MEASURES OF THE EFFECTIVENESS AND EFFICIENCY OF IT SUPPLY

MODUL 6. SESSION 22- 26

Matakuliah : M0624/Information Technology ValuationTahun : 2008

Bina Nusantara

INTRODUCTION

• AS DISCUSSED IN CHAPTER 2, THERE ARE 3 TYPES OF IT SUPPLY ACTIVITIES:A. MANAGING THE IT INFRASTRUCTURE AND OPERATIONSB. DEVELOPING, IMPLEMENTING AND MAINTAINING IT APPLICATIONSC. SUPPORTING IT USERS

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INTRODUCTION

• THE MAJORITY OF COMPANIES HAVE ADOPTED SOME KIND OF FEDERAL IT MANAGEMENT STRUCTURE. THE FEDERAL IT MANAGEMENT STUCTURE FEATURES DEVOLVED RESPONSI-BILITY FOR IT TO BUSINESS UNIT, THE DEVELOPMENT OF IT ARCHITECTURE FOR THE BUSINESS UNIT AND DERIVATION OF BUSINESS UNIT IT PLANS IS AN ACTIVITY OF EACH BUSINESS UNIT.

• THE FEDERAL IT MANAGEMENT STRUCTURE LEADS TO 6 SETS OF INTERRELATED, CORPORATE IT MANAGEMENT AND SUPPLY ACTIVITIES, SEE FIG 6.1.

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Corporate Functional

Leadership and Guidance

Defining the corporate IT architecture,

standards and policies

Promoting innovative use

of IT

Shared IT Supply

Managing IT Supply and Account Management

Managing the IT infrastructure and

operations

Developing and maintaining IT applications

Supporting IT users

Figure 6.1: Corporate IT Management and Supply Activites

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INTRODUCTION

• THE FUNCTIONAL LEADERSHIP AND GUIDANCE FUNCTION, AND THE PROMOTION OF INNOVATIVE USE OF IT, ARE REGARDED AS IT MANAGEMENT RATHER THAN IT SUPPLY ACTIVITIES.

• THE SUPPLY OF SHARED, CENTRAL IT SERVICES CAN BE ORGANISED IN DIFFERENT WAYS.

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INTRODUCTION• IN PRINCIPLE, COMPANIES CHOOSE FROM A RANGE

OF SIX OPTIONS, LISTED HERE IN INCREASING ORDER OF COMPETITIVENESS:1. IN HOUSE SERVICE UNIT, AS A SOLE SUPPLIER AND WORK-ING ONLY FOR THE BUSINESS, FUNCTIONING AS A COST CENTER.2. IN HOUSE SERVICE UNIT, CHARTERED TO SEEK EXTERNAL BUSINESS, FUNCTIONING AS A PROFIT CENTER.3. PATNERSHIP WITH EXTERNAL SERVICE SUPPLIER4. JOIN VENTURE WITH EXTERNAL SERVICE SUPPLIER.

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INTRODUCTION5. IN HOUSE UNIT TRANSFERRED TO OUTSOURCING SUPPLIER6. ALL IT SERVICES PURCHASED COMPETITIVELY FROM EXTERNAL SUPPLIERS.

• AS THE LEVEL OF COMPETITIVENESS OF IT SUPPLY INCREASES, IT SUPPLIERS ARE MORE OFTEN ASKED TO DEMONSTRATE AND QUANTIFY THEIR PERFORMANCE LEVELS, INCREASINGLY THROUGH BENCHMARKING AGAINS OTHER IT SUPPLIERS AND INCLUDING DIRECT COMPETITORS.

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INTRODUCTION• APPROPRIATE PERFORMANCE MEASURES WILL BE

ATTACHED TO THESE 5 SCORECARDS TO DETERMINE THE EFFECTIVENESS AND EFFICIENCY LEVELS OF IT SUPPLY AS A WHOLE:1. IT SUPPLY MANAGEMENT2. ACCOUNT MANAGEMENT3. IT DEVELOPMENT MANAGEMENT4. IT INFRASTRUCTURE MANAGEMENT5. CLIENT SUPPORT

THIS WILL COMPLETE THE 3RD AND FINAL LAYER OF THE BTRIPLEE FRAMEWORK.

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MEASURES OF IT SUPPLY MANAGEMENT

• THECONCEPT OF RUNNING IT SUPPLY AS A BUSINESS MEANS ADOPTING THE PRACTICES A PROFESSIONAL SERVICE ORGANIZATION MUST USE TO BE COMPETITIVE AND TO SURVIVE. IN PARTICULAR IT APPLIES TO IN HOUSE SERVICE CENTER (NOT FOR PROFIT, BUT NO LOSS) AND PROFIT CENTER (EXPECTED TO MAKE A PROFIT)

• A PROFESSIONAL SERVICE FIRM MUST FOCUS ON ”OUTSTANDING CLIENT SERVICE, PROFESSIONAL SATISFACTION FOR EMPLOYEES, AND FINANCIAL SUCCESS” IF IT IS SURVIVE.

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MEASURES OF IT SUPPLY MANAGEMENT

• THE ORGANIZATION SHOULD FOCUS ON THE ANSWERS TO 4 SIMPLE QUESTIONS:

1. IS IT SUPPLY EFFECTIVE? (CUSTOMER PERSPECTIVE?)2. IS IT SUPPLY EFFICIENT? (ULTIMATELY THE CUSTOMER

AND SHAREHOLDER PERSPECTIVEINITIALLY THE INTERNAL PERSPECTIVE)

3. WILL THE IT SUPPLIER MAINTAIN ITS FULL POTENTIAL IN THE FUTURE? (INNOVATION AND LEARNING PERSPECTIVE)

4. DOES IT SUPPLY DELIVER SHAREHOLDER VALUE? (FINANCIAL PERSPECTIVE)

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MEASURES OF IT SUPPLY MANAGEMENT

• ANSWERS THE 1ST QUESTION MAY BE FOUND BY MEASURING THE EXTENT TO WHICH PRE DEFINED GOALS, DERIVED FROM CUSTOMER EXPECTATIONS, ARE REALIZED.

• ANSWERS THE 2ND QUESTIONMAY BE FOUND BY INVESTIGATING OVERALL IT SUPPLY EFFICIENCY FACTORS, SUCH AS:1. TOO MUCH BUREAUCRACY, MEASURED BY THE NUMBER OF MANAGEMENT LAYERS IN PLACE.2. TOO MUCH OVERHEAD, MEASURED BY THE AMOUNT OF INDIRECT IT SUPPLY ACTIVITIES IN RELATION TO DIRECT ACTIVITIES.

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MEASURES OF IT SUPPLY MANAGEMENT

3. REDUNDANCY OF SIMILAR ACTIVITIES PERFORMED IN DIFFERENT IT SUPPLY PROCESSES. E.G.: CUSTOMER SERVICE PERFORMED IN EACH IT SUPPLY PROCESS MIGHT BE MORE EFFICIENT IN A COMBINED CUSTOMER-SERVICE FUNCTION REPRESENTING ALL IT SUPPLY PROCESSES.

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MEASURES OF IT SUPPLY MANAGEMENT

• ANSWERS THE 3RD QUESTION, MAY BE FOUND FROM SELECTED PERFORMANCE INDICATORS, AIMED AT THE INNOVATIVE CAPABILITY OF IT SUPPLY, AND ARE DERIVED FROM THE SCORECARDS OF THE REMAINING IT SUPPLY PROCESSES AND SUPPORTED BY EXTERNAL COMPARISONS AND HISTORICAL TRENDS.

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MEASURES OF IT SUPPLY MANAGEMENT

• ANSWER THE 4TH QUESTIONS, DEAL WITH THE BUDGET VERSUS REALIZATIONS RELATIONSHIP, ETC., AND PERFORMANCE INDICATORS THAT ARE COMMONLY USED TO MEASURE THE HEALTH OF ANY BUSINESS, SUCH AS PROFIT AS % OF TURNOVER, PROFIT PER EMPLOYEE, ROS, ROA, ETC.

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Relationship with Customers

High

Close

Basic

Distant

Faithful Servant

Always helping, wherever possible, no

questions asked

Business Partner

Top quality, knows what we want, always one leap

ahead

John Average

As good as many other, does what we want, first asks for

the budget

Prima Donna

Best in town, very innovative, hand to get

hold of

Figure 6.2 : Positioning the IT Supplier

Sophistication of Services

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MEASURES OF IT SUPPLY MANAGEMENT

• FIG. 6.2. CAN BE USED TO DERIVE A MISSION AND ROLES OF IT SUPPLY BY ELABORATING ON THE ANSWERS TO 2 BASIC QUESTIONS:

1. WHAT ARE THE SERVICES REQUIRED BY OUR CUSTOMERS, RANGING FROM BASIC TO ANVANCED?

2. HOW CLOSE IS THE CUSTOMER RELATIONSHIP, RANGING FROM DISTANT TO CLOSE?

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MEASURES OF IT SUPPLY MANAGEMENT

• THE ANSWERS LEAD TO 4 POSSIBLE:1. BASIC SERVICE, DISTANT CUSTOMER: THE IT SUPPLIER

IS REGARDED AS AN IT SERVICES AND FACILITIES SUPPLIER, DELIVERING COMMODITY SERVICES THAT ARE NOT DISCRIMINATING BY ANY STANDARD.

2. BASIC SERVICE, CLOSE CUSTOMER: THE IT SUPPLIER IS REGARDED AS A FAITHFUL SERVICES AND MAINTAINING LARGE CORPORATE INFORMATION SYSTEMS ARE GENERALLY THE MOST IMPORTANT PARTS OF THE TOTAL SERVICE.

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MEASURES OF IT SUPPLY MANAGEMENT

3. ADVANCED SERVICE, DISTANT CUSTOMER: THE IT SUPPLIER IS SEEN AS A HIGH QUALITY CONSULTANT AND SUPPLIER OF STATE OF THE ART IT SERVICES.

4. ADVANCED SERVICE, CLOSE CUSTOMER: THE IT SUPPLIER PERFORMS AS A BUSINESS PARTNER: DESIGNING, BUILDING, INTEGRATING, OPERATING AND SUPPORTING IT APPLICATIONS AND IT INFRASTRUCTURE THAT MEET THE HIGHEST PROFESSIONAL BUSINESS STANDARD.

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MEASURES OF ACCOUNT MANAGEMENT

• MEASURES OF ACCOUNT MANAGEMENT BECOMES INCREAS-INGLY IMPORTANT IN TODAY’S IT SUPPLY ORGANIZATIONS.

• THT IMPORTANT QUESTIONS IS: “WHAT CONSTITUTES GOOD ACCOUNT MANAGEMENT?”

• KOTLER, BELIEVES AN ACCOUNT MANAGER SHOULD MASTER THE MARKETING CONCEPT: DETERMINING THE NEEDS AND THE WANTS OF TARGET MARKETS AND DELIVERING THE DESIRED SATISFACTIONS MORE EFFECTIVELY AND EFFICIENTLY THAN COMPETITORS.

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MEASURES OF ACCOUNT MANAGEMENT

• THE TRADITIONAL MARKETING MIX (4 P: PRODUCT, PRICE, PROMOTION AND PLACE) SHOULD REFLECT GOOD ACCOUNT MANAGEMENT.

• LAUTERBORN, CLAIMS THE 4 C AS A NEW ONE (REPLACE 4 P): 1. CUSTOMER WANTS AND NEEDS2. COST TO SATISFY THOSE NEEDS3. CONVENIENCE TO BUY4. COMMUNICATION

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MEASURES OF IT DEVELOPMENT MANAGEMENT

• THE CONCEPT OF RUNNING IT SUPPLY AS A PROFESSIONAL BUSINESS IS EQUALLY VALID FOR IT DEVELOPMENT AND MAINTENANCE ACTIVITIES.

• FIG. 6.3 ILLUSTRATES THE SPECTRUM OF DEVELOPMENT AND MAINTENANCE ROLES.

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Skills, knowledge and experience of people

Culture of the Organization

Emphasis on effectiveness

of results

Emphasis on effectiveness of activities Emphasis

on IT Issues

Emphasis on Business

Issues

Data Center Operators

Facilities Managers

Infrastructure Service Providers

Business consultants

Centers of Expertise

Figure 6.3: Roles of IT Infrastructure Management Functions

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MEASURES OF IT DEVELOPMENT MANAGEMENT

• DEVELOPMENT AND MAINTENANCE OF LARGE SCALE SYSTEMS;THE EFFECTIVENESS OF IT DEVELOPMENT CAN BE MEASURED USING INDICATORS RELATED TO 3 PRINCIPAL CATEGORIES OF REQUIREMENTS:1. RESPONSIVENESS TO CUSTOMERS AND BUSINESS NEEDS.2. EFFECTIVE AND RELIABLE PROJECT MANAGEMENT.3. ADHERENCE TO IT ARCHITECTURE STANDARDS.

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MEASURES OF IT DEVELOPMENT MANAGEMENT

• RAPID APPLICATION DEVELOPMENT (RAD)RAD IS A DEVELOPMENT APPROACH THAT INCORPORATES STATE OF THE ART:1. DEVELOPMENT TECHNIQUES, SUCH AS RE-USE OF INTERMEDIATE AND FINAL DEVELOPMAT DELIVERABLES, OBJECT ORIENTATION, PROTOTYPING2. DEVELOPMENT TOOLS, SUCH AS REPOSITORY BASED I-CASE TOOLS3. PROJECT MANAGEMENT APPROAVHES, SUCH AS TIME-BOXED PROJECT MANAGEMENT.

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MEASURES OF IT DEVELOPMENT MANAGEMENT

• PACKAGE IMPLEMENTATIONTHIS APPROACHES DRASTICALLY REDUCE THE TIME TO DEVELOP NEW IT APPLICATIONS, REDUCE DEVELOPMENT COSTS, IS TO BUY FUNCTIONALITY (FUNCTION POINTS), DELIVERING A LARGE AMOUNT OF USEFUL WORK AT ONCE.PACKAGES WILL NEARLY ALWAYS PROVE TO BE BETTER INVESTMENT, PROVIDED THEY MEET THE ESSENTIAL REQUIREMENTS, SINCE THEY SRE NOT ONLY LESS EXPENSIVE TO ACQUIRE AND MAINTAIN, BUT ALSO BECAUSE THEY CANBE IMPLEMENTED MORE QUICKLY SO THAT ITS BENEFITS CAN BE ACHIEVED EARLIER.

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MEASURES OF IT DEVELOPMENT MANAGEMENT

• APPROPRIATE CLASSES OF MEASURES FOR IT DEVELOPMENT ACTIVITIES:1. BUSINESS PROCESS KNOWLEDGE: THE ABILITY TO UNDERSTAND THE BUSINESS WORKS IN TERM OF FLOW OF BUSINESS PROCESSES AND THEIR STRUCTURES, AND THE ANALYTICAL SKILLS TO FIND OUT HOW THE BUSINESS CPULD WORK BETTER.2. UNDER STANDING AND APPLICATION OF STATE OF THE ART IT: THE INSIGHT INTO MODERN IT APPLICATIONS AND THEIR POTENTIAL IMPACT ON THE BUSINESS.

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MEASURES OF IT DEVELOPMENT MANAGEMENT

3. RAPID APPLICATION DEVELOPMENT: PROTOTYPING TECHNIQUES, JOINT APPLICATION DESIGN (JAD) TECHNIQUES, EVOLUTIONARY DEVELOPMENT METHODS, ETC., HAVE TO BE MASTERED.4. EFFECTIVE COMMUNICATION AND TEAMWORK: JOINT DEVELOPMENT TEAMS PENETRATE EXISTING FUNCTIONAL BOUNDARIES AND QUESTION FUNCTIONAL RESPONSIBILITIES.

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MEASURES OF IT INFRASTUCTURE MANAGEMENT

• THE VERY IMPORTANT ASPECT OF INFRASTRUCTURE MANAGEMENT IS EFFICIENCY, MAINLY BECAUSE OF THE LARGE PART OF THE IT BUDGET CONSUMED BY INFRASTRUCTURE.

• LARGER DATA CENTER CAN REALIZE GREATER ECONOMIES AF SCALE AND BIGGER PAYOOFS FROM AUTOMATION, PARTICULARLY THE USE OF HARDWARE AND SOFTWARE DATA CENTER AUTOMATION PRODUCTS.

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MEASURES OF IT INFRASTUCTURE MANAGEMENT

• THERE ARE 6 KSF FOR EFFICIENCY:1. USE ECONOMIES OF SCALE TO REDUCE H/W AND S/W COSTS2. LOCATE IN A LOW COST GEOGRAPHIC AREA TO REDUCE FACILITY AND STAFF COSTS3. IMPLEMENT FORMAL CAPACITY PLANNING AND INCREASE H/W UTILIZATION4. ESTABLISH STANDARDS AND PROCEDURES TO ACHIEVE A HIGH DEGREE OF AUTOMATION

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MEASURES OF IT INFRASTUCTURE MANAGEMENT

5. OPTIMIZE WORKFLOWS TO ELIMINATE OR REDUCE PHYSICAL MOVEMENT OF ITEMS INTO AND OUT OF THE DATA CENTER6. IMPLEMENT ORGANIZATIONAL CHANGES TO PROMOTE QUALITY, EFFICIENCY, AND DEFECT PREVENTION.TO ASSESS EFFECTIVENESS AND EFFICIENCY IT INFRASTRUCTURE AND AS ASSOCIATED WITH THE BALANCED SCORE CARD, USED 3 STAGES PERSPECTIVES.

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MEASURES OF IT INFRASTUCTURE MANAGEMENT

1st STAGE OF IT INFRASTRUCTURE MEASUREMENT (THE INTERNAL PERSPECTIVE)

A.COLLECT INTERNAL MEASURES ON DATA CENTER OPERATIONS

B.THERE ARE NO REAL DIFFICULTIES IN MEASURING THE PERFORMANCE OF OPERATIONS FOR PURPOSES OF INTERNAL MANAGEMENT, ESPECIALLY IN LARGE MAINFRAME ENVIRONMENT.

C.PLENTY OF LOCAL HISTORY FOR COMPARISON AND TREND ANALYSIS.

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MEASURES OF IT INFRASTUCTURE MANAGEMENT

• TWO EXCEPTIONS CONDITION:1. THE MOST TECHNICALLY SOPHISTICATED AND

PEOPLE INTENS-IVE FUNCTIONS WITHIN OPERATIONS, SYSTEMS PROGRAMING, AND TECHNOLOGY PLANNING.

2. EXTENSIVE H/W MONITORING FACILITIES ARE NOT AVAILABLE IN SOME ENVIRONMENT, ESPECIALLY THR NON MAINFRAME, SUCH AS CLIENT SERVER MONITORING. THE MAJORITY OF COSTS TO MANAGE ARE INCRESINGLY FOUND ON YHE USER SIDE.

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MEASURES OF IT INFRASTUCTURE MANAGEMENT

2ND STAGE OF IT INFRASTRUCTURE MEASUREMENT (THE CUSTOMER PERSPECTIVE)

A.MEASURES ASSUME THE PERSPECTIVE OF THE BUSINESS LOOKING FOR SERVICE, NOT THE MACHINE PROVIDING IT

B.PERFORMANCE MANAGEMENT TAKES THE FORM OF A SERIES OF KEY INDICATORS AND OF FORMAL SERVICE LEVEL AGREEMENTS (SLA) NEGOTIATED WITH BUSINESS MANAGEMENT.

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MEASURES OF IT INFRASTUCTURE MANAGEMENT

3RD STAGE OF IT INFRASTRUCTURE MEASUREMENT (THE INNOVATION AND LEARNING, AND FINANCIAL PERSPECTIVES)

A.THE ORGANIZATIONS ONLY REPORT OPERATIONS PERFORM-ANCE ANNUALY, SHOWING HOW FORMAL SLA’S HAVE BEEN MET.

B.THIS APPROACH REPRESENTS A DESIRABLE CONDITION: PERFORMANCE AND USER RELATIONSHIP ARE STRONG.

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MEASURES OF CLIENT SUPPORT

• CLIENT SUPPORT IS THE OVERALL LABEL OF ACTIVITIES NORMALLY FOUND IN FUNCTIONS SUCH AS END USER COMPUTING (EUC) SERVICES, INFORMATION CENTER (IC), CALL CENYERS, USER EDUCATION AND TRAINING DEPT., DATA CENTER HELP DESK, AND OTHER ON DEMAND USER SERVICE.

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MEASURES OF CLIENT SUPPORT10 KEY QUALITIES OF THE HELP DESK AS FOLLOWS:

1. GOOD COMMUNICATION SKILLS: ORAL, LISTENING, WRITTEN

2. TECHNICAL SKILLS: COMPUTER S/W AND SYSTEMS KNOWLEDGE

3. PEOPLE, SERVICE AND CUSTOMER ORIENTED4. PATIENT, RELAXED, EVEN-TEMPERED5. WORK WELL UNDER PRESSURE6. GOOD PHONE SKILLS7. INTELLIGENT, ABLE TO LEARN AND THINK LOGICALLY

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MEASURES OF CLIENT SUPPORT

8. PROBLEM SOLVING SKILLS 9. GOOD ANALYTICAL, QUESTIONING SKILLS10. FRIENDLY, PERSONABLE, OUTGOING

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CONCLUSION• TO ADDRESS EFFECTIVENESS AND EFFICIENCY

MEASUREMENT ISSUES OF IT SUPPLY, THE 4 PERSPECTIVES OF THE BALANCED SCORECARD CONCEPT OF KAPLAN AND NORTON HAVE BEEN INTRODUCED: THE CUSTOMER, INTERNAL, INNOVATION AND LEARNING, AND FINANCIAL PERSPECTIVE.

• IF IT SUPPLY IS RUN AS A BUSINESS, WHICH IS MANAGED AS A PROFIT CENTER, THESE SCORECARD CAN BE COMPLEMENTED BY 2 ADDITIONALLY DEFINED SCORECARDS: ACCOUNT MANAGEMENT AND IT SUPPLY MANAGEMENT.

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CONCLUSION• SEE APPENDIX C WICH IS SHOW THE 20

DEVELOPED SCORECARDS (4 SCORECARDS FOR 5 IT SUPPLY PROCESSES).CHOICES ARE CONTINGENT ON THE GOALS, ROLES, RELATIVE STRENGTHS, AND WEAKNESSES OF THE IT SUPPLIER IN QUESTION.

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• THE END OF SESSION 22 - 26