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.

Ø> According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger and more profitable than those that do not”.

Ø> Most organizations outsource their noncore business functions, such as payroll and IT.

OUTSOURCING BENEFITS

Ø>>  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:

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

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

Ø~Undertake new initiatives.

Ø~Address both minor and major problems.

Ø~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.

Information partnerships with other organizations

=>> 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.

=>> 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.

=>> 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 

>>> 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”.

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).

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 email 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 teams interaction and dynamics including calendaring, scheduling and videoconferencing .

EXPLICIT AND TACIT KNOWLEDGE

=>>> 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.

=>>> 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: 

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 allows users to edit documents, share ideas or monitor the status of a project.

WEB CONFERENCING

>> Web Conferencing – blends audio, video and document-sharing technologies to create virtual meeting rooms where people “gather” at a password-protected website.

VIDEOCONFERENCING

>> Video Conference – A set of interactive telecommunication technologies that allow two or more locations to interact via two-way video and audio transmissions simultaneously. 

INSTANT MESSAGING

=>> Email is the dominant form of collaboration application, but real-time collaboration tools like instant messaging are creating a new communication dynamic.

=>>Instant messaging – types 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 14 : E - BUSINESS

E-BUSINESS

>>>  The internet is a powerful channel that presents new opportunities for organization to;

     Ø  Touch customers.

     Ø  Enrich products and services with information.

     Ø  Reduce costs.

>>>  How do E-Commerce and E-Business differ?

     Ø   E-Commerce – the buying and selling of goods and services over the internet.

     Ø  E-Business – the conducting of business on the internet including, not only buying and selling, but also serving customers and collaborating with business partners.

INDUSTRIES USING E-BUSINESS

E-BUSINESS MODELS

>>>  E - Business Model – An approach to conducting electronic business on the Internet: 

BUSINESS-TO-BUSINESS (B2B)

>>>  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)

>>> 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.

>>> Business types;

~  Brick-and-mortar business.

~  Pure-play business.

~  Click-and-mortar business.

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.

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 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.

E-BUSINESS BENEFITS AND CHALLENGES

>>>  E- business benefits include;

~  Highly accessible.

~  Increased customer loyalty.

~  Improved information content.

~  Increased convenience.

~  Increased global reach.

~  Decreased cost.

>>>  E- business challenges include;

=  Protecting consumers.

=  Leveraging existing systems.

=  Increased liability.

=  Providing security.

=  Adhering to taxation rules.

>>>  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 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 12 : 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. 

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.

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. Two 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

CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

---> CRM is a business philosophy based on the premise that those organizations that understand the needs of individual customers are best positioned to achieve sustainable competitive advantage in the future.

---> A customer strategy starts with understanding who the company's customers are and how the company can meet strategic goals.

---> As the business world increasingly shifts from product focus to customer focus, most organizations recognize the treating existing customers well is the best source of profitable and sustainable revenue growth in the age of e-business, however, an organization is challenged more than ever before to truly satisfy its customers.

RECENTLY, FREQUENCY, AND MONETARY VALUE

=> An organization can find its most valuable customers by using a formula that industry insiders call RFM-recency, frequency, and monetary value. In other words, an organization must track:

~ How recently a customer purchased items (recently).

~ How frequently a customer purchases an item (frequently).

~ How much a customer spends on each purchase (monetary value).

THE EVOLUTION OF CRM

=> Knowing the customer, especially knowing the profitability of individual customers, is highly lucrative in the financial service industry.

=> There are three phases in the evolution of CRM:

1. CRM Reporting technology help organizations identify their customers across other applicants.

2. CRM Analysis technology helps organizations segment their customers into categories such as best and worst customers.

3. CRM Predicts technological help organizations make predictions regarding customer behavior such as which customers are at risk of leaving.

THE UGLY SIDE OF CRM: WHY CRM MATTERS MORE NOW THAN EVER BEFORE

Now companies have no choice as the power of the customer grows exponentially as the internet grows. In every case, customers have become an integral part of the action as a member of the aggregated, interactive, self-organizing, auto-entertaining audience on businesses. However, this should no be a surprise, since it was the customers crazy passion and hobbies and obsessions-that build up the web in the first place.

CUSTOMER RELATIONSHIP MANAGEMENT'S EXPLOSIVE GROWTH

When customers buy on Internet, they see, and they steer, entire value chains.

=> Customer web interaction become conversations, interactive dialogs with shared knowledge, not just business transaction. Web- based customer care can actually become the focal point of customer relationship management and provide breakthrough benefits for both the enterprise and its customers, substantially reducing costs while improving service.

=> Current users allow allocating 20 percent of their IT budget to CRM solutions.

USING ANALYTICAL CRM TO ENHANCE DECISIONS

The two components of a CRM strategy are:

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

=> Analytical CRM supports back-office operations and strategic analysis and includes all systems that do not deal directly with the customers.

The primary difference between operational CRM and analytical CRM in the direct interaction between the organization and its customers.

~>Personalization occurs when a website can know enough about a person's likes and dislikes that it can fashion offers that are more likely to appeal to that person. Many organizations are now utilizing CRM to create customer rules and templates that marketers can use to personalize customer messages.

CUSTOMER RELATIONSHIP MANAGEMENT SUCCESS FACTOR

~> CRM solutions make organizational business processes more intelligent. This is achieved by understanding customer behavior and preferences, then realigning product and service offering and related communications to make sure they are synchronized with customer needs and preferences. If an organization is implementing a CRM system, it should study the industry best practices to help ensure a successful implementation.

~> Using he analytical capabilities of CRM can help a company Anticipate customer need and proactively serve customers in way that build relationship, create loyalty, and enhance bottom lines.