Outsourcing in the 21st Century

Hey ho lets go last chapter! 

OUTSOURCING PROJECTS

Insourcing (in-house-development) -  is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.

Outsourcing - is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.

Onshore outsourcing - is engaging another company within the same country for services.

Nearshore outsourcing - is contracting an outsourcing arrangement with a company in a nearby country.

Offshore outsourcing -  is using organizations from developing countries to write code and develop systems.

Outsourcing Benefits

•      increased quality and efficiency
•       reduced operating expenses
•       outsourcing non-core process
•       reduced exposure to risk
•       economies of scale, expertise, and best practices
•       access to advanced technologies
•       increased flexibility
•       avoid costly outlay of capital funds
•       reduced headcount and associated overhead expense
•       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.

Long period causes : 

•  difficulties in getting out of a contract
• problems in foreseeing future needs
•  problems in reforming an internal IT department after the contract is finished

Competitive edge

Confidentiality

Creating Collaborative Partnerships

WEB 2.0: ADVANTAGES OF BUSINESS 2.0

The next generation of Internet use – more mature, distinctive communications platform characterized by new qualities such as collaboration, sharing and free.

Business 2.0 encourages user participation and the formation of communities that contribute to the content.

CONTENT SHARING THROUGH OPEN SOURCING

Open system -  consist of nonproprietary hardware and software based on publicly known standards that allow third parties to create add-on-products to plug into or interoperate with the system. 

Source code - contains instructions written by a programmer specifying the actions to be performed by computer software.

Open source - refers to any software whose source code is made available free (not on a fee or licensing basis as in business) for any third party to review and modify.

USER-CONTRIBUTED CONTENT

User-contributed content - is created and updated by many users for many users. Websites move control of online media from the hands of leaders to the hands of users. One of the most popular forms of user-generated content is a reputation system,where buyers post feedback on sellers.

COLLABORATION INSIDE THE ORGANIZATION

Collaboration system - is a set of tools that supports the work of teams or groups by facilitating the sharing and flow of information. 

Business 2.0’s collaborative mind-set generates more information faster from a wider audience. 

Collective intelligence - is collaborating and tapping into the core knowledge of all employees, partners, and customers. Knowledge can be real competitive advantage for an organization.

Knowledge Management System (KMS) - supports the capturing, organization and dissemination of knowledge throughout an organization. KMS can distribute an organization’s knowledge base by interconnecting people and digitally gathering the expertise.

Explicit and Tacit Knowledge

Explicit knowledge - consists of anything that can be documented, archived, and codified, often with the help of IT. Examples of explicit knowledge are assets such as parents, trademarks, business plans, marketing research, and customer lists. 

Tacit knowledge - is the knowledge contained in people’s heads. 

COLLABORATION OUTSIDE THE ORGANIZATION

Crowd sourcing, which refers to the wisdom of the crowd. The idea that collective intelligence is greater than the sum of its individual parts has been around for a long time. With Business 2.0 the ability to efficiently tap into its power is emerging.

 NETWORKING COMMUNITIES WITH BUSINESS 2.0 

Social media - refers to websites that rely on user participation and user-contributed content such as Facebook, Youtube, and Digg. 

Social network - is an application that connects people by matching profile information.. The first is the ability to create and maintain a profile that serves as an online identity within the environment. The second is the ability to create connections between other people within network.

SOCIAL TAGGING

Tags - specified keywords or phrases incorporated into website content for means of classification or taxonomy

Website Bookmark - Locally stored URL 

Social bookmarking - Allows users to share, organize, search and manage bookmarks 

 BUSINESS 2.0 TOOLS FOR COLLABORATING 

BLOGS

A blog, or web blog, is an online journal that allows users to post their own comments, graphics, and video. Unlike traditional HTML web pages, blog websites let writers communicate-and readers respond-on a regular basis through a simple yet customizable interface that does not require any programming. Blogs are no different from marketing channels such as video, print, audio, or presentations.

Microblogs

Microblogging is the practice of sending brief posts to a personal blog, either publicly or to a private group of subscribers who can read posts as IMs or a text messages. The main advantage of microblogging is that posts can be submitted by a variety of means, such as instant messaging, email, or the web.

Real Simple Syndication (RSS)

Is web format used to publish frequently updated works, such as blogs, news headlines, audio, and video, in a standardized format. An RSS document or feed includes full or summarized text, plus other information such as publication date and authorship.

WIKIS

A wiki is a type of collaborative web page that allows users to add, remove and change content, which can be easily organized or reorganized as required. While blogs have largely drawn on the creative and personal goals of individual authors, wikis are based on open collaboration with any and everybody. Wikipedia, the open encyclopedia that launched in 2001, has become one of the most 10 most popular web destinations, reaching an estimated 217 million unique visitors a month. The network effect describes how products in an network increase in value to users as the number of users increases.

MASHUPS

mashup - is a website or web application that uses content from more than one source to create a completely new product or service. 

The term is typically used in the context of music. The web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries, and so on to create content with a new purpose. Content used in mashup is typically sourced from an application programming interface (API), which is a set of routines, protocols, and tools for building software applications. A programmer then puts these building blocks together.

 THE CHALLENGES OF BUSINESS 2.0 

Technology Dependence

These days, many people search the information through Internet. Without the Internet, they will find it is difficult to search the information.

Information Vandalism

Allowing anyone to edit anything opens the door for individuals to purposely damage, destroy, or vandalize website content.

Violations of Copyright and Plagiarism

A great deal of copyrighted material tends to find its ways to blogs and wikis where many times blame cannot be traced to a single person

Ebusiness

 E-BUSINESS MODEL 

A business model is a plan that details how a company creates, delivers, and generates revenues.
Ebusiness model is a plan that details how a company creates, delivers  and generates revenues on Internet

Ebusiness Models

Brick-and-Mortar Business
A business that operates in a physical store without an internet presence
* Example : The Gap

Click - and- Mortar Business
A business that operates in a physical store and on the Internet
* Example : Calaqisya, Barnes & Nobles

Pure-Play (Virtual) Business
A business that operates on the internet only without a physical store
*Example : Google

 E-BUSINESS TOOLS FOR CONNECTING AND COMMUNICATING 

• EMAIL
• INSTANT MESSAGING
• VIDEOCONFERENCING
• CONTENT MANAGEMENT SYSTEM - Help companies manage the creation,storage,editing of their website content.

Taxonomy - Scientific classification of organisms into group based on similarities of structure or origin
Information Architecture - The set of ideas about how all information in a given context should be organized 

 THE CHALLENGES OF E-BUSINESS 

• Protecting Consumers
• leveraging existing system
• increasing liability
• providing security

 

Integrating the Organization from End to End - Enterprise Resource Planning

ENTERPRISE RESOURCE PLANNING (ERP)

Serve as the organization's backbone in providing fundamental decision-making support. 
The heart of 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 system help organization to achieve :

1. Obtain operational efficiencies, lower costs, improve supplier, and customer relations, all units of the organization must work together towards goal.
2. ERP automates business processes such as order fulfillment- taking an order from a customer, shipping the purchase, and then billing for it.

ERP enables employees across the organization to share information across a single, centralized database

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 pre-built links to popular enterprise applications, which reduces the time necessary to develop solutions that integrate applications from multiple vendors.

Building a Customer-centric Organization - Customer Relationship Management

Customer Relationship Management (CRM) 

Means of managing all aspects of a customer's relationship with an organization to increase customer loyalty and retention and an organization's profitability

• provide better customer service
• make call centers more, efficient
• cross sell products more effectively
• help sales staff close deals faster
• Can obtain overview of the customer's products, account information and purchasing history

The Benefits of CRM

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

• Allows a company to operate more efficiently and effectively in the area of supporting customer needs
• Enables a firm to treat customers as individuals, gaining important insights into their buying preferences and shopping behaviours.

RFM Formula : recency, frequency and monetary value

EVOLUTION OF CRM

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

OPERATIONAL AND ANALYTICAL CRM

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

 

WHY CRM MATTERS MORE NOW? 

• The key competitive strategy to stay focused on customer needs and to integrate a customer-centric approach throughout an organization.
• Can acquire enterprise wide knowledge about customer
• Can improve the business processes that deliver value to an organization's customers, suppliers and employees.
• Help a company anticipate customer needs and proactively serve customers in ways that build relationship, create loyalty

 

Extending the Organization - Supply Chain Management

Hey ho lets go! 

Basics of Supply Chain

• A supply chain consists of all parties involved, directly or indirectly in procurement ( purchasing raw materials).
• 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.
• SCM is becoming increasingly important in creating organizational efficiencies and competitive advantages.
• It improves ways for companies to find the raw components they need to make a product or service, manufacture that product or service, and deliver it to customers.
• Typical supply chain : Supplier's Supplier, Supplier, Manufacturer, Distributor, Retailer, Customer, Customer's Customer

The Five Basic Supply Chain Management Activities

IT Roles in the Supply Chain

• Creating the integrations or tight process and information linkages between functions within a firm - marketing, sales, finance
• Between firms which allow the smooth, synchronized flow of both information and product.

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.

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.

Enabling the Organization - Decision Making

Making Business Decision :

Decision making is one of the most important and challenging aspect of management decision range from routine choices such as how many item to order, or how many people to hire, to unexpected ones such as what to do if a key of employee suddenly quits or needed materials do not arrive.

The Decision Making Process

1. Problem Identification

2. Data collection

3. Solution Generation

4. Solution Test

5. Solution Selection

6. Solution Implementation

There are reason for growth of decision making information system :

• people need to analyze large amount of information
• people must make decision quickly
• people must apply sophisticated analysis technique
• people must protect corporate asset of organizational  information
  
  
  Transaction Processing System

moving up thru organizational pyramid users move from requiring transactional information to analytical information.

Decision Support System 
model information to support managers & business professionals during the decision-making process.
DSS used three quantitative models that are :- sensitivity analysis, what-if analysis and goal seeking analysis.

Interaction between DSS and TPS 

          

Executive Information System (EIS) - a specialized DSS that supports senior level executives within the organization.

EIS offering capabilities :
1. consolidation
2. drill down
3. slice-and-dice

            

Interaction between TPS and EIS

Digital dashboard

Integrates info from multiple components and presents it in unified display

 example of dashboard

Artificial Intelligence (AI)

Ultimate goal is ability to build a system that can mimic human intelligence
Intelligent system - various commercial applications of artificial intelligence
Artificial intelligence - simulates human intelligence such as ability to reason and learn