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  1. MEIE881 The Management Information Systems Organization

  2. MIS Organization Define CKO, CTO, CIO, CPO, IT GovernanceDiscuss the functions typically performed in the IS organizationDiscuss the advantages, disadvantages and characteristics of centralized, decentralized and federal organizational structuresDiscuss and apply Weill’s framework for IT Governance

  3. Figure 9.1 The CIO’s lieutenants

  4. Figure 9.3 Sample IS organization chart

  5. What IS Does Not Do • Does not perform core business functions such as: • Selling • Manufacturing • Accounting • Does not set business strategy. • General managers must not delegate critical technology decisions.

  6. Figure 9.7 Organizational continuum

  7. PROS Global standards Common data “One voice” with suppliers Economies of scale Access to large capacity Better recruitment of IT personnel CONS Technology may not meet local needs Lack of business unit control ‘Us’ vs. ‘They’ Slow support for strategic initiatives Centralization: Advantages & Disadvantages

  8. ADVANTAGES Better meet local needs Closer partnership between IT and business units Greater flexibility Better match with decentralized enterprise structure Better unit control over overhead costs DISADVANTAGES Difficulty in maintaining global standards & consistent data Higher infrastructure costs Loss of control Duplication of staff & data Harder to negotiate preferential supplier agreements Decentralization: Advantages & Disadvantages

  9. Figure 9.10 Federal IT

  10. Federalism • Structuring approach • Distributes power, hardware, software, data and personnel between a central IS group and IS in business units

  11. IT Governance – Weill (2004) • Definition – specifying the framework for decision rights and accountabilities to encourage desirable behavior in the use of IT • Broad-based input rights • Mostly Federal (followed by IT Duopoly) • High IT governance performers could describe IT governance • (but not low IT governance performers) • IT duopolies for IT principles and investments

  12. IT Governance Archetypes

  13. Top Three Overall Governance Performers

  14. IT Governance CSFs • Transparency • Actively designed • Infrequently redesigned • Education about IT governance • Simplicity (few performance goals) • An exception handling process (for new opportunities) • Governance designed at multiple organizational levels • Aligned incentives

  15. Matching Information Security Decisions and Archetypes

  16. Outsourcing Discuss the reasons for outsourcing Discuss disadvantages of outsourcing Discuss conditions when outsourcing is appropriate Define backsourcing and describe the reasons for backsoucing Discuss structuring and managing the outsourcing arrangement Describe open sourcing and strategies for its use

  17. Offshore sourcing • Define offshore sourcing, captive center, nearshoring • Discuss reasons for and challenges of offshore sourcing • Describe steps clients take in finding a provider • Describe steps providers take in acquiring clients

  18. Sourcing Decisions Nearshoring Offshoring Outsourcing Is This Working Make or Buy Backsourcing Insourcing

  19. Outsourcing • The purchase of a good or service from another company • Farm out data center operations (facilities management) • Farm out tasks and services • Farm out systems development • May transfer IS function to vendor

  20. Saving $$$: Provider Advantages • Tighter overhead cost control • More aggressive use of low-cost labor pools • More effective bulk purchases and leasing arrangements • Better management of excess hardware capacity • Better control over software licenses • Hustle (Staying alive) • Creative and more realistic structuring of leases • Leaner management structure because of increased competence and critical mass volumes of work

  21. Outsourcing Disadvantages • Reliance on vendor/partner • Loss of control • Considerations about security/confidentiality • Evaporization of cost savings • Loss of competitive advantage • Slight of hand with employees

  22. Outsourcing strategies

  23. Outsourcing strategies

  24. Backsourcing • Bringing an outsourcing arrangement back in house • Reasons • Economic • Strategic • Relationship • Power

  25. Structuring the Alliance • Flexible contract ( a lot can happen over 10 years) • Shorten length • Termination clause • Detailed performance standards • Service levels (terminal response times) • Baseline period measurement • Growth rates • Service volume fluctuations • Resolution of performance disputes

  26. Structuring the Alliance • Partial vs. complete outsourcing • Multiple vendors • Cost savings • Multiple evaluations • Outside consultants

  27. Structuring the Alliance • Supplier stability and quality • Conflict of interests • Management fit • Conversion problems

  28. Managing the Alliance • Strong CIO function • Partnership/contract management • Architecture planning • Emerging technologies • Continuous learning • Service Oriented Architecture

  29. Managing the Alliance • Performance measurements – continuous • Low-structured tasks more difficult to outsource • Low-structured task provide higher margins for provider • Customer-outsourcer interface • Specified account manager in provider company

  30. Offshore sourcing • Captive center – offshore center owned by the client company • Offshore sourcing (offshoring) – sourcing to a company outside the home country • Nearshoring – sourcing service work to a foreign, lowewr-wage country that is relatively close in distance or time zone (or both). • Most common offshore sourcing IT activities • Maintenance • Testing • Coding

  31. Where do Captive Centers Fit? Offshoring Outsourcing Is This Working Make or Buy Backsourcing Insourcing

  32. Captive Centers • Hybrid Captive • Performs core business processes for parent company • Outsources noncore work • Shared Captive • Performs work for parent company and external customers • Divested Captive • Terminated Captive

  33. Estimates on Market SizesCarmel & Tjia, 2006

  34. Demand for offshore work • Most aggressive offshore consumers are in US; Within Europe, UK is most active • Most active industries: financial services (banks, investment firms, insurance cos) and technology firms (software, hardware & telecommunications) • Motivation: cost savings, flexibility, accessing talent, follow-the-sun • 100 nations are now exporting software services and products •

  35. Wages for Software Professionals Carmel & Tija 2005

  36. Extra offshore costs (%)Carmel & Tija 2005

  37. Offshore challenges • Communication breakdown • Coordination breakdown • Control breakdown • Cohesion barriers • Culture clash

  38. Offshoring from client Perspective • Laying the foundation • Identifying providers • Assessing and selecting the provider

  39. Laying the foundation • Assess your offshoring readiness (project management maturity, risk assessment, organizational flexibility, offshore experience) • Set up powerful launch team • Hire external expert • Create a strategy and a plan • Select right project

  40. Identifying the providers • Locate providers • Select country (language, general software skills, government, travel time) • Develop criteria for provider selection • Write RFI/RFP

  41. Assessing and selecting the provider • Due diligence • Check references • Set up local meetings to discuss their abilities and your criteria • Pay attention to soft elements (i.e., trust, feeling comfortable • Offshore visit • Make recommendation and contract negotiations

  42. Marketing offshore services: Provider Perspective • Fierce competition: 4000 companies in low cost countries • Quality of service can’t be judged until after the service is consumed • Many IT services companies founded by technical professionals – not marketeers

  43. Characteristics: Successful IT Services Exporters International Trade Center • A truly international outlook (and desire) for exporting • A long-term commitment to exporting • May take 2-3 years to generate business • Thorough research into new markets and development of export plans • An international reputation for quality.

  44. First Steps • Create realistic business plan • Types of offshore services required by market • Assess competitors and their place in market • Best ways to enter target market • Seek business intelligence • Define target markets • Market size • Linkages (linguistic, historic, geographic, diaspora) • Set up local base (sales office; representative) • Conduct SWOT analysis

  45. Local Marketing Activities • Generate client leads • “numbers game” • Trade fairs • Marketing material • Seminars • Public relations

  46. Business Discussions with Clients • Know client types • Know offshoring champions in firm • Start with low-risk projects • Cultivate long-term relationships • Know clients’ cultures • Build trust • Create country branding (with trade associations and government offices)

  47. Offshoring Issues • Onshore Outsourcing • IS Outsourcing Bad for the US?

  48. Open Sourcing • The process of building and improving “free” software by an Internet community • Release early and often • Delegate as much as possible • Archive and manage the versions • Be as open as possible

  49. Free Software The freedom to run the program for any purpose. The freedom to study how the program works, and adapt it to your needs. Access to the source code is a precondition for this. The freedom to distribute copies so that you can help your neighbor. The freedom to improve and release your improvements to the public, so that the whole community benefits. Access to source code is a precondition for this GNU Project- Free Software Foundation, “The Free Software Definition,”, Downloaded 4/3/02.

  50. Open Sourcing Issues • Protection of Intellectual Property • Updating and maintaining open source code • Competitive advantage • Tech support • Standards