CHAPTER 15 : OUTSOURCING IN THE 21ST CENTURY

CHAPTER 15 : OUTSOURCING IN THE 21ST CENTURY

Outsourcing Project

• 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

• 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- 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 practice process expertise. This facilitates the design, building, training, and deployment of business processes or functions.
• Industry changes- high level pf organization 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”
• Most organizations outsource their noncore 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

• 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
• Confidentiality
• Scope definition 

                

CHAPTER 14: OUTSOURCING COLLABORATIVE PARTNERSHIPS

CHAPTER 14: OUTSOURCING COLLABORATIVE PARTNERSHIPS

QUESTION FROM THIS CHAPTER: 

• Identify the different ways in which companies collaborate using technology
• Compare the different categories of collaboration technologies
• Define the fundamental concepts of a knowledge management system

TEAMS, PARTNERSHIPS AND ALLIANCES

Organizations create and use teams, partnerships, and alliances to: undertake new initiatives, address both minor and major problems and capitalize on significant opportunities. Organizations create teams, partnership, and alliances both internally with employees and externally with other organizations

Organizations from 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.

TEAMS, PARTNERSHIPS AND ALLIANCES

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 system, 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, deploying applications and remote project and sales management.
• Collaboration system- supports the work of teams by facilitating the sharing and the flow of information

Identify the different ways in which companies collaborate using technology:

• Companies must be able to collaborate. Without collaboration companies simply would have a very difficult time operating. Companies collaborate in a number of ways including document exchange, shared whiteboards, discussion forums and e-mail.

Compare the different categories of collaboration technologies:

Two categories of collaboration:

• Unstructured collaboration (information collaboration): includes document exchange, shared whiteboards, discussion forums and e-mail.
• Structured collaboration (process collaboration): involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules.

Collaboration business functions

Collaboration systems also include:

                ⇒Knowledge management systems

                ⇒Content management systems

                ⇒Workflow management systems

                ⇒Groupware systems

KNOWLEDGE MANAGEMENT SYSTEMS

Define the fundamental concepts of a knowledge management system:

    

⇨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’ heads

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

The reasons why organizations launch knowledge management programs

              

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

SOCIAL NETWORKING

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

Groupware technologies

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 

CHAPTER 13: CREATING COLLABORATIVE PARTNERSHIPS THROUGH E-BUSINESS

CHAPTER 13: CREATING COLLABORATIVE PARTENSHIPS THROUGH EBUSINESS

QUESTION FROM THIS CHAPTER:

• Compare e-commerce and e-business
• Compare the four types of a e-business models
• Describe the benefits and challenge associated with e-business
• The difference among e-shops and e-malls

E-BUSINESS

The internet is a powerful channel that presents new opportunities for an organization to touch customers, enrich products and services with information and reduce costs.

Compare e-commerce and e-business:

• E-commerce is the buying and selling of goods and services over the Internet. E-commerce refers only to online transactions.
• E-business is the conducting of business on the Internet, not only buying and selling. But also serving customers and collaborating with business partners.

The primary difference between e-commerce and e-business is that e-business also refers to online exchanges of information.

INDUSTRIES USING E-BUSINESS

E-BUSINESS MODELS

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

Compare the four types of a e-business models

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 marketplaces, or e-market places 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

ELECTRONIC MARKETPLACES

SEARCH ENGINE MARKETING

BUSINESS-TO CUSTOMER (B2C)

The difference among e-shops and e-malls:

• 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 : consist 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- operate in a physical store without an Internet presence. For example, Bata.

• Pure-play business- a business that operates on Internet only without a physical store. Examples, Amazon.com

• Click-and-mortar business- a business that operates in a physical store and on the Internet. Example, Calaqisya

CONSUMER-TO-BUSINESS (C2B)

• Priceline.com is an example of 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

 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
• Reversed 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:

Describe the benefits and challenge associated with e-business:

E-BUSINESS BENEFITS

• Highly accessible: businesses can operate 24 hours a day, 7 days a week, 365 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: business, 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 challenge of e-business is the lack of growth in some sectors due to product or service limitation
• Managing Consumer Trust: Internet marketers must develops a trustworthy relationship to make that initial sale and generate customer loyalty
• Ensuring Consumer Protection: implement Internet security, protect from misuse of a customer information.
• Adhere to Taxation Rules: 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.

E-BUSINESS BENEFITS AND CHALLENGES:

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 services
• 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

WEB MASHUPS:

CHAPTER 12 : INTEGRATIING THE ORGANIZATION FROM END TO END- ENTERPRISE RESOURCE PLANNING

CHAPTER 12 : INTEGRATIING THE ORGANIZATION FROM END TO END- ENTERPRISE RESOURCE PLANNING

QUESTION FROM THIS CHAPTER: 

• Describe the role information plays in enterprise resource planning systems
• Identify the primary forces driving the explosive growth of enterprise resource planning systems
• Explain the business value of integrating supply chain management, customer relationship management, and enterprise resource planning systems

ENTERPRISE RESOURCE PLANNING
    

 Enterprise resource planning systems (ERP) serve as the organization’s backbone in providing fundamental decision-making support. In the past, departments made decisions independent of each other.
     ERP systems provide a foundation for collaboration between departments, enabling people in different business areas to communicate. ERP systems have been widely adopted in large organizations to score critical knowledge use to make the decisions that drive performance.
    At 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 system. 

ERP system automate business process

Describe the role information plays in enterprise resource planning systems:

• The primary purpose of an ERP is to collect, update, and maintain enterprisewide information 
• All of the functional departments access the same information when making decisions and solving problems 

BRINGING THE ORGANIZATION TOGETHER 

In most organizations, information has traditionally been isolated within specific department, whether on an individual database, in a file cabinet, or on an employee’s pc. ERP enables employees across a single, centralized database.

 

DISADVANTAGES BEFORE ERP: 

•  Update issues 
•  Redundancy 
•  Inaccurate information across databases 
•  Different formats of information in the different databases 
•  Inability to access other department information and nit being provided with a 360 degree  view of the organization 
•  Different customer information in different databases 
•  Customer contact from multiple departments with different messages 

DISADVANTAGES BRINGING THE ORGANIZATION TOGETHER: 

• Not as flexible and far more difficult to change
• Might not meet all department needs as well as an individual specific system
• Multiple access levels increases security issue
• Ethical dilemmas from accessing different department information such as payroll

THE EVOLUTION OF ERP 

ERP solutions were develop to deliver automation across multiple units of an organization, to help facilitate the manufacturing process and address issues such as raw material, inventory, order entry distribution.

INTEGRATING SCM, CRM, AND ERP 

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

INTEGRATION TOOLS 

Effectively managing the transformation to an integrated enterprise will be critical to the success of the 21st century organization. The key is the integration of the disparate it applications. An integrated enterprise infuses support areas, such as finance and human resources, with a strong customer orientation.

 Data points where SCM, CRM and ERP integrate

Many companies purchase modules from an ERP vendor, an SCM vendor and a CRM vendor 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 functionally which reduced the time necessary to develop solutions that integrate applications from multiple vendors

ERP systems must integrate various organization processes and be:

1. Flexible

2. Modular and open

3. Comprehensive

4. Beyond the company

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 collaboration efforts

Identify the primary forces driving the explosive growth of enterprise resource planning systems: 

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

Explain the business value of integrating supply chain management, customer relationship management, and enterprise resource planning systems:

• Most organizations piecemeal their applications together since no one vendor can respond to every organization’s needs; hence, customers purchase multiple applications from multiple vendors. 

CHAPTER 11: BUILDING A CUSTOMER – CENTRIC ORGANIZATION – CUSTOMER RELATIONSHIP MANAGEMENT

CHAPTER 11: BUILDING A CUSTOMER – CENTRIC ORGANIZATION – CUSTOMER RELATIONSHIP MANAGEMENT

QUESTION FROM THIS CHAPTER: 

- Compare operational and analytical customer relationship management
- Identify the primary forces driving the explosive growth of customer relationship management
- Define the relationship between decision making and analytical customer relationship management

CUSTOMER RELATIONSHIP MANAGEMENT (SCM)

   Today, most competitors are simply a mouse-click away, and this intense competition is forcing firms to switch from sales-focused business strategies to customer-focused business strategies. Customers are one of a firm’s most valuable assets, and building strong loyal customer relationship is a key competitive advantage.
   CRM is means of managing all aspect of a customer’s relationship with a an organization to increase customer loyalty and retention and an organization’s profitability.

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 sale processes 
• - Discover new customers 
• - Increase customer revenues 

RECENCY, FREQUENCY, and MONETARY VALUE

Organizations can find their most valuable customers through “RFM” Recency, Frequency, Monetary value
• How recently a customer purchased items ( RECENCY )
• How frequently a customer purchased items ( FREQUENCY )
• How much a customer spends on each ( MONETARY VALUE )

THE EVOLUTION OF CRM 

• CRM  reporting technology – help organizations identify their customer across other applications
• CRM analysis technologies – help organizations 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 

THE UGLY SIDE OF CRM 

Identify the primary forces driving the explosive growth of customer relationship management: 

• The primary forces driving the explosive growth of CRM include Automation/ Productivity/ Efficiency, Competitive Advantage, Customer Demand / Requirements, Increase Revenues, Decrease Costs, Customer Support, Inventory Control, Accessibility 

CUSTOMER RELATIONSHIP MANAGEMENT’S EXPLOSIVE GROWTH 

Forecasts for CRM Spending ( in billions ) 

Compare operational and analytical customer relationship management:

• Operational CRM – supports traditional transaction processing for day-to-day font-office operations or systems that deal directly with the customers. For example, marketing, shipping.
• 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 is the direct interaction between the organization and its customers

OPERATIONAL CRM AND ANALYTICAL CRM 

Define the relationship between decision making and analytical customer relationship management: 

• Analytical CRM solutions are designed to dig deep into a company’s historical customer information and expose patterns of behavior on which a company can capitalize. Analytical CRM is primarily used to enhance and support decision making and works by identifying patterns in customer information collected form the various operational CRM systems. 

CUSTOMER RELATIONSHIP MANAGEMNET 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- avoid big-bang approach 
• Scalability for organization growth 

CHAPTER 10 : EXTENDING THE ORGANIZATION – SUPPLY CHAIN MANAGEMENT

CHAPTER 10 : EXTENDING THE ORGANIZATION – SUPPLY CHAIN MANAGEMENT

QUESTION FROM THIS CHAPTER: 

- List and describe the components of a typical supply chain
- Define the relationship between decision making and supply chain management
- Describe the four changes resulting from advances in IT that are driving supply chains

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 improvement to influence their supply chains

BASIC OF SUPPLY CHAIN

The supply chain has three main links:
1. Material flow from suppliers and their “upstream” suppliers al 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 at all levels

List and describe the components of a typical supply chain:

• Supplier’s supplier, Supplier, Manufacturer, Distributor, Retailer, Customer, Customer’s Customer

INFORMATION TECHNOLOGY’S ROLE IN THE SUPPLY CHAIN

            As companies evolve into extended organizations, the roles of supply chain participants are changing. It is now common for suppliers to be involved in product development and for distributors to act as consultants in brand marketing. The nation of virtually seamless information links within and between organizations is an essential element of integrated supply chains. 

            Information technology’s primary role in Supply Chain Management is creating the integrations or tight process and information linkages between functions within firm such as marketing, sales, finance, manufacturing and distributions. Information technology integrates planning, decision-making processes, business operating processes and information sharing for business performance management. 

Factors Driving SCM

VISIBILITY

SUPPLY CHAIN VISIBILITY  

Is the ability to view all areas up and down the supply chain. Changing supply chain 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
Its occurs when distorted product demand information passes from one entity to the next throughout the supply chain. The misinformation  passes information regarding a slight rise in demand  for a product could cause different members in the supply chain, magnifying the issue and creating excess inventory and costs. For example, Pizza.

CONSUMER BEHAVIOUR
      The behavior of customers has changed the way businesses compete. 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 management software can be broken down into :

-Supply chain planning (SCP) software- uses advanced mathematical algorithmas to improve the flow and efficiency of the supply chain more too transactional

-Supply chain execution (SCE) software- automates the different steps and stages of the supply chain

SPEED

During the past decade, competition has focused on speed. New forms of servers, telecommunications, wireless applications, and software are enabling companies to perform activities that were once never thought possible. Another aspect of speed is the company’s ability to satisfy continually changing customer requirements efficiently, accurately and quickly.

Three factors fostering speed

SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS 

Supply chain management 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 built to assists decision makers in the design and operation of integrated supply chains.

DSSs allow managers to examine performance and relationships over the supply chain and among:
- Suppliers
- Manufacturers
- Distributors
- Other factors that optimize supply chain performance 

Define the relationship between decision making and supply chain management: 

⇉SCM  enhances decision making. Collecting, analyzing, and distributing transactional information to all relevant parties, SCM systems help all the different entities in the supply chain work together more effectively. SCM systems provide dynamic holistic views of organizations. Users can “drill down” into detailed analyses of supply chain activities in a process analogues to DSS. Without SCM systems, organizations would be unable to make accurate and timely decisions regarding their supply chain.

Describe the four changes resulting from advances in IT that are driving supply chains:

⇉Although people have been talking about integrated supply chain for a long time, it has only been recently that advances in information technology have made it possible to bring the idea to life and truly integrate the supply chain. Visibility, consumer behavior, competition and speed are a few of the changes resulting from advances in information technology that are driving supply chain.