Chapter 19 – Outsourcing in the 21st Century

OUTSOURCING PROJECTS

•   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

§  Financial savings

§  Rapid growth

§  Industry changes

§  The Internet

§  Globalization

•   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 CHALLENGES

•   Outsourcing challenges include;

§  Contract length

1.       Difficulties in getting out of a contract

2.       Problems in foreseeing future needs

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

§  Competitive edge

§  Confidentiality

§  Scope definition 

Chapter 15 – Creating Collaborative Partnerships

TEAMS, PARTNERSHIPS AND ALLIANCES

Ø  Organizations create and use teams, partnerships and alliances to;

§  Undertake new initiatives

§  Address both minor and major problems

§  Capitalize on significant opportunities

Ø  Organizations create teams, partnerships and alliances both internally with employees and externally with other organizations

Ø  Collaboration system – supports the work of teams by facilitating the sharing and flow of information

Information partnerships with other organizations

Ø  Organizations from alliance 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

Ø  Information technology can make a business partnership easier to establish and manage

§  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

Ø  The internet has dramatically increased the ease and availability for IT – enabled organizational alliance and partnerships

COLLABORATION SYSTEMS

Ø  Collaboration solves specific business tasks such as telecommuting, online meetings, deploying applications, and remote project and sales management

Ø  Collaboration system – An IT- based set of tools that supports the work of teams by facilitating the sharing and flow of information.

Ø  Two categories of collaboration

1.       Unstructured collaboration (information collaboration) – includes document exchange, shared whiteboards, discussion forums, and email.

2.       Structured collaboration (process collaboration) – involves shared participation in business processes such as workflow in which knowledge is hard-coded as rules

Collaborative business functions 

Ø  Collaboration systems include;

§  Knowledge management systems

§  Content management systems

§  Workflow management systems

§  Groupware systems

KNOWLEDGE MANAGEMENT SYSTEMS

Ø  Knowledge management (KM) – involves capturing, classifying, evaluating, retrieving and sharing information assets in a way that provides context for effective decisions and actions

Ø  Knowledge management system – supports the capturing and use of an organization’s “know-how”

EXPLICIT AND TACIT KNOWLEDGE

Ø  Intellectual and knowledge-based assets fall into two categories;

1.       Explicit knowledge – consists of anything that can be documented, archived, and codified, often with the help of IT

2.       Tacit knowledge – knowledge contained in people’s heads

Ø  The following are two best practices for transferring or recreating tacit knowledge

1.       Shadowing – less experienced staff observe more experienced staff to learn how their more experienced counterparts approach their work

2.       Joint problem solving – a novice and expert work together on a project

Reasons why organizations launch knowledge management programs 

CONTENT MANAGEMENT

Ø  Content management system (CMS) – provides tools to manage the creation, storage, editing and publication of information in a collaborative environment

Ø  CMS marketplace includes;

§  Document management system (DMS)

§  Digital assets management system (DAM)

§  Web content management system (WCM)

WORKING WIKIS

Ø  Wikis – web-based tools that make it easy for users to add, remove, and change online content

Ø  Business wikis – collaborative web pages that allows users to edit documents, share ideas or monitor the status of a project

WORKFLOW MANAGEMENT SYSTEMS

Ø  Work activities can be performed in series or in parallel that involves people and automated computer systems

Ø  Workflow – defines all the steps or business rules, from beginning to end, required for a business process

Ø  Workflow management system – facilitates the automation and management of business processes and controls the movement of work through the business process

Ø  Messaging-based workflow system – sends work assignments through an email system

Ø  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 technologies

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

Chapter 14 – E business

E-commerce is buying and selling using an electronic medium. It is accepting credit and payments over the net, doing banking transactions using the Internet, selling commodities or information using the World Wide Web and so on.

  E-Business in addition to encompassing E-commerce includes both front and back-office applications that form the engine for modern E-commerce. E-business is not just about E-commerce transactions; it's about re-defining old business models, with the aid of technology to maximize customer value. E-Business is the overall strategy and E-commerce is an extremely important facet of E-Business.

  Thus e-business involves not merely setting up the company website and being able to accept credit card payments or being able to sell products or services on time. It involves fundamental re-structuring and streamlining of the business using technology by implementing enterprise resource planning (ERP) systems, supply chain management, customer relationship management, data ware housing, data marts, data mining, etc

E BUSINESS MODELS

Ø  E business model – An approach to conducting electronic business on the Internet 

Business-to-Business (B2B)

Ø  Electronic marketplace (E market place) – interactive business communities providing a central market where multiple buyers and sellers can engage in e business activities. 

Business-to-Consumer (B2C)

Ø  Common B2C e business models include;

§  E shop – A version of retail store where customers can shop at any hour of the day without leaving their home or office

§  E mall – consists of a number of e shops; it serves as a gateway through which a visitor can access other e shops

Ø  Business types;

§  Brick-and-mortar business

§  Pure-play business

§  Click-and-mortar business

Consumer-to-Business (C2B)

Ø  Priceline.com is an example of a C2B e business model

Ø  The demand for C2B e business will increase over the next few years due to customer’s desire for greater convenience and lower prices

Consumer-to-Consumer (C2C)

Ø  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

§  Reverse auction – Buyers use to purchase a product or service, selecting the seller with the lowest bid

Ø  C2C communities include;

§  Communities of interest – People interact with each other on specific topics, such as golfing and stamps 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-to-one with Michael Jordan

EBUSINESS BENEFITS AND CHALLENGES

Ø  E business benefits include;

§  Highly accessible

§  Increased customer loyalty

§  Improved information content

§  Increased convenience

§  Increased global reach

§  Decreased cost

Ø  E business challenges include;

§  Protecting consumers

§  Leveraging existing systems

§  Increased liability

§  Providing security

§  Adhering to taxation rules

Ø  There are numerous advantages and limitations in e business revenue models including;

§  Transaction fees

§  License fees

§  Subscription fees

§  Value-added fees

§  Advertising fees

MASHUPS

Ø  Web mash up – 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

§  Mash up editor – WSYIWYGs (What You See Is What You Get) for mash ups 

Chapter 13 - Creating Innovative Organization

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. 

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

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

The role of CRM in supporting business operations are:allows an organization to gain insights into customers' shopping and buying behaviors.

• A CRM system consists of a historical view and analysis of all the acquired or to be acquired customers. This helps in reduced searching and correlating customers and to foresee customer needs effectively and increase business.
• CRM contains each and every bit of details of a customer, hence it is very easy for track a customer accordingly and can be used to determine which customer can be profitable and which not.
• In CRM system, customers are grouped according to different aspects according to the type of business they do or according to physical location and are allocated to different customer managers often called as account managers. This helps in focusing and concentrating on each and every customer separately.
• A CRM system is not only used to deal with the existing customers but is also useful in acquiring new customers. The process first starts with identifying a customer and maintaining all the corresponding details into the CRM system which is also called an ‘Opportunity of Business’. The Sales and Field representatives then try getting business out of these customers by sophistical following up with them and converting them into a winning deal. All this is very easily and efficiently done by an integrated CRM system.
• The strongest aspect of Customer Relationship Management is that it is very cost-effective. The advantage of decently implemented CRM system is that there is very less need of paper and manual work which requires lesser staff to manage and lesser resources to deal with. The technologies used in implementing a CRM system are also very cheap and smooth as compared to the traditional way of business.
• All the details in CRM system is kept centralized which is available anytime on fingertips. This reduces the process time and increases productivity.
• Efficiently dealing with all the customers and providing them what they actually need increases the customer satisfaction. This increases the chance of getting more business which ultimately enhances turnover and profit.
• If the customer is satisfied they will always be loyal to you and will remain in business forever resulting in increasing customer base and ultimately enhancing net growth of business.

Operational CRM	Analytical CRM
·         Deal directly with the customers	·         Do not deal directly with customers
·         Supports back-office operations	·         Supports traditional transactional processing for day-to-day front-office operations
·         Example: Campaign management, e-marketing, telemarketing and e-selling.	·         Example: Develop customer profiles and analyze customer or product profitability.

USING ANALYTICAL CRM TO ENHANCE DECISION 

Ø  Operational CRM – supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers

Ø  Analytical CRM – supports back-office operations and strategic analysis and includes all system that do not deal directly with the customers

CUSTOMER RELATIONSHIP MANAGEMENT SUCCESS FACTORS

CRM success factors include;

Ø  Clearly communicate the CRM strategy

Ø  Define information needs and flows

Ø  Build an integrated view of the customer

Ø  Implement in iterations

Ø  Scalability for organizational growth

USING ANALYTICAL CRM TO ENHANCE DECISION

Operational CRM and analytical CRM