Week 8 Monday, October 17

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Week 8Monday, October 17

• Outsourcing
• Managing Operations
• Systems Development
• IT Project Management

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Drivers of Outsourcing

• 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

3
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

1. Position on the strategic grid

Product differentiation
High
Strategic Strategic IT plan, initiatives
Depends
Yes
Factory Operational IT
Impact of Existing IT applications
Yes
Depends
Support Basic elements
Turnaround Gradual adoption
Low
High
Low
Impact of Future IT applications
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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

Impact of Existing IT applications
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
Impact of Future IT applications
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Framework for Outsourcing

• 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

10
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

12
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 the Alliance

• Critical areas
• CIO Function
• Management (balance between organization and
  outsourcer)
• Planning (vision)
• Awareness of emerging technologies
• Continuous adaptation (evolution)
• Performance measurements
• Essential standards, measurements and
  interpretations

14
Managing the Alliance

• Mix and coordination of Tasks
• Development versus maintenance (portfolios)
• Associated risks inherent to each
• Customer-outsourcer interface
• Delegation of authority, not responsibility

15
Information SecurityProtecting the Information
Resource

• Five security pillars
• Authentication verifying the authenticity of
  the user
• Something you know, have or are (i.e., physical
  attribute)
• Identification identifying users to grant them
  appropriate access
• Privacy protecting information from being seen
• Integrity keeping information in its original
  form
• Nonrepudiation preventing parties from denying
  actions they have taken

Encryption
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Management and Technical Countermeasures

• Management countermeasures
• Evaluate return on their security expenditures
• Conduct security audits
• Do not outsource cybersecurity
• Security awareness training
• Technical countermeasures
• Firewalls
• Encryption
• Virtual private networks (VPN)

Expense
Likelihood
Balancing between expense and likelihood of a
threat
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Planning for Business Continuity

• Recognize threats
• Contingency plans if a threat is realized
• Alternate workspaces for people to resume work
• Backup IT sites
• Up-to-date evacuation plans
• Backed up computers and servers
• Helping people cope with disaster

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Internal and External Resources

• Internal
• Multiple data centers
• Distributed processing
• Backup communications facilities
• LANs
• External
• Integrated disaster recovery services
• Specialized disaster recovery services
• Online and off-line data storage

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Systems Development
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Systems Development

• The activity of creating or modifying existing
  business systems
• Managing the implementation of IT
• Size of the implementation requires a sound
  methodology
• Understanding the users information needs and
  the processes he/she must follow to complete
  his/her tasks

21
Systems Development Life Cycle (SDLC)

• Systems Requirements
• Software Requirements
• Preliminary Design
• Detailed Design
• Code and Debugging
• Test and Preoperation
• Operation and Maintenance

Documentation and deliverables
Sunset period
Each phase is managed according to its scope and
has deliverables
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Systems Development Life CycleAnother Example

• Definition Phase
• Feasibility analysis Economic, operational and
  technical
• Requirements definition The right system
• Logical design (the whats)
• Construction Phase
• System design Physical design (the hows)
• System building
• System testing
• Implementation
• Installation
• Operations
• Maintenance

Building the system right
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Documentation and Managing User Changes
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Systems Development Life Cycle
Cost of make a change ()
PreliminaryDesign
Coding and Debugging
Testing and preoperation
System Requirements
Software Requirements
DetailedDesign
Danger of off-shoring
Time
Other variations exist
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Prototyping and Discovering User Specs
Refine Prototype
Complete Task
Investigate and analyze problem
Iterations
Develop Prototype
Operationalize Prototype
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Prototypes

• Operational (evolutionary) prototype eventually
  becomes the system or application
• Non-operational (throw-away) prototype is used
  to determine specifications of the actual system
  or application
• Discarded after users specifications are known

Often used for novel systems and applications or
when technology or specifications are known
Actually number of iterations are unknown,
therefore managers must carefully monitor
progress.
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RAD (Rapid Application Development)

• A technique that employs tools, techniques and
  methodologies designed to speed application
  development
• Reduces paper-based documentation
• Automates program source code generation
• Facilitates user participation in design and
  development activities
• Best suited for decision support and management
  information systems

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JAD (Joint Application Development)

• Process for daa collection and requirements
  analysis involving group meetings
• Team approach Facilitator, developer, users,
  observers, managers, experts
• Assumes
• People who actually do a job have the best
  understanding of that job
• People who are trained in information technology
  have the best understanding of the possibilities
  of that technology

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JAD (Joint Application Development)

• Cont.
• Assumes
• Information systems and business processes rarely
  exist in isolation
• People working in these related areas have
  valuable insight on the role of a system within a
  larger community.
• The best information systems are designed when
  all of these groups work together on a project as
  equal partners.

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Approaches to Implementation

• Parallel
• Pilot
• Phase
• Cutover

Old
New
Old
New
Old
New
Old
New
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Sunset Period
Performance Requirements
Organizational Needs
Widening gap
System Performance
Upgrades
Time
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Systems Integration

• Database management systems (DBMS)
• Enterprise resource planning (ERP)
• Integration of processes and activities
• Middleware

Not mutually exclusive
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Project Management

• Application of knowledge, skills, tools and
  techniques to project activities to meet project
  requirements
• Processes involve initiating, planning,
  executing, controlling and closing
• Knowledge areas involve integration
  (coordination), scope (project boundary), time,
  cost, quality, human resources, communication,
  risk, and procurement

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Project Manager

• Setting up the project establish the scope,
  time frame and deliverables
• Managing the schedule coordinating activities
  and resources, and schedule of deliverables
• Managing the finances costs, cash flows,
  benefits
• Managing the benefits profitability, cost
  reductions, changes to working capital, and
  adherence to regulatory/legal reform
• Managing the risks, opportunities and issues
  identify and weigh
• Soliciting independent reviews

35
Change Management

• Helping people to accept change
• Overcoming resistance
• Accept and adopt changes

36
Lewin-Schein Model for Change
Getting people to change their behavior.
Move
Freeze
Unfreeze
Prepare for change
Implement change
Stop change

• Assurance that change comes with predefined goals
• Stopping change with goals are achieved

• Convincing people to accept change
• Selling the benefits of change

• Managing change

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Lewins Theory of Change
Change
Restraining Forces
Driving Forces
Driving forces must overcome restraining forces
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Fred DavisPerceived Usefulness, Perceived Ease
of Use, and Perceived Use

• Perceived Ease of Use
• Self-efficacy beliefs Perceived exertion level
  to implement behavioral change
• Perceived Usefulness
• Outcome beliefs Perceived success resulting
  from behavioral change

Perceived Use
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Fred DavisPerceived Usefulness, Perceived Ease
of Use, and Perceived Use
Perceived Ease of Use
Perceived Use
Perceived Usefulness
Perceived use is the best predictor of actual
future use
If a person believes the amount of expended
energy to adapt to a new system will place
him/her in a better position as a result of its
use, he/she is more likely to commit him/herself
to using it.
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Risk Management

• Types of risk
• Technical failure due to technology
• Business failure do due organizational issues
• Assessment of risks
• Projects leadership commitment, experience,
  abilities, formal and informal management skills
• Employees perspective acceptance to change
• Scope and urgency extent of change (breadth and
  depth), need to implement change

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Risk Management
Likelihood of Business Change
Employees Perspective
Project Scope and Urgency
Recommended Project Method
Leadership
High
Big Bang

Less Risky
Improvisation
-

Guided Evolution


Top-down Coordination
-
-
Championed Dealmaker


More Risky
-
Championed Improvision
-
Champion Guided Evolution
-

Migrate or Kill the Project
-
Low
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Other Aspects of IT Project ManagementBased on a
Survey of 10 Executives in Sacramento

• Develop and compare feasibility, complexity,
  scalability and cost of possible solutions
• Project portfolio investing in the right
  projects
• Aligning projects and initiatives to strategic
  objectives
• Risk management risk considerations, factors
  and plans
• Contingency plans
• Managing multiple vendors and workflow
• Regulatory and compliance issues
• Leveling resources over projects human,
  financial, technical

43
Other Aspects of IT Project ManagementBased on a
Survey of 10 Executives in Sacramento

• Project planning, execution and scheduling
  Prioritizing, defining performance measures,
  tracking processes to ensure performance,
  schedule resources, project monitoring, change
  and service controls, quality assurance and
  testing, identify key drivers
• Project leadership Assessing change and change
  management, communication and organizational
  skills
• Adoption issues
• Identify and understanding stakeholders

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Good IT Project Management

• Deliver on time
• Come in or under budget
• Meet the original objectives
• Establish ground rules
• Foster discipline, planning, documentation and
  management
• Obtain and document the final user requirements
• Obtain tenders from all appropriate potential
  vendors
• Include suppliers in decision making
• Convert existing data
• Follow through after implementation

Successful project characteristics
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Value of a System or Application

• Benefits the business will receive from the IT
• IT by itself provides no benefits or advantages
• Measuring benefits
• Distinguish between the different roles of the
  systems support role, integral to strategy, or
  product/service offering
• Measure what is important to management
• Assess investments across organizational levels

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Measuring Benefits Role of System

• Measuring organizational performance ability to
  support the organization and its users with their
  tasks
• Measuring business value help meeting
  organizational and business goals
• Measuring a product or service profitability of
  product or service

47
Measuring Benefits Importance to Management

• IT is usually not viewed as a revenue generator
• Investment to improve the business
• Corporate effectiveness
• Less tangible benefits includes
• Customer relations (satisfaction)
• Employee morale
• Time to complete an assignment

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Measuring Benefits Across the Organization
Sources of Value

• Potential benefits differ at various
  organizational levels
• Dimensions
• Economic performance payoffs (market measures of
  performance)
• Organizational processes impact (measures of
  process change)
• Technology impacts (impacts on key functionality)

Individual
Corporate
Division
Assess ITs impact in each cell
49
Value of IT Investments to Investors

• Brynjolfsson, Hitt and Yang study
• Every 1 of installed computer capital yielded up
  to 17 in stock market value, and no less than 5
• Led to organizational changes that created 16
  worth of intangible assets
• Past IT investments correlated with higher
  current market value

50
Value of IT Investments to Investors

• Brynjolfsson and Hitt study
• Organizational factors correlated to and
  complemented IT investments
• Use of teams and related incentives
• Individual decision-making authority
• Investments in skills and education
• Team-based initiatives
• Businesses making the highest IT investments not
  only invest in IS but also invest in making
  organizational changes to complement the new IS

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Value of IT Investments to Investors

• Brynjolfsson and Hitt study (cont.)
• Led to adoption of decentralized work practices
• Frequent use of teams
• Employees empowered (i.e., given broader
  decision-making authority)
• Offer more employee training

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Value of IT Investments to Investors

• Brynjolfsson, Hitt and Yang study
• Companies with the highest market valuation had
  the largest IT investments and decentralized work
  practices
• Market value of investing in IT is substantially
  higher in businesses that use these decentralized
  practices because each dollar of IT investment is
  associated with more intangible assets because
  the IT investments complement the work practices

Other resource
IT
Leveraging
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