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

2. 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?

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

4. What Are Operations?

5. 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

6. 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

7. 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

8. 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

9. 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

10. Outsourcing IS Functions

11. 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

12. 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

13. 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

14. 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

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

16. Governance

17. 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)

18. 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

19. 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.

20. 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

21. 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

22. 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

23. 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