Managing Operations

1. Managing Operations Chapter 8 Information Systems Management in Practice 8th Edition

2. Chapter 8 • Introduction • What Are Operations? • Why Talk About Operations? • Solving Operational Problems: A Portfolio Approach • Operational Measures • The Importance of Good Management • What’s New in Operations?

3. Chapter 8 cont’d • Outsourcing Functions • The Driving Forces Behind Outsourcing • Changing Customer-Vendor Relationships • Outsourcing’s History • Managing Outsourcing • Offshoring • Insourcing • Conclusion

4. What Are Operations?

5. Solving Operational Problems: A Portfolio Approach • Typical Operations Problems: • Slow response times • Down networks • Data unavailability • Three Strategies to Improve Operations • Buy more equipment • Regulate and prioritize computer workload and activities • Implement operational measurements, set standards and benchmarks

6. Operational Measures • External Measures • System uptime (downtime) • Response and turnaround time • Program failures • Internal Measures • Computer usage as percentage of capacity • Disk storage used • Job queue length

7. What’s New in Operations? • Managing open source • New options to develop cost-effective applications • Getting serious with security • Managing information security becomes prevalent in organizations with the proliferation of insecure network-based systems • Large-scale data warehousing • Content management will be a critical daily operation

8. What’s New in Operations? • Enforcing Privacy • Striking the right balance when disseminating data within organization • Dealing with Talent Shortage • Retaining talented workers • Constantly redefine job of IT professional • More operations managers are managing outward • Managing outsourcing • e.g., Web hosting, headhunting for IT talents • Operations are being simplified • Centralizing operations

9. Microsoft Case Example: Offloading of Operations (Webcast) • Launch of new version of Windows included a private Webcast to original equipment manufacturers (OEM) in 83 countries • Handled by Akamai • Specializes in Web hosting • More than 12,000 servers in 66 countries • Windows launch set a record for attendance, global reach and audience participation

10. Outsourcing IS Functions

11. The Driving Forces Behind Outsourcing • Two drivers are leading companies to restructure and thus outsource: • Added value in products and services for the customer • Based on the value proposition, focus on core competences and businesses

12. Changing Customer-Vendor Relationships • Relationships have evolved over the years (in chronological order) • Buying professional services • Consulting, training • Buying products • Integrating systems (project-based) • Planning, development, maintenance and training • Outsourcing (time-based) • Contracting most of certain IT activities

13. Managing Outsourcing • Numerous aspects need to be handled well to create a successful working relationship • Organizational structure • Governance (control) • Day-to-day working • Supplier development

14. Organizational Structure • Outsourcing is a joint effort between parties that may not have the same goals • Layers of joint teams typically established • Top-level team: • Final word in conflict resolution • Operational team: • Oversees day-to-day operations • Joint special purpose teams: • Created periodically to solve pressing issues • Committees: • Oversee the use of formal change management • Relationship manager(s): “look after” the relationship

15. Governance • Foundations of outsourcing relationship laid out in a contract • Service Level Agreements (SLAs) important component: • Responsibilities • Performance requirements • Penalties • Bonuses • Metrics (of performance)

16. Governance

17. Day-to-Day Working • Recommendations for managing daily interactions: • Manage expectations, not staff • Realize that informal ways of working may disappear • Loss of informal ways adds to rigor (firmness) and thus work quality • Integration of two staffs require explicit actions • Grant outsourcing staff appropriate access • Hold joint celebrations and social events • Invite each other to meetings • Communicate frequently (regularly)

18. Supplier Development • Topic receiving increased attention in the production sourcing area • Buying parts and services that go into one’s own products and services • Assisting one’s suppliers to improve their product and services by improving their processes

19. Offshoring • Offshoring refers to getting work done in a different country, usually to leverage cost advantages. • Companies turn to offshoring to tap lower labor costs and an ample supply of qualified people • Offshore outsourcing is the practice of hiring a vendor to do the work offshore, usually to lower costs and take advantage of the vendor's expertise, economies of scale, and large and scalable labor pool.

20. Offshoring • Offshore outsourcing differs from domestic outsourcing in a number of unique ways • Offshoring options are broadening • Customer service, back-office processing, BPO etc. • Cultural differences • Address communication issues and provide cultural training • Local country laws need to be followed

21. Hewitt Associates Case Example: Offshoring • Provides HR services to Global 500 companies • Outsource maintenance of core HR computer systems to two Indian companies • Choosing the provider • Hired consultants to review, rank and select vendors • Negotiating the deals • Drew up contract and detailed SLAs • Migration and ongoing management (workload and staff) • 70% based in India; 15% posted to Hewitt; 15% own staff • Hewitt had to adjust to Indian vendors’ high standards of maintenance and engineering discipline • Positive outcome

22. Offshoring • Use offshoring to advantage • A major criticism is that it decreases skills and knowledge of client’s IS organization • Need not be so – develop different competences • Redefine services using offshoring • Understand customers • Understand demographics • Office end-to-end service • Dominate the screen • Controlling where the information ends up

23. Insourcing • Generally interpreted as the delegation or contracting of operations or jobs within a business to an internal, but mostly independent sub-contractor • Parent-subsidiary model • Parent company outsources all operations to subsidiary IT firm • Maintain tight control of contract job execution • Protect intellectual property and business know-how • Insourcing is typically done solely from within a company's own operational infrastructure