Chapter 8 Information Systems Management in Practice 8th Edition Managing Operations Chapter 8 Information Systems Management in Practice 8th Edition

Chapter 8 Introduction What Are Operations? Why Talk About Operations? Solving Operational Problems: A Portfolio Approach Operational Measures The Importance of Good Management What’s New in Operations?

Chapter 8 cont’d Outsourcing Functions Conclusion The Driving Forces Behind Outsourcing Changing Customer-Vendor Relationships Outsourcing’s History Managing Outsourcing Offshoring Insourcing Conclusion

What Are Operations?

Solving Operational Problems: A Portfolio Approach Typical Operations Problems: Slow response times Down networks Data unavailability Three Strategies to Improve Operations Buy more equipment Regulate and prioritize computer workload and activities Implement operational measurements, set standards and benchmarks

Operational Measures External Measures Internal Measures System uptime (downtime) Response and turnaround time Program failures Internal Measures Computer usage as percentage of capacity Disk storage used Job queue length

What’s New in Operations? Managing open source New options to develop cost-effective applications Getting serious with security Managing information security becomes prevalent in organizations with the proliferation of insecure network-based systems Large-scale data warehousing Content management will be a critical daily operation

What’s New in Operations? Enforcing Privacy Striking the right balance when disseminating data within organization Dealing with Talent Shortage Retaining talented workers Constantly redefine job of IT professional More operations managers are managing outward Managing outsourcing e.g., Web hosting, headhunting for IT talents Operations are being simplified Centralizing operations

Microsoft Case Example: Offloading of Operations (Webcast) Launch of new version of Windows included a private Webcast to original equipment manufacturers (OEM) in 83 countries Handled by Akamai Specializes in Web hosting More than 12,000 servers in 66 countries Windows launch set a record for attendance, global reach and audience participation

Outsourcing IS Functions

The Driving Forces Behind Outsourcing Two drivers are leading companies to restructure and thus outsource: Added value in products and services for the customer Based on the value proposition, focus on core competences and businesses

Changing Customer-Vendor Relationships Relationships have evolved over the years (in chronological order) Buying professional services Consulting, training Buying products Integrating systems (project-based) Planning, development, maintenance and training Outsourcing (time-based) Contracting most of certain IT activities

Managing Outsourcing Numerous aspects need to be handled well to create a successful working relationship Organizational structure Governance (control) Day-to-day working Supplier development

Organizational Structure Outsourcing is a joint effort between parties that may not have the same goals Layers of joint teams typically established Top-level team: Final word in conflict resolution Operational team: Oversees day-to-day operations Joint special purpose teams: Created periodically to solve pressing issues Committees: Oversee the use of formal change management Relationship manager(s): “look after” the relationship

Governance Foundations of outsourcing relationship laid out in a contract Service Level Agreements (SLAs) important component: Responsibilities Performance requirements Penalties Bonuses Metrics (of performance)

Governance

Day-to-Day Working Recommendations for managing daily interactions: Manage expectations, not staff Realize that informal ways of working may disappear Loss of informal ways adds to rigor (firmness) and thus work quality Integration of two staffs require explicit actions Grant outsourcing staff appropriate access Hold joint celebrations and social events Invite each other to meetings Communicate frequently (regularly)

Supplier Development Topic receiving increased attention in the production sourcing area Buying parts and services that go into one’s own products and services Assisting one’s suppliers to improve their product and services by improving their processes

Offshoring Offshoring refers to getting work done in a different country, usually to leverage cost advantages. Companies turn to offshoring to tap lower labor costs and an ample supply of qualified people Offshore outsourcing is the practice of hiring a vendor to do the work offshore, usually to lower costs and take advantage of the vendor's expertise, economies of scale, and large and scalable labor pool.

Offshoring Offshore outsourcing differs from domestic outsourcing in a number of unique ways Offshoring options are broadening Customer service, back-office processing, BPO etc. Cultural differences Address communication issues and provide cultural training Local country laws need to be followed

Hewitt Associates Case Example: Offshoring Provides HR services to Global 500 companies Outsource maintenance of core HR computer systems to two Indian companies Choosing the provider Hired consultants to review, rank and select vendors Negotiating the deals Drew up contract and detailed SLAs Migration and ongoing management (workload and staff) 70% based in India; 15% posted to Hewitt; 15% own staff Hewitt had to adjust to Indian vendors’ high standards of maintenance and engineering discipline Positive outcome

Offshoring Use offshoring to advantage A major criticism is that it decreases skills and knowledge of client’s IS organization Need not be so – develop different competences Redefine services using offshoring Understand customers Understand demographics Office end-to-end service Dominate the screen Controlling where the information ends up

Insourcing Generally interpreted as the delegation or contracting of operations or jobs within a business to an internal, but mostly independent sub-contractor Parent-subsidiary model Parent company outsources all operations to subsidiary IT firm Maintain tight control of contract job execution Protect intellectual property and business know-how Insourcing is typically done solely from within a company's own operational infrastructure