—A number of different financial analysis techniques can be performed to help determine a project’s priority. A few of these include net present value, return on investment, and payback analysis. These financial analysis techniques help determine the organization’s financial expectations for the project

UNDERSTANDING PROJECT PLANNING
After selecting strategic projects and identifying a project manager the next critical component is the project plan Building a project plan involves two key components Project charter Project plan No one would think of building an office complex by turning loose 100 different construction teams to build 100 different rooms, with no single blueprint or agreed-upon vision of the completed structure. Yet this is precisely the situation in which many large organizations find themselves when managing information technology projects. Organizations routinely overschedule their resources (human and otherwise), develop redundant projects, and damage profitability by investing in nonstrategic efforts that do not contribute to the organization’s bottom line. Project management offers a strategic framework for coordinating the numerous activities associated with organizational projects.

Project charter - A document issued by the project initiator or sponsor that formally authorizes the existence of a project and provides the project manager with the authority to apply organizational resources to project activities and includes Project scope statement Project objectives Project constraints Projects assumptions Ask your student to define the scope to build a basic calculator The calculator must have numbers between 0 and 9 and be able to add, multiply, divide, and subtract Notice that the scope is the 30,000 foot view – it doesn’t define the style, color, layout, materials, etc. Project scope defines the work that must be completed to deliver a product with the specified features and functions. A project scope statement describes the business need, justification, requirements, and current boundaries for the project. The business need can be characterized by the problem the results of the project will satisfy. This is important in linking the project with the organization’s overall business goals. The project scope statement includes constraints, assumptions, and requirements—all components necessary for developing accurate cost estimates. Project objectives - quantifiable criteria that must be met for the project to be considered a success. Project constraints – specific factors that can limit options. They include: budget, delivery dates, available skilled resources, and organizational policies. Project assumptions - factors that are considered to be true, real, or certain without proof or demonstration. Examples include hours in a workweek or time of year the work will be performed.

SMART criteria are useful reminders on how to ensure that the project has created understandable and measurable objectives Ask your students what happens when objectives are not SMART If an objective is not specific then it is open to interpretation If an objective is not measurable then there is no way to determine if the project is on track If an objective is not agreed upon then chances are high the project will fail If an objective is not realistic then chances are high that the project will fail If an objective does not include a time frame then there is no way to determine if the project is on track Why is the following not SMART? I will work hard this semester to achieve my goals? Does not state what the goals are Does not state how to measure working hard Might not be realistic depending on the goals Does have a time frame of a semester

Project plan – A formal, approved document that manages and controls project execution A well-defined project plan should be Easy to understand and read Communicated to all key participants Appropriate to the project’s size, complexity, and criticality Prepared by the team, rather than by the individual project manager A project plan should be prepared by the team, rather than by the individual project manager Ask your students why this is important How would they feel if a project manager handed them a plan? Would they work hard to meet the deadlines? Probably not because the timeframes required to finish the task were forced upon them. They did not participate in the initial estimates and do not feel any ownership on the project. How would they feel about a project plan that they created along with the project manger? Would they work hard to meet the deadline? Probably, because they defined the timeframes they required to finish the tasks.

Two primary diagrams used in project planning include PERT and Gantt charts PERT chart Dependency Critical path Gantt chart Dependency – a logical relationship between the project tasks, or between a project task and a milestone Critical path – a path from the start to the finish that passes through all the tasks that are critical to completing the project in the shortest amount of time Ask your students why do you need to create dependencies? Dependencies inform the project manager of tasks associated with or affected by another task PERT (Program Evaluation and Review Technique) chart – is a graphical network model that depicts a project’s tasks and the relationships between those tasks (Dependencies and Critical paths are found in PERT charts) Gantt chart – a simple bar chart that depicts project tasks against a calendar

PERT Chart EXPERT – PERT Chart Example The red boxes denote the critical path Why is the critical path important? It informs a project manager of the shortest timeframe the project could possibly be completed in the project

MS Project – Gantt Chart Example This Gantt chart displays simple start and finish dates and resource names A Gantt chart is one of the most common tools used by project managers MS Project offers many additional tracking components such as Actual Start date, Budget, and Percent Complete When reviewing the Gantt chart can you point out the three interdependent project management tasks? Resources Timeframe Scope – tasks CLASSROOM EXERCISE Developing a Project Plan Break your students into groups and ask them to develop a project plan (Gantt chart) for building a small piece of software that tracks student grades for a single course. If they do not have Microsoft Project, have them use Excel or the project features in Visio. Be sure that their project plans list all phases in the SDLC and that they represent an incremental development methodology, not a waterfall methodology. Be sure the tasks under each phase are discussed in detail.

MANAGING PROJECTS Managing a project includes Identifying requirements
Establishing clear and achievable objectives. Balancing the competing demands of quality, scope, time, and cost Adapting the specifications, plans, and approach to the different concerns and expectations of the various stakeholders A project manager can, of course, bring enormous benefits to an organization such as reduced project expense, high company morale, and quicker time to market. A competent project manager sets the correct expectations early in the project with achievable milestones Ask your students to provide some examples of changes they have dealt with in their professional lives Change at your school Change to your major Change at your job How hard was it to deal with the change? What tools and resources did you use to deal with the change? What could you have done different to make dealing with the change easier? Would a project plan have helped you deal with the change?

MANAGING PROJECTS A project manager must focus on managing three primary areas to ensure success People Communications Change Managing People Managing people is one of the hardest and most critical efforts a project manager undertakes. Resolving conflicts within the team and balancing the needs of the project with the personal and professional needs of the team are two of the challenges facing project managers. Managing Communications While many companies develop unique project management frameworks based on familiar project management standards, all of them agree that communication is the key to excellent project management. This is quite easy to state, but not so easy to accomplish! Managing Change Change, whether it comes in the form of a crisis, a market shift, or a technological development, is challenging for all organizations. Successful organizations and successful people learn to anticipate and react appropriately to change. Change management – A set of techniques that aid in evolution, composition, and policy management of the design and implementation of a system CLASSROOM VIDEO Dealing with Difficult People This is a fantastic site. It offers numerous videos and specific details on the best way to use the videos to get your point across - without making anyone cross. I've used some of these when dealing with difficult students and it worked perfect. Funny videos can be more than just a bit of fun. Funny videos can sometimes be used in the workplace, and in team meetings or workshops, to set a relaxed atmosphere/get people's attention, make memorable/useful points, or diffuse tense situations. Funny videos are especially useful when you have some difficult people to deal with, who are unaware of the impact they are having on everyone else. Humor, used appropriately, can bring the issue into their awareness in an acceptable way, and be more effective than confronting the behavior directly.

OUTSOURCING PROJECTS In-sourcing (in-house- development) –Uses the professional expertise within an organization to develop and maintain its 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 Discuss the Allied Office Products example in the text Insourcing has been instrumental in creating a viable supply of IT professionals and in fact in creating a better quality workforce combining both technical and business skills This is an interesting lecture given by Tom Friedman at MIT on his book The World is Flat and the power of outsourcing CLASSROOM EXERCISE Mail Bombing If you are discussing outsourcing remember to discuss how it affects the employees and the culture. Here is a scary article Outsourcing May Not Be Popular, But Letter Bombs?

OUTSOURCING PROJECTS Factors driving outsourcing growth include
Core competencies Financial savings Rapid growth The Internet and globalization CLASSROOM EXERCISE The Outsourcing Debate Print and cut out the below companies. Assign the companies to your students. Each company has an argument for or against outsourcing. Have your student’s debate for or against outsourcing. Team size can vary. Review the IM for additional details. Core competencies. Many companies have recently begun to consider outsourcing as a means to fuel revenue growth rather than just a cost-cutting measure. Outsourcing enables an organization to maintain an up-to-date technology infrastructure while freeing it to focus on revenue growth goals by reinvesting cash and human capital in areas offering the greatest return on investment. Financial savings. It is typically cheaper to hire workers in China and India than similar workers in the United States. Technology is advancing at such an accelerated rate that companies often lack the resources, workforce, or expertise to keep up. It is close to impossible for an IT department to maintain a “best-of breed” status, especially for small and medium-sized enterprises where cost is a critical factor. Rapid growth. A company’s sustainability depends on both speed to market and ability to react quickly to changes in market conditions. By taking advantage of outsourcing, an organization is able to acquire best-practices process expertise. This facilitates the design, building, training, and deployment of business processes or functions. Industry changes. High levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies. The significant increase in merger and acquisition activity created a sudden need to integrate multiple core and noncore business functions into one business, while the deregulation of the utilities and telecom industries created a need to ensure compliance with government rules and regulations. Companies in either situation turned to outsourcing so they could better focus on industry changes at hand. The Internet. The pervasive nature of the Internet as an effective sales channel has allowed clients to become more comfortable with outsourcing. Barriers to entry, such as lack of capital, are dramatically reduced in the world of ebusiness due to the Internet. New competitors enter the market daily. Globalization. As markets open worldwide, competition heats up. Companies may engage outsourcing service providers to deliver international services

OUTSOURCING PROJECTS Onshore outsourcing Nearshore outsourcing
Offshore outsourcing 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 Discuss the three different types of outsourcing options and determine which one would be ideal for each of the following: Production of a new cereal Development of a new CRM system Development and maintenance of a KM system Production of a new sneaker Deployment of a logistics system

OUTSOURCING PROJECTS Big selling point for offshore outsourcing “inexpensive good work” Does outsourcing always guarantee inexpensive good work? CLASSROOM EXERCISE Categories In a group research the Internet and find examples of outsourcing arrangements that have gone bad Was the arrangement onshore, nearshore, or offshore If offshore, was the arrangement a leader, up-and-comer or a rookie?

OUTSOURCING PROJECTS Most organizations outsource their noncore business functions, such as payroll and IT For each industry, determine the benefits and challenges of outsourcing CLASSROOM EXERCISE Outsourcing Issues There are many issues and obstacles to outsourcing such as time zone differences and accents. Break your students into groups and ask them to research the Internet to find examples of companies that have experiences issues with outsourcing. Ask your students to present their findings to the class and offer a small prize to the team that finds the most outrageous example. There is also a great video by Thomas Friedman on his famous book The World is Flat. The video can be found at The video lasts around 40 minutes.

OUTSOURCING BENEFITS Outsourcing benefits include
Increased quality and efficiency of business processes Reduced operating expenses for head count and exposure to risk for large capital investments Access to outsourcing service provider’s expertise, economies of scale, best practices, and advanced technologies Increased flexibility for faster response to market changes and less time to market for new products or services Are there any additional outsourcing benefits not mentioned in the text? Outsourcing Benefits The many benefits associated with outsourcing include: Increased quality and efficiency of a process, service, or function. Reduced operating expenses. Resources focused on core profit-generating competencies. Reduced exposure to risks involved with large capital investments. Access to outsourcing service provider’s economies of scale. Access to outsourcing services provider’s expertise and best-in-class practices. Access to advanced technologies. Increased flexibility with the ability to respond quickly to changing market demands. No costly outlay of capital funds. Reduced head count and associated overhead expense. Reduced frustration and expense related to hiring and retaining employees in an exceptionally tight job market. Reduced time to market for products or service

OUTSOURCING CHALLENGES
Outsourcing challenges include Length of contract Difficulties in getting out of a contract Problems in foreseeing future needs Problems in reforming an internal IT department after the contract is finished Threat to competitive advantage Loss of confidentiality Contract length – Most outsourcing contracts span several years and cause the issues discussed above 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

LEARNING OUTCOME REVIEW
Now that you have finished the chapter please review the learning outcomes in your text Be sure to review the learning outcomes included in the end-of-chapter material

SYSTEMS DEVELOPMENT AND PROJECT MANAGEMENT: CORPORATE RESPONSIBILITY

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