MEIE881

The Management Information

Systems Organization

MIS Organization

Define CKO, CTO, CIO, CPO, IT GovernanceDiscuss the functions typically performed in the IS organizationDiscuss the advantages, disadvantages and characteristics of centralized, decentralized and federal organizational structuresDiscuss and apply Weill‟s framework for IT Governance

Title Responsibility

Chief technology officer (CTO) Track emerging technologies

Advise on technology adoption

Design and manage IT architecture to insure consistency and compliance

Chief knowledge officer (CKO) Create knowledge management infrastructure

Build a knowledge culture

Make corporate knowledge pay off

Chief telecommunications officer (CTO)

Manage phones, networks, and other communications technology across entire enterprise

Chief network officer Build/maintain internal and external networks

Chief resource officer Manage outsourcing relationships

Chief information security officer Insures information management practices are consistent with security requirements

Chief privacy officer Responsible for processes and practices that insure privacy concerns of customers, employees and vendors are met

Figure 9.1 The CIO’s lieutenants

Chief

Information

Officer

Chief

Knowledge

Officer

Chief

Technology

Officer

Chief

Network

Officer

IS Managers

Name

Title

Systems

Developers/

Developers

Business

Analysts

Database

Administrators

Support

Personnel/

Operations

Other

Figure 9.3 Sample IS organization chart

What IS Does Not Do

Does not perform core business functions such as:Selling

Manufacturing

Accounting

Does not set business strategy.General managers must not delegate critical

technology decisions.

Figure 9.7 Organizational continuum

Centralization: Advantages

& Disadvantages

PROS

Global standards

Common data

“One voice” with suppliers

Economies of scale

Access to large capacity

Better recruitment of IT personnel

CONS

Technology may not meet local needs

Lack of business unit control

„Us‟ vs. „They‟

Slow support for strategic initiatives

Decentralization: Advantages

& Disadvantages

ADVANTAGES

Better meet local needs

Closer partnership between IT and business units

Greater flexibility

Better match with decentralized enterprise structure

Better unit control over overhead costs

DISADVANTAGES

Difficulty in maintaining global standards & consistent data

Higher infrastructure costs

Loss of control

Duplication of staff & data

Harder to negotiate preferential supplier agreements

Figure 9.10 Federal IT

Federalism

Structuring approach

Distributes power, hardware, software, data and personnel between a central IS group and IS in business units

IT Governance – Weill (2004)

Definition – specifying the framework for decision rights and accountabilities to encourage desirable behavior in the use of IT

Broad-based input rights

Mostly Federal (followed by IT Duopoly)

High IT governance performers could describe IT governance

(but not low IT governance performers)

IT duopolies for IT principles and investments

IT Governance Archetypes

CxO Level Execs

Corp IT and/or BU IT

BU Leaders or Process Owners

Business Monarchy

IT Monarchy

Feudal

Federal

IT Duopoly

Anarchy

Top Three Overall

Governance Performers

IT Principles

IT Architecture

IT Infrastruc-ture

Business Application Needs

IT investment & Priorit.

Bus Monarchy

IT Monarchy

Feudal

Federal

Duopoly

Anarchy

IT Governance CSFs

1. Transparency2. Actively designed3. Infrequently redesigned4. Education about IT governance5. Simplicity (few performance goals)6. An exception handling process (for new

opportunities)7. Governance designed at multiple

organizational levels8. Aligned incentives

Information Security

Decision

Recommended

Archetype

Rationale

Information Security

Strategy

Business monarchy Business leaders have the knowledge of the company‟s

strategies, upon which security strategy should be based. No

detailed technical knowledge is required

Information Security

Policies

IT duopoly Technical and security implications of behaviors and processes

need to be analyzed and tradeoffs between security and

productivity need to be made. Need to know the particularities of

company‟s IT infrastructure.

Information Security

Infrastructure

IT monarchy In depth technical knowledge and expertise is needed.

Information Security

Education/Training/

Awareness

IT duopoly Business buy-in and understanding are needed; Technical

expertise and knowledge of critical security issues is needed in

building programs.

Information Security

Investments

IT duopoly Requires financial (quantitative) and qualitative evaluation of

business impacts of security investments. Business case has to

be presented for rivaling projects.

Matching Information Security

Decisions and Archetypes

Outsourcing

Discuss the reasons for outsourcing

Discuss disadvantages of outsourcing

Discuss conditions when outsourcing is appropriate

Define backsourcing and describe the reasons for backsoucing

Discuss structuring and managing the outsourcing arrangement

Describe open sourcing and strategies for its use

Offshore sourcing

Define offshore sourcing, captive center, nearshoring

Discuss reasons for and challenges of offshore sourcing

Describe steps clients take in finding a provider

Describe steps providers take in acquiring clients

Make

or Buy

Is This

Working

Insourcing

Outsourcing

Offshoring

Backsourcing

Sourcing Decisions

Nearshoring

Outsourcing

The purchase of a good or service from another company

Farm out data center operations (facilities management)

Farm out tasks and services

Farm out systems development

May transfer IS function to vendor

Saving $$$: Provider

Advantages

Tighter overhead cost control

More aggressive use of low-cost labor pools

More effective bulk purchases and leasing arrangements

Better management of excess hardware capacity

Better control over software licenses

Hustle (Staying alive)

Creative and more realistic structuring of leases

Leaner management structure because of increased competence and critical mass volumes of work

Outsourcing

Disadvantages

Reliance on vendor/partner

Loss of control

Considerations about security/confidentiality

Evaporization of cost savings

Loss of competitive advantage

Slight of hand with employees

Outsourcing strategies

DECISIONCRITERIA

“MAKE”PRESSURE

“BUY”PRESSURE

CoreCompetency

Often core* Oftensupport*

Security/Confidentiality

Veryconfidential

Not highlyconfidential

SoftwareAvailability

Uniqueapplication

Softwareavailable forcommonproblem

Outsourcing strategies

DECISION CRITERIA

“MAKE” STRATEGY

“BUY” STRATEGY

Partners No reliable, competent, motivated, or financially stable partners available

Suitable partners available

Time Frame Time available for application development

Available time too limited

IT Professionals

Available in- house

Not available in-house

Backsourcing

Bringing an outsourcing arrangement back in house

Reasons

Economic

Strategic

Relationship

Power

Structuring the Alliance

Flexible contract ( a lot can happen over 10 years)Shorten length

Termination clause

Detailed performance standardsService levels (terminal response times)

Baseline period measurement

Growth rates

Service volume fluctuations

Resolution of performance disputes

Structuring the Alliance

Partial vs. complete outsourcing

Multiple vendors

Cost savings

Multiple evaluations

Outside consultants

Structuring the Alliance

Supplier stability and quality

Conflict of interests

Management fit

Conversion problems

Managing the Alliance

Strong CIO function

Partnership/contract management

Architecture planning

Emerging technologies

Continuous learning

Service Oriented Architecture

Managing the Alliance

Performance measurements – continuous

Low-structured tasks more difficult to outsource

Low-structured task provide higher margins for provider

Customer-outsourcer interface

Specified account manager in provider company

Offshore sourcing

Captive center – offshore center owned by the client company

Offshore sourcing (offshoring) – sourcing to a company outside the home country

Nearshoring – sourcing service work to a foreign, lowewr-wage country that is relatively close in distance or time zone (or both).

Most common offshore sourcing IT activities

Maintenance

Testing

Coding

Make

or Buy

Is This

Working

Insourcing

Outsourcing

Offshoring

Backsourcing

Where do Captive Centers Fit?

Captive Centers

Hybrid CaptivePerforms core business processes for parent

company

Outsources noncore work

Shared CaptivePerforms work for parent company and

external customers

Divested Captive

Terminated Captive

Estimates on Market SizesCarmel & Tjia, 2006

2003 2008 (est)

Global Market of IT Services

$536 billion at 6.2%

N/A

Global Market of IT-enabled Services

$405 billion at 8% $680 billion

Indian R&D sourcing

$1.3 billion $9.1 billion

Global [offshore] sourcing of software & services

$10 billion; total savings from offshoring by US corps -$6.7 billion

$21 billion; total savings from offshoring by US corps -$31 billion

Demand for offshore work

Most aggressive offshore consumers are in US; Within Europe, UK is most active

Most active industries: financial services (banks, investment firms, insurance cos) and technology firms (software, hardware & telecommunications)

Motivation: cost savings, flexibility, accessing talent, follow-the-sun

100 nations are now exporting software services and products

http://www.youtube.com/watch?v=LnhTQFHkgmw

Wages for Software

Professionals Carmel & Tija 2005

USA $63,000 Mexico $7,000

Canada $57,000 India $5,000

UK $45,000-$99,000

Russia $5,500-$7,500

Japan $44,000 Indonesia $5,000

Singapore $43,000 Ukraine $5,000

Israel $39,500 Poland $4,800

Ireland $23,000 Pakistan $3,600

Brazil $20,000 China $3,000

South Africa $18,000 Vietnam $1,400

Extra offshore costs (%)

Carmel & Tija 2005

Meta Grp CIO

Search & Contract 1-2 0.02 - 2

Process changes 1-10 1-10

Efficiency/lost productivity 0-20 3-27

Governance 5-7 6-10

Communication/cultural 3-8

Travel 2-3

Turnover – offshore site 1-2

Restructuring/transitioning 5-8

Total Extra Costs 12-52% 15-57%

Offshore challenges

Communication breakdown

Coordination breakdown

Control breakdown

Cohesion barriers

Culture clash

Offshoring from client

Perspective

Laying the foundation

Identifying providers

Assessing and selecting the provider

Laying the foundation

Assess your offshoring readiness (project management maturity, risk assessment, organizational flexibility, offshore experience)

Set up powerful launch team

Hire external expert

Create a strategy and a plan

Select right project

Identifying the providers

Locate providers

Select country (language, general software skills, government, travel time)

Develop criteria for provider selection

Write RFI/RFP

Assessing and selecting the

provider

Due diligence

Check references

Set up local meetings to discuss their abilities and your criteria

Pay attention to soft elements (i.e., trust, feeling comfortable

Offshore visit

Make recommendation and contract negotiations

Marketing offshore services:

Provider Perspective

Fierce competition: 4000 companies in low cost countries

Quality of service can‟t be judged until after the service is consumed

Many IT services companies founded by technical professionals – not marketeers

Characteristics: Successful IT

Services Exporters International Trade Center

A truly international outlook (and desire) for exporting

A long-term commitment to exporting

May take 2-3 years to generate business

Thorough research into new markets and development of export plans

An international reputation for quality.

First Steps

Create realistic business planTypes of offshore services required by market

Assess competitors and their place in market

Best ways to enter target market

Seek business intelligence

Define target marketsMarket size

Linkages (linguistic, historic, geographic, diaspora)

Set up local base (sales office; representative)

Conduct SWOT analysis

Local Marketing Activities

Generate client leads

“numbers game”

Trade fairs

Marketing material

Seminars

Public relations

Business Discussions with

Clients

Know client typesKnow offshoring champions in firm

Start with low-risk projects

Cultivate long-term relationships

Know clients‟ cultures

Build trust

Create country branding (with trade associations and government offices)

Offshoring Issues

Onshore Outsourcing

IS Outsourcing Bad for the US?

Open Sourcing

The process of building and improving “free” software by an Internet community

Release early and often

Delegate as much as possible

Archive and manage the versions

Be as open as possible

Free Software

The freedom to run the program for any purpose.

The freedom to study how the program works, and adapt it to your needs. Access to the source code is a precondition for this.

The freedom to distribute copies so that you can help your neighbor.

The freedom to improve and release your improvements to the public, so that the whole community benefits. Access to source code is a precondition for this GNU Project- Free Software Foundation, “The Free

Software Definition,” http://www.gnu.org/philosophy/free-sw.html, Downloaded 4/3/02.

Open Sourcing Issues

Protection of Intellectual Property

Updating and maintaining open source code

Competitive advantage

Tech support

Standards