mcnurlin8e ch08 managing operations

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2009 Pearson Education, Inc. Publishing as Prentice Hall

Managing Operations

Chapter 8

Information Systems

Management in Practice

8th Edition


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2009 Pearson Education, Inc. Publishing as Prentice Hall 8-2

Chapter 8

Introduction

What Are Operations?

Why Talk About Operations? Solving Operational Problems: A Portfolio

Approach

Operational Measures

The Importance of Good Management

Whats New in Operations?


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Chapter 8 contd

Outsourcing Functions

The Driving Forces Behind Outsourcing

Changing Customer-Vendor Relationships

Outsourcings History

Managing Outsourcing

Offshoring

Insourcing

Conclusion


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Introduction


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What Are Operations?


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Why Talk About Operations

Typical IT Budget:

Administrative and planning: 20%

Technology, networks, PCs: 44%

Maintenance: 11%

Systems development and enhancement: 25%

Effective Management of IT Operations

Consistently apply best practices Involve all stakeholders in IT-related operations

Adopt partnerships perspective


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Solving Operational Problems:

A Portfolio Approach

Typical Operations Problems:

Slow response times

Down networks

Data unavailability and integrity compromise

Three Strategies to Improve Operations Buy more equipment

Regulate and prioritize computer workload andactivities

Implement operational measurements, setstandards and benchmarks



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

External problems can be explained by deviations in

internal operations



The Importance of Good

Management

IS management must create an

organizational culture that values good

operations

Key to managing operations is the same as in

any management job

Set standards or goals and manage accordingly

Monitor performance

Respond quickly to problems

Hire a good manager (certain skill sets)




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




contd

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



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



Outsourcing IS Functions



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



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



Five-Option Continuum



Outsourcings History

Monolithic Outsourcing (1989)

Huge outsourcing contracts that involved almost

entire IT operations

Transitional Outsourcing (1990s)

Choice of outsourcing of maintenance of legacy

systems or development of new client-server

systems Outsource retrofitting of old systems for Y2K

compliance



Outsourcings History contd

Best-of-Breed Outsourcing Selective outsourcing based on vendor specialty

Desktop support, data center operations, networkmanagement

Coordination is a challenge here

Shared Services Consolidate all non-core activities to one shared services

functional group to be outsourced

Business Process Outsourcing (BPO) Outsourcing all or most of a reengineered process (BPR)

that has large IT component



ANZ Banking Group Ltd.

Case Example: Business Process Outsourcing

Australian bank outsourced procurement function toimprove service levels and increase scale of operations

Lessons learned from experience Be prepared to change the contract as your environment changes

Make step changes in technology and processes to save time andmoney, focus on having an effective transition

Do your best to make the outsourced group appear seamless to youremployees

Focus early on what you want and dont get sidetracked Keep incentive mechanism simple and transparent

Be able to benchmark performance

Understand, to a fair degree of detail, the value chain you plan toembrace



Outsourcings History contd

E-business Outsourcing

With arrival of business use of Internet,

outsourcing has been one way that companies

can quickly get Web sites up and handlingbusiness

Preferred mode of operations in Internet-based firms

Allow a company to move fast, remain flexible and

minimize fixed costs in computer hardware

Utility Computing

On-demand pricing model (pay for what you use)


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Managing Outsourcing

Numerous aspects need to be handled well

to create a successful working relationship

Organizational structure

Governance

Day-to-day working

Supplier development


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Organizational Structure

Outsourcing is a joint effort between parties thatmay 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


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Eastman Kodak Company

Case Example: Managing outsourcing

Selective outsourcing from vendors

Data centers and networks

Managing telecommunications

PC support

Voice messaging


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Eastman Kodak Company

contd

Management Structure (an outsourcing best practice)

Management board(senior management)

Meets twice a year (strategic issues)

Advisory council (15-member)

Meets monthly (technical and operational issues)

Supplier and alliance management group

Manages long-term relationships and contracts

Relationship manager

Focal point between Kodak and supplier

Working groups

Deal with specific technology areas

Client surveys

Sent out twice a year to 5,000 internal users


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Governance

Foundations of outsourcing relationship laid

out in a contract

Service Level Agreements (SLAs) important

component:

Responsibilities

Performance requirements

Penalties

Bonuses

Metrics (of performance)

Can be tricky


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Governance contd


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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 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


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Supplier Development

Topic receiving increased attention in the

production sourcing area

Buying parts and services that go into ones own

products and services

Assisting ones suppliers to improve their

product and services by improving their

processes


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Offshoring

Companies turn to offshoring to tap lower labor

costs and an ample supply of qualified people

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


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Hewitt Associates

Case Example: Offshoring

Provides HR services to Global 500 companies

Outsource maintenance of core HR computer systems totwo 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 ofmaintenance and engineering discipline

Positive outcome


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Offshoring contd

Use offshoring to advantage

A major criticism is that it decreases skills and

knowledge of clients 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


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Insourcing

Generally interpreted as the delegation orcontracting of operations or jobs within abusiness to an internal, but mostly

independent sub-contractor Parent-subsidiary model

Parent company outsources all operations tosubsidiary IT firm

Maintain tight control of contract job execution Protect intellectual property and business know-

how


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Conclusion

Subject of managing IT operations is

especially important today

E-commerce

Increasing use of outsourcing

Information and computer security (viruses)

Terrorism

Whether operations take place in-house oroutsourced, the modus operandiis based on

partnerships


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permission of the publisher. Printed in the United States of America.

Copyright 2009 Pearson Education, Inc.Publishing as Prentice Hall

mcnurlin8e ch08 managing operations

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