KUMPULAN 2A CLOSER LOOK 13.4

& A CLOSER LOOK13.5

NAME : NAME : MATRIK NO MATRIK NO ::NOR MELISSA BT AZLAN NOR MELISSA BT AZLAN D20072030862D20072030862AZIZAH BT SADELIAZIZAH BT SADELI D20072030866D20072030866ZARINA BT SULEIMANZARINA BT SULEIMAND20072030867D20072030867NUR HIDAYATI BT ISMAILNUR HIDAYATI BT ISMAIL D20072031737D20072031737ROSE DIANI BT ZAINIROSE DIANI BT ZAINI D20072031738D20072031738

13.4 - Identifying High-Payoff 13.4 - Identifying High-Payoff Projects Projects

WFF (Wing Fat Foods) – wholesaler, delivering perishable and nonperishable foodstuffs as well as hardware, kitchenware and household to restaurants, groceries and similar business along the Atlantic Coast of the United States.

CSC MethodCSC MethodStep 1 Pre-study preparation : Determine scope and participants and

collect project idea stimuli. The analyst invited 25 IT users to participate in an in-depth

interview Collected project ideas to serve as stimuli.

Step 2 Participant interviews : Elicit personal constructs from

organization members. Conducted 25-50 minute interviews with each participant Showing the participant three system description Asking him or her to rank the system attributes and explain their

importance to the organization (a line of questions was asked until the

participant suggested a concrete feature or attribute) The analyst collect about 8 chains of suggestions per participant.

Step 3 Analysis : Aggregate personal constructs into CSC models

Clustered the interview statements into constructs and mapped it into a matrix.

Mapping each cluster into CSC map Represented the the construct as nodes and the links in the chains as

lines connecting the nodes.

Clustered the chains using the Ward and Peppard strategic planning framework.

The depicts an organization-specific CSC model consists : From left to right Descriptions of desired system attributes Resulting expected performance outcomes Associated organizational goals

Step 4 Idea workshops : Elicit feasible strategic IT from technical and

business experts and customers CSC maps were used by both IT professionals from within WFF and

non-IT customers as starting point for developing a portfolio of IT proposals.

Yield 14 project ideas including decision support system for scheduling, routing and loading trucks for delivery as well as the support activities for existing systems including training and updated equipement and maintenance support.

Resource Allocation Consists of developing the plans for hardware, software, data

communications and networks, facilities, personnel and financial – to execute the master development plan.

A contentious process in most organizations because opportunities and requests for spending far exceed the available funds – can lead to intense, highly political competition among organizational units.

Requests for funding approval from the steering committee fall into 2 categories :

1st category : consists of projects and infrastructure that are critical for the organization to stay in business. Example : it may imperative to purchase or upgrade hardware if the network or disk drives or the processor on the main computer are approaching capacity limits.

2nd category : consists of less-critical items such as new projects, maintenance or upgrades of existing systems and infrastructure to support systems and future needs.

Outsourcing, Offshore Outsourcing and IT Outsourcing, Offshore Outsourcing and IT as a Subsidyas a Subsidy Outsourcing is contracting work to be completed by an outside

vendor. The major reasons for outsourcing, cited by a survey of large

US companies are : Desire to focus on core competency (36%) Cost reduction (36%) Improve quality (13%) Increase speed to market (10%) Faster innovation (4%) CIOs are now focusing more on outsourcing to deliver business

value beyond the traditional areas of cost savings and operational efficiencies in response to increasingly dynamic environment.

Over 45% of the firms that expect to be involved in outsourcing reported applications development is likely to lead all other IT functions outsourced followed by applications maintenance (35%), telecommunications/LAN (33%) and PC maintenance (33%).

Since the late 1980s, many organizations have outsourced the majority of their IT functions rather than just incidental parts.

The trend became classic in 1989 when Eastman Kodak transferred its data centers to IBM under 10 year, $500 million contract.

Advantages and Advantages and DisadvantagesDisadvantages

Advantages Transactional outsourcing agreements – company outsources

discrete processes that have well-defined business rules, have a success rate of 90%.

Co-sourcing alliances – client company outsourcer vendor jointly manage projects such as application development or maintenance work, have a success rate of 63%.

Strategic partnerships – a single outsourcer takes responsibility for the majority of a client company’s IT services, has a success rate of about 50%.

Potential outsourcing benefits : Financial

Avoidance of heavy capital investment, thereby releasing funds for other uses.

Improved cash flow and cost accountability Improved cost benefits from economies of scale and from sharing

computer housing, hardware, software and personnel.

Less need for expensive office space. Reduction and control of operating costs. Technical Access to new information technologies Greater freedom to choose software due to a wider range of hardware Ability to achieve technological improvements more easily Greater access to technical skills not available internally Faster application development and placement of IT applications into

service. Management Concentration on developing and running core business activity.

Improved company focus. Delegation of IT development (design, production and acquisition) and

operational responsibility to suppliers Elimination of need to recruit and retain competent IT staff Reduced risk of bad software. Human Resources Opportunity to draw on specialist skills available from a pool of expertise

when needed. Enriched career development and opportunities for remaining

staff.

Quality Clearly defined service levels Improved performance accountability Improved quality accreditation Flexibility Quick response to business demands (agility) Ability to handle IT peaks and valleys more effectively (flexibility).

Disadvantages shirking occurs when a vendor deliberately underperforms while

claiming

full payment. poaching occurs when a vendor develops a strategic application for a

client and then uses it for other clients. opportunistic repricing (“”holdup”) occurs when a client enters into a

long

term contract with a vendor and the vendor changes financial terms at

some point or over-charges for unanticipated enhancements and contract

extensions.

Irreversibility of the outsourcing decision possible breach of contract by the vendor or its inability to deliver Loss of control over IT decisions Loss of critical IT skills Vendor lock-in Loss of control over data Loss of employee morale and productivity Uncontrollable contract growth Failure to consider all of costs

In making a decision to outsource, executives should In making a decision to outsource, executives should consider 5 major risk areas :consider 5 major risk areas :

i.i. Higher developmental or operational costs than anticipatedHigher developmental or operational costs than anticipated

ii.ii. Inability to provide the expected service levels at Inability to provide the expected service levels at implementationimplementation

iii.iii. Exceeding the time to continueExceeding the time to continue

iv.iv. Neglecting to navigate the internal politics of the Neglecting to navigate the internal politics of the outsourcing companyoutsourcing company

Strategies For Strategies For OutsourcingOutsourcing

There have 6 Strategies :There have 6 Strategies :

1. Understand the project•have a high degree of understanding of the project.

2. Divide and conquer•Dividing a large project into smaller and more manageable pieces.

3. Align incentives•Designing contractual incentives based on activities that can be measured accurately can result in achieving desired performance.

4. Write short-period contracts• Contract may be written for 5-10 year terms.

5. Control subcontracting• Vendors may subcontract some of the services to other

vendors.

6. Do selective outsourcing• Cramm (2001) suggests than an organization insource

important work, such as strategic applications, investments and HRM.

Continue…Continue…

Is outsourcing with a vendor located in a country other than the one in which the client company is based.

This trend is primarily due to :

i) global markets

ii) lower cost

iii) increased access to skilled labor

Aspray (2006)

Worldwide : Regional divisions of labor

India – US

Eastern Europe, Russia – Western Europe

China – Asia Pacific, Japan

Offshore OutsourcingOffshore Outsourcing

Outsourcing can be done in many countries with various outsourcers.

Factor : cost, technical capabilities, business and political environment, quality infrastructure, risk

About one-third of Fortune 500 companies outsource software development to software companies in India.

It can reduce IT expenditures by 15% - 25% within the first year and in long term, outsourcing can help reduce cost and improve the quality of IT services delivered. (Davison, 2004)

Continue…Continue…

However, organizations must balance the risks and fears involved in offshore outsourcing including :

• Cost-reduction expectations• Data/security and protection• Process discipline which is the use of the same process

repeatedly without innovation• Loss of business knowledge• Vendor failure to deliver• Scope creep, which is the request for additional services

not included in the outsourcing agreement• Government oversight/regulation• Differences in culture• Knowledge transfer

Continue…Continue…

Based on cased study, the types of work that are not readily offshore outsourced including :

• Work that has not been routinized

• Work that if offshored would result in the client company losing too much control over critical operations

• Situations in which offshoring would place the client company at too great a risk to its data security, data privacy or intellectual property and proprietary information

• Business activities that rely on an uncommon combination of specific application-domain knowledge and IT knowledge in order to do the work properly.

Continue…Continue…

Evaluating Evaluating OutsourcingOutsourcing

In a survey of senior IT managers in the US and Europe, undertaken by IDG Research Services, the majority rated their ability to measure the business value of outsourcing relationships as “fair” or “poor”.

For outsourcing, the balance scorecard (described in section 13.3 and table 13.6) can be applied to assess value creation in the outsourcing relationship.

Software applications such as dashboard for tracking specific measures can provide metrics.

The balance scorecard can also be used to provide periodic feedback of the value of the outsourcing agreement.