CHAPTER 19: OUTSOURCING IN THE 21st CENTURY

     OUTSOURCING PROJECTS

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

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

     FORMS OF OUTSOURCING OPTIONS

·         onshore outsourcing – engaging another company within the same country for services

·         Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country, often this country will share a border with a native country.

·         Offshore outsourcing – using organizations from developing countries to write code and develop systems. In offshore outsourcing the country is geographically far away.

     INFLUENTIAL DRIVERS AFFECTING THE GROWTH OF THE OUTSOURCING MARKET

·         Core competencies – outsourcing enables an organization to maintain an up-to-date technology infrastructure while freeing it to focus on revenue growth goals by reinvesting cash and human capital in areas offering the greatest return on investment.

·         Financial savings – typically cheaper to hire workers in China and India than similar workers in the United States.  Technology is advancing at such an accelerated rate that companies often lack the resources, workforce, or expertise to keep up.

·         Rapid growth – an organization is able to acquire best- practices process expertise. This facilities the design, building, training and employment of business processes and functions.

·         Industry changes – high levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies. The significant increase in merger and acquisition activity created in sudden need to integrate multiple core and noncore business functions into one business.

·         The Internet – barriers to entry such as lack of capital, are dramatically reduced in the world of e-business due to the internet. New competitors enter the market daily.

·         Globalization – as market opens worldwide, competition heats up. Companies may engage outsourcing service providers to deliver international services.

     OUTSOURCING BENEFITS

1.            ·         Increased quality and efficiency of a process, service, or function

2.            ·         Reduced operating expenses

3.            ·         Resources focused on core profit-generating competencies

4.            ·         No costly outlay of capital funds

5.            ·         Reduced time to market for products or services

6.            ·         Reduced head count and associated overhead expenses

     OUTSOURCING CHALLENGES

·         Contract length – most of the outsourced IT contracts are for a relativity long time period. 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 contract if 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, hence creating difficulties is establishing an appropriate contract.

3.    Problems in reforming an internal IT department after the contract period is finished.

·         Competitive edge – a competitive business advantage provided by an internal IT department that understands the organization and is committed to its goals can be lost in an outsourced arrangement. In an outsourced arrangement, IT staff are striving to achieve the goals and objectives of the outsourcing service provider, which may conflict with those of the organization.

·         Confidentiality – the organization must assess the potential risk and cost of a confidentiality breach in determining the net benefits of an outsourcing arrangement.

·         Scope definition – the services required is within the contract scope while the service provider is sure it is outside the scope and so is subject to extra fees.

CHAPTER 15 : CREATING COLLABORATIVE PARTNERSHIP

Teams , Partnerships, and Alliances

• organizations create and use teams, partnerships, and alliances to                       - undertake new initiatives                                                                                               - address both minor and major problem

• organizations create teams, partnerships and alliances both internally with employees and externally with other organizations.
• facilitating the sharing and flow of information.
• core competency is an organization's key strength, a business function that it does better than any of its competitors.
• core competency strategy is organization chooses to focus specifically on its core competency and forms partnerships with other organizations to handle nonstrategic business processes.
• information partnerships occurs when two or more organizations cooperate by integrating their IT systems, thereby providing customers with the best of what each can offer.

Collaboration Systems

• an IT-based set of tools that supports the work of teams by facilitating the sharing and flow of information.
• categories:
• unstructured collaboration (information collaboration)
• structured collaboration (process collaboration)

Explicit and Tacit Knowledge

• explicit consists of anything that can be documented, archived, and codified, often with the help of IT.
• tacit is knowledge contained in people's head.

Content Management

• - provides tools to manage the creation, storage, editing, and publication of information in a collaborative environment

Working Wikis

• -wikis is web-based tools to make it easy for users to add, remove and change online.

Workflow Management Systems

• -workflow defines all the steps or business rules, from beginning to end, required for a business process.
• -workflow management system is facilitates the automation and management of business processes and controls the movement of work through the business process

Groupware Systems 

• -groupware is software that supports team interaction and dynamics including calendaring, scheduling and videoconferencing.

CHAPTER 14 : E-BUSINESS

Ebusiness

Biggest benefit of the internet: how it enables organizations to perform business with anyone, anywhere, anytime.

· Ecommerce- the buying and selling of goods and services over the internet.

- It refers only to online transactions.

· Ebsuiness- derived from the term Ecommerce. It is the conducting of business on the internet, not only buying and selling, but also serving customers and collaborating with business partners.

-  Also refers to online exchanges if information.

Ebusiness Models

· Ebusiness Model- is an approach to conducting electronic business on the internet

-  Takes place between two major entities- business and consumers.

   Business-to-business (B2B)

·         Applies to business buying from and selling to each other over the internet.

·         Electronic marketplaces represent a new wave in B2B ebusiness models.

·         Electronic marketplaces or emarketplaces- are interactive business communities providing a central market space where multiple buyers and sellers can engage in business activities.

-  They represent structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels.

 Business-to-business Emarketplace Overview.

· Their sell almost anything, from services to direct materials.

Business-to-consumer (B2C)

·Applies to any business that sells its products or services to consumers over the internet.

        Eshop

·Sometimes referred to as an estore or etailer. It is a version of a retail store where customers can shop at any hour of the day without leaving their home or office.

· These online stores sell and support a variety of products and services.

·The other online businesses channeling their goods and services via the internet only, such as Amazon.com, are called pure plays.

Types of Businesses:

· Brick-and-mortar business- a business that operates in a physical store without an internet presence.

· Pure-play (virtual) business- a business that operates on the internet only without a physical store. Examples include Amazon.com and Expedia.com

· Click-and-mortar business- a business that operates in a physical store and on the internet. Examples include REI and Barnes and Noble.

  Email

·  Email- consists of a number of eshops. It serves as a gateway through which a  visitor can access other eshops.

 - It may be generalized or specialized depending on the products offered by the eshops it hosts.

- Eshops in emails benefit from brand reinforcement and increased traffic as visiting one shop on the email often leads to browsing “neighboring” shops.

Consumer-to-business (C2B)

·  Applies to any consumer that sells a product or service to a business over the internet.

·  An example is Priceline.com where bidders (or customers) ser their prices for items such as airline tickets or hotel rooms, and a seller decides whether to supply them.

Consumer-to-consumer (C2C)

·  Applies to sites primarily offering goods and services to assist consumers interacting with each other over the internet.

·The internet’s most successful C2C online auction website, eBay, links like-minded buyers and sellers for a small commission.

· C2C online communities, or virtual communities, interact via email groups, web-based discussion forums, or chat rooms.

Online auctions:

· Electronic auction (eauction)- sellers and buyers solicit consecutive bids from each other and prices are determined dynamically.

· Forward auction- an auction that sellers use as a selling channel to many buyers and the highest bid wins.

· Reverse auction- an auction that buyers use to purchase a product or service, selecting the seller with the lowest bid.

C2C Communities:

· Communities of interest- people interact with each other on specific topics, such as golfing and stamp collecting.

·Communities of relations- people come together to share certain life experience, 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.

Ebusiness Benefits:

· Highly Accessible- businesses can operate 24 hours a day, 7 days a week, and 365 days a year.

· Increased Customer Loyalty- additional channels to contact, respond to, and access customers helps contribute to customer loyalty.

· Improved Information Content- in the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and web pages present customers with updated information in real time about goods, services, and prices.

· Increased Convenience- Ebusiness automates and improves many of the activities that make up a buying experience.

· Increased Global Reach- Business, both small and large, can reach new markets.

·Decreased Cost- the cost of conducting business on the Internet is substantially less than traditional forms of business communication.

Ebusiness Challenges:

·Protecting Consumers- consumers must be protected against unsolicited goods and communication, illegal or harmful goods, insufficient information about goods or their suppliers, invasion of privacy, and cyberfraud.

·Leveraging Existing Systems- most companies already use information technology to conduct business in non-Internet environments, such as marketing, order management, billing, inventory, distribution, and customer service. The internet represents an alternative and complementary way to do business, but it is imperative that ebusiness systems integrate existing sytsems in a manner that avoids duplicating functionality and maintains usability, performance, and reliability.

· Increasing Liability- Ebsuiness exposes suppliers to unknown liabilities because internet commerce law is vaguely defined and differs from country to country. The internet and its use in ebusiness have raised many ethical, social, and political issues, such as identity theft and information manipulation.

·Providing Security- The internet provides universal access, but companies must protect their assets against accidental or malicious misuse. System security, however, must not create prohibitive complexity or reduce flexibility. Customer information also needs to be protected from internal and external misuse. Privacy systems should safeguard the personal information critical to building sites that satisfy customer and business needs. A serious deficiency arises from the use of the internet as a marketing means. Sixty percent of internet users do not trust the internet as a payment channel. Making purchases via the internet is considered unsafe by many. The issue affects both the business and the consumer. However, with encryption and the development of secure websites, security is becoming less of a constraint for ebusinesses.

·Adhering to Taxation Rules- the internet is not yet subject to the same level of taxation as traditional businesses. While taxation should not discourage consumers from using electronic purchasing channels, it should not favor internet purchases over store purchases either. Instead, a tax policy should provide a level playing field for traditional retail businesses, mail-order companies, and internet-based merchants. The internet marketplace is rapidly expanding, yet it remains mostly free from traditional forms of taxation. In one recent study, uncollected state and local sales taxes from ebusiness were projected to exceed $60 billion in 2008.

Mashups

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

·The web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries and so on.

·Application Programming Interface (API)- set of routines, protocols, and tools for building software applications. A good API makes it easier to develop a program by providing all the building blocks.

· Mashup editors- they are WYSIWYGs (What You See Is What You Get) for mashups. They provide a visual interface to build a mashup, often allowing the user to drag and drop data points into a web application

CHAPTER 12 : INTEGRATING THE ORGANIZATION FROM END TO END

*when a users enters or updates information in one module, it is immediately and automatically updated throughout the entire system.

*SCM, CRM, and ERP are the backbone of e-business
*integration of those applications is the key of success for many companies
*integration allows the unlocking of information to make it available to any user, anywhere,anytime.

Integration Tools
*Many companies purchased module from ERP,SCM,and CRM vendor and must integrate the different modules together.
*Middleware- several diff. types of software which sit in the middle of and provide connectivity btween 2 or more software applications.
*Enterprise Application Integration (EAI) middleware - packages togther commonly used functionally which reduced the time necessary to develop solutions that integrate applications from multiple vendors.

ERP must integrate  various organization processes and be 

•  flexible
• modular and open
•  comprehensive
• beyond the company

CHAPTER 11

Building Customer-Centric Organization-Customer Relationship Management.

CRM enables organizations to :

- provide better customer service

-make call centers more efficient

-cross sell products more effectively

-help sales staff close deals faster

-simplify marketing and sales process

-discover new customers

-increase customers revenues

Evolution of CRM

Operational CRM: support traditional processing for day to day front office operations or systems that deal directly with customers

Analytical CRM : supports back office operations and strategic analysis and includes all systems that do not deal directly with the customers.

CRM success factors :

• clearly communicate CRM strategy
• define information needs and flows
• build an integrated view of the customer
• implement in iterations
• scalability for organizational growth.