CHAPTER 19 Outsourcing in the 21st Century Organization

OUTSOURCING DEVELOPMENT
 
• In the high-speed global business environment, an organization needs to maximize its profits, enlarge its market share, and restrain its ever-increasing costs
• 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





• Benefits from outsourcing include:
1. Financial savings
2. Increased technical abilities
3. Market agility


• Factors driving outsourcing growth include:
1. Core competencies
2. Rapid growth
3. Industry changes
4. The Internet


DEVELOPING STRATEGIC OUTSOURCING PARTNERSHIP
 
• Business process outsourcing (BPO) – contracting of a specific business task, such as payroll, to a third-party service provider
• BPO is divided into two categories:
1. Back-office outsourcing
2. Front-office outsourcing


SOURCING’S NEW SURGE – OFFSHORING
 
• Offshore outsourcing – using organizations from developing countries to write code and develop systems

• According to Forrester Research, nearly half of all businesses use offshore providers, and two-thirds plan to send work overseas in the near future 

Chapter 15 : Creating Collaborative Partnerships

TEAMS, PARTNERSHIP 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
• It is just as important for an organization to form teams, partnerships, and alliances with other organizations
• An organization that uses a core competency strategy will focus on its core competency and form partnerships with other organizations to handle nonstrategic business processes
• The most common example of this is outsourcing payroll or accounting functions
• Many organizations want to focus on the marketing and selling of a unique product or service. These organizations do not want to incur the expense of maintaining accounting or tax experts on staff, hence they will outsource these functions to a business partner
• This is a great time to refer back to the opening case
• Discuss how Levi’s core competency is brand-name differentiation and recognition, while Wal-Mart’s core competency is retail cost leadership
• The partnership between these two organizations enables cost-leadership selling of a widely recognized brand name
• 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 allows people, teams, and organizations to leverage and build upon the ideas and talents of staff, suppliers, customers, and business partners
• It involves a unique set of business challenges that:
• Include complex interactions between people who may be in different locations and desire to work across function and discipline areas
• Require flexibility in work process and the ability to involve others quickly and easily
• Create and share information rapidly and effortlessly within a team
• Increasingly, organizations are extending their focus from internal operations like planning and scheduling, enterprise resource planning and sales force automation, toward operations beyond their own four walls with external customers and suppliers
• 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
1. Unstructured collaboration (information collaboration) - includes document exchange, shared whiteboards, discussion forums, and e-mail
2. 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:


1. Knowledge management system – supports the capturing and use of an organization’s “know-how”
2. Content management system (CMS) – provides tools to manage the creation, storage, editing, and publication of information in a collaborative environment
3. Workflow management system – controls the movement of work through a business process
4. Groupware – software that supports team interaction and dynamics including calendaring, scheduling, and videoconferencing


Knowledge management system
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
1. Explicit knowledge – consists of anything that can be documented, archived, and codified, often with the help of IT
2. Tacit knowledge - knowledge contained in people’s heads
• The following are two best practices for transferring or recreating tacit knowledge
1. Shadowing – less experienced staff observe more experienced staff to learn how their more experienced counterparts approach their work
2. Joint problem solving – a novice and expert work together on a project


Reasons why organizations launch knowledge management programs





• 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)

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 

CHAPTER 6 : VALUING ORGANIZATIONAL INFORMATION

CHAPTER 6 : VALUING ORGANIZATIONAL INFORMATION

ORGANIZATIONAL INFORMATION

·                     ·         Information is everywhere in an organization

·                     ·         Employees must be able to obtain and analyze the many different levels, formats and granularity of organizational information to make decisions

·                     ·         Successfully collecting, compiling, sorting and analyzing information can provide tremendous insight into how an organization is performing

·                     ·         Levels, formats and granularity of organizational information

THE VALUE OF TRANSNATIONAL AND ANALYTICALLY INFORMATION

·         ·         Transaction information verses analytically information

THE VALUE OF TIMELY INFORMATION

·         Timeliness is an aspect of information that depends on the situation

§  Real-time information – immediate, up-to-date information

§  Real-time system – provides real-time information in response to query requests

THE VALUE OF QUALITY INFORMATION

·         Business decisions are only as good as the quality of the information used to make the decisions

·         You never want to find yourself using technology to help you make a bad decision faster

UNDERSTANDING THE COSTS OF POOR INFORMATION

·         The four primary sources of low quality information include;

§  Online customers intentionally enter inaccurate information to protect their privacy

§  Information from different systems have different entry standards and formats

§  Call center operators enter abbreviated or erroneous information by accident or to save time

§  Third party and external information contains inconsistencies, inaccuracies and errors

·         Potential business effects resulting from low quality information include;

§  Inability to accurately track customers

§  Difficulty identifying valuable customers

§  Inability to identify selling opportunities

§  Marketing to nonexistent customers

§  Difficulty tracking revenue due to inaccurate invoices

§  Inability to build strong customer relationships

UNDERSTANDING THE BENEFITS OF GOOD INFORMATION

·         High quality information can significantly improve the chances of making a good decision.

·         Good decisions can directly impact an organization’s bottom line.

CHAPTER 7 : STORING ORGANIZATIONAL INFORMATION

CHAPTER 7 : STORING ORGANIZATIONAL INFORMATION

What is INFORMATION

Information is stored in databases.

Database – maintains information about various types of objects (inventory), events (transactions), people (employees), and places (warehouses)

Database models include:

Hierarchical database model – information is organized into a tree-like structure (using parent/child relationships) in such a way that it cannot have too many relationships

Network database model – a flexible way of representing objects and their relationships

Relational database model – stores information in the form of logically related two-dimensional tables

Entity – a person, place, thing, transaction, or event about which information is stored

The rows in each table contain the entities

Attributes (fields, columns) – characteristics or properties of an entity class

The columns in each table contain the attributes

Primary keys and foreign keys identify the various entity classes (tables) in the database:

Primary key – a field (or group of fields) that uniquely identifies a given entity in a table

Foreign key – a primary key of one table that appears an attribute in another table and acts to provide a logical relationship among the two tables

 Database advantages from a business perspective include:

Increased flexibility

Increased scalability and performance

Reduced information redundancy

Increased information integrity (quality)

Increased information security

A well-designed database should :

Handle changes quickly and easily

Provide users with different views

Have only one physical view

--Physical view – deals with the physical storage of information on a storage device

Have multiple logical views

--Logical view – focuses on how users logically access information

A database must scale to meet increased demand,  while maintaining acceptable performance levels

Scalability – refers to how well a system can adapt to increased demands

Performance – measures how quickly a system performs a certain process or transaction

Information integrity – measures the quality of information

Integrity constraint – rules that help ensure the quality of information

Relational integrity constraint

Business-critical integrity constraint

Databases offer several security features including:

Password – provides authentication of the user

Access level – determines who has access to the different types of information

Access control – determines types of user access, such as read-only access

Database management systems (DBMS) – software through which users and application programs interact with a database.

Data-driven Web sites – an interactive Web site kept constantly updated and relevant to the needs of its customers through the use of a database.

 Integration – allows separate systems to communicate directly with each other :

Forward integration – takes information entered into a given system and sends it automatically to all downstream systems and processes

Backward integration – takes information entered into a given system and sends it automatically to all upstream systems and processes

Chapter 9

ENABLING THE ORGANIZATIONS - DECISION MAKING

Organizational information

ü Employees must be able to obtain and analyze to many different levels, formats and granu larities of organizational information to make decision

ü Successfully collecting, compiling, sorting and analyzing information can provide tremendous insight into how an organization is performing

The value of timely information

ü Timeliness is an aspect of information that depends on the situation :

-         Real-time information – immediate up-to-date information

-         Real-time system – provides real-time information in response to query requests

The value of quality information

ü Business decisions are only as good as the quality of the information used to make the decisions

ü You never want to find yourself using technology to help you make a bad decision faster

ü Characteristic of high-quality information include :

-         Accuracy

-         Completeness

-         Consistency

-         Uniqueness

-         Timeliness

Understanding the cost of poor information

ü The four primary sources of low quality information include :

I.            Online customers intentionally enter inaccurate information to protect their privacy

II.            Information from different systems have different entry standards and formats

III.            Call centre operators enter abbreviated or erroneous by accident or to save time

IV.            Third party and external information contains inconsistencies, inaccuracies and errors

ü Potential business effects resulting from low quality information include :

-         Inability to accurately track customers

-         Difficulty identifying valuable customers

-         Inability to identify selling opportunities

-         Marketing to nonexistent customers

-         Difficulty tracking revenue due to inaccurate invoices

-         Inability to build strong customer relationship

·        Understanding the benefits of good information

ü High quality information can significantly improve the chances of making a good decision

ü Good decision can directly impact an organization’s bottom line

DECISION MAKING

Reasons for the growth of decision making information systems

-people need to analyze large amounts of information

-people must take decision quickly

-people must apply sophisticated analysis techniques, such as modelling and foresting, to make good decisions

-people must protect the corporate asset of organizational information

MODEL

A simplified representation or abstraction of reality

IT SYSTEMS IN AN ENTERPRISE

EXECUTIVES - EXECUTIVE INFORMATION SYSTEM (EIS)

MANAGERS - DECISION SUPPORT SYSTEMS (DSS)

ANALYSIS – TRANSACTION PROCESSING SYSTEMS (TPS)

TRANSACTION PROCESSING SYSTEMS

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

-Transaction processing system – 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 SYSTEMS

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

-Three quantitative models used by DSSs include :

1. Sensitively 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 inputs necessary to achieve a goal such as a desired level of output

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.consolodation– involves the aggregation of intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem

2.drill-down – enables, users to get details and details of details, of information

3.slice-and-dice – looks at information from different perspectives

ARTIFICIAL INTELLIGENCE

-INTELLIGENT SYSTEM – various commercial applications of artificial intelligence

-ARTIFICIAL INTELLIGENCE (AI) – Simulates human intelligence such as the ability to reason and learn

-advantages: can check info 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 expert in solving difficult problems

2. neural network – attempts to emulate the way the human brain works

-fuzzy logic – a mathematical method of handling imprecise or      subjective information

3. genetic algorithm – an AI system that mimics the evolutionary, survival-if-the-fittest process to generate increasingly better solutions to a problem

4. intelligent agent – special-purposed-knowledge-based information system that accomplishes specific tasks on behalf of its users

DATA-MINING

-data-mining software includes many forms of AI such as neural networks and expert system

-common forms of data-mining analysis capabilities include:

1. cluster analysis

2. association detection

3. statistical analysis

CLUSTER ANALYSIS

-CLUSTER ANALYSIS – To divide an information set into mutually exclusive groups such that the members of each group are 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 such items as Web sites and checkout scanner information to detect customers’ buying behavior and predict future behaviour 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

Chapter 10

SUPPLY CHAIN MANAGEMENT

WHAT is Supply Chain Management?

- Companies that excel in supply chain operations perform better in almost every financial measure of success, according to a report from Boston-based MR Research Inc.

- These companies understand that value chain performance translates to productivity and market-share leadership.

how the supply chain is related.

What is the Basics of Supply Chain

 A supply chain consists of all parties involved, directly or indirectly, in the procedurement of a product or raw material.

- Organization must embrace technologies that can effectively manage and oversee their supply chain.

supply chain management involves the management of information flow between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

Information Technology's Role in the Supply Chain

·                               The notion of virtually seamless information links within and between organizations is an essential element of integrated supply chain.

·                               Information technology's primary role in SCM is creating the integration or tight process and information linkages between functions within a firm.

·                               Considerable evidence shows that this type of supply chain integration results in superior supply chain capabilities and profits.

VISIBILITY

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

Bullwhip effect occurs when distorted products demand information passes from one entity to the next through the supply chain.

*Information technology allows additional visibility in the supply chain.

CONSUMER BEHAVIOR

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

Ones an organization understand customer demand and its effect on the supply chain it can begging to estimate the impact that its supply chain will have on its customers and ultimately the organization's performance.

COMPETITION

Supply chain management can be broken down in"

Supply chain planning 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 executive (SCE) software automates the different stems and stages of the supply chain.

SPEED

During the past decade, competition has focused on speed. New forms of severs, telecommunications enabling companies to perform activities that were once never thought possible.

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

What is the Supply Chain Management Success Factors

To succeed in today's competitive markets, companies must align their supply chains with the demands of the markets key serve.

To achieve success such as reducing operation costs, improving asset productivity, and compressing order cycle time, and organization should follow the seven principles of SCM outlines.

One of the benefits is to know immediately what is being transacted at the customer and of the supply chain instead of waiting days or weeks for the information to flow.

Organizations should study industry best practices to improve their chances of successful implementation of SCM systems. The following are keys to SCM success.

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.

WEAN EMPLOYEES OF 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.

ENSURE THE SCM SYSTEM SUPPORTS THE ORGANIZATIONAL GOALS

It is important to select SCM software that give organizations and advantage in the areas most crucial to their business success.

DEPLOY IN INCREMENTAL PHASES AND MEASURE AND COMMUNICATE SUCCESS

Design the deployment of the SCM system in incremental phases.

BE FUTURE ORIENTED

The supply chain design must anticipate the future state of the business.

Chapter 11

BUILDING A CUSTOMER - CENTRIC ORGANIZATION - Customer Relationship Management

Customer Relationship Management (CRM)

CRM is a business philosophy based on the premise that those organizations that understand the needs of individual customers are best positioned to achieve sustainable competitive advantage in the future.

- A customer strategy starts with understanding who the company's customers are and how the company can meet strategic goals.

- As the business world increasingly shifts from product focus to customer focus, most organizations recognize the treating existing customers well is the best source of profitable and sustainable revenue growth in the age of e-business, however, an organization is challenged more than ever before to truly satisfy its customers.

Recently, Frequency, and Monetary Value

An organization can find its most valuable customers by using a formula that industry insiders call RFM-recency, frequency, and monetary value. In other words, an organization must track:

- How recently a customer purchased items (recently)

- How frequently a customer purchases an item (frequently

- How much a customer spends on each purchase (monetary value)

The evolution of CRM

Knowing the customer, especially knowing the profitability of individual customers, is highly lucrative in the financial service industry.

There are three phases in the evolution of CRM:

1.                               CRM Reporting technology help organizations identify their customers across other applicants

2.                               CRM analysis technology helps organizations segment their customers into categories such as best and worst customers.

3.                               CRM predicts technological help organizations make predictions regarding customer behavior such as which customers are at risk of leaving.

The Ugly Side of CRM: Why CRM Matters More Now than Ever Before

Now companies have no choice as the power of the customer grows exponentially as the internet grows. In every case, customers have become an integral part of the action as a member of the aggregated, interactive, self-organizing, auto-entertaining audience on businesses. However, this should no be a surprise, since it was the customers crazy passion and hobbies and obsessions-that build up the web in the first place.

Customer Relationship Management's Explosive Growth

When customers buy on Internet, they see, and they steer, entire value chains.

- Customer web interaction become conversations, interactive dialogs with shared knowledge, not just business transaction. Web- based customer care can actually become the focal point of customer relationship management and provide breakthrough benefits for both the enterprise and its customers, substantially reducing costs while improving service.

- Current users allow allocating 20 percent of their IT budget to CRM solutions.

Using Analytical CRM to Enhance Decisions

The two components of a CRM strategy are:

- 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.

The primary difference between operational CRM and analytical CRM in the direct interaction between the organization and its customers.

-Personalization occurs when a website can know enough about a person's likes and dislikes that it can fashion offers that are more likely to appeal to that person. Many organizations are now utilizing CRM to create customer rules and templates that marketers can use to personalize customer messages.

Customer Relationship Management Success Factor

CRM solutions make organizational business processes more intelligent. This is achieved by understanding customer behavior and preferences, then realigning product and service offering and related communications to make sure they are synchronized with customer needs and preferences. If an organization is implementing a CRM system, it should study the industry best practices to help ensure a successful implementation.

Using he analytical capabilities of CRM can help a company Anticipate customer need and proactively serve customers in way that build relationship, create loyalty, and enhance bottom lines.

Chapter 12

INTEGRATING THE ORGANIZATION FROM END TO END- ENTERPRISE RESOURCE PLANNING

Enterprise Resource Planning (ERP)

·         It serves as the organization’s backbone in providing fundamental decision making support.

·         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.

·         The heart of an ERP system is a central database that collects information from and feeds information into all the ERP system’s individual application components (called modules), supporting diverse business function such as accounting, manufacturing, marketing, and human resources.

·         ERP automates business processes such as order fulfillment- taking an order from a customer, shipping the purchase, and then billing for it.

ERP Integration Data Flow

 ERP Process Flow

Bringing the Organization Together

·  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.

 Organization before ERP

 ERP- Bringing the Organization Together

The Evolution of ERP

·      Although ERP solutions were developed to deliver automation across multiple units of an organization, to help facilitate the manufacturing process and address issues such as raw materials, inventory, order entry, and distribution, ERP was unable to extend to other functional areas of the company such as sales, marketing, and shipping. It could not tie to any CRM capabilities that would allow organizations to capture customer-specific information, nor did it work with websites or portals used for customer service or order fulfillment.

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.

 2 main competitors in ERP market:

1.    Oracle

2.    Sap

 Primary Users and Business Benefits of Strategic Initiatives.

Integration Tools

·         An integrated enterprise infuses support areas, such as finance and human resources, with a strong customer orientation.

·         Integration are achieved using:

   Middleware- several different types of software that sit in the middle of and provide connectivity between two or more software applications. It translates information between disparate systems

·         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.

 Integration between SCM, CRM, and ERP Applications.

·         Companies run on independent applications, such as SCM, CRM, and ERP. If one application performs poorly, the entire customer value delivery system is affected.

Enterprise Resource Planning’s 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

To qualify as a true ERP solution, the system not only must integrate various organization processes, but also must be:

·         Flexible- an ERP system should be flexible 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 not be confined to organizational boundaries but rather support online connectivity to business partners or customers.

Everyone involved in sourcing, producing, delivering the company’s product works with the same information, which eliminates redundancies, cuts wasted time, and removes misinformation.