© 2009 Pearson Education, Inc. Publishing as Prentice Hall Managing Operations Chapter 8 Information Systems Management in Practice 8 th Edition.

© 2009 Pearson Education, Inc. Publishing as Prentice Hall

Managing Operations

Chapter 8Information Systems

Management in Practice

8th Edition

8-2


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?

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Chapter 8 cont’d

Outsourcing Functions The Driving Forces Behind Outsourcing Changing Customer-Vendor Relationships Outsourcing’s History Managing Outsourcing Offshoring Insourcing

Conclusion

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Introduction

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What Are Operations?

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Why Talk About Operations

Typical IT Budget: Administrative and planning: 20% Technology, networks, PCs: 44% Maintenance: 11% Systems development and enhancement: 25%

Effective Management of IT Operations Consistently apply best practices Involve all stakeholders in IT-related operations Adopt partnerships perspective

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Solving Operational Problems: A Portfolio Approach

Typical Operations Problems: Slow response times Down networks Data unavailability and integrity compromise

Three Strategies to Improve Operations Buy more equipment Regulate and prioritize computer workload and

activities Implement operational measurements, set

standards and benchmarks

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Operational Measures

External Measures System uptime (downtime) Response and turnaround time Program failures

Internal Measures Computer usage as percentage of capacity Disk storage used Job queue length

External problems can be explained by deviations in internal operations

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The Importance of Good Management

IS management must create an organizational culture that values good operations

Key to managing operations is the same as in any management job Set standards or goals and manage accordingly

Monitor performance Respond quickly to problems

Hire a good manager (certain skill sets)

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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

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What’s New in Operations? cont’d

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

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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

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Outsourcing IS Functions

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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

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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

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Five-Option Continuum

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Outsourcing’s History

Monolithic Outsourcing (1989) Huge outsourcing contracts that involved almost

entire IT operations Transitional Outsourcing (1990s)

Choice of outsourcing of maintenance of legacy systems or development of new client-server systems

Outsource retrofitting of old systems for Y2K compliance

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Outsourcing’s History cont’d

Best-of-Breed Outsourcing Selective outsourcing based on vendor specialty

Desktop support, data center operations, network management

Coordination is a challenge here Shared Services

Consolidate all non-core activities to one shared services functional group to be outsourced

Business Process Outsourcing (BPO) Outsourcing all or most of a reengineered process (BPR)

that has large IT component

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ANZ Banking Group Ltd.

Case Example: Business Process Outsourcing Australian bank outsourced procurement function to

improve service levels and increase scale of operations Lessons learned from experience

Be prepared to change the contract as your environment changes Make step changes in technology and processes to save time and

money, focus on having an effective transition Do your best to make the outsourced group appear seamless to your

employees Focus early on what you want and don’t get sidetracked Keep incentive mechanism simple and transparent Be able to benchmark performance Understand, to a fair degree of detail, the value chain you plan to

embrace

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Outsourcing’s History cont’d

E-business Outsourcing With arrival of business use of Internet,

outsourcing has been one way that companies can quickly get Web sites up and handling business Preferred mode of operations in Internet-based firms Allow a company to move fast, remain flexible and

minimize fixed costs in computer hardware Utility Computing

On-demand pricing model (pay for what you use)

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Managing Outsourcing

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

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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

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Eastman Kodak Company

Case Example: Managing outsourcing Selective outsourcing from vendors

Data centers and networks Managing telecommunications PC support Voice messaging

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Eastman Kodak Company cont’d

Management Structure (an outsourcing “best practice”) Management board (senior management)

Meets twice a year (strategic issues) Advisory council (15-member)

Meets monthly (technical and operational issues) Supplier and alliance management group

Manages long-term relationships and contracts Relationship manager

Focal point between Kodak and supplier Working groups

Deal with specific technology areas Client surveys

Sent out twice a year to 5,000 internal users

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Governance

Foundations of outsourcing relationship laid out in a contract Service Level Agreements (SLAs) important

component: Responsibilities Performance requirements Penalties Bonuses Metrics (of performance)

Can be tricky

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Governance cont’d

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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 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

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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

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Offshoring

Companies turn to offshoring to tap lower labor costs and an ample supply of qualified people

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

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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

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Offshoring cont’d

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

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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

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Conclusion

Subject of managing IT operations is especially important today E-commerce Increasing use of outsourcing Information and computer security (viruses) Terrorism

Whether operations take place in-house or outsourced, the modus operandi is based on partnerships

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© 2009 Pearson Education, Inc. Publishing as Prentice Hall Managing Operations Chapter 8 Information Systems Management in Practice 8 th Edition.

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