MEIE881

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MEIE881

• The Management Information Systems Organization

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MIS Organization

• Define CKO, CTO, CIO, CPO, IT
  GovernanceDiscuss the functions typically
  performed in the IS organizationDiscuss the
  advantages, disadvantages and characteristics of
  centralized, decentralized and federal
  organizational structuresDiscuss and apply
  Weills framework for IT Governance

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Figure 9.1 The CIOs lieutenants
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Figure 9.3 Sample IS organization chart
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What IS Does Not Do

• Does not perform core business functions such as
• Selling
• Manufacturing
• Accounting
• Does not set business strategy.
• General managers must not delegate critical
  technology decisions.

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Figure 9.7 Organizational continuum
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Centralization Advantages Disadvantages

• PROS
• Global standards
• Common data
• One voice with suppliers
• Economies of scale
• Access to large capacity
• Better recruitment of IT personnel

• CONS
• Technology may not meet local needs
• Lack of business unit control
• Us vs. They
• Slow support for strategic initiatives

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Decentralization Advantages Disadvantages

• ADVANTAGES
• Better meet local needs
• Closer partnership between IT and business units
• Greater flexibility
• Better match with decentralized enterprise
  structure
• Better unit control over overhead costs

• DISADVANTAGES
• Difficulty in maintaining global standards
  consistent data
• Higher infrastructure costs
• Loss of control
• Duplication of staff data
• Harder to negotiate preferential supplier
  agreements

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Figure 9.10 Federal IT
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Federalism

• Structuring approach
• Distributes power, hardware, software, data and
  personnel between a central IS group and IS in
  business units

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IT Governance Weill (2004)

• Definition specifying the framework for
  decision rights and accountabilities to encourage
  desirable behavior in the use of IT
• Broad-based input rights
• Mostly Federal (followed by IT Duopoly)
• High IT governance performers could describe IT
  governance
• (but not low IT governance performers)
• IT duopolies for IT principles and investments

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IT Governance Archetypes
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Top Three Overall Governance Performers
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IT Governance CSFs

• Transparency
• Actively designed
• Infrequently redesigned
• Education about IT governance
• Simplicity (few performance goals)
• An exception handling process (for new
  opportunities)
• Governance designed at multiple organizational
  levels
• Aligned incentives

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Matching Information Security Decisions and
Archetypes
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Outsourcing

• Discuss the reasons for outsourcing
• Discuss disadvantages of outsourcing
• Discuss conditions when outsourcing is
  appropriate
• Define backsourcing and describe the reasons for
  backsoucing
• Discuss structuring and managing the outsourcing
  arrangement
• Describe open sourcing and strategies for its use

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Offshore sourcing

• Define offshore sourcing, captive center,
  nearshoring
• Discuss reasons for and challenges of offshore
  sourcing
• Describe steps clients take in finding a provider
• Describe steps providers take in acquiring clients

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Sourcing Decisions
Nearshoring
Offshoring
Outsourcing
Is This Working
Make or Buy
Backsourcing
Insourcing
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Outsourcing

• The purchase of a good or service from another
  company
• Farm out data center operations (facilities
  management)
• Farm out tasks and services
• Farm out systems development
• May transfer IS function to vendor

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Saving Provider Advantages

• Tighter overhead cost control
• More aggressive use of low-cost labor pools
• More effective bulk purchases and leasing
  arrangements
• Better management of excess hardware capacity
• Better control over software licenses
• Hustle (Staying alive)
• Creative and more realistic structuring of leases
• Leaner management structure because of increased
  competence and critical mass volumes of work

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Outsourcing Disadvantages

• Reliance on vendor/partner
• Loss of control
• Considerations about security/confidentiality
• Evaporization of cost savings
• Loss of competitive advantage
• Slight of hand with employees

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Outsourcing strategies
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Outsourcing strategies
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Backsourcing

• Bringing an outsourcing arrangement back in house
• Reasons
• Economic
• Strategic
• Relationship
• Power

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Structuring the Alliance

• Flexible contract ( a lot can happen over 10
  years)
• Shorten length
• Termination clause
• Detailed performance standards
• Service levels (terminal response times)
• Baseline period measurement
• Growth rates
• Service volume fluctuations
• Resolution of performance disputes

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Structuring the Alliance

• Partial vs. complete outsourcing
• Multiple vendors
• Cost savings
• Multiple evaluations
• Outside consultants

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Structuring the Alliance

• Supplier stability and quality
• Conflict of interests
• Management fit
• Conversion problems

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Managing the Alliance

• Strong CIO function
• Partnership/contract management
• Architecture planning
• Emerging technologies
• Continuous learning
• Service Oriented Architecture

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Managing the Alliance

• Performance measurements continuous
• Low-structured tasks more difficult to outsource
• Low-structured task provide higher margins for
  provider
• Customer-outsourcer interface
• Specified account manager in provider company

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Offshore sourcing

• Captive center offshore center owned by the
  client company
• Offshore sourcing (offshoring) sourcing to a
  company outside the home country
• Nearshoring sourcing service work to a foreign,
  lowewr-wage country that is relatively close in
  distance or time zone (or both).
• Most common offshore sourcing IT activities
• Maintenance
• Testing
• Coding

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Where do Captive Centers Fit?
Offshoring
Outsourcing
Is This Working
Make or Buy
Backsourcing
Insourcing
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Captive Centers

• Hybrid Captive
• Performs core business processes for parent
  company
• Outsources noncore work
• Shared Captive
• Performs work for parent company and external
  customers
• Divested Captive
• Terminated Captive

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Estimates on Market SizesCarmel Tjia, 2006
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Demand for offshore work

• Most aggressive offshore consumers are in US
  Within Europe, UK is most active
• Most active industries financial services
  (banks, investment firms, insurance cos) and
  technology firms (software, hardware
  telecommunications)
• Motivation cost savings, flexibility, accessing
  talent, follow-the-sun
• 100 nations are now exporting software services
  and products
• http//www.youtube.com/watch?vLnhTQFHkgmw

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Wages for Software Professionals Carmel Tija
2005
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Extra offshore costs ()Carmel Tija 2005
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Offshore challenges

• Communication breakdown
• Coordination breakdown
• Control breakdown
• Cohesion barriers
• Culture clash

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Offshoring from client Perspective

• Laying the foundation
• Identifying providers
• Assessing and selecting the provider

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Laying the foundation

• Assess your offshoring readiness (project
  management maturity, risk assessment,
  organizational flexibility, offshore experience)
• Set up powerful launch team
• Hire external expert
• Create a strategy and a plan
• Select right project

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Identifying the providers

• Locate providers
• Select country (language, general software
  skills, government, travel time)
• Develop criteria for provider selection
• Write RFI/RFP

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Assessing and selecting the provider

• Due diligence
• Check references
• Set up local meetings to discuss their abilities
  and your criteria
• Pay attention to soft elements (i.e., trust,
  feeling comfortable
• Offshore visit
• Make recommendation and contract negotiations

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Marketing offshore services Provider Perspective

• Fierce competition 4000 companies in low cost
  countries
• Quality of service cant be judged until after
  the service is consumed
• Many IT services companies founded by technical
  professionals not marketeers

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Characteristics Successful IT Services Exporters
International Trade Center

• A truly international outlook (and desire) for
  exporting
• A long-term commitment to exporting
• May take 2-3 years to generate business
• Thorough research into new markets and
  development of export plans
• An international reputation for quality.

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First Steps

• Create realistic business plan
• Types of offshore services required by market
• Assess competitors and their place in market
• Best ways to enter target market
• Seek business intelligence
• Define target markets
• Market size
• Linkages (linguistic, historic, geographic,
  diaspora)
• Set up local base (sales office representative)
• Conduct SWOT analysis

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Local Marketing Activities

• Generate client leads
• numbers game
• Trade fairs
• Marketing material
• Seminars
• Public relations

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Business Discussions with Clients

• Know client types
• Know offshoring champions in firm
• Start with low-risk projects
• Cultivate long-term relationships
• Know clients cultures
• Build trust
• Create country branding (with trade associations
  and government offices)

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Offshoring Issues

• Onshore Outsourcing
• IS Outsourcing Bad for the US?

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Open Sourcing

• The process of building and improving free
  software by an Internet community
• Release early and often
• Delegate as much as possible
• Archive and manage the versions
• Be as open as possible

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Free Software

• The freedom to run the program for any purpose.
• The freedom to study how the program works, and
  adapt it to your needs. Access to the source code
  is a precondition for this.
• The freedom to distribute copies so that you can
  help your neighbor.
• The freedom to improve and release your
  improvements to the public, so that the whole
  community benefits. Access to source code is a
  precondition for this GNU Project- Free Software
  Foundation, The Free Software Definition,
  http//www.gnu.org/philosophy/free-sw.html,
  Downloaded 4/3/02.

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Open Sourcing Issues

• Protection of Intellectual Property
• Updating and maintaining open source code
• Competitive advantage
• Tech support
• Standards