MGT300 Chapter 15: Outsourcing in the 21st Century

OUTSOURCING PROJECTS

• In sourcing (in-house-development) – A common approach using the professional expertise within an organization to develop and maintain the organization’s information technology systems
• Outsourcing – An arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house

• Onshore outsourcing – engaging another company within the same country for services
• Near shore outsourcing – contracting an outsourcing arrangement with a company in a nearby country
• Offshore outsourcing – using organizations from developing countries to write code and develop systems

Big selling point for offshore outsourcing “inexpensive good work”


Factors driving outsourcing growth include;

• Core competencies
• Financial savings
• Rapid growth
• Industry changes
• The Internet
• Globalization

-According to Pricewater house Coopers “Businesses that outsource are growing faster, larger and more profitable than those that do not”
-Most organizations outsource their non core business functions, such as payroll and IT




OUTSOURCING BENEFITS

Outsourcing benefits include:-

• Increased quality and efficiency
• Reduced operating expenses
• Outsourcing non-core processes
• 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

Outsourcing challenges include:-

• Contract length

1.       Difficulties in getting out of a contract
2.       Problems in foreseeing future needs
3.       Problems in reforming an internal IT department after the contract is finished

• Competitive edge 
• Confidentiality
• Scope definition 

MGT300 Chapter 14– Creating Collaborative Partnerships

TEAMS, PARTNERSHIPS AND ALLIANCES

Organizations create and use teams, partnerships and alliances to;

• Undertake new initiatives
• Address both minor and major problems
• Capitalize on significant opportunities

Organizations create teams, partnerships and alliances both internally with employees and externally with other organizations
Collaboration system – supports the work of teams by facilitating the sharing and flow of information


Information partnerships with other organizations



Organizations from alliance and partnerships with other organizations based on their core competency

• Core competency – An organization’s key strength, a business function that it does better than any of its competitors
• Core competency strategy – Organization chooses to focus specifically on its core competency and forms partnerships with other organizations to handle nonstrategic business processes

Information technology can make a business partnership easier to establish and manage

• 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

The internet has dramatically increased the ease and availability for IT – enabled organizational alliance and partnerships


COLLABORATION SYSTEMS

• Collaboration solves specific business tasks such as telecommuting, online meetings, deploying applications, and remote project and sales management
• Collaboration system – An IT- based set of tools that supports the work of teams by facilitating the sharing and flow of information.
• Two categories of collaboration

1.       Unstructured collaboration (information collaboration) – includes document exchange, shared whiteboards, discussion forums, and email.
2.       Structured collaboration (process collaboration) – involves shared participation in business processes such as workflow in which knowledge is hard-coded as rules


Collaborative business functions 




Collaboration systems include:-

• Knowledge management systems
• Content management systems
• Workflow management systems
• Groupware systems

KNOWLEDGE MANAGEMENT SYSTEMS

• Knowledge management (KM) – involves capturing, classifying, evaluating, retrieving and sharing information assets in a way that provides context for effective decisions and actions
• Knowledge management system – supports the capturing and use of an organization’s “know-how”

EXPLICIT AND TACIT KNOWLEDGE

Intellectual and knowledge-based assets fall into two categories;
1.       Explicit knowledge – consists of anything that can be documented, archived, and codified, often with the help of IT
2.       Tacit knowledge – knowledge contained in people’s heads

The following are two best practices for transferring or recreating tacit knowledge
1.       Shadowing – less experienced staff observe more experienced staff to learn how their more experienced counterparts approach their work
2.       Joint problem solving – a novice and expert work together on a project


Reasons why organizations launch knowledge management programs 




CONTENT MANAGEMENT

Content management system (CMS) – provides tools to manage the creation, storage, editing and publication of information in a collaborative environment
CMS marketplace includes;

• Document management system (DMS)
• Digital assets management system (DAM)
• Web content management system (WCM)

WORKING WIKIS

• Wikis – web-based tools that make it easy for users to add, remove, and change online content
• Business wikis – collaborative web pages that allows users to edit documents, share ideas or monitor the status of a project

WORKFLOW MANAGEMENT SYSTEMS

• Work activities can be performed in series or in parallel that involves people and automated computer systems
• Workflow – defines all the steps or business rules, from beginning to end, required for a business process
• Workflow management system – facilitates the automation and management of business processes and controls the movement of work through the business process
• Messaging-based workflow system – sends work assignments through an email system
• Database-based workflow system – stores documents in a central location and automatically asks the team members to access the document when it is their turn to edit the document

GROUPWARE SYSTEMS

Groupware technologies

• Groupware – software that supports teams interaction and dynamics including calendaring, scheduling and videoconferencing 

WEB CONFERENCING

• Web conferencing – blends audio, video and document-sharing technologies to create virtual meeting rooms where people “gather” at a password-protected website

VIDEOCONFERENCING

• Video conference – A set of interactive telecommunication technologies that allow two or more locations to interact via two-way video and audio transmissions simultaneously 

 INSTANT MESSAGING

• Email is the dominant form of collaboration application, but real-time collaboration tools like instant messaging are creating a new communication dynamic
• Instant messaging – types of communications service that enables someone to create a kind of private chat room with another individual to communicate in real-time over the internet
• Instant messaging application 

MGT300 Chapter 13 - Creating Innovative Organization

The Internet is a powerful channel that presents new opportunities for an organization to:

• Touch customers
• Enrich products and services with information
• Reduce costs

How do e-commerce and e-business differ?

• E-commerce – the buying and selling of goods and services over the Internet (online transactions)
• E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners (online transactions, serving customers and collaborating with business partner)

Industries Using E-Business

E-business model – an approach to conducting electronic business on the Internet

Business-to-Business (B2B)

Electronic marketplace (e-marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities.

Electronic marketplace (e-marketplace)

• Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels
• Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers
• Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials

Search Engine Marketing

Business-to-Consumer (B2C)

Common B2C e-business models include:

• e-shop – a version of a 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

e-shop

e-mall

Business types:

Brick-and-mortar business- operates in a physical store without an Internet presence. Eg: Bata.

Pure-play business- a business that operates on the Internet only without a physical store. Examples include fashionvalet.com. 

Click-and-mortar business– a business that operates in a physical store and on the Internet .Eg: Hijabs by Hanami

CarFax

Amazon.com

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

Priceline.com

Agoda.com

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 stamp 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-on-one with Michael Jordan

E-Bay

mudah.my

E-Business Benefits

E-Business benefits include:

• Highly accessible-Businesses can operate 24 hours a day, 7 days a week, 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-E-business automates and improves many of the activities that make up a buying experience
• Increased global reach-Businesses, both small and large, can reach new markets
• Decreased cost -The cost of conducting business on the Internet is substantially smaller than traditional forms of business communication

E-business challenges include:

• Identifying Limited Market Segments-The main challenge of e-business is the lack of growth in some sectors due to product or service limitation.
• Managing Consumer Trust-Internet marketers must develop a trustworthy relationship to make that initial sale and generate customer loyalty.

E-business challenges include:

• Ensuring Consumer Protection-Implement Internet Security, protect from misuse of customer information.
• Managing Consumer Trust-Companies that operate online must obey a patchwork of rules about which customers are subject to sales tax on their purchase and which are not.

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 mashup - a Web site or Web application that uses content from more than one source to create a completely new service
• Application programming interface (API) - a set of routines, protocols, and tools for building software applications
• Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups

MGT300 Chapter 12: Integrating the Organization from End to End – Enterprise Resource Planning

Enterprise Resources Planning (ERP)

• Serve as the organization's backbone in providing fundamental decision-making support.
• At the heart of all ERP systems is a database, when a user enters or updates information in one module, it is immediately and automatically updated throughout the entire systems

ERP systems automate business processes

Bringing the Organization Together

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

ERP – The organization before ERP

ERP – bringing the organization together

The Evolution of ERP
- 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

Integrating SCM, CRM, and ERP

- SCM, CRM, and ERP are the backbone of e-business
- Allows the unlocking of information to make it available to any user, anywhere, anytime
- Integration of these applications is the key to success for many companies

Integration Tools
Many companies purchase modules from an ERP vendor, an SCM vendor, and a CRM vendor and must integrate the different modules together

• Middleware – several different types of software which sit in the middle of and provide connectivity between two or more software applications 
• Enterprise application integration (EAI) middleware – packages together commonly used functionality which reduced the time necessary to develop solutions that integrate applications from multiple vendors

Data points where SCM, CRM, and ERP integrate

Enterprise Resource Planning (ERP)

ERP systems must integrate various organization processes and be:-

• Flexible-must be able to quickly respond to the changing needs of the organization
• Modular and open-must have an open system architecture, meaning that any module can be interface, with or detached whenever required without affecting the other modules. 
• Comprehensive-must be able to support a variety of organizational functions for a wide range of businesses
• Beyond the company-must support external partnerships and collaboration efforts

Enterprise Resource Planning’s Explosive Growth

• SAP boasts 20,000 installations and 10 million users worldwide
• ERP solutions are growing because:-

1. ERP is a logical solution to the mess of incompatible applications that had sprung  up in most businesses
2. ERP addresses the need for global information sharing and reporting
3. ERP is used to avoid the pain and expense of fixing legacy systems

MGT300 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
• Help sales staff close deals faster
• Simplify marketing and sales processes
• Discover new customers
• Increase customer revenues

Recency, Frequency, and Monetary Value
Organizations can find their most valuable customers through “RFM” - Recency, Frequency, and Monetary value

• How recently a customer purchased items (Recency)
• How frequently a customer purchased items (Frequency)
• How much a customer spends on each purchase (Monetary Value)

The Evolution of CRM

• CRM reporting technology – help organizations identify their customers across other applications
• CRM analysis technologies – help organization segment their customers into categories such as best and worst customers
• CRM predicting technologies – help organizations make predictions regarding customer behavior such as which customers are at risk of leaving
• Three phases in the evolution of CRM include reporting, analyzing, and predicting.

Using Analytical CRM to Enhance Decisions

• 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
• Operational CRM and analytical CRM

Customer Relationship Management Success Factors

CRM success factors include:

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

MGT300 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 integration or tight process and information linkages between functions within a firm such as marketing, sales, finance, manufacturing, and distribution between firms, which allow the smooth, synchronized flow of both information and product between customers, suppliers and transportation providers across the supply chain

A) 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.

B) 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.

C) 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.

D) 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.

• DEPLOY IN INCREMENTAL PHASE AND MEASURE AND COMMUNICATE SUCCESS

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. 

SCM Stories

MGT300 Chapter 9 – Enabling the Organization-Decision Making

Decision Making 

•  Reasons for Growth of Decision Making Information System

-     People need to analyze large amounts of information > Improvements in technology itself, innovations in communication, and globalization have resulted in a dramatic increase in the alternatives and dimensions people need to consider when making a decision or appraising an opportunity

-     People must make decisions quickly > Time is of the essence and people simply do not have time to sift through all the information manually

-    People must apply sophisticated analysis techniques, such as modeling and forecasting, to  make good decisions > Information systems substantially reduce the time required to perform these sophisticated analysis techniques

-      People must protect the corporate asset of organizational information > Information systems offer the security required to ensure organizational information remains safe.

•   Model – A simplified representation or abstraction of reality

•   IT systems in an enterprise

Transaction Processing System

• 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 (analysis) 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

• Decision support system (DSS) – models information to support managers and business professionals during the decision-making process

1.  Three quantitative models used by DSSs include;      Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model
2. What-if analysis – checks the impact of a change in an assumption on the proposed solution
3. Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of outputs

What-if analysis

Goal-seeking analysis

Executive information system 

• Executive information system (EIS) – 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
2. Drill-down – enables users to get details, and details of information
3. Slice-and-dice – looks at information from different perspectives

•   Interaction between a TPS and an EIS

•   Interaction between a TPS and a DSS

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

Artificial intelligence (AI)

•  The ultimate goal of AI is the ability to build a system that can mimic human intelligence
•  Intelligent system – various commercial applications of artificial intelligence
•  Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn
• Four most common categories of AI include;

1. Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems
2. Neural network – attempts to emulate the way the human brain works > Fuzzy logic – a mathematical method of handling imprecise or subjective information
3. Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem
4. Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

Data Mining

• Data-mining software includes many forms of AI such as neutral networks and expert systems