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Lecture Business management information system - Lecture 18: Managing operations. Introduction, what are operations, why talk about operations? solving operational problems, operational measures, the importance of good management, what’s new in operations.
Managing Operations Lecture 18 Managing Operations n The three major operational issues discussed are: ă Outsourcing information systems functions ă Information security, and ă Planning for business continuity n Due to mergers, the Internet, e-commerce, and the 9/11 attacks, the subject of computer operations has been receiving a lot of attention Managing Operations n Systems operations are important because, if they are not professionally run (and backed up properly), a computer or network crash could shut down a company’s business for some period of time n Case examples include Microsoft, ANZ Banking Corporation, Mobil Travel Guide, Eastman Kodak, Honda Motor Company, Exult, Credit Card Fraud, Plymouth Rock Assurance, and Household International Todays Lecture n Introduction n What are Operations ă Why Talk About Operations? ă Solving Operational Problems ă Operational Measures ă The Importance of Good Management ă Whats New in Operations Todays Lecture n Outsourcing Information Systems Functions ă The Driving Forces Behind Outsourcing ă Changing Customer-Vendor Relationships ă Outsourcings History ă Managing Outsourcing ă Offshoring Introduction n Due to mergers, the Internet, e-commerce, and the September 11 terrorist attacks, the subject of computer operations has been receiving a lot of attention n Systems operations are important because: ă If they are not professionally run: Introduction n n A company could suffer a computer or network crash that could shut down their business for some period of time It is not a trivial area, especially as companies become increasingly reliant on networks and computers to run their business Industrial System Operation Management Introduction… n Poorly run IS shops cause IS executives to end up ‘fighting fires’ instead of setting policy OR n They find themselves looking for a job! Introduction… The main change in operations is the shift in viewpoint towards managing operations (Figure 8-1): n Traditionally – managing inward, i.e.: managing one’s own operations staff n Today – just as likely to mean managing outward = managing relationships with (external) service providers Outsourcing IS Functions: Outsourcing’s History n Mid to late 90s = Best-of-breed outsourcing ă Selective outsourcing began ă Collaborative outsourcing one company prime contractor and secondary external service providers Outsourcing IS Functions: Outsourcing’s History cont n n Shared services ă in-sourcing to shared service groupn Improved efficiencies & n Saved money Business process outsourcing ă As IT Outsourcing ‘matured’ it became a commodity service Outsourcing IS Functions: Outsourcing’s History cont Profit margins dropped n Competitors rose n Quality Vs Cost Vs $$$ Vs Pressure – not all was happy n ă Higher margins in specialized specific areas n Business process of which IT was a significant component ANZ Case Example: Business Process Outsourcing n n Australia’s third largest bank has outsourced its procurement function, not to reduce costs, but to gain greater quality purchases and lower ANZ’s annual purchasing spend The bank has learned numerous lessons in this worldleading outsourcing deal: Be prepared to change the contract as your environment changes Make step changes in technology and processes to save time and money, focus on having an effective ANZ Case Example: Business Process Outsourcing transition Do your best to make the outsourced group appear seamless to your employees Focus early on what you want and don’t get sidetracked Keep incentive mechanism simple and transparent Be able to benchmark performance, and Understand, to a fair degree of detail, the value chain you plan to embrace Outsourcing IS Functions: Outsourcing’s History cont n E-business outsourcing ă With the arrival of business use of the Internet, outsourcing has been one way that companies can quickly get Websites up and handling business ă In dot-coms and Internet- based operations n Preferred mode of operation Outsourcing IS Functions: Outsourcings History cont ă Even with the dot-com crash = still a legitimate way to mobilize for e-business Allows a company to move fast n Companies can remain flexible n Does not tie up $$$ in computer and networking equipment ă Obsolete? n Outsourcing IS Functions: Outsourcings History cont n Utility Computing ă Also known as on-demand computing, virtual data centers and grid computing n Idea = computing power can be treated like electricity: You plug in and only pay for what you use ă Numerous vendors, especially IBM, HP and Sun are promoting access rather than ownership n Selling the idea of turning clients’ fixed IT costs into variable costs Outsourcing IS Functions: Outsourcing’s History cont ă Important to understand: n The amount of consulting required n The chargeback mechanism (for only paying for use) Outsourcing IS Functions: Outsourcing’s History cont n n The contract terms n Where it could provide benefits etc In 15 years, IT outsourcing has expanded (and changed) significantly MOBIL TRAVEL GUIDE Case Example: Utility Computing n Illustrates the convergence of e-business and IT outsourcing into utility computing in a high-need area: its Web site n Travel guide for North America ¨ Information static and site couldn’t handle the spikes in demand during e.g holidays MOBIL TRAVEL GUIDE Case Example: Utility Computing n Wanted to upgrade site but rather than making the large investment to upgrade its own IT resources = turned to IBM to host and manage the site ă No need for upfront investments ă No concern re handling peaks n Saving 35% in maintenance and software costs n Only paying for what it uses of IBM’s world-class, highly scalable e-business infrastructure Summary n What are Operations ă Why Talk About Operations? ă Solving Operational Problems ă Operational Measures ¨ The Importance of Good Management ¨ What’s New in Operations Summary n Outsourcing Information Systems Functions ă The Driving Forces Behind Outsourcing ă Changing Customer-Vendor Relationships ă Outsourcings History ¨ Managing Outsourcing ... in operations is the shift in viewpoint towards managing operations (Figure 8-1 ): n Traditionally – managing inward, i.e.: managing one’s own operations staff n Today – just as likely to mean managing. .. to mergers, the Internet, e-commerce, and the 9/11 attacks, the subject of computer operations has been receiving a lot of attention Managing Operations n Systems operations are important because,.. .Managing Operations n The three major operational issues discussed are: ¨ Outsourcing information systems functions ¨ Information security, and ¨ Planning for business continuity