What’s Happening?! Oracle to PeopleSoft employees – stand by for your FedEx delivery to your...

What’s Happening?!What’s Happening?!

Oracle to PeopleSoft employees – stand by for your FedEx delivery to your home.

SBC is buying AT&T for $16 billion.

Procter and Gamble is buying Gillette for $57 billion.

P&G has 16 brands with $1 billion+ annual revenue.

Gillette has 5.

United pilots and flight attendants have ratified new contracts that include pay cuts. (Pilots – 11.8% -- $180 million, Flight attendants 9.5% --$131 million. Mechanics are balking at a 5% cut. The goal with six unions is $725 million reduction in operating costs.

Midterm Exam – Feb. 8, 2005Midterm Exam – Feb. 8, 2005

Must answer essay question 15 points Must answer essay question 20 points Answer one of two essay questions 20 points Answer three of four essay questions 45 points

Total 100 points

2 -- 20 point questions

4 – 15 point questions

Midterm Exam ClinicMidterm Exam Clinic

Wednesday, Feb. 2, 2005Wednesday, Feb. 2, 2005

4:00 to 5:00 PM4:00 to 5:00 PM

Baskin conference room 330Baskin conference room 330

Leslie ClarkLeslie Clark

Graniterock InternshipGraniterock InternshipWe are looking for someone with strong technical skills in software development using Visual Studio .NET. This person should have a passion for coding. The quote from the hiring manager was "I want that student that all the other people in the class go to for help on their coding projects". If you know any students who may be interested in an internship here at our Corporate Office in Watsonville working with the IT staff, please ask them to email me with a resume ASAP. We currently have an intern doing this work, but she will be leaving soon. Barbara Kimball Staffing Manager Human Resource Services (831) 768-2061 [email protected]

Chapter 8 IntroductionChapter 8 Introduction

Evaluating Business Strategies

and

The Use of Information Systems:

The Strategic Option Generator

Where Are We?Where Are We?

Section I: The Business Environment -- Chapters 2 – 5Section I: The Business Environment -- Chapters 2 – 5

Section II: The Company Environment -- Chapters 6 – 7Section II: The Company Environment -- Chapters 6 – 7

Section III: The Use of Information Systems -- Chapters 8 – 12.Section III: The Use of Information Systems -- Chapters 8 – 12.

VisionStrategyTactics

Business Plan

• Competitive Options• Roles, Roles and Relationships• Redefine and/or Define• Telecommunications

as the Delivery Vehicle• Success Factor Profile

A Systematic Approach

Chapter ObjectivesChapter Objectives Identifying business strategies.

Relating the use of the Information Systems to gain a competitive advantage.

Strategic Option Generator

A model that can identify strategic opportunities

involving the use of information systems.

It will be used after the fact in our analysis term

papers to introduce Section III and should not get

into a large amount of detail.

A Systematic ApproachA Systematic Approach

VisionStrategyTactics

Business Plan

• Competitive Options• Roles, Roles and Relationships• Redefine and/or Define• Telecommunications

as the Delivery Vehicle• Success Factor Profile

• Competitive Options

TARGET

CUSTOMER COMPETITORSUPPLIER

THRUST

DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE

MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE

STRATEGIC OPTION GENERATOR

Figure 8-1

TARGET

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE


Figure 8-1

THRUST

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE


Figure 8-1

MODE

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE


Figure 8-1

DIRECTION

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE


Figure 8-1

EXECUTION

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE


Figure 8-1

Analysis of Federal Express

Customer

Differentiation Innovation Growth

Offensive

Use Provide

ConclusionsConclusions

The Strategic Option Generator is the first of the five The Strategic Option Generator is the first of the five factors to be used to do an analysis of the competitive use factors to be used to do an analysis of the competitive use of information systems within a company.of information systems within a company.

While it can be used to identify future opportunities, it will While it can be used to identify future opportunities, it will be used after the fact in Section III of our analysis term be used after the fact in Section III of our analysis term papers.papers.

It is necessary to understand it to use it properly.It is necessary to understand it to use it properly.

Chapter 8Chapter 8

Evaluating Business Strategies and the Use of

Information Systems: Strategic Option Generator

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE


Figure 8-1

Biggest MistakeBiggest Mistake

Target, thrust and mode are fairly straight-forward so they don’t tend to cause problems for students.

Direction is a source of problems and confusion since the name of the element is not self-explanatory.

This element deals with whom the use of IS is intended.

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE

Federal Express Analysis Using the Strategic Option Generator

Figure 8-2

TARGET


THRUST


MODE

DIRECTION

OFFENSIVE DEFENSIVE

USE PROVIDE

EXECUTION

STRATEGICADVANTAGE

UPS Analysis Using the Strategic Option Generator

Figure 8-3

Chapter 9Chapter 9

The Roles, Roles and Relationships Concept

Chapter 9Chapter 9

1. Roles, Roles, Relationship Concept and

Examples.

2. Triggers of Action.

3. Technology Transfer Through

Organizational Learning.

4. IS Organization as a Business within a

Business.

5. Outsourcing the management of IS.

IS as a Competitive Resource?IS as a Competitive Resource?

• Business competitiveness is a top priority.

• What about Information Systems?

Why are some companies successful

while others are frustrated with a lack

of results and benefits from the use of

information systems?

Success Can Be Elusive!Success Can Be Elusive!

Roles, Roles and RelationshipsRoles, Roles and Relationships

1. What organizational leadership is necessary to gain a competitive advantage through the use of information systems?

2. How does an organization determine the appropriate use of information systems to gain a competitive advantage on an on-going basis?

3. Does a specific event, activity or person tend to trigger the start of a program that emphasizes the competitive use of information systems?


4. Can an organization sustain a competitive advantage that is built on an information system?

5. Is this a broad based approach or is the successful use of competitive information tied to a small number of people playing key roles?

6. Does outsourcing the management of information systems impact its possible use as a competitive resource?

1. Business Leadership?

2. Information Systems Leadership?

3. A Proven Information Systems Track

Record?

4. Business Stability?

5. Information Content of the Business?

6. IS Cost and/or Risk?

How Much is Based OnHow Much is Based On

Roles, Roles and Relationship ConceptRoles, Roles and Relationship Concept**********************

1. The role of information systems is focused on competitive priorities.

2. Senior management plays a major role in positioning and

prioritizing the competitive role of information systems.

3. There is an on-going working relationship between senior

management and the information systems organization to

sustain the successful use of information systems to compete.

1. Who Makes Competitive Strategy Decisions?

Two Important QuestionsTwo Important Questions

2. Who Makes Competitive Strategy Decisions

When the Process is Built on a Computer Base?

The primary role of the top executive

is to assure the long term viability

of the business.

Top Executive Job DescriptionTop Executive Job Description

The Role of the Senior ExecutiveThe Role of the Senior Executive

• Provide a long term vision for the future of the business.

• Recognize the value of information to the organization.

• Sponsor and participate in determining the role of information systems.

The Person that Runs the Business on a Day-To-Day Basis

• Communicate the importance of the information systems role.

• Provide funding, including R&D, to address the major requirements.

• Focus on results and benefits.

• Motivate to make things happen!

Role of Other Senior ManagementRole of Other Senior Management

Understand the role of information systems within

the organization.

Identify and specify requirement for new

information systems.

Justify and fund existing and new systems.

Sponsor their information systems on an on-going

basis.

Role of IS ExecutiveRole of IS Executive

Function as a member of the senior management team.

Provide an understanding of the realm of the possible, feasible, affordable and achievable with information systems.

Posture information systems as a service and support organization in both fact and perception.

Using IS to CompeteUsing IS to Compete

Senior Management

Information SystemsOrganization

Functional Management

Users

Figure 9-1

Leadership in two forms:

- Business Leadership

- IT Leadership


To assure that the corporation's present as well as future demands for information, information processes, information systems and computer-based technologies are provided in such a manner that the daily conduct of the business will not be impacted and that the future business opportunities can be capitalized on and managed by the corporation.

Information Systems Organization Information Systems Organization Mission StatementMission Statement

The Reeducation of UPSThe Reeducation of UPS

• For decades UPS focused on managing physical

distribution.

• Today, new IT and relaxed regulations have made

logistics management the imperative.

• Information about a package is often as important as

the package itself.

• In one decade IT went from a limited factor to a

critical enabling resource.

Kent “Oz” Nelson ,CEO

An Essential Partnership

Using Information Systems to Using Information Systems to Gain a Competitive AdvantageGain a Competitive Advantage

Using Information Systems to CompeteUsing Information Systems to Compete

InformationSystems

Organization

Business Leadership

Senior Management

IT Leadership

Figure 9-2

1. A formal structure within the organization.

2. Integral to the way that the business is run.

RelationshipsRelationships

• Senior Management?

• Functional Management?

• Information Systems Management?

Who Should Be the Primary Who Should Be the Primary Initiator of Using Information Initiator of Using Information

Systems to Compete?Systems to Compete?

Using IS to CompeteUsing IS to CompetePrimary ResponsibilitiesPrimary Responsibilities

DirectionConceptualApproach

SpecificApproach

SeniorManagement

FunctionalManagement

I/SManagement

7

2

1

10

2

5

3

10

4

1

5

10Figure 9-4

Technology TransferTechnology TransferThrough Organizational Through Organizational

LearningLearning

There is a direct correlation between

the successful introduction of a new

information system within an organization

and the learning curve of the primary

users.

Information Technology

Computer-based Applications

Organization

Learning Curves

CompetitiveAdvantage

Action Initiators

Vision

Strategy

Tactics

ProcessImprovement

CrisisManagement

Executive Power

Business Leadership

Technology Leadership

Figure 9-5

Making It Happen!Making It Happen!

More on LeadershipMore on Leadership

1. Entrepreneur Founder

2. Corporate Managers

3. Corporate Caretakers

Bob TownsendUp the Organization

A Business

Competitors

Board of DirectorsS

uppl

iers

Custom

ersProducts/Services

Figure 9-6

InformationSystemsBusiness

Competitors

Steering CommitteeS

uppl

iers U

sers

Figure 9-7

Competitors

Steering CommitteeS

uppl

iers U

sers

InformationSystems

Organization

Opportunities Direction

I/T NeedsReal $s

ProductsPeople

Wants & NeedsJustificationReal $s?

Products& ServicesConstraintsCosts

Real Dollars

Needs and Priorities

Figure 9-8

OutsourcingHiring someone whose expertise can perform a business function or activity better, more cost effectively and/or in a more timely manner than can be achieved in-house.

Also enables the company to focus on its core competencies and those factors that mean the difference between success and failure.

Outsourcing

Outsourcing is a current, major focus of many business enterprises.

It continues to be a very hot topic.

OutsourcingOutsourcing

Logical?

Necessary?

Appropriate?

Cost-effective?

What?

With Whom?

Where?

How Long?

How Much Risk?

The Evolution of Outsourcing of Outsourcing

The concept of outsourcing is not new. For decades, companies have outsourced a number of functions such as cafeteria service, janitorial service, security guards, payroll, clerical support, manufacturing and distribution.

Outsourcing, by the old definition, was very specific, targeted, and often project based. The company might design a product, then outsource the manufacture of various components, subassemblies, even the finished product.

Things have evolved to where anything that is not a core business process is a candidate to outsource.

Outsourcing IS ManagementOutsourcing IS Management

• Strategically Significant?

• A Way to Save Money on a Short Term Basis?

• A Way to Avoid the Need to Manage Technical

People in an Environment that Keeps Changing?

UB example

Outsourcing Information Outsourcing Information Systems ManagementSystems Management

Is the outsourcing of the management of

information systems a contradiction of its

possible strategic significance?

Information System GoalsInformation System Goals

To help achieve organizational objectives by:

1. Supporting the decision making process.

2. Providing necessary information.

3. Providing a communications network.

4. Accommodating change within the

organization.

5. Maintaining an approach with a general

manager’s perspective.

IS Organization BusinessIS Organization Business

1. Designing Information Systems

2. Building Information Systems

3. Maintaining and Running Information

Systems

IT Outsourcing OptionsIT Outsourcing Options

• Software Development and/or Maintenance

• Application Service Provider

• Global Network Provider

• Network Management

• Management of Entire IS Function

• IT Training

• Consulting and Reengineering

India’s IT Outsourcing IndustryIndia’s IT Outsourcing Industry

GOOD STUFF, CHEAP

That's the reputation of India's IT outsourcing industry, and it's both a blessing and a curse.

The blessing is that India has finally been able to move onto the global stage by harnessing its greatest natural resource—people—and focusing on filling the world's need for IT skills and services.

India has grown its IT exports in less than a decade from $150 million to more than $4 billion—10.5% of India's total overseas sales. Its success is built on a solid record for developing IT talent as well as delivering top-notch legacy system maintenance and software applications.

India’s IT Outsourcing IndustryIndia’s IT Outsourcing Industry

The curse is that, despite what IT outsourcing has meant for India's economy, the country's top IT vendors have been typecast and they have major competition from Ireland, China, the Philippines and Israel.

India’s IT Outsourcing IndustryIndia’s IT Outsourcing IndustryNobody can beat their price!

Software programming in India costs roughly $35 per hour, as opposed to $200 in the United States—and their quality is world-class.

Of the 23 companies worldwide that have been awarded the US Software Engineering Institute's Capability Maturity Model Level 5 rating for fault-free software engineering processes (the equivalent of a perfect 10 in Olympic competition), 15 of those elite companies are Indian, among them Infosys, NIIT and Wipro.

China Versus India for OutsourcingChina Versus India for Outsourcing

India’s global advantage in IT rests on a tripartite

foundation:

1) Good IT education

2) Competitive wages

3) English language competency.

On the first two, China already competes. That leaves

English which has improved significantly in the past ten

years.

Most managers are used to managing internal resources and staff directly, and having total control over the decision-making process in their area.

There are some fundamental differences in managing an outsourced function.

US CorporationsUS Corporations

The Corporation Today

A company must ensure that internal

resources are dedicated to core competencies

and that the right outside relationships are

established, maintained, and nurtured.

Chief Resource Officer (CRO)

New Organizational Model is Creating a New Management Role.

Outsourcing has rapidly changed and evolved -- from vertical to virtual, tactical to strategic, cost-cutting to cutting-edge.

The stakes have increased, the risks and the rewards have soared, yet the manner in which outsourcing engagements are conducted and supervised has remained the same.

The CRO is a strategic position, charged not with managing corporate resources (time, money, and personnel), but with managing the complex series of relationships the modern corporation must have with its outside resources.

The CRO evaluates the need for resources in each function, finds the resources required outside the company, and implements and nurtures the relationship to the company's best advantage.

Chief Resource Officer

Chief Resource ManagerChief Resource Manager

Outsourcing deals fall apart because there was no one in a Chief Resource Manager position to manage and follow-up on objectives and contractual agreements.

A CRO-type position means taking a global, visionary, forward-thinking role in how to use resources and make them effective and efficient for an organization.

There is a definite need to manage change during the life of an outsourcing contract.

CRO Skill Profile

1. Experience managing different businesses

2. Experience managing costs

3. Project management

4. Contract negotiations

5. Political and cultural consciousness

6. Ability to think out of the box

7. Comfortable with change

Evaluation CriteriaEvaluation CriteriaIt is important in considering offshore outsourcing to

address the following with a potential vendor:

a) Do they have offices in US and in proximity to

them. Developing long term products require lot of

interaction with the vendor locally.

b) Get resumes of IT professionals who will work

on your project in foreign country and/or the US. If an

offshore vendor has experienced IT professionals working

for them for a good length of time, they have good retaining

and employee policies.

Evaluation CriteriaEvaluation Criteria

c) Understand the vendor process to develop and

deliver the project on a timely basis.

d) Get references on where they have successfully

completed similar projects.

e) Clearly understand the financial and property rights of

such a relationship.

f) Make sure that you have a way out if things do not go

well or according to schedule.

Benefits Realized from Outsourcing IS Management

0% 10% 20% 30% 40% 50% 60% 70%

Vendor Expertise

Increased Focus on CoreCompetencies

Improved Quality and Delivery

Cost Reduction

Balance Sheet Improvement

Actual Benefits

Expected Benefits

Deloitte & Touche Survey

A Well-Structured AllianceA Well-Structured Alliance

• Strategic Synergy. The two (or more) organizations

together can achieve a high level of benefits. • Clarity of purpose. The goals and benefits are explicit

and clear. • Growth opportunity. The relationship--and its benefits--

can be expanded. • Less risk. The relationship reduces the level of risk. • Excellent chemistry. There a good "fit" between the two

or more organizations. • Win-Win Proposition. Each party can benefit fairly from

the relationship.

Outsourcing Resources

The Outsourcing Institute

http://www.outsourcing.com

ASP Outsourcing Center

http://www.asp-outsourcing-center.com

Some Basic Conclusions Some Basic Conclusions

1. There are common factors among companies that have gained a competitive advantage through the use of information systems.

2. The difference between the good examples and the

less successful ones is getting bigger.

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