MIS 5241 Chapter 7 Managing Diverse IT Infrastructures (Outsourcing by other names)

MIS 5242 AGENDA  Introduction: Who Cares?  New Service Models  Web Services  Incremental Outsourcing  Managing Relationships with Service Providers  Managing Legacies  Managing Infrastructure Assets

MIS 5243 Introduction: Who Cares? INFRASTRUCTURE ASSETS (OWNED) INFRASTRUCTURE ASSETS (BORROWED) COST BASIS DEPRE- CIATION Remember Rifkin’s Age of Access EXPENSE BASIS MANAGE- MENT PRODUCTION NEW / DEVELOPED / EXISTING

MIS 5244 CHANGING RELATIONSHIPS: Hard/Owned/Proprietary Soft/Rented/Shared  Developed by business itself to meet strategic needs  Created unique standards that led to mismatches, confusion  Lack of interoperability  Operators were locked into specific technologies and technology providers  Can use others’ infrastructure  Common standards mean easy sharing with customers and partners and common interfaces  Interoperable (TCP/IP) with cheap software  Not locked in; competition reigns among providers; innovation rages; prices drift ever lower Yeah, but what’s the UPside? Yeah, but what’s the DOWNside?

MIS 5245 New Service Models All items marked with * can be rented, leased, borrowed, outsourced, or subscribed to. * * * * * * Data Services Network Services Business Services Transmission/ Connection Services Fulfillment Services IT Services

MIS 5246 General Service Model Hosting Data Application Workflow Technical Services Telcoms Security Fulfillment Application Design And Development Corporate-wide E-Commerce Website Business Service Design, Development And Delivery ASP E-Business Business Services

MIS 5247 Access Benefits  Don’t need so many IT workers  Reduced time to market (no infrastructure to develop or acquire)  24x7  Better cash flow profiles (Figure 7.1)  Lowered IT costs and risks (shared)  Global access to applications

MIS 5248 Web Services Service Requester Service Provider Registry   Selected Service Provider   1 Request 2 Bid 3 Select 4 Satisfy 5 Close 

MIS 5249 Incremental Outsourcing: General Considerations “Strategic” ? Yes Internal No Reliable? Low Cost? No Internal Yes Outsource How shall we handle this system or application? Hmmm. Is it… But this is GREATLY simplified!

MIS Incremental Outsourcing: More Specific Considerations System Maturity Competitive Role IS Dept. Capability Initiation Low Weak Growth High Average Mature Sustainably Superior High Stage of Application or System or Business: Early stages are riskier since Revenue drivers could be threatened Don’t outsource strategic or competitive systems Ascertain skills market; your IS Dept. may well be capable of insourcing

MIS Hosting Model Provider Operates Client Operates Colocation Hosting Shared Hosting Just space Shared facilities Dedicated facilities Special Deals Dedicated Hosting Not Possible Who operates system or application What is provided

MIS Selecting Service Partners SELECTION Description (Size, plans) Whom are we dealing with? Financial Do they have enough resources? Proposal (Plan) How are they proposing to deliver services to us? Service Guarantees What level of service will we get? Risk Management What risks are we exposed to and how will they be mitigated? Pricing Structure What do we pay for certain levels of service?

MIS Service Level Agreement  Conditions for liability for service levels  Risks, ameliorations, penalties  Problems occur with “webs” of agreements whereby B provides service to C based on level of service from A.

MIS Legacies?  Technology problems; inherent incompatibilities  Residual process complexity; old patches, old solutions, new problems  Local adaptations, narrow vision  Nonstandard data definition, formats, displays  Organizational legacies; implications of older technology, loyalties

MIS Managing IT Assets  What is an Asset? Frozen capability!  Total Cost of Ownership (TCO)  Whose asset?  Is a Service an Asset? Is a Lease an Asset? Is a contracted employee an asset?  When is an asset a liability? Asset as Frozen Capability Initial cost to purchase Ongoing expense to operate Production

MIS The Hard and the Soft Industrial Paradigm Networked Paradigm  Hard goods and products  Hard-wired relationships  Hard designs  Hard production assets  Hard and soft goods and products  Malleable, flexible relationships  Software-based, data- sensitive designs  Hard and soft production assets

MIS Role of Assets Hard Asset Standard Good Hard Resources Standardization makes mass production easy, but requires fixed relationships and encourages hard assets Soft Asset Customized Good Soft Resources Networking makes it easy to follow multiple standards, allowing variable relationships and encouraging “soft” assets

MIS Outsourcing  Your views?