CHAPTER 15 : 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.

- Onshore outsourcing – engaging another company within the same country for services

- Near shore 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

According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger and more profitable than those that do not”.

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

OUTSOURCING BENEFITS

• Increased quality and efficiency
• Reduced operating expenses
• Outsourcing non-core processes
• Reduced exposure to risk
• Economies of scale, expertise and best practices
• Access to advanced technologies
• Increased flexibility
• Avoid costly outlay of capital funds
• Reduced headcount and associated overhead expense
• Reduced time to market for products or services

OUTSOURCING CHALLENGES

• Contract length

-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

- Effective and innovative use of IT can be lost when using an outsourcing service provider

• Confidentiality

- Confidential information might be breached by an outsourcing service provider , especially one that provides services to competitors

• Scope definition 

- Scope creep is a common problem with outsourcing agreements

CHAPTER 14 : Creating Collaborative Partnerships

⏩ Teams, Partnerships, and Alliances

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 nonstrategic 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 e-mail
• Structured collaboration (process collaboration) - involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules

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”

➣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

⏩ KM Technologies

Knowledge management systems include:

• Knowledge repositories (databases)
• Expertise tools
• E-learning applications
• Discussion and chat technologies
•  Search and data mining tools

⏩ KM and Social Networking

➣Finding out how information flows through an organization.

➣Social Networking Analysis (SNA) – a process of mapping a group’s contacts (whether personal or professional) to identify who knows whom and who works with whom.

➣SNA provides a clear picture of how employees and divisions work together and can help identify key experts.

⏩ 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)

➢Document management system (DMS)

Supports the electronic capturing, storage, distribution, archival,  and accessing of documents.

➢Digital asset management system (DAM)

Similar to DMS, generally works with binary rather than text files, such as multimedia files types.

➢Web content management system (WCM).

Adds an additional layer to document and digital asset management that enables publishing content both to intranets and to public Web sites.

⏩ 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 e-mail 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 videoconferencing.

➢ Groupware technologies

VIDEOCONFERENCING

Videoconference - 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 Web site.

INSTANT MESSAGING

E-mail 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 13 : E-BUSINESS

➤ E - BUSINESS

The internet is a powerful channel that presents new opportunities for organization to;

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

 How do ecommerce and e business differ?

• 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

➤ E - BUSINESS MODELS

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

Business-to-Business (B2B)

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

Business-to-Consumer (B2C)

Common B2C e business models include;

• E shop – A version of retail store where customers can shop at any hour of the day without 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.Eg : Bata
• Pure-play business-a business that operates on the internet only without a physical store.Eg ; fashionvalet.com
• Click-and-mortar business-a business that operates in a physical store and on the internet.Eg: Hijabs by Hanami

Consumer-to-Business (C2B)

• Priceline.com is an example of a C2B e 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 stamps collecting
• Communities of relations – People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts
• Communities of fantasy – People participate in imaginary environments, such as fantasy football teams and playing one-to-one with Michael Jordan

➤ E-BUSINESS BENEFITS AND CHALLENGES

E-business benefits include:

• Highly accessible - Businesses can operate 24 hours a day, 7 days a week, 365 days a year
• Increased customer loyalty - Additional channels to contact, respond to, and access customers helps contribute to customer loyalty
• Improved information content - In the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and Web pages present customers with updated information in real-time about goods, services, and prices
• Increased convenience - E-business automates and improves many of the activities that make up a buying experience
• Increased global reach - Businesses, both small and large, can reach new markets
• Decreased cost - The cost of conducting business on the Internet is substantially smaller than traditional forms of business communication

E-business challenges include : 

• Identifying Limited Market Segments - The main challenge of e-business is the lack of growth in some sectors due to product or service limitation.
• Managing Consumer Trust - Internet marketers must develop a trustworthy relationship to make that initial sale and generate customer loyalty.
• Ensuring Consumer Protection - Implement Internet Security, protect from misuse of customer information.
• Adhering to taxation rules - Companies that operate online must obey a patchwork of rules about which customers are subject to sales tax on their purchase and which are not.

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 service.

• 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
• Web 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.
• It enables people in different business areas to communicate. 
• ERP system helps an organization to obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market share.
• ERP enables employees across the organization to share information across a single, centralized database.
• With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency.

                                       

➤ THE ORGANIZATION BEFORE ERP

➤ INTEGRATING SCM, CRM, and ERP

• Integration of SCM, CRM, and ERP is the key to success for many companies. 
• Integration allows the unlocking of information to make it available to any user, anywhere, anytime. 

                          

➤INTEGRATION TOOL

* Middleware- several different types of software that sit in the middle of and provide connectivity between two or more software applications.

* Enterprise application integration (EAI) middleware- represents a new approach to middleware by packaging together commonly used functionality, such as providing prebuilt links to popular enterprise applications, which reduces the time necessary to develop solutions that integrate applications from multiple vendors.

ERP systems must integrate various organization processes and be :

• Flexible- an ERP system should be quicly in order to respond to the changing needs of an enterprise. 
• Modular and open- an ERP system has to have open system architecture, meaning that any module can be interfaced with or detached whenever required without affecting the other modules. The system should support multiple hardware platforms for organizations that have a heterogeneous collection of systems. It must also support third- party add-on components. 
• Comprehensive- an ERP system should be able to support a variety of organizational functions and must be suitable for a wide range of business organizations. 
• Beyond the company- an ERP system must support external partnerships and collaboration efforts.

➤ ERP EXPLOSIVE GROWTH

Reasons of ERP being proven to be such a powerful force:

• ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses. 
• ERP addresses the need for global information sharing and reporting.
• ERP is used to avoid the pain and expense of fixing legacy systems.

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
•   Helps sales staff close deals faster
•   Simplify marketing and sales processes
•   Discover new customers
•   Increase customer revenues

➤ RECENCY, FREQUENCY AND MONETARY VALUE

An organization can their most valuable customers by using a formula RFM :

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

➤ THE EVOLUTION OF CRM

• CRM reporting technologies - help organizations identify their customers across other applications. 
• CRM analysis technologies -  help organizations segment their customers into categories such as best and worst customers. 
• CRM predicting technologies - help organizations predict customer behavior, such as which customers are at risk of leaving.

➤ THE UGLY SIDE OF CRM

➤ CRM EXPLOSIVE GROWTH

                                  

➤ USING ANALYTICAL CRM TO ENHANCE DECISION 

• 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 system that do not deal directly with the customers

➤ CRM SUCCESS FACTORS

•  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 :

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

                         

                              

INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN

Information technology’s primary role in SCM is creating the integrations or tight process and information linkages between functions within a firm such as marketing, sales, finance, manufacturing, and distribution – and between firms, which allow the smooth, synchronized flow of both information and product between customers, suppliers and transportation providers across the supply chain.

VISIBILITY 

• Supply Chain Visibility is the ability to view all areas up and down the supply chain. Changing supply chains requires a comprehensive strategy buoyed by information technology. Organizations can use technology tools that help them integrate upstream and downstream, with both customers and suppliers.
• The bullwhip effect occurs when distorted product demand information passes from one entity to the next throughout the supply chain.

CONSUMER BEHAVIOR

• The behavior of customers has changed the way businesses complete. Customers will leave if a company does not continually meet their expectations. They are more demanding because they have information readily available, they know exactly what they want, and they know when and how they want it.
• Demand planning software generates demand forecasts using statistical tools and forecasting techniques. Companies can respond faster and more effectively to consumer demands through supply chain enhancements such as demand planning software.
• Once an organization understands customer demand and its effect on the supply chain it can begin to estimate the impact that its supply chain will have on its customers and ultimately the organization’s performance.

COMPETITION

• Supply chain planning (SCP) software uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory. SCP depends entirely on information for its accuracy.
• Supply chain execution (SCE) software automates the different steps and stages of the supply chain. This could be as simple as electronically routing orders from a manufacturer to a supplier.

SPEED 

These systems raise the accuracy, frequency and speed of communication between suppliers and customers, as well as between internal users.

Another aspect of speed is the company’s ability to satisfy continually changing customer requirements efficiently, accurately and quickly.

SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS

SCM industry best practices include :

MAKE THE SALE TO SUPPLIERS

The hardest part of any SCM system is its complexity because a large part of the system extends beyond the company’s walls. Not only will the people in the organization need to change the way they work, but also the people from each supplier that is added to the network must change. Be sure suppliers are on board with the benefits that the SCM system will provide.

WEAN EMPLOYEES OFF TRADITIONAL BUSINESS PRACTICES

Operations people typically deal with phone calls, faxes and orders scrawled on paper and will most likely want to keep it that way. Unfortunately, an organization cannot disconnect the telephones and fax machines just because it is implementing a supply chain management system. If the organization cannot convince people that using the software will be worth their time, they will easily find ways to work around it, which will quickly decrease the changes of success for the SCM system.

ENSURE THE SCM SYSTEM SUPPORTS THE ORGANIZATION GOALS

It is important to select SCM software that gives organizations an advantage in the areas most crucial to their business success. If the organizational goals support highly efficient strategies, be sure the supply chain design has the same goals.

DEPLOY IN INCREMENTAL PHASE AND MEASURE AND COMMUNICATE SUCCESS

Design the development of the SCM system in incremental phases. For instance, instead of installing a complete supply chain management system across the company and all suppliers at once, start by getting it working with a few key suppliers, and then move on to the other suppliers. Along the way, make sure each step is adding value through improvements in the supply chain’s performance. While a big-picture perspective is vital to SCM success, the incremental approach means the SCM system should be implemented in digestible bites and also measured for success one step at a time.

BE FUTURE ORIENTED 

The supply chain design must anticipate the future state of the business. Because the SCM system likely will last for many more years than originally planned, managers need to explore how flexible the systems will be when (not if) changes are required in the future. The key is to be certain that the software will meet future needs, not only current needs. 

CHAPTER 8 : Accessing Organizational Information - Data Warehouse

What is Data Warehouse?
➤ Defined in many different ways, but not rigorously.

• A decision support database that is maintained separately from the organization’s operational database.
• A consistent database source that bring together information from multiple sources for decision support queries.
• Support information processing by providing a solid platform of consolidated, historical data for analysis.

History of Data Warehousing
➤ In the 1990’s executives became less concerned with the day-to-day business operations and more concerned with overall business functions.
➤ The data warehouse provided the ability to support decision making without disrupting the day-to-day operations, because :

• Operational information is mainly current – does not include the history for better decision making
• Issues of quality information
• Without information history, it is difficult to tell how and why things change over time

Data Warehouse Fundamentals
➤ Data warehouse – A logical collection of information – gathered from many different operational databases – that supports business analysis activities and decision-making tasks.
➤The primary purpose of a data warehouse is to combined information throughout an organization into a single repository for decision-making purposes – data warehouse support only analytical processing.

Data Warehouse Model
➤ Extraction, transformation and loading (ETL) – A process that extracts information from internal and external databases, transforms the information using a common set of enterprise definitions, and loads the information into a data warehouse.
➤ Data warehouse then send subsets of the information to data mart.
➤ Data mart – contains a subset of data warehouse information.

                              

Multidimensional Analysis and Data Mining 

➤ Relational Database contains information in a series of two-dimensional tables.

➤ In a data warehouse and data mart, information is multidimensional, it contains layers of columns and rows.

Dimension – A particular attribute of information.

                                  

Cube – Common term for the representation of multidimensional information.

                         

➤ Once a cube of information is created, users can begin to slice and dice the cube to drill down into the information.

➤ Users can analyze information in a number of different ways and with number of different dimensions.

Data Mining – the process of analyzing data to extract information not offered by the raw data alone. Also known as “knowledge discovery” – computer-assisted tools and techniques for sifting through and analyzing vast data stores in order to finds trends, patterns and correlations that can guide decision making and increase understanding.

➤ To perform data mining users need data-mining tools.

Data-mining tool – uses a variety of techniques to finds patterns and relationships in large volumes of information. Eg: retailers and use knowledge of these patterns to improve the placement of items in the layout of a mail-order catalog page or Web page.

Information Cleansing or Scrubbing

➤ An organization must maintain high-quality data in the data warehouse.

➤ Information cleansing or scrubbing – A process that weeds out and fixes or discards inconsistent, incorrect or incomplete information.

➤ Occurs during ETL process and second on the information once if is in the data warehouse.

➤ Contract information in an operational system.

                            

➤ Standardizing Customer name from Operational Systems

                               

➤ Information cleansing activities

                

➤ Accurate and complete information

                           

Business Intelligence 

Business Intelligence – refers to applications and technologies that are used to gather, provides access, analyze data and information to support decision making efforts.

➤ These systems will illustrate business intelligence in the areas of customer profiling, customer support, market research, market segmentation, product profitability, statistical analysis, and inventory and distribution analysis to name a few.

➤ Eg; Excel, Access