Week 7 Monday, March 6

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Week 7Monday, March 6

• Managing Diverse IT Infrastructures
• Outsourcing the IT Function

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Building an IT Infrastructure

• Every organization developed its own
  communication infrastructure
• Technologies did not interoperate well
• Reliance on proprietary organizations meant that
  companies were locked in to a specific vendor
  technologies

Performance and reliability problems
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Internet Technologies and Open Standards

• Organizations can share a communication
  infrastructure common to all business partners
  and customers
• Communication technologies incorporate well due
  to TCP/IP standards
• Organizations are less locked in to specific
  vendor technologies

Combine technologies from numerous vendors and
expect them to interconnect seamlessly
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Incremental Service Providers and Common
Infrastructures

• As communication technologies improve and become
  more compatible and modular, businesses can
  obtain smaller increments of service from outside
  vendors with shorter lead times and contract
  durations
• Pay for what you need
• Service partners and new business models
• Outsource services that are needed
• Leads to diverse IT infrastructures
• Managing service provider relationships becomes
  important
• Virtual integration

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New Service Models and BenefitsOpportunities

• Overcome the shortage of specialized skills by
  reducing the need for internal staff
• Network-based service delivery models help
  businesses quickly develop new capabilities
• Service providers can quickly achieve economies
  of scale in IT investments to maintain highly
  available and reliable systems
• Improves cash-flow by reducing the initial
  (costly) IT investments
• Upgrades performed centrally and timely
• Services available anywhere, anytime over the Net

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Vision Service PlanManaging Accounts Online
Internet availability
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24 x 7 Commercial Banking
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Electronic Data Systems (EDS)Service Provider
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EDS
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EDS
(Highlight added)
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EDS, Available Services
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My SAP
Enterprise computing services
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For example
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Incremental services
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On Demand, Utility and Grid Computing Models

• Common attributes
• Financial models that make IT services easier and
  less risky to procure and manage
• Restructuring and reengineering of existing
  application s to make them easier to manage and
  use
• Enhancements to infrastructure to improve
  interoperability and efficiency in use of
  computing assets

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On Demand Computing
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Grid Computing

• A computational grid is a hardware and software
  infrastructure that provides dependable,
  consistent, pervasive, and inexpensive access to
  high-end computational capabilities. Foster and
  Kesselman, 1998

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Grid Checklist Characteristics of a GridFoster,
2002

• Coordinates resources that are not subject to
  centralized control
• Integrates and coordinates resources and users
  that live within different control domains
• Standard, open, general-purpose protocols and
  interfaces used
• Built from multi-purpose protocols and interfaces
  that address fundamental issues (i.e.,
  authentication, authorization, resource
  discovery, resource access)
• Deliver non-trivial qualities of service
• Allow constituent resources to be used in a
  coordinated fashion to deliver various qualities
  of service to meet complex user demands

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Grid.org, Grid Computing
(Highlight added)
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Grid Computing Benefits
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Grid Computing

• Application layer includes all different user
  applications (science, engineering, business,
  financial), portals and development toolkits
  supporting the applications. This is the layer
  that users of the grid will "see".

Source gridcafe.web.cern.ch/gridcafe/
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Grid Computing

• Middleware layer provides the tools that enable
  the various elements (servers, storage, networks,
  etc.) to participate in a unified Grid
  environment. The middleware layer can be thought
  of as the intelligence that brings the various
  elements together - the "brain" of the Grid!

Source gridcafe.web.cern.ch/gridcafe/
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Grid Computing

• Resource layer, made up of the actual resources
  that are part of the Grid, such as computers,
  storage systems, and electronic data catalogues
  which can be connected directly to the network
• Network assures the connectivity for the
  resources in the Grid

Source gridcafe.web.cern.ch/gridcafe/
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Grid Computing, Another View

• User Applications
• Obtain the necessary authentication credentials
  to open the files (resource and connectivity
  protocols)
• Query an information system and replica catalogue
  to determine where copies of the files in
  question can currently be found on the Grid, as
  well as where computational resources to do the
  data analysis are most conveniently located
  (collective services)
• Submit requests to the fabric - the appropriate
  computers, storage systems, and networks - to
  extract the data, initiate computations, and
  provide the results (resource and connectivity
  protocols)
• Monitor the progress of the various computations
  and data transfers, notifying the user when the
  analysis is complete, and detecting and
  responding to failure conditions (collective
  services).

Source gridcafe.web.cern.ch/gridcafe/
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Grid Computing, Another View

• Collective Services
• Keep directories of available resources updated
  at all times
• Broker resources (which like stock broking, is
  about negotiating between those who want to "buy"
  resources and those who want to "sell")
• Monitor and diagnose problems on the Grid
• Replicate key data so that multiple copies are
  available at different locations for ease of use
• Provide membership/policy services for keeping
  track on the Grid of who is allowed to do what,
  when.

Source gridcafe.web.cern.ch/gridcafe/
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Grid Computing, Another View

• Resource and connectivity protocols handle all
  "Grid specific" network transactions between
  different computers and other resources on the
  Grid
• Fabric - all the physical infrastructure of the
  Grid, including computers and the communication
  network

Source gridcafe.web.cern.ch/gridcafe/
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Types of GridsSource Grid Cafe

• National Grids - couple high-end resources across
  a nation
• Private Grids - characterized by a relatively
  small scale, central management and common
  purpose
• Project Grids - created to meet the needs of a
  variety of multi-institutional research groups
  and multi-company "virtual teams", to pursue
  short- or medium-term projects (scientific
  collaborations, engineering projects)
• Goodwill Grids - for anyone owning a computer at
  home who wants to donate some computer capacity
  to a good cause

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Types of GridsSource Grid Cafe

• Peer-to-peer - depends on people sharing data
  (like the now defunct Napster and its many
  subsequent imitators) between their computers
• No central control
• Consumer Grid - resources are shared on a
  commercial basis, rather than on the basis of
  goodwill or mutual self-interest
• Companies or other organizations rent distributed
  resources, and the owners of these resources are
  paid for the computing power or data storage
  capacity they contribute, by a "middleman" in
  charge of the middleware

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Managing Risk Through OutsourcingInternal vs.
External Service Delivery

• If unique and provide a significant advantage,
  dont outsource
• IT services essential for running a business but
  common across competitors can be outsourced

Keep internal
Is external deliveryreliable and lower cost?
Does service offer a competitive advantage?
Outsource
Keep internal
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Incremental Outsourcing andManaging Risks

• Outsourcing a particular function rather than the
  entire operation
• Consequences of mismanagement are not as
  far-reaching
• Offers new and attractive choices to managers
  seeking to improve the IT infrastructure

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Drivers of OutsourcingSprague and McNurlin

• Breakdown in IT performance
• Need to retool lacking technology
• Intense supplier pressures
• Sales of surplus supplier capacity
• Simplified general management agenda
• Outsource non-core competence operations
• Financial factors
• Reduce sporadic capital investments in IT
• Downsizing IT operating costs
• Greater organizational awareness of ITs costs
• More appealing for takeovers

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Drivers of Outsourcing

• Corporate culture
• Resistance to change within the organization
• Labor unions
• Eliminating an internal irritant
• Conflicts between users and IT staff
• Other factors
• Quick access to current technology and skills
• Need to quickly response to changes in the market

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Framework for Outsourcing

• Position on the strategic grid

Product differentiation
High
Strategic Strategic IT plan, initiatives
Depends
Yes
Factory Operational IT
IT Impact on Business Operations
Yes
Depends
Support Basic elements
Turnaround Gradual adoption
Low
IT Impact on Strategy
High
Low
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Strategic Grid Outsourcing
Strategic Strategic IT plan, initiatives
Factory Operational IT
High

• Economies of scale
• Higher-quality service and backup
• Management focus facilitated

• Correct internal problem
• Tap cash source
• Cost flexibility
• Divestiture

IT Impact on Business Operations
Support Basic elements
Turnaround Gradual adoption

• Access to IT professionals
• Focus on core competencies
• Access to current IT
• Reduce risk in IT investments

• Internal IT shortfalls
• Internal IT development skill shortfalls

Low
High
Low
IT Impact on Strategy
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Framework for OutsourcingSprague and McNurlin

• Position on strategic grid (cont.)
• Outsource operational activities
• More operationally dependent organizations
• Need for greater analysis when large IT budgets
  involved
• Development portfolio
• Maintenance vs. development projects
• High structured vs. low structured development
  work

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Framework for Outsourcing

• Operational learning
• Organizational assimilation of technology
• Organizations IT architecture and infrastructure
• Currency of architecture
• Current technology in the organization
• Segregated operations more easily outsourced

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Structuring the Alliance between Outsourcer and
Outsourcee (Customer)

• Factors
• Contract flexibility
• Standards and control
• Areas to outsource
• Cost savings
• Supplier stability and quality
• Management fit
• Conversion problems

Alliance
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Structuring the Alliance between Outsourcer and
Outsourcee (Customer)

• Contract flexibility
• Accommodating changes in the environment
• Information needs
• Competitive needs
• Advances in IT
• Standards and control
• Risk (i.e., lost of control, disruptions) in
  operations
• Risk in introducing innovations to the
  organization
• Risk in revealing internal secrets

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Structuring the Alliance between Outsourcer and
Outsourcee (Customer)

• Areas to outsource
• Determine
• Are operations segregated or tightly embedded?
• Can specialized competencies be acquired in the
  long run?
• Are operations core to the organization?
• Cost savings
• Objective evaluation of costs and savings

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Structuring the Alliance between Outsourcer and
Outsourcee (Customer)

• Supplier Stability and Quality
• Financial stability
• Difficult to insource
• Difficult to change outsourcers
• Incompatibility between the organization and
  outsourcer
• Technology
• Organization culture
• Between technology and organizations strategy

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Structuring the Alliance between Outsourcer and
Outsourcee (Customer)

• Management fit
• Compatibility between management styles and
  cultures
• Conversion problems
• Mergers and acquisitions
• Incompatibilities

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Managing IT Infrastructure Assets

• Total cost of ownership
• Cost and benefits associated with service
  delivery to each client device
• Operating costs includes software licensing,
  labor and other costs to remain connected

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Strategic Implications

• What are the strategic implications with on
  demand (utility and grid) computing?
• Benefits and Costs
• What are the strategic implications with out
  sourcing?
• Benefits and Costs