Chapter 15 : Outsourcing in the 21st century.

Incourcing : 
A common approach using the professional expertise within an organization to develop and maintain the organization’s information technology systems. Insourcing has been instrumental in creating a viable supply of IT professionals and in creating a better quality workforce combining both technical and business skills.

Outsourcing :
Is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house. In some cases, the entire information technology department is outsourced, including planning, and business analysis as well as the installation, management, and servicing of the network and workstations.

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

• Onshore outsourcing -  engaging another company within the same country for sevices.
• Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country. Often this country will share a border with the native country.
• Offshore outsourcing – using organizations from developing countries to write code and develop systems. In offshore outsourcing the country is geographically far away.

The influential drivers afeecting the growth of the outsourcing market include :

• Core competencies – many companies have recently begun to consider outsourcing as a mean to fuel revenue growth rather than just a cost-cutting measure.
• Financial savings – it is typically cheaper to hire workers in China and India than similar workers in the United States. Technology is advancing at such an accelerated rate than companies often lack the resources and etc.
• Rapid growth – a company’s sustainability depends on both speed to market and ability to react quickly to changes in market conditions.
• Industry changes – high levels of organization across industries have increased demand for outsourcing to better focus on core competencies.
• The internet – the pervasive nature of the internet as an effective sales channel has allowed clients to become more comfortable with outsourcing.
• Globalization – as markets open worldwide, competition heats up. Companies may engage outsourcing service providers to delivers to deliver international services.

OUTSOURCING BENEFITS.

§  Increased quality and efficiency of 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 service 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 – most of the outsourced IT contracts are for a relatively long time period (several years). This is because of the high cost of transferring assets and employees as well as maintaining technological investment. The long contract causes three particular issues:

1. Difficulties in getting out of a contract ig the outsourcing service provider turns out to be      unsuitable.
2. Problems in foreseeing what the business will need over the next 5 or 10 years (typical contract  lengths) hence creating difficulties in establishing an appropriate contract.
3. Problems in reforming an internal IT department after the contract period is finished.

Competitive edge – effective and innovative use of IT can give an organization a competitive edge over its rivals. A competitive business advantage provided by an internal IT department that inderstands the organization and is commited to its goals can be lost in an outsourced arrangement.

Confidentially – in some of organizations, the information stored in the computer system is central

Chapter 14 – 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?

• Ecommerce – 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)

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
• Pure-play business
• Click-and-mortar business

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

EBUSINESS BENEFITS AND CHALLENGES

E business benefits include;

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

E business challenges include;

• Protecting consumers
• Leveraging existing systems
• Increased 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 mash up – A Web site or Web application that uses content from more than one source to create a completely new services
• Application programming interface (API) – A set of routines, protocols, and tools for building software applications
• Mash up editor – WSYIWYGs (What You See Is What You Get) for mash ups 

Chapter 13 - Creating Innovative Organization

Disruptive Technology

• Digital Darwinism- implies that organizations that cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction. 

Disruptive versus sustaining technology

• Disruptive technology- new ways of doing things that initially does not meet the needs of existing customers.
• Sustaining technology- produces an improved product customers are eager to buy, such as faster car or larger hard drive.
• It provides us with better, faster, and cheaper products in established markets.

Disruptive and Sustaining Technologies

• Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies. 

The Internet- Business Disruption
Evolution of the internet

• Internet- a global public network of computer networks that pass information from one to another using common computer protocols.
•  Protocols- are the standards that specify the format of data as well as the rules to be followed during transmission.
• Internet Engineering Task Force (IEFT) - the protocol engineering and development arm of the internet.
• Internet Architecture Board (IAB)- responsible for defining the overall architecture of the Internet, providing guidance and broad direction to the IETF). 
• Internet Engineering Steering Group (IESG)- responsible for technical management of IETF activities and the internet standards process.

Evolution of the World Wide Web

• The internet was restricted to noncommercial activities, and its users included government employees, researchers, university professors, and students. The World Wide Web changed the purpose and use of the internet.
• World Wide Web (WWW)- a global hypertext system that uses the internet as its transport mechanism.
• Hypertext transport protocol (HTTP)- the internet standard that supports the exchange of information on the WWW. 
• It enables web authors to embed hyperlinks in web documents      
• It defines the  process by which a web client, called a browser, originates a request for information and sends it to a web server, a program designed to respond to HTTP requests and provide the desired information.

Reasons for World Wide Web Growth:

• The microcomputer revolution made it possible for an average person to own a computer. 
• Advancements in networking hardware, software, and made it media possible for business PCs to be inexpensively connected to larger networks.
• Browser software such as Microsoft’s Internet Explorer and Netscape Navigator gave computer users an easy-to-use graphical interface to find, download, and display web pages.
• The speed, convenience, and low cost of email have made it an incredibly popular tool for business and personal communications. 
• Basic web pages are easy to create and extremely flexible.
• Digital divide- is when those with access to technology have great advantages over those without access to technology

Internet’s Impact on Information

• Easy to compile- searching for information on products, prices, customers, suppliers, and partners is faster and easier when using the internet. 
• Increased richness- information richness refers to the depth and breadth of information transferred between customers and businesses. Businesses and customers can collect and track more detailed information when using the internet.
• Increased reach- information reach refers to the number of people a business can communicate with, on a global basis. Businesses can share information with numerous customers all over the world.
• Improved content- a key element of the internet is its ability to provide dynamic relevant content. Buyers need good content descriptions to make informed purchases, and sellers use content to properly market and differentiate themselves from the competition. Content and product description establish the common understanding between both parties to the transaction. As a result, the reach and richness of that content directly affects the transaction. 

File Formats Offere
d over the WWW.Web 2.0

• A set of economic, social, and technology trends that collectively from the basis for the next generation of the internet- a more mature, distinctive medium characterized by user participation, openness, and network effects. 
• It is more than just the latest technology buzzword; it is a transformative force that is catapulting companies across all industries toward a new war of performing business.

Chapter 12 - Integrating The Organization From The End To End - Enterprise Resource Planning Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP)

1. It serves as the organization’s backbone in providing fundamental decision making support.
2. It enables people in different business areas to communicate. 
3. ERP system helps an organization to obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market share.
4. 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. 
5.  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.

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 find its most valuable customers by using a formula that industry insiders call FRM;

• Ø  How recently a customer purchased items (recency)
• Ø  How frequently a customer purchased items (frequency)
• Ø  How much a customer speeds on each purchased (monetary value)

THE EVALUATION 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: WHY CRM MATTERS MORE NOW THAN EVER BEFORE

CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH

USING ANALYTICAL CRM TO ENHANCE DECISION

Ø  Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers
Ø  Analytical CRM – supports back-office operations and strategic analysis and includes all system that do not deal directly with the customers

CUSTOMER RELATIONSHIP MANAGEMENT SUCCESS FACTORS

CRM success factors include;

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

USING ANALYTICAL CRM TO ENHANCE DECISION

Operational CRM and analytical CRM

Chapter 10 – Extending the Organization – Supply Chain Management

BASICS OF SUPPLY CHAIN

SCM – the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability
The supply chain has three main links.

1. Materials flows from suppliers and their upstream suppliers at all levels
2. Transformation of materials into semi-finished products, or the organization’s own production       processes
3. 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.

CUSTOMER 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

To succeed in today’s competitive markets, companies must align their supply chain with the demands of the markets they serve.

Supply chain performance is now a distinct competitive advantage for companies proficient in the SCM area.

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.

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 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

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 - 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

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. Eg: What will happen to the supply chain if a hurricane in South Carolina reduces holding inventory from 30% to 10%?
2. What-if analysis – checks the impact of a change in an assumption on the proposed solution. Eg: Repeatedly changing revenue in small increments to determine it effects on other variables.
3. Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output. Eg: Determine how many customers must purchase a new product to increase gross profits to $5 million

Executive Information Systems

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. Eg: Data for different sales representatives can be rolled up to an office level. Then state level, then a regional sales level.
2. Drill-down – enables users to get details, and details of details, of information. Eg: From regional sales data then drill down to each sales representatives at each office.
3. Slice-and-dice – looks at information from different perspectives. Eg: One slice of information could display all product sales during a given promotion, another slice could display a single product’s sales for all promotions.

Digital dashboard – integrates information from multiple components and presents it in a unified display

Artificial Intelligence (AI)

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:

*    Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems. Eg: Playing Chess.

* Neural Network – attempts to emulate the way the human brain works. Eg: Finance industry uses neural network to review loan applications and create patterns or profiles of applications that fall into two categories – approved or denied.

Fuzzy logic – a mathematical method of handling imprecise or subjective information. Eg: Washing machines that determine by themselves how much water to use or how long to wash.

Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem. 

Eg: Business executives use genetic algorithm to help them decide which combination of projects a firm should invest.

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

• Multi-agent systems
• Agent-based modeling

Eg:  Shopping bot: Software that will search several retailer’s websites and provide a comparison of each retailers’s offering including prive and availability.

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

Eg: Consumer goods by content, brand loyalty or similarity 

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

Eg: Maytag uses association detection to ensure that each generation of appliances is better than the previous generation.

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

Eg: Kraft uses statistical analysis to assure consistent flavor, color, aroma, texture, and appearance for all of its lines of foods

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