Chapter 19 : Outsourcing in the 21st century.

Incourcing : A common approach using the professional expertise within an organization to develop and maintain the organization’s information technology systems. Insourcing has been instrumental in creating a viable supply of IT professionals and in creating a better quality workforce combining both technical and business skills.

Outsourcing :  Is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house. In some cases, the entire information technology department is outsourced, including planning, and business analysis as well as the installation, management, and servicing of the network and workstations.

The three different forms of outsourcing options a project must consider are :

§  Onshore outsourcing -  engaging another company within the same country for sevices.

§  Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country. Often this country will share a border with the native country.

§  Offshore outsourcing – using organizations from developing countries to write code and develop systems. In offshore outsourcing the country is geographically far away.

The influential drivers afeecting the growth of the outsourcing market include :

§  Core competencies – many companies have recently begun to consider outsourcing as a mean 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. Technology is advancing at such an accelerated rate than companies often lack the resources and etc.

§  Rapid growth – a company’s sustainability depends on both speed to market and ability to react quickly to changes in market conditions.

§  Industry changes – high levels of 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 delivers to deliver international services.

OUTSOURCING BENEFITS.

§  Increased quality and efficiency of a process, service, or function.

§  Reduced operating expenses.

§  Resources focused on core profit-generating competencies.

§  Reduced exposure to risks involved with large capital investments.

§  Access to outsourcing service provider’s economies of scale.

§  Access to outsourcing services provider’s expertise and best-in class practices.

§  Access to advanced technologies.

§  Increased flexibility with the ability to respond quickly to changing market demands.

§  No costly outlay of capital funds.

§  Reduced head count and associated overhead expense.

§  Reduced frustration and expense related to hiring and retaining employees in an exceptionally tight job market.

§  Reduced time to market for products or services.

OUTSOURCING CHALLENGES

§  Contract length – most of the outsourced IT contracts are for a relatively long time period (several years). This is because of the high cost of transferring assets and employees as well as maintaining technological investment. The long contract causes three particular issues:

1.      Difficulties in getting out of a contract ig the outsourcing service provider turns out to be unsuitable.

2.      Problems in foreseeing what the business will need over the next 5 or 10 years (typical contract lengths) hence creating difficulties in establishing an appropriate contract.

3.      Problems in reforming an internal IT department after the contract period is finished.

§  Competitive edge – effective and innovative use of IT can give an organization a competitive edge over its rivals. A competitive business advantage provided by an internal IT department that inderstands the organization and is commited to its goals can be lost in an outsourced arrangement.

§  Confidentially – in some of organizations, the information stored in the computer system is central

Chapter 14 : E-Business

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

·         Ebusiness Model- is an approach to conducting electronic business on the internet

-  Takes place between two major entities- business and consumers.

 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 supply chains, and creating new sales channels.

 Business-to-business Emarketplace Overview.

·         Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers.

·         Existing marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials.

Business-to-consumer (B2C)

·         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.

Types of Businesses:

·         Brick-and-mortar business- a business that operates in a physical store without an internet presence.

·         Pure-play (virtual) business- a business that operates on the internet only without a physical store. Examples include Amazon.com and Expedia.com

·         Click-and-mortar business- a business that operates in a physical store and on the internet. Examples include REI and Barnes and Noble.

        Email

·         Email- consists of a number of eshops. It serves as a gateway through which a  visitor can access other eshops.

-      It may be generalized or specialized depending on the products offered by the eshops it hosts.

-      Eshops in emails benefit from brand reinforcement and increased traffic as visiting one shop on the email often leads to browsing “neighboring” shops.

Consumer-to-business (C2B)

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

·         An 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.

Online auctions:

·         Electronic auction (eauction)- sellers and buyers solicit consecutive bids from each other and prices are determined dynamically.

·         Forward auction- an auction that sellers use as a selling channel to many buyers and the highest bid wins.

·         Reverse auction- an auction that buyers use to purchase a product or service, selecting the seller with the lowest bid.

C2C Communities:

·         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 experience, 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.

Ebusiness Benefits and Challenges.

Ebusiness Benefits:

·         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:

·         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.

·         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.

·         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.

·         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.

·         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.

Mashups

·         Web mashup- a website or web application that uses content from more than one source to create a completely new service.

·         The web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries and so on.

·         Application Programming Interface (API)- set of routines, protocols, and tools for building software applications. A good API makes it easier to develop a program by providing all the building blocks.

·         Mashup editors- they are WYSIWYGs (What You See Is What You Get) for mashups. They provide a visual interface to build a mashup, often allowing the user to drag and drop data points into a web application.

Chapter 13 : Creating Innovative Organizations

Disruptive Technology

Digital Darwinism- implies that organizations that cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction. 

Disruptive versus sustaining technology

• Disruptive technology- new ways of doing things that initially does not meet the needs of existing customers.
• Sustaining technology- produces an improved product customers are eager to buy, such as faster car or larger hard drive.

          - It provides us with better, faster, and cheaper products in established markets.

Disruptive and Sustaining Technologies

• Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies. 

The Internet- Business Disruption
Evolution of the internet

• Internet- a global public network of computer networks that pass information from one to another using common computer protocols.
•  Protocols- are the standards that specify the format of data as well as the rules to be followed during transmission.
• Internet Engineering Task Force (IEFT) - the protocol engineering and development arm of the internet.
• Internet Architecture Board (IAB)- responsible for defining the overall architecture of the Internet, providing guidance and broad direction to the IETF). 
• Internet Engineering Steering Group (IESG)- responsible for technical management of IETF activities and the internet standards process.

Evolution of the World Wide Web

• The internet was restricted to noncommercial activities, and its users included government employees, researchers, university professors, and students. The World Wide Web changed the purpose and use of the internet.
• World Wide Web (WWW)- a global hypertext system that uses the internet as its transport mechanism.
• Hypertext transport protocol (HTTP)- the internet standard that supports the exchange of information on the WWW. 

           - It enables web authors to embed hyperlinks in web documents    
           - It defines the  process by which a web client, called a browser, originates a request for information and sends it to a web server, a program designed to respond to HTTP requests and provide the desired information.

 Reasons for World Wide Web Growth:

• The microcomputer revolution made it possible for an average person to own a computer.  
• Advancements in networking hardware, software, and made it media possible for business PCs to be inexpensively connected to larger networks.
• Browser software such as Microsoft’s Internet Explorer and Netscape Navigator gave computer users an easy-to-use graphical interface to find, download, and display web pages.
• The speed, convenience, and low cost of email have made it an incredibly popular tool for business and personal communications. 
• Basic web pages are easy to create and extremely flexible.
• Digital divide- is when those with access to technology have great advantages over those without access to technology

Internet’s Impact on Information

• Easy to compile- searching for information on products, prices, customers, suppliers, and partners is faster and easier when using the internet. 
• Increased richness- information richness refers to the depth and breadth of information transferred between customers and businesses. Businesses and customers can collect and track more detailed information when using the internet.
• Increased reach- information reach refers to the number of people a business can communicate with, on a global basis. Businesses can share information with numerous customers all over the world.
• Improved content- a key element of the internet is its ability to provide dynamic relevant content. Buyers need good content descriptions to make informed purchases, and sellers use content to properly market and differentiate themselves from the competition. Content and product description establish the common understanding between both parties to the transaction. As a result, the reach and richness of that content directly affects the transaction. 

File Formats Offered over the WWW.Web 2.0

• A set of economic, social, and technology trends that collectively from the basis for the next generation of the internet- a more mature, distinctive medium characterized by user participation, openness, and network effects. 
• It is more than just the latest technology buzzword; it is a transformative force that is catapulting companies across all industries toward a new war of performing business.

Chapter 12 - Integrating The Organization From The End To End - Enterprise Resource Planning

Enterprise Resource Planning (ERP)

·                     It serves as the organization’s backbone in providing fundamental decision making support.

·                     It enables people in different business areas to communicate. 

·                     ERP system helps an organization to obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market share.

·                     The heart of an ERP system is a central database that collects information from and feeds information into all the ERP system’s individual application components (called modules), supporting diverse business function such as accounting, manufacturing, marketing, and human resources. 

·                      ERP automates business processes such as order fulfillment- taking an order from a customer, shipping the purchase, and then billing for it. 

ERP Integration Data Flow 

ERP Process Flow 

Bringing the Organization Together 

·                      ERP enables employees across the organization to share information across a single, centralized database.

·                     With extended portal capabilities, an organization can also involve its suppliers and customers to participate in the workflow process, allowing ERP to penetrate the entire value chain, and help the organization achieve greater operational efficiency.

Organization before ERP 

ERP- Bringing the Organization Together 

The Evolution of ERP 

Although ERP solutions were developed to deliver automation across multiple units of an organization, to help facilitate the manufacturing process and address issues such as raw materials, inventory, order entry, and distribution, ERP was unable to extend to other functional areas of the company such as sales, marketing, and shipping. It could not tie to any CRM capabilities that would allow organizations to capture customer-specific information, nor did it work with websites or portals used for customer service or order fulfillment

Integrating SCM, CRM, and ERP

Integration of SCM, CRM, and ERP is the key to success for many companies. Integration allows the unlocking of information to make it available to any user, anywhere, anytime. 2 main competitors in ERP market: 

1.    Oracle 

2.    Sap

Primary Users and Business Benefits of Strategic Initiatives.

Integration Tools

·                     An integrated enterprise infuses support areas, such as finance and human resources, with a strong customer orientation. 

·                     Integration are achieved using:  

* Middleware- several different types of software that sit in the middle of and provide connectivity between two or more software applications. It translates information between disparate systems.

* Enterprise application integration (EAI) middleware- represents a new approach to middleware by packaging together commonly used functionality, such as providing prebuilt links to popular enterprise applications, which reduces the time necessary to develop solutions that integrate applications from multiple vendors.

 Integration between SCM, CRM, and ERP Applications.

·                     Companies run on independent applications, such as SCM, CRM, and ERP. If one application performs poorly, the entire customer value delivery system is affected.

Enterprise Resource Planning’s Explosive Growth:

Reasons of ERP being proven to be such a powerful force:

·                     ERP is a logical solution to the mess of incompatible applications that had sprung up in most businesses. 

·                     ERP addresses the need for global information sharing and reporting.

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

To qualify as a true ERP solution, the system not only must integrate various organization processes, but also must be:

·                      Flexible- an ERP system should be flexible in order to respond to the changing needs of an enterprise. 

·                     Modular and open- an ERP system has to have open system architecture, meaning that any module can be interfaced with or detached whenever required without affecting the other modules. The system should support multiple hardware platforms for organizations that have a heterogeneous collection of systems. It must also support third- party add-on components. 

·                      Comprehensive- an ERP system should be able to support a variety of organizational functions and must be suitable for a wide range of business organizations. 

·                      Beyond the company- an ERP system must not be confined to organizational boundaries but rather support online connectivity to business partners or customers.

Everyone involved in sourcing, producing, delivering the company’s product works with the same information, which eliminates redundancies, cuts wasted time, and removes misinformation.

Chapter 11 : Building a Customer-centric Organization Customer Relationship Management

Customer Relationship Management :

=> CRM is a means of managing all aspects of a customer's relationship with an organization to increase customer loyalty retention and an organization's profitability.   

=> To guarantee that every customer has a highly satisfying online buying experience, the company asks the dealers to agree to a number of standards including :

1. checking online orders twice daily.

2. shipping online orders within 24 hours.

3. responding to customer inquiries within 24 hours.

The Benefits of CRM :

=> Allows a company to operate more efficiently and effectively in the area of supporting customer needs.

=>CRM moves far beyond technology by identifying customer needs and designing specific marketing campaigns tailored to each.

=> The firm can analyze it to identify patterns and create marketing campaigns and sales promotions for different customer segments.

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.

•        Materials flows from suppliers and their upstream suppliers at all levels
•        Transformation of materials into semi-finished products, or the organization’s own production processes
•        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

1. 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.

WEAN EMPLOYEES OFF TRADITIONAL BUSINESS PRACTICES

1. 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

1. 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

1. 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 

1. 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.