CHAPTER 19: OUTSOURCING IN THE 21st CENTURY

OUTSOURCING PROJECTS

Insourcing (in-house development) is a common approach using the professional expertise within the organization to develop and maintain the organization’s information technology system.

Outsourcing is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.

FORMS OF OUTSOURCING OPTIONS

·         Onshore outsourcing – engaging another company within the same country for services

·         Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country, often this country will share a border with a native country.

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

INFLUENTIAL DRIVERS AFFECTING THE GROWTH OF THE OUTSOURCING MARKET

·         Core competencies – outsourcing enables an organization to maintain an up-to-date technology infrastructure while freeing it to focus on revenue growth goals by reinvesting cash and human capital in areas offering the greatest return on investment.

·         Financial savings – typically cheaper to hire workers in China and India than similar workers in the United States.  Technology is advancing at such an accelerated rate that companies often lack the resources, workforce, or expertise to keep up.

·         Rapid growth – an organization is able to acquire best- practices process expertise. This facilities the design, building, training and employment of business processes and functions.

·         Industry changes – high levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies. The significant increase in merger and acquisition activity created in sudden need to integrate multiple core and noncore business functions into one business.

·         The Internet – barriers to entry such as lack of capital, are dramatically reduced in the world of e-business due to the internet. New competitors enter the market daily.

·         Globalization – as market opens worldwide, competition heats up. Companies may engage outsourcing service providers to deliver international services.

OUTSOURCING BENEFITS

1. ·         Increased quality and efficiency of a process, service, or function
2. ·         Reduced operating expenses
3. ·         Resources focused on core profit-generating competencies
4. ·         No costly outlay of capital funds
5. ·         Reduced time to market for products or services
6. ·         Reduced head count and associated overhead expenses

OUTSOURCING CHALLENGES

·         Contract length – most of the outsourced IT contracts are for a relativity long time period. 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 contract if 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, hence creating difficulties is establishing an appropriate contract.

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

·         Competitive edge – a competitive business advantage provided by an internal IT department that understands the organization and is committed to its goals can be lost in an outsourced arrangement. In an outsourced arrangement, IT staff are striving to achieve the goals and objectives of the outsourcing service provider, which may conflict with those of the organization.

·         Confidentiality – the organization must assess the potential risk and cost of a confidentiality breach in determining the net benefits of an outsourcing arrangement.

·         Scope definition – the services required is within the contract scope while the service provider is sure it is outside the scope and so is subject to extra fees.

CHAPTER 15: CREATING COLLABORATIVE PARTNERSHIPS

WEB 2.0: ADVANTAGES OF BUSINESS 2.0

The next generation of Internet use – more mature, distinctive communications platform characterized by new qualities such as collaboration, sharing and free. Business 2.0 encourages user participation and the formation of communities that contribute to the content. In Business 2.0, technical skills are no longer required to use and publish information to the World Wide Web, eliminating entry barriers for online business.

CONTENT SHARING THROUGH OPEN SOURCING

Open system consist of nonproprietary hardware and software based on publicly known standards that allow third parties to create add-on-products to plug into or interoperate with the system. Source code contains instructions written by a programmer specifying the actions to be performed by computer software. Open source refers to any software whose source code is made available free (not on a fee or licensing basis as in business) for any third party to review and modify.

USER-CONTRIBUTED CONTENT

User-contributed content is created and updated by many users for many users. Websites move control of online media from the hands of leaders to the hands of users. One of the most popular forms of user-generated content is a reputation system,where buyers post feedback on sellers.

COLLABORATION INSIDE THE ORGANIZATION

Collaboration system is a set of tools that supports the work of teams or groups by facilitating the sharing and flow of information. Business 2.0’s collaborative mind-set generates more information faster from a wider audience. Collective intelligence is collaborating and tapping into the core knowledge of all employees, partners, and customers. Knowledge can be real competitive advantage for an organization.Knowledge Management System (KMS) supports the capturing, organization and dissemination of knowledge throughout an organization. KMS can distribute an organization’s knowledge base by interconnecting people and digitally gathering the expertise.

Explicit and Tacit Knowledge

Explicit knowledge consists of anything that can be documented, archived, and codified, often with the help of IT. Examples of explicit knowledge are assets such as parents, trademarks, business plans, marketing research, and customer lists. Tacit knowledge is the knowledge contained in people’s heads. The challenge inherent in tacit knowledge is figuring out how to recognize, generate, share, and manage knowledge that resides in people’s heads. Related technologies can help facilitate the dissemination of tacit knowledge, identifying it in the first place can be major obstacle.

COLLABORATION OUTSIDE THE ORGANIZATION

Crowdsourcing, which refers to the wisdom of the crowd. The idea that collective intelligence is greater than the sum of its individual parts has been around for a long time. With Business 2.0 the ability to efficiently tap into its power is emerging. For many years organizations believed that good ideas came from the top. Traditional e-business communications were limited to face to face conversations and one-way technologies that used asynchronous communications, or communication such as email in which the message and the response do not occur at the same time. Business 2.0 brought synchronous communication, or communications that occur at the same time such as IM or chat.

NETWORKING COMMUNITIES WITH BUSINESS 2.0

Social media refers to websites that rely on user participation and user-contributed content such as Facebook, Youtube, and Digg. A social network is an application that connects people by matching profile information. Social networking is the practice of expanding your business and/or social contacts by constructing a personal network. Social networking provides two basic functions. The first is the ability to create and maintain a profile that serves as an online identity within the environment. The second is the ability to create connections between other people within network. Social networking analysis (SNA) maps group contacts identifying who knows each other and who works together. It can also identify key experts with a specific knowledge such as how to solve a complicated programming problem or launch a new product.

Social Tagging

Describes the collaborative activity of marking shared online content with keywords or tags as a way to organize it for future navigation, filtering, or search. The entire user community is invited to tag, and thus essentially defines, the content. Folksonomy is similar to taxonomy except that crowdsourcing determines the tags or keyword-based classification system. Using the collective power of a community to identify and classify content significantly lowers content categorization costs, because there is no complicated nomenclature to learn. A website bookmark is a locally stored URL or the address of a file or Internet page saved as a shortcut. Social bookmarking allows users to share, organize, search, and manage bookmarks.

BUSINESS 2.0 TOOLS FOR COLLABORATING

Blogs

A blog, or web blog, is an online journal that allows users to post their own comments, graphics, and video. Unlike traditional HTML web pages, blog websites let writers communicate-and readers respond-on a regular basis through a simple yet customizable interface that does not require any programming. Blogs are no different from marketing channels such as video, print, audio, or presentations.

Microblogs

Microblogging is the practice of sending brief posts to a personal blog, either publicly or to a private group of subscribers who can read posts as IMs or a text messages. The main advantage of microblogging is that posts can be submitted by a variety of means, such as instant messaging, email, or the web.

Real Simple Syndication (RSS)

Is web format used to publish frequently updated works, such as blogs, news headlines, audio, and video, in a standardized format. An RSS document or feed includes full or summarized text, plus other information such as publication date and authorship.

Wikis

A wiki (the word is Hawaiian for quick) is a type of collaborative web page that allows users to add, remove and change content, which can be easily organized or reorganized as required. While blogs have largely drawn on the creative and personal goals of individual authors, wikis are based on open collaboration with any and everybody. Wikipedia, the open encyclopedia that launched in 2001, has become one of the most 10 most popular web destinations, reaching an estimated 217 million unique visitors a month. The network effect describes how products in an network increase in value to users as the number of users increases.

Mashups

A mashup is a website or web application that uses content from more than one source to create a completely new product or service. The term is typically used in the context of music. The web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries, and so on to create content with a new purpose. Content used in mashup is typically sourced from an application programming interface (API), which is a set of routines, protocols, and tools for building software applications. A programmer then puts these building blocks together.

THE CHALLENGES OF BUSINESS 2.0

Technology Dependence

These days, many people search the information through Internet. Without the Internet, they will find it is difficult to search the information.

Information Vandalism

Allowing anyone to edit anything opens the door for individuals to purposely damage, destroy, or vandalize website content.

Violations of Copyright and Plagiarism

A great deal of copyrighted material tends to find its ways to blogs and wikis where many times blame cannot be traced to a single person

WEB 3.0: DEFINING THE NEXT GENERATION OF ONLINE BUSINESS OPPORTUNITIES

Based on intelligent web applications using natural language processing, machine-based learning and reasoning, and intelligent applications. Web 3.0 is the next step in the evolution of the Internet and web applications. Business leaders who explore its opportunities will be the first to market with competitive advantages. Although Web 3.0 is still a bit speculative, some topics and features are certain to be included in it, such as integration of legacy devices, intelligent applications, open ID, a worldwide database and open technologies.

E-GOVERNMENT: THE GOVERNMENT MOVES ONLINE

Involves the use of strategies and technologies to transform governments by improving the delivery of services and enhancing the quality of interaction between the citizen-customer and all branches of government.

MBUSINESS: SUPPORTING ANYWHERE BUSINESS

The ability to purchase goods and services through a wireless Internet-enable device. The emerging technology behind m-business is a mobile device equipped with a web-ready micro-browser that can perform the services. 

chapter fourteen: 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 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 thirteen : 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.

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 twleve : INTEGRATING THE ORGANIZATION FROM 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.