1. Managing IT Operations Dr. Merle P. Martin MIS Department CSU Sacramento

2. Agenda t What is IT Operations? t IT Operation Trends t Data Center Operations t Improving Center Operations t Data Center Economics t Outsourcing t Managing Networks t Contingency Management

3. Deloitte & Touche Study t US and Canadian firms t Late 1995 t 431 CIOs t Abbreviated “ DT ”

4. What is IT Operations? t Organization t Budget emphasis t Functions

5. IT Department CIO Operations Systems Development Support Computer facilities operations Data entry Systems analysis and design Programming Data administration Information center Information technology

6. CIO Turnover t DT Study, 1995 t 1991 14% t 1992 17.5% t 1993 18.8% t 1994 15.5% t 1995 17.0%

7. Why CIOs Left t Why predecessors left t Dismissed / demoted 34% t New position 23% t Left voluntarily 18% t Lateral move 10% t Retired 19% t Promoted 5% t 44% dismissed from old position

8. IT Operations Budget t 33% Systems and Programming u 85% maintenance u 15% new development v decreasing t 10% Administration / Training t 57% IT Operations

9. Budget by Platform t DT Study, 1995 t Mainframe 44% t Client / Server 36% t Other 20%

10. IT Operations Functions t Systems operators u operate hardware u schedule application runs u input / output preparation t Data-entry operators t Maintenance technicians

11. IT Operations Trends t Decreasing hardware costs t “Lights Out” computer rooms t Increasing PCs / workstations t Expert System ( ES ) technology u maintenance troubleshooting

12. Trends t Increasing use of automated tools u Increase in complexity u Blaab’s Law: “Old technologies persist in “Old technologies persist in the face of new technologies” the face of new technologies”

13. Improving Data Centers t Application functional quality u how it meets user needs t Technical quality u how easy to maintain? u how efficient ( MIPS) ? u tension between these goals

14. Improve Centers t Application age u legacy systems u NNC study (1987) u inefficient centers - 8.7 years u efficient centers - 4.2 years

15. Legacy Systems t DT Study, 1995 t 65% legacy systems slated for replacement were to be replaced over next 2 years t Legacy systems still a problem, but not as significant

16. Improve Centers t Portfolio coverage u what % potential applications are actually developed? u beware of “hidden backlog” u NNC study: v inefficient centers - 24% v efficient centers - 40%

17. Improve Centers t Mix of Center staff: u NNC study: v inefficient centers - more employees v greater % of them were “hands on” t User feedback t Problem detection / correction

18. Issue 17% CIO turnover rate per year AND 44% were dismissed or demoted. u Why would you want to be a CIO? u How can you be a “CIO Survivor”? What do you think?

19. Center Economics t “C harge-back ” mode u no operating budget u charge clients for services u clients can shop elsewhere u centers can spend what they collect - NO MORE! u Increasing quality at decreasing cost

20. Center Economics t Economies of scale BIG IS BETTER! t Gorch’s Law IP = IC ** 2 where: IP = increase in computer power IP = increase in computer power IC = increase in computer costs IC = increase in computer costs t Used as barrier to PCs in 1980s

21. Center Economics t Gorch’s Law works with Data Centers because: u Mainframes more efficient than PCs for large volumes u 3GL more efficient than 4GL u Telecommunications value = n (n - 1) where n = # nodes u Larger network more effective

22. Center Economics t Typical efficiency measures t Use Millions of Instructions per Second (MIPS) t Hardware Costs per MIPS t Storage Costs per MIPS t Software Costs per MIPS t Teale Data Center “Real Decisions” study - large IBM

23. Center Economics t Hardware u Total Group $31K / MIPS u Comparable Size 27K / MIPS u Govt. Industry 29K / MIPS u Teale Data Center 12K / MIPS

24. Center Economics u Storage costs - Teale 76% of Comparable Size group u Software costs v Total Group 10.0K /MIPS v Comparable Size 9.3K /MIPS v Govt. Industry 11.4K /MIPS v Teale 8.7K /MIPS

25. Center Economics t Teale Quality goals: u > 99.9% availability u 4 hour network Mean Time to Repair (MTTR) u Subsecond transaction response u Immediate Help Desk assistance

26. Center Economics t Strategies u Upgrade to latest equipment / software u Consolidation u Outsourcing

27. Center Consolidation t Chase Manhattan Bank u 100 data centers into 58 u Saved $58 million in 2 years t First Interstate Bank u 13 data centers into 2 u reduced staff 2300 to 700 u lowered overall budget by $93 million

28. Center Consolidation t JC Penny u 20 data centers to 4 u Save $11 million a year t State of Wisconsin u 12 data centers into one u Goal: save $1 to $3 million a year u exempted from state procurement laws

29. Outsourcing IT Functions t WHY? u overall business trend u global competition u value-added criterion v Would customer pay for this ? u need for technical specialist u employee costs ( fringe benefits )

30. Outsourcing Types t Professional services ( consulting) t Services ( training / data entry ) t Temporary employees u contract programmers t Transactions ( credit reports ) t Systems integrators

31. When to Outsource When to Outsource t Activity not strategic t Save at least 15% t Need technology specialists t Increase financial flexibility u capital to operating expenses u free personnel for development u acquire new technologies quicker

32. Consolidate, Transfer Internally Improve, Leverage OutsourceOutsource Redesign (Reengineer) Non - Critical CriticalCritical “Best- of- Breed” Needs Improve- ment QualityQuality ImportanceImportance

33. What NOT to Outsource t Strategy ( IT Plan ) t Architecture u tied to firm’s culture t Portfolio ( What / When ) t Vendor management

34. Outsource Tendencies t DT Study, 1995 t Disaster recovery 75% t Network management 50% t Application development 44% t Application maintenance 40% t Data center operations 30% t Data entry 26%

35. Outsource Failures t DT Study, 1995 t Vendor expertise and sophistication t Cost reduction t Improved delivery quality t Increased focus on core competencies t Balance sheet improvement

36. Issue What IT functions in your company have been or should be outsourced? u Why? u What obstacles were there (or are there) to outsourcing?

37. Network Mgmt Scope t Fault handling t Performance monitoring t Change ( project) management t Tactical ( future ) planning t Cost control

38. Network Mgmt Trends t Emerging standards t Integration as a goal: u different networks ( LAN / WAN ) u different vendors t Combine with management of computers u “finger pointing ”

39. Network ( Cont.) t Distributed applications u client / server u Oracle’s Lotus Notes t Increased automation t Increased outsourcing

40. Contingency Mgmt t NOT disaster recovery u reactive, not proactive t Worst case scenario u all our eggs in one basket u natural disaster u human error / sabotage

41. Contingency Mgmt. Methods t Disaster Recovery firm u outsource strategic function? t Off-line storage t Data redundancy u replicated databases u fragmented databases

42. Off-line Storage t Teale Data Center u Airfreight data twice a year to Florida (Colorado) u Send an operator along u Electronic switching u Simulate switchover in Oakland t State of Alaska u At least 10 miles from site

43. Contingency Methods t Back-up power generators t “ What if ” scenarios u military war games u EDS t Scaled-down manual system t Back-up / recovery procedures t Martin, figure 15-12

44. TransactionsTransactions EntryEntry Online log files End of day Off-line log file Record contents Backup records File recovery Recovered record contents

45. Contingency Methods t Parallel systems t Processing backup facility u Foundation Health t Contingency Management Plan How will IT outages affect your firm?

46. Issue Tell us a Contingency Management war story t What happened? t How did the firm recover? t How could the situation have been u averted? u mitigated?

47. Points to Remember t What is “IT Operations”? t IT Operation trends t Improving Data Center operations t Data Center economics t Outsourcing IT functions t Managing networks t Contingency management These are management issues!