CHAPTER 19: OUTSOURCING IN THE 21th CENTURY

CHAPTER 19: OUTSOURCING IN THE 21th CENTURY

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

i) includes:

      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

ii) outsourcing challenges include:

- contract length

·                     difficulties in getting out of a contract

·                     problems in foreseeing future needs

·                     problems in reforming an internal IT department after the contract is finished

v  competitive edge

v  confidentiality

v  scope definition

CHAPTER 15 - CREATING COLLABORATIVE PARTNERSHIPS

CHAPTER 15 - 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 is to support the work of teams by 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- EBUSINESS

 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

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 chains, and creating new sales channels.

Business-to-business (B2B)

·         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.

·         Consumer-to-business (C2B)

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

·         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.

Ebusiness Benefits and Challenges.

·         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:

Ø  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.

Ø  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.

Ø  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.

Ø  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.

Ø  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

CHAPTER 12 - INTEGRATING THE ORGANIZATION FROM END TO END- ENTERPRISE RESOURCE PLANNING

CHAPTER 12 - INTEGRATING THE ORGANIZATION FROM END TO END- ENTERPRISE RESOURCE PLANNING

ERP

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

Evolution of ERP

*SCM, CRM, and ERP are the backbone of e-business
*integration of those applications is hte 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 A CUSTOMER - CENTRIC ORGANIZATION - Customer Relationship Management

Chapter 11 : Building a customer - Centric organization - Customer Relationship Management

Customer Relationship Management (CRM)

CRM is a business philosophy based on the premise that those organizations that understand the needs of individual customers are best positioned to achieve sustainable competitive advantage in the future.

- A customer strategy starts with understanding who the company's customers are and how the company can meet strategic goals.

- As the business world increasingly shifts from product focus to customer focus, most organizations recognize the treating existing customers well is the best source of profitable and sustainable revenue growth in the age of e-business, however, an organization is challenged more than ever before to truly satisfy its customers.

Recently, Frequency, and Monetary Value

An organization can find its most valuable customers by using a formula that industry insiders call RFM-recency, frequency, and monetary value. In other words, an organization must track:

- How recently a customer purchased items (recently)

- How frequently a customer purchases an item (frequently

- How much a customer spends on each purchase (monetary value)

The evolution of CRM

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

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 customers.

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

The Ugly Side of CRM: Why CRM Matters More Now than Ever Before

Now companies have no choice as the power of the customer grows exponentially as the internet grows. In every case, customers have become an integral part of the action as a member of the aggregated, interactive, self-organizing, auto-entertaining audience on businesses. However, this should no be a surprise, since it was the customers crazy passion and hobbies and obsessions-that build up the web in the first place.

Customer Relationship Management's Explosive Growth

When customers buy on Internet, they see, and they steer, entire value chains.

- Customer web interaction become conversations, interactive dialogs with shared knowledge, not just business transaction. Web- based customer care can actually become the focal point of customer relationship management and provide breakthrough benefits for both the enterprise and its customers, substantially reducing costs while improving service.

- Current users allow allocating 20 percent of their IT budget to CRM solutions.

Using Analytical CRM to Enhance Decisions

The two components of a CRM strategy are:

- 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.

The primary difference between operational CRM and analytical CRM in the direct interaction between the organization and its customers.

-Personalization occurs when a website can know enough about a person's likes and dislikes that it can fashion offers that are more likely to appeal to that person. Many organizations are now utilizing CRM to create customer rules and templates that marketers can use to personalize customer messages.

Customer Relationship Management Success Factor

CRM solutions make organizational business processes more intelligent. This is achieved by understanding customer behavior and preferences, then realigning product and service offering and related communications to make sure they are synchronized with customer needs and preferences. If an organization is implementing a CRM system, it should study the industry best practices to help ensure a successful implementation.

Using he analytical capabilities of CRM can help a company Anticipate customer need and proactively serve customers in way that build relationship, create loyalty, and enhance bottom lines.

CHAPTER 10 : EXTENDING THE ORGANIZATION - Supply Chain Management

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

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.

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.

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.

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.

WE AN 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.