MGT 300 - Chapter 15

Outsourcing in the 21^st Century

Outsourcing Projects

• ·         Insourcing (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

*Factors driving outsourcing growth include:

• ·         Core competencies - Many companies have recently begun to consider outsourcing as a means to fuel revenue growth rather than just a cost-cutting measure.
• ·         Financial savings - It is typically cheaper to hire workers in China and India than similar workers in the United States.
• ·         Rapid growth - an organization is able to acquire best-practices process expertise. This facilitates the design, building, training, and deployment of business processes or functions.
• ·         Industry changes - High levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies.
• ·         The Internet - The pervasive nature of the Internet as an effective sales channel has allowed clients to become more comfortable with outsourcing.
• ·         Globalization - As markets open worldwide, competition heats up. Companies may engage outsourcing service providers to deliver international services

*According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not”

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 -   Most outsourcing contracts span several years and cause the issues discussed above
•  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 -  Effective and innovative use of IT can be lost when using an outsourcing service provider
• Confidentiality - Confidential information might be breached by an outsourcing service provider, especially one that provides services to competitors 
• Scope definition - Scope creep is a common problem with outsourcing agreements

MGT 300 - Chapter 14

Creating Collaboration Partnerships

*Organizations create and use teams, partnerships and alliances to:

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

*Organizations create teams, partnerships and alliances both internally with employees and externally with other organizations

Teams, Partnership and Alliances

*Organizations form alliances 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 partnership – 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 alliances and partnerships

 Collaboration Systems        

    

*Collaboration solves specific business tasks such as telecommuting, online meetings, developing applications, and remote project and sale 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 e-mail
• 2.      Structured collaboration (process collaboration) – involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules

*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

• ·         Explicit knowledge – consists of anything that can be documented, archived, and codified, often with the help of IT
• ·         Tacit knowledge - knowledge contained in people’s heads

*The following are two best practices for transferring or recreating tacit knowledge

• ·         Shadowing – less experienced staff observe more experienced staff to learn how their more experienced counterparts approach their work
• ·         Joint problem solving – a novice and expert work together on a project

KM Technologies

*Knowledge management systems include:

• 
  
• ·         Knowledge repositories (databases)
• ·         Expertise tools
• ·         E-learning applications
• ·         Discussion and chat technologies
• ·         Search and data mining tools

KM and Social Networking

*Finding out how information flows through an organization

• ·         Social networking analysis (SNA) – a process of mapping a group’s contacts (whether personal or professional) to identify who knows whom and who works with whom
• ·         SNA provides a clear picture of how employees and divisions work together and can help identify key experts

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 asset 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 allow 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 e-mail 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

Instant Messaging

·         E-mail is the dominant form of collaboration application, but real-time collaboration tools like instant messaging are creating a new communication dynamic

·         Instant messaging - type 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

MGT 300 - Chapter 13

E-BUSINESS

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

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

E-Commerce & E-Business

• ·        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 the business partners (online transactions, serving customers and collaborating with business partner)

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 to access to various mechanisms in which to buy and sell almost anything, from services to direct materials

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-mail – consists of a number of e-shops, it serves as a gateway through which a visitor can access other e-shops

*Business types:

• ·        Brick-and-mortar business – operates in a physical store without an internet presence.
• ·        Pure-play business – a business that operates on the internet only without a physical store.
• ·        Click-and-mortar business – a business that operates in a physical store and on the internet

*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 price

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 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-to-one with Michael Jordan
• 
  

 E-Business Benefits

*E-Business benefits include:

• ·        Highly accessible – Business 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 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
• ·        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

*E-Business challenges include:

• ·        Identifying Limited Market Segments - The main challenges of e-business is the lack of growth in some sectors due to product or service limitation
• ·        Managing Consumer Trust – internet marketers must developed a trustworthy relationship to make that initial sale and generate customer loyalty
• ·        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 routines, protocols, and tools for building software applications
• ·        Mashup editor – (What you see is what you get)

MGT 300 - Chapter 12

Integrating the Organization from End to End – Enterprise Resources Planning

Integrating SCM, CRM, and ERP

*SCM, CRM and ERP are the backbone of e-business

*Integration of these applications is the key to success for many companies

*Integration allows the unlocking of information to make it available to any user, anywhere,     anytime

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

Enterprise Resource Planning (ERP)

*ERP systems must integrate various organization processes and be:

·         Flexible

• ·         Modular and open
• ·         Comprehensive
• ·         Beyond the company

Enterprise Resource Planning (ERP)

*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 business

*Beyond the company – must support external partnerships and collaborations efforts

Enterprise Resources Planning’s Explosive Growth

*SAP Boasts 20,000 installations and 10 million users worldwide

*ERP solutions are growing because:

·         ERP is a logical solutions to the mess of incompatible applications that had sprung up in most information

·         ERP addresses the need for global information sharing and reporting

·         ERP is used to avoid the pain and expense of fixing legacy systems

MGT 300 - Chapter 11

Building a customer-center 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 (Frequently)
• ·         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

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

Customer Relationship Management Success Factors

*CRM success factors include:

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

MGT 300 - Chapter 10

Extending the Organization - Supply Chain Management

SUPPLY CHAIN MANAGEMENT

✱ The average company spends nearly half of every dollar that it earns on production

✱ In the past, companies focused primarily on manufacturing and quality improvements to        influence their supply chains

BASICS OF SUPPLY CHAIN

✱ The supply chain has three main links :

1. Materials flow from suppliers and their ''upstream'' suppliers at all levels
2. Transformation of materials into semi finished and finished products through the organization's own production process
3. Distribution of products to customers and their ''downstream'' customers at all levels

BASICS of SUPPLY CHAIN

✱ Plan 

    - A company must have a plan for managing all the resources that go toward meeting              customer demand for products or services

✱ Source

    - Companies must carefully choose reliable suppliers that will deliver goods and services        required for making products

✱ Make

    - This is the step where companies manufacture their products or services. This can                include scheduling the activities necessary for production, testing, packaging and                  preparing for delivery

✱ Deliver (Logistic)

    - Companies must be able to receive orders from customers, fulfill orders via a network          of warehouse, pick transportation companies to deliver system to facilitate payments.

✱ Return

    - This is typically the most problematic step in the supply chain. Companies must create 

      a network for receiving defective and excess products and support customers who have        problems with delivered products.

VISIBILITY

✱ Visibility - more visible models of different ways to do things in the supply chain have            emerged. High visibility in the supply chain is charging industries, as Wal-Mart                        demonstrated

✱ Supply Chain Visibility - the ability to view all areas up and down the supply chain

✱ Bullwhip effect - occurs when distorted product demand information passes form one            entity to the next throughout the supply chain

✱ supply chain visibility allows organizations to eliminate the bullwhip effect

• retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe

✱ companies can respond faster and more effectively to consumer demands through                supply chain enhances

✱ Demand planning software - generates demand forecasts using statistical tools and              forecasting techniques

✱ Supply Chain Planning (SCP) Software - uses advanced mathematical algorithms to            improve the flow and efficiency of the supply chain

✱ Supply Chain Execution (SCE) Software - automates the different steps and stages of          the supply chain

Supply Chain Management Success Factors

✱ SCM industry best practices include :

1. Make the sale to suppliers
2. Wean employees off traditional business practices
3. Ensure the SCM system supports the organizational goals
4. Deploy in incremental phases and measure and communicate success
5. Be future oriented

SCM Success Stories

✱ Numerous decision support systems (DSSs) are being to assist decision makers in the          design and operation of integrated supply chains

✱ DSSs allow managers to examine performance and relationship over the supply chain          and among :

• Suppliers
• Manufacturers
• Distributors
• Other factors that optimize supply chain performance

THE END CHAPTER 10