CHAPTER 15

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

⧭ Reasons companies outsource

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

⧭ Nearshore 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

Many companies have recently begun to consider outsourcing as a means 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.

🔼Rapid growth

an organization is able to acquire best-practices process expertise. This facilitates the design, building, training, and deployment of business processes or functions.

🔼Industry changes

High levels of reorganization 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 deliver international services

🔼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 Benefits

🔺 Outsourcing benefits include:

➷Increased quality and efficiency

➷Reduced operating expenses

➷Outsourcing non-core processes

➷Reduced exposure to risk

➷Economies of scale, expertise, and best

practices

➷Access to advanced technologies

➷Increased flexibility

➷Avoid costly outlay of capital funds

➷Reduced headcount and associated overhead

expense

➷Reduced time to market for products or services

Outsourcing Challenges

➤ Outsourcing challenges include:

➸Contract length

    ➢ Most outsourcing contracts span several years and cause the issues discussed above

             ➳ Difficulties in getting out of a contract

             ➳ Problems in foreseeing future needs

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

➸Competitive edge

➢Effective and innovative use of IT can be lost when using an outsourcing service provider

➸Confidentiality

➢Confidential information might be breached by an outsourcing service provider, especially one that provides services to competitors

➸Scope definition

➢Scope creep is a common problem with outsourcing agreements

CHAPTER 14

CREATING COLLABORATIVE PARTNERSHIPS

Teams, Partnerships, and Alliances

➤ Organizations create and use teams,partnerships, and alliances to:

        ➷ Undertake new initiatives
        ➷ Address both minor and major problems
        ➷ Capitalize on significant opportunities

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

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

➤ Organizations form alliances 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

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

      ➷Information partnership – occurs when two or more organizations cooperate by integrating their IT systems, thereby providing customers with the best of what each can offer

➤The Internet has dramatically increased the ease and availability for IT-enabled organizational alliances and partnerships

Collaboration Systems

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

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

⧭Two categories of collaboration :

⟴Unstructured collaboration (information collaboration) - includes document exchange,shared whiteboards, discussion forums, and e-mail
⟴Structured collaboration (process collaboration) - involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules

⧭Collaborative business functions

⧭Collaboration systems include:

   ⟰ Knowledge management systems
   ⟰ Content management systems
   ⟰ Workflow management systems
   ⟰ Groupware systems

Knowledge Management Systems

🔺Knowledge management (KM) – involves capturing, classifying, evaluating, retrieving, and sharing information assets in a way that provides context for effective decisions and actions
🔺Knowledge management system – supports the capturing and use of an organization’s

“know-how”

Explicit and Tacit Knowledge

🔻 Intellectual and knowledge-based assets fall into two categories

   ⤇Explicit knowledge – consists of anything that can be documented, archived, and
codified, often with the help of IT
   ⤇Tacit knowledge - knowledge contained in people’s heads

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

   ⤇Shadowing – less experienced staff observe more experienced staff to learn how their
more experienced counterparts approach their work
   ⤇Joint problem solving – a novice and expert work together on a project

🔻 Reasons why organizations launch knowledge management programs

KM Technologies

🔺 Knowledge management systems include:

    🔽Knowledge repositories (databases)
    🔽Expertise tools
    🔽E-learning applications
    🔽Discussion and chat technologies

    🔽Search and data mining tools

KM and Social Networking

⧪ Finding out how information flows
through an organization

   ⥈ Social networking analysis (SNA) – a process of mapping a group’s contacts (whether personal or professional) to identify who knows whom and who works with whom

   ⥈ SNA provides a clear picture of how employees and divisions work together and

can help identify key experts

Social Networking

Content Management

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

➤ CMS marketplace includes:

⬲Document management system (DMS)
⬲Digital asset management system (DAM)

⬲Web content management system (WCM)

Document management system (DMS)

⧭ Supports the electronic capturing, storage, distribution, archival, and accessing of documents

Digital asset management system (DAM)

⧭ Similar to DMS, generally works with binary rather than text files, such as multimedia

files types.

Web content management system (WCM)

⧭ Adds an additional layer to document and digital asset management that enables

publishing content both to intranets and to public Web sites

Content Management

⧭ Content management system vendor overview

WORKING WIKIS

⧭ Wikis - Web-based tools that make it easy for users to add, remove, and change online content

⧭ Business wikis - collaborative Web pages that allow users to edit documents, share ideas, or monitor the status of a project

Workflow Management Systems

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

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

business process

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

⧪ Messaging-based workflow system – sends work assignments through an

e-mail system

⧪ 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

⧭ Groupware – software that supports team interaction and dynamics including calendaring, scheduling, and videoconferencing

VIDEOCONFERENCING

⧭ Videoconference - a set of interactive telecommunication technologies that allow two or more locations to interact via two-way video and audio transmissions simultaneously.

WEB CONFERENCING

⧭ Web conferencing - blends audio, video, and document-sharing technologies to create virtual meeting rooms where people “gather” at a password-protected Web site.

INSTANT MESSAGING

⧭ E-mail is the dominant form of collaboration application, but real-time collaboration tools like instant messaging are creating a new communication dynamic

⧭ Instant messaging - type of communications service that enables someone to create a kind of private chat room with another individual to communicate in real-time over the Internet

⧭ Instant messaging application

CHAPTER 13

E-BUSINESS

⧭ The internet is a powerful channel that presents new opportunities for an organization      to:

      ➽ Touch customers
      ➽ Enrich products and services with information
      ➽ Reduce costs

 ⧭ How do e-commerce and e-business differ?

        ➤  E-commerce – the buying and selling of goods and services over the Internet                                           (online transactions)
        ➤  E-business – the conducting of business on the Internet including, not only buying                                  and selling, but also serving customers and collaborating with                                            business partners (online transactions, serving customers                                                  and collaborating with business partner)

⧭ Industries Using E-Business

⧭ E-business model – an approach to conducting electronic business on the Internet

BUSINESS-TO BUSINESS (B2B)

⧭ Electronic marketplace (e-marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities




ELECTRONIC MARKETPLACE (E-MARKETPLACE)

🔻 Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels

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

🔻 Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct material




ELECTRONIC MARKETPLACE

SEARCH ENGINE MARKETING

BUSINESS-TO-CONSUMER(B2C)

🔺 Common B2C e-business models include:
🔽 e-shop – a version of a 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




E-SHOP

E-MALL

BUSINESS-TO-CONSUMER(B2C)

➽Business types:
➼Brick-and-mortar business- operates in a physical store without an Internet presence. Eg: Bata.
➼Pure-play business- a business that operates on the Internet only without a physical store. Examples include fashionvalet.com.

➼Click-and-mortar business– a business that operates in a physical store and on the Internet .Eg: Hijabs by Hanami

CarFax

Amazon.com

CONSUMER-TO-BUSINESS(C2B)

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

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

PriceLine.com

Agoda.com

CONSUMER-TO-CONSUMER(C2C)

⧭ 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

⧭ C2C communities include :

🔽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 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-on-one with Michael Jordan


e-Bay

Mudah.my

E-BUSINESS BENEFITS

E-Business benefits include:

➤Highly accessible
     ➷Businesses can operate 24 hours a day, 7 days a week, 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
    ➷E-business automates and improves many of the activities that make up a buying               experience
➤Increased global reach
    ➷Businesses, both small and large, can reach new markets
➤Decreased cost
    ➷The cost of conducting business on the Internet is substantially smaller than                      traditional forms of business communication

E-BUSINESS CHALLENGES

E-business challenges include:

⧪Identifying Limited Market Segments

⟴The main challenge of e-business is the lack of growth in some sectors due to product        or service limitation.

⧪Managing Consumer Trust

⟴Internet marketers must develop a trustworthy relationship to make that initial sale          and generate customer loyalty.

⧪Ensuring Consumer Protection
⟴Implement Internet Security, protect from misuse of customer information.

⧪Managing Consumer Trust
⟴Companies that operate online must obey a patchwork of rules about which customers      are subject to sales tax on their purchase and which are not.

E-BUSINESS BENEFITS & CHALLENGES

There are numerous advantages and limitations in e-business revenue models
including:

➽Transaction fees
➽License fees
➽Subscription fees
➽Value-added fees
➽Advertising fees

MASHUPS

⧭Web mashup - a Web site or Web application that uses content from more than
one source to create a completely new service

   ⦽Application programming interface (API) - a set of routines, protocols, and tools for          building software applications

   ⦽Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups