Managing Diverse IT Infrastructure Chapter 7 Managing Diverse IT Infrastructure

IT Operations Via Proprietary Technologies (pre-commercial Internet Era—1990s) Develop own communications infrastructure to reach customers Duplication in infrastructure investment Multiplicity of technologies confused partners and business customers Technologies did not interoperate well Complex software required to bridge between otherwise incompatible systems Company locked in to specific vendor technologies Little bargaining power with technology providers

IT Operations Via Public Infrastructure (open standards) Companies share communication infrastructure common to all partners and customers Interact via common interfaces (often, Web browsers) Seamless interaction reduces complexity Technologies interoperate well TCP/IP (Transmission Control Protocol/Internet Protocol) Software that bridges systems is simple, standardized, inexpensive (sometimes free)

Less locked in to specific vendor technologies More competition among vendors Lower prices, better performance Combine technologies from numerous vendors Services historically provided by IT departments acquired in real time from service providers As communication technologies improve and become more compatible and modular, firms can obtain smaller and smaller increments of service from vendors with less lead time and contact durations

Job of IT Manager Formidable, But Not a Losing Game Diverse IT infrastructure results from evolving service models Legacy systems perform vital functions and must be supported Accelerating trend toward heterogeneity in supported client devices Increasingly, cell phones and personal digital assistants (PDAs), not personal computers, are interaction tools with IT Variety of service delivery models and technologies creates complexity

New Ways of Thinking Needed to Manage Diverse, Distributed, and Complex Infrastructure and Technology Assets

Advantages of Incremental Outsourcing Managing the shortage of skilled IT workers Reduced time to market Early mover advantage requires rapid deployment Shift to 24 x 7 operations Requires large capital investment Skip startup difficulties Reliability proven with select providers

Advantages of Incremental Outsourcing, cont. Favorable cash flows profiles Large in-house up-front outlays yield delayed and uncertain benefits Subscription-based IT services result in faster payback flows (Figure 7.1) Cost reduction in IT value chain Business functionality delivered through centralized systems (ex., software upgrades; economies of scale)

Advantages of Incremental Outsourcing, cont. Applications globally accessible Location of PC irrelevant Virtual workspace available for traveling employees; benefit will increase as client devices (PDAs) continue to evolve Cost of moving employees eliminated

Evolution of the IT Services Value Chain (Figure 7.2) Independent software vendors (ISVs) develop web-based software Operates in vendor-owned security 24x7 facilities Aggregators (distributors) collect the offerings of ISVs and hosters into coherent packages they sell through resellers (retailers) that offer value-added services (tech support, consulting)

Supporting Players Network providers Outsourcing partners that specialize in back-office businesses such as billing or help desk operations Communication carrier providers Backbone providers Telephone companies DSL services Wireless providers Customer firms using Web services negotiate and acquire services in real time from a dynamic and fluid market for those services

Advantages of the IT Value Chain Specialization Economies of Scale and Scope Resellers focus on managing relationships with end customers Aggregators focus on combining offerings of different software vendors so they interoperate Hosters focus on reliable and secure operations of a type of system (e-mail)

What to Outsource See Figure 7.3, pg 459 Systems core; strategic; provide competitive advantage? Stakes are not so high with incremental outsourcing, versus outsourcing large segments of the IT function Mistakes reversible, less costly More experimentation is feasible Does have across the organization consequences

Levels of Hosting (pp. 461-62) Colocation hosting Shared hosting Dedicated hosting Simple dedicated hosting Complex dedicated hosting Custom dedicated hosting

Relations with Service Providers (see Table 7.2) Selecting a provider Providers priorities and direction Financial information Proposed plan for meeting your needs Mitigation of critical risks Availability Security Service guarantee Pricing

Relationship Management Information sharing Problem-tracking and customer relationship systems Incentives among partners—avoid political problems Service-level Agreement (SLA) Describe the specific conditions by which the service provider is held liable for service interruptions and the penalties that will be incurred (see Table 7.4) Designed with teeth Difficult to determine appropriate penalty levels Need shared objectives; help all receive a reasonable rate of return

Difficulties with Legacy Systems Technology problems Constraints result from inherent incompatibilities in older technologies Proprietary technologies not designed to converse easily with technologies of other vendors Residual process complexity Systems address problems that no longer exist, such as limited bandwidth or processing power

Nonstandard data definitions Local adaptation Developed for very focused business purposes within functional hierarchies (not enterprise systems or real-time) Nonstandard data definitions No compatibility of data definitions throughout organization

Key Issues in Managing Legacies How will new infrastructure exchange data with legacy systems? Will new infrastructure obtain needed real-time interaction with legacy systems? What works-arounds are necessary? Are they sustainable? What is the long-term strategy for renewing legacy systems?

Key Issues with Legacy Organizations and Cultures How will new infrastructures affect ways of working and communicating? Are anticipated changes acceptable? Should technology drive organizational and cultural change? Should organization and culture be protected from technology effects? What are criteria for deciding whether systems or process will change when conflict exists?

Managing IT Assets The variety of asset configurations in modern IT infrastructures makes certain business questions hard to answer. How are IT investments deployed across business lines or units? How are IT assets being used? Are they being used efficiently? Are they being deployed to maximum business advantage? How can deployment create more value?

Extremely difficult as assets are less and less centralized. Yet organizations over the last decade have focused on reclaiming management control over IT assets.

Total Cost of Ownership (TCO) IT services analyzed in terms of costs and benefits associated with service delivery to each client device Example: $250 per month to provide office productivity services to a PC desktop Includes costs shared with other clients Costs not necessarily accounted for as line items in budgets or accounting systems Difficult not to miss costs How to allocate among clients is difficult

Completing the equation on the benefit side is essential for evaluate return on the asset investment Need more than just services used and with what frequency if you evaluate true value added Usage information per client, per month can be used as a basis for comparison with service provider costs

Summary: Assessing Opportunities and Risks What services within our IT infrastructures are candidates for incremental outsourcing? What are the opportunities to convert large up-front IT investments into spread-over-time subscription services? Are service delivery partners technically and financially capable enough to support evolving IT service needs? Do we have well-defined processes for partner selection to ensure that we will continue to have highly capable partners?

Do we have detailed service-level agreements in place with our service providers? Have we made sure that the SLAs in our service delivery chains interlock and that incentives are aligned up and down the chain? What are our short-term and long-term strategies for dealing with legacy system issues? What systems should we replace, and when should we replace them?