Chapter 19: Outsourcing in The 21st Century

Outsourcing Projects

Insourcing (in-house-development) - A common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.

Outsourcing - An arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.

Reasons companies outsource.

The three different forms of outsourcing options a project must consider are:

• Onshore outsourcing - Engaging another company within the same country for services.
• Nearshore outsourcing - Contracting an outsourcing arrangement with a company in a nearby country.
• Offshore outsourcing - Using organizations from developing countries to write code and develop systems.

Big selling point for offshore outsourcing "inexpensive good work".

Factors driving outsourcing growth include:

• Core competencies.
• Financial savings.
• Rapid growth.
• Industry changes.
• The Internet.
• Globalization.

Most organizations outsource their noncore business functions such as payroll and IT.

Outsourcing Benefits

• Increased quality and efficiency a process, service or function.
• Reduced operating expenses.
• Resources focused on core profit-generating competencies.
• Reduced exposure to risks involved with large capital investments.
• Access to outsourcing services provider's economies of scale.
• Access to outsourcing services provider's expertise and best-in-class practices.
• Access to advanced technologies.
• Increased flexibility with the ability to respond quickly to changing market demands.
• No costly outlay of capital funds.
• Reduced head count and associated overhead expense.
• Reduced frustration and expense related to hiring and retaining employees in an exceptionally tight job market.
• Reduced time to market for products or services.

Outsourcing Challenges

Contract length

Causes three particular issues:

• Difficulties in getting out of a contract.
• Problems in foreseeing future needs.
• Problems in reforming an internal IT department after the contract is finished.

Competitive edge.

Confidentiality.

Scope definition.

Chapter 15: Creating Collaborative Partnerships

Teams, Partnerships and Alliance

Organizations create and use teams, partnerships, and alliances to :

• Undertake new initiatives.
• Address both minor and major problems.
• Capitalize on significant opportunities.

Organizations create teams, partnerships and alliances both internally with employees and externally with other organizations.

Collaboration system - Supports the work of teams by facilitating the sharing and flow of information.

Organizations form alliances and partnerships with other organizations based on their core competency.

Core competency - An organization’s key strength, a business function that it does better than any of its competitors.

Core competency strategy - Organization chooses to focus specifically on its core competency and forms partnerships with other organizations to handle non-strategic business processes.

Information technology can make a business partnership easier to establish and manage.

Information partnership – occurs when two or more organizations cooperate by integrating their IT systems, thereby providing customers with the best of what each can offer.

The Internet has dramatically increased the ease and availability for IT-enabled organizational alliances and partnerships. 

Collaboration Systems

Collaboration solves specific business tasks such as telecommuting, online meetings, deploying applications, and remote project and sales management.

Collaboration system - An IT-based set of tools that supports the work of teams by facilitating the sharing and flow of information.

Two categories of collaboration :

• Unstructured collaboration (information collaboration) - includes document exchange, shared whiteboards, discussion forums, and email.
• Structured collaboration (process collaboration) - involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules.

Collaborative business functions :

Collaboration systems include :

• Knowledge management systems.
• Content management systems.
• Workflow management systems.
• Groupware systems.

Knowledge Management Systems

Knowledge management (KM) - Involves capturing, classifying, evaluating, retrieving, and sharing information assets in a way that provides context for effective decisions and actions.

Knowledge management system supports the capturing and use of an organization’s “know-how”.

Explicit and Tacit Knowledge

Intellectual and knowledge-based assets fall into two categories :

• Explicit knowledge - Consists of anything that can be documented, archived and codified, often with the help of IT.
• Tacit knowledge - Knowledge contained in people’s heads.

The following are two best practices for transferring or recreating tacit knowledge:

• Shadowing - Less experienced staff observe more experienced staff to learn how their more experienced counterparts approach their work.
• Joint problem solving - A novice and expert work together on a project.

Reasons why organizations launch knowledge management programs.

Content Management

Content management system (CMS) - Provides tools to manage the creation, storage, editing, and publication of information in a collaborative environment.

CMS marketplace includes :

• Document management system (DMS)
• Digital asset management system (DAM)
• Web content management system (WCM)

Content management system vendor overview:

Working Wikis

Wikis - web-based tools that make it easy for users to add, remove, and change online content.

Business wikis - collaborative web pages that allow users to edit documents, share ideas, or monitor the status of a project.

Workflow Management Systems

Work activities can be performed in series or in parallel that involves people and automated computer systems.

• Workflow – defines all the steps or business rules, from beginning to end, required for a business process.
• Workflow management system – facilitates the automation and management of business processes and controls the movement of work through the business process.
• Messaging-based workflow system – sends work assignments through an email system .
• Database-based workflow system – stores documents in a central location and automatically asks the team members to access the document when it is their turn to edit the document.

Groupware Systems

Groupware – software that supports team interaction and dynamics including calendaring, scheduling, and video conferencing.

Groupware technologies.

Video Conferencing

Video conference - a set of interactive telecommunication technologies that allow two or more locations to interact via two-way video and audio transmissions simultaneously.

Web Conferencing

Web conferencing - blends audio, video, and document-sharing technologies to create virtual meeting rooms where people “gather” at a password-protected website.

Instant Messaging

Email is the dominant form of collaboration application, but real-time collaboration tools like instant messaging are creating a new communication dynamic.

Instant messaging - type of communications service that enables someone to create a kind of private chat room with another individual to communicate in real-time over the Internet.

Instant messaging application.

Chapter 14 : E-Business

E-Business

The Internet is a powerful channel that presents new opportunities for an organization to:

• Touch customers.
• Enrich products and services with information.
• Reduce costs.

Difference between e-commerce and e-business.

• E-commerce - the buying and selling of goods and services over the Internet.
• E-business - the conducting of business on the Internet including, not only buying and selling but also serving customers and collaborating with business partners.

Industries using E-Business

E-Business Models

E-business model - An approach to conducting electronic business on the Internet.

Business-to-Business (B2B)

Eloctronic marketplace (e-marketplace) - interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities.

Business-to-Consumer
Common B2C e-business models include:

• e-shop - A version of a retail store where customers can shop at any hour of the day leaving their home or office.
• e-mall - Consists of a number of e-shops, it serves as a gateway through which a visitor can access other e-shops.

Business types:

• Brick-and-Mortar business - Operates in a physical store without an Internet presence.
• Pure-play (virtual) business - A business that operates on the Internet only without a physical store. 
• Click-and-Mortar business - a business that operates in a physical store and the Internet. 

Consumer-to-Business (C2B)

• Priceline.com is one of the example of a C2B a business-model.
• The demand for C2B e-business will increase over the next few years due to customer's desire for greater convenience and lower prices. 

Consumer-to-Consumer (C2C)
Online auctions:

• Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically.
• Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins.
• Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid.

C2C communities include:

• Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting.
• Communities of relations - People come together to share certain life experiences such as cancer patients, senior citizens and car enthusiasts.
• Comunities of fantasy - People participate in imaginary environments such as fantasy football teams and playing one-to-one with Michael Jordon. 

E-Business Benefits and Challenges

E-Business benefits include:

• Highly accessible.
• Increased customer royalty.
• Improved information content.
• Increased convenience.
• Increased global reach.
• Decreased cost.

E-Business challenges include:

• Protecting consumers.
• Leveraging existing systems.
• Increasing liability.
• Providing security.
• Adhering to taxation rules.

There are numerous advantages and limitations in e-business revenue models including:

• Transaction fees.
• License fees.
• Subscription fees.
• Value-added fees.
• Advertising fees.

Mashups

Web mashup - A Web site or Web application that uses content from more than one source to create a completely new sercvice.

• Application programming interface (API) - A set of routines, protocols and tools for building software applications.
• Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups.

chapter 12: Integrating the organization from end to end - enterprise resource planning

Enterprise Resource Planning (ERP)
At the heart of all ERP systems is a database, when a user enters or updates information in one module, it is immediately and automatically updated throughout the entire system.

• ERP systems automate business processes.

Bringing the Organization Together

ERP - The organization before ERP.

ERP - bringing the organization together.

The Evolution of ERP

Integrating SCM, CRM and ERP

• SCM, CRM and ERP are the backbone of e-business.
• Integration of these applications is the key to success for many companies.
• Integration allows the unlocking of information to make it available to any user, anywhere, anytime.
• SCM and CRM market overviews.

• General audience and purpose of SCM, CRM and ERP

Integration Tools
Many companies purchase modules from an ERP vendor, an SCM vendor and a CRM vendor and must integrate the different modules together.

• Middleware - several different types of software which sit in the middle of and provide connectivity between two or more software two or more software applications
• Enterprise application integration (EAI) middleware - packages together commonly used functionality which reduced the time necessary to develop solutions that integrate applications from multiple vendors.   

Data points where SCM, CRM and ERP intergrate.

Enterprise Resource Planning (ERP)

ERP systems must integrate various organization processes and be:

• Flexible.
• Modular and open.
• Comprehensive.
• Beyond the company.

chapter 11: Building a Customer-Centric Organization - Customer relationship management

Customer Relationship Management (CRM)

CRM enables an organization to:

• Provide  better customer service.
• Make call centers more efficient.
• Cross sell products more effectively.
• Help sales staff close deals faster.
• Simplify marketing and sales processes.
• Discover new customers.
• Increase customer revenues.

Organizations can find their most valuable customers through "RFM" - Recency, Frequency and Monetary value.

• How recently a customer purchased items (Recency)
• How frequently a customer purchased items (Frequency)
• How much a customer spends on each purchase (Monetary Value)

The Evolution of CRM

Three phases in the evolution of CRM include reporting, analyzing and predicting.

• CRM reporting technology - help organizations identity their customers across other applications.
• CRM analysis technologies - help organization segment their customers into categories such as best and worst customer.
• CRM predicting technologies - help organizations make predictions regarding customer behavior such as which customers are at risk of leaving.

The Ugly Side of CRM

Customer Relationship Management's Explosive Growth

CRM Business Drivers

Forecasts for CRM Spending (in billions)

Using Analytical CRM to Enhance Decisions

Operational CRM - supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers.

Analytical CRM - supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers.

• Operational CRM and analytical CRM

Customer Relationship Management Success Factors

CRM success factors include:

• Clearly communicate the CRM strategy.
• Define information needs and flows.
• Build an integrated view of the customer.
• Implement in iterations.
• Scalability for organizational growth.

chapter 10: extending the organization - supply chain management

Basics of Supply Chain

The supply chain has three main links:

1. Materials flow from suppliers and their "upstream" suppliers at all levels.
2. Transformation of materials into semi-finished and finished products through the organization's own production process.
3. Distribution of products to customers and their "downstream" customers at all levels. 

Organizations must embrace technologies that can effectively manage supply chains.

Information Technology's Role in the Supply Chain

IT's primary role is to create integration or tight process and information linkages between functions within a firm.

• Factors Driving SCM

Visibility

Supply chain visibility - the ability to view all areas up and down the supply chain.

Bullwhip effect - occurs when distorted product demand information passes from one entity to the next throughout the supply chain.

Consumer behavior

Companies can respond faster and more effectively to consumer demands through supply chain enhances.

Demand planning software - generates demand forecasts using statistical tools and forecasting techniques.

Competition

Supply chain planning (SCP) software - uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain.

Supply chain execution (SCE) software - automates the different steps and stages of the supply chain.

• SCP and SCE in the supply chain

Speed

Three factors fostering speed:

Supply Chain Management Success Factors

SCM industry best practices include:

1. Make the sale to suppliers.
2. Wean employees off traditional business practices.
3. Ensure the SCM system supports the organizational goals.
4. Deploy in incremental phases and measure and communicate success.
5. Be future oriented.

SCM Success Stories.

Top reasons why more and more executives are turning to SCM to manage their extended enterprises.

Numerous decision support system (DSSs) are being built to assist decision makers in the design and operation of integrated supply chains.

DSSs allow managers to examine performance and relationships over the supply chain and among:

• Suppliers.
• Manufactures.
• Distributors.
• Other factor that optimize supply chain performance. 

Examples companies using supply chain chain to drive operations.

Chapter 9: Enabling the Organization - Decision Making

Decision Making

Reasons for the growth of decision-making information systems.

• People need to analyze large amounts of information.
• People must make decisions quickly.
• People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions.
• People must protect the corporate asset of organizational information.

Enhancing Decision Making with MIS

Model - A simplified representation or abstraction of reality.

• IT systems in an enterprise

Transaction Processing Systems

• Moving up through the organizational pyramid users move from requiring transactional information to analytical information.

• Transaction processing system (TPS) - the basic business system that serves the operational level (analysts) in an organization.
• Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information.
• Online analytical processing (OLAP) - the manipulation of information to create business intelligence in support of strategic decision making.

Decision Support System

Decision support system (DSS) - models information to support managers and business professionals during the decision-making process.

Three quantitative models used by DSSs include:

1. Sensitivity analysis - the study of the impact that changes in one (or more) parts of the model have on other parts of the model.
2. What-if analysis - checks the impact of a change in an assumption on the proposed solution.
3. Goal-seeking analysis - finds the input necessary to achieve a goal such as a desired level of output.

What-if Analysis

Goal-seeking Analysis

Interaction between a TPS and a DSS

• The TPS supplies transaction-based data to the DSS.
• The DSS summarizes and aggregates the information from the many different TPS systems, which assists managers in making informed decisions. 

Executive Information Systems

Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization.

 Most EISs offering the following capabilities:

1. Consolidation - involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information.
2. Drill-down - enables users to get details, and details of details, of information.
3. Slice-and-dice - looks at information from different perspectives.

Interaction between a TPS and an EIS

Digital dashboard

• Integrates information from multiple components and presents it in a unified display.

Artificial Intelligence

Intelligent system - various commercial applications of artificial intelligence.

Artificial intelligence (AI) - stimulates human intelligence such as the ability to reason and learn.

• AI advantage  is it can check information on competitor.
• The ultimate goal of AI is the ability to build a system that can mimic human intelligence.

Four most common categories of AI include :

1. Expert system - computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems.
2. Neural network - attempts to emulate the way the human brain works.
3. Genetic algorithm - an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem.
4. Intelligent agent - special-purposed knowledge-based information system that accomplishes specific task on behalf of its users.

Data Mining

Data-mining software includes many forms of AI such as neural networks and expert systems.

Common forms of data-mining analysis capabilities include:

• Cluster analysis.
• Association detection.
• Statistical analysis.

Cluster Analysis

Cluster analysis - A technique used to divide an information set into mutually exclusive groups such that the members of each group are as close together as possible to one another and the different groups are as far apart as possible.

• CRM systems depend on cluster analysis to segment customer information and identify behavioral traits.

Association Detection

Association detection - reveals the degree to which variables are related and the nature and frequency of these relationships in the information.

• Market basket analysis - analyzes such items as Web sites and checkout scanner information to detect customers’ buying behavior and predict future behavior by identifying affinities among customers’ choices of products and services.

Statistical Analysis

Statistical analysis - performs such functions as information correlations, distributions, calculations, and variance analysis.

• Forecast - predictions made on the basis of time-series information.
• Time-series information - time-stamped information collected at a particular frequency.