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  • IT and IT-enabled Business Process Outsourcing ISM 6367 Prof. Mihir A. Parikh
  • Transcript

    • 1. ISM 6305 Information Resources Management IT and IT-enabled Business Process Outsourcing IT and IT-enabled Business Process Outsourcing
    • 2. Core IT Activities <ul><li>IT operations planning and management. </li></ul><ul><li>Anticipating new technologies. </li></ul><ul><ul><li>IT must keep an eye on emerging technologies. </li></ul></ul><ul><ul><li>Work closely with management to make appropriate decisions. </li></ul></ul><ul><ul><li>Weigh risks and benefits of new technologies. </li></ul></ul><ul><li>Strategic direction. </li></ul><ul><ul><li>IS can act as consultants to management. </li></ul></ul><ul><ul><li>Educate managers about current technologies/trends. </li></ul></ul><ul><li>Process innovation. </li></ul><ul><ul><li>Review business processes to innovate. </li></ul></ul><ul><ul><li>Survey best practices. </li></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 3. Core IT Activities (continued) <ul><li>Supplier management. </li></ul><ul><ul><li>Carefully manage outsourced IT. </li></ul></ul><ul><li>Architecture and standards. </li></ul><ul><ul><li>Be aware of incompatibilities. </li></ul></ul><ul><ul><li>Inconsistent data undermines integrity. </li></ul></ul><ul><li>Security </li></ul><ul><ul><li>Important to all general managers. </li></ul></ul><ul><ul><li>Much more than a technical problem. </li></ul></ul><ul><li>Business continuity planning </li></ul><ul><ul><li>Disaster recovery. </li></ul></ul><ul><ul><li>“What if” scenarios. </li></ul></ul><ul><li>Human resource management. </li></ul><ul><ul><li>Hiring, firing, training, outsourcing, etc. </li></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 4. IT Activity Categorization IT and IT-enabled Business Process Outsourcing
    • 5. Outsourcing <ul><li>IT Outsourcing </li></ul><ul><ul><li>Data network management; data center management; data entry; application hosting; software-as-a service (SaaS); etc. </li></ul></ul><ul><ul><li>IBM; EDS; TCS; Wipro; Infosys, etc. </li></ul></ul><ul><li>IT-enabled Business Process Outsourcing (BPO) </li></ul><ul><ul><li>Call center; medical transcripts; insurance claims processing; accounts reconciliation; content management </li></ul></ul><ul><ul><li>ADP; Convergys; GE Services; ICICI OneSource; HCL; Genpact; MphasiS, etc. </li></ul></ul><ul><li>IT-enabled Knowledge Process Outsourcing (KPO) </li></ul><ul><ul><li>High value addition; knowledge-intensive processes </li></ul></ul><ul><ul><li>Tax return preparation and audit; legal research; financial research; patents filling services; business intelligence services; technology R&D; animation design; gaming, etc. </li></ul></ul><ul><ul><ul><li>Accenture; Gartner; Evalueserve; IPPro; Scope; Corbus </li></ul></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 6. IT Outsourcing Services <ul><li>Level 1 – IT physical space (real estate) services </li></ul><ul><ul><li>Floor space and physical facility maintenance; specialized HVAC plant maintenance </li></ul></ul><ul><li>Level 2 – Network services </li></ul><ul><ul><li>Internal and external connectivity (local area networks and wide area networks); network management; firewall and other data security services </li></ul></ul><ul><li>Level 3 – Platform services </li></ul><ul><ul><li>Support for hardware and operating systems; reboot services; data backup and disaster recovery </li></ul></ul><ul><li>Level 4 – Application support services </li></ul><ul><ul><li>Application hosting and Web Services; application performance monitoring; application design and development </li></ul></ul><ul><li>Level 5 – Business operating services </li></ul><ul><ul><li>Administering and operating applications; Overall IT operations management </li></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 7. Drivers of IT and BP Outsourcing <ul><li>Cost savings </li></ul><ul><li>Strategic focus on core competences </li></ul><ul><li>Improve performance/ fix broken IT </li></ul><ul><li>Instant adoption of best practices </li></ul><ul><li>Access to IT resources </li></ul><ul><li>Access to technical staff and special skills </li></ul><ul><li>Transition to new technologies </li></ul><ul><li>Handle peak demands </li></ul><ul><li>Consolidation of IT services </li></ul><ul><li>Other financial reasons (cash flow; asset management; fixed to variable cost) </li></ul>IT and IT-enabled Business Process Outsourcing
    • 8. When to Outsource IT and IT-enabled Business Process Outsourcing Internal versus External IT Service Delivery
    • 9. When to Outsource IT and IT-enabled Business Process Outsourcing Uninterrupted service-oriented IRM (Factory) Outsourcing Presumption: Yes Support-oriented IRM Outsourcing Presumption: Yes Turnaround IRM Outsourcing Presumption: Mixed IRM = Information Resource Management Strategic IRM Outsourcing Presumption: Mixed Impact of IT on Core Strategy Impact of IT on Core Operations High Low High Low
    • 10. Support-Oriented IRM <ul><li>Impact on Core Strategy and Operations </li></ul><ul><ul><li>Low and Low, respectively </li></ul></ul><ul><li>Outsourcing presumption: YES </li></ul><ul><li>Reasons to consider outsourcing </li></ul><ul><ul><li>Access to higher IT professionalism </li></ul></ul><ul><ul><li>Ability to lay off a low-priority, problem-laden area to experts </li></ul></ul><ul><ul><li>Access to current IT skills </li></ul></ul><ul><ul><li>Better IT planning </li></ul></ul><ul><ul><li>Reduce the risk of inappropriate IT architecture/conform to industry practices </li></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 11. Uninterrupted Service-Oriented IRM <ul><li>Impact on Core Strategy and Operations </li></ul><ul><ul><li>Low and High, respectively </li></ul></ul><ul><li>Outsourcing presumption: YES </li></ul><ul><li>Reasons to consider outsourcing </li></ul><ul><ul><li>Economies of scale for SMEs </li></ul></ul><ul><ul><li>Higher quality of services and backup </li></ul></ul><ul><ul><li>Reduce IT risks </li></ul></ul><ul><ul><li>Facilitate management focus on core business </li></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 12. Turnaround IRM <ul><li>Impact on Core Strategy and Operations </li></ul><ul><ul><li>High and Low, respectively </li></ul></ul><ul><li>Outsourcing presumption: MIXED </li></ul><ul><li>Reasons to consider outsourcing </li></ul><ul><ul><li>Access to technologies and skills not available with the internal IT department </li></ul></ul><ul><ul><li>Instant improvement in IT performance </li></ul></ul><ul><ul><li>Transition to new technologies </li></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 13. Strategic IRM <ul><li>Impact on Core Strategy and Operations </li></ul><ul><ul><li>High and High, respectively </li></ul></ul><ul><li>Outsourcing presumption: MIXED </li></ul><ul><li>Reasons to consider outsourcing </li></ul><ul><ul><li>Rescue and out-of-control internal IT unit </li></ul></ul><ul><ul><li>Assure high level of IT reliability </li></ul></ul><ul><ul><li>Tap source of cash </li></ul></ul><ul><ul><li>Facilitate cost flexibility </li></ul></ul><ul><ul><li>Divestiture of management attention </li></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 14. Managing Outsourcing IT and IT-enabled Business Process Outsourcing Vendor Selection Outsourcing Contract Implementation Operations/ Relationship Evaluation Decision to Renew Decision to Outsource
    • 15. Structuring Offshoring IT and IT-enabled Business Process Outsourcing
    • 16. Structuring Offshoring IT and IT-enabled Business Process Outsourcing
    • 17. Structuring Offshoring IT and IT-enabled Business Process Outsourcing
    • 18. Offshoring Agreement <ul><li>Three types </li></ul><ul><ul><li>Third-party agreements </li></ul></ul><ul><ul><ul><li>Arms-length </li></ul></ul></ul><ul><ul><ul><li>Tight control </li></ul></ul></ul><ul><ul><li>Captive agreements </li></ul></ul><ul><ul><ul><li>Subsidiaries </li></ul></ul></ul><ul><ul><ul><li>Acquisitions </li></ul></ul></ul><ul><ul><li>Build-operate-transfer (BOT) agreement </li></ul></ul><ul><ul><ul><li>Reverse BOT </li></ul></ul></ul>IT and IT-enabled Business Process Outsourcing
    • 19. Legal Contractual Components <ul><li>Scope of service </li></ul><ul><li>Service level and fees </li></ul><ul><li>Managing service providers </li></ul><ul><li>Coordination of project activities </li></ul><ul><li>Intellectual property rights </li></ul><ul><li>Privacy and data protection </li></ul><ul><li>Non-compete and non-solicitation </li></ul><ul><li>Labor/HR issues </li></ul><ul><li>Representations, warranties, and indemnities </li></ul><ul><li>Disaster recovery, limited liabilities, and insurance </li></ul><ul><li>Termination and transition </li></ul><ul><li>Tax implications </li></ul><ul><li>Jurisdictions and arbitrations </li></ul>IT and IT-enabled Business Process Outsourcing
    • 20. Risks in Outsourcing <ul><li>Loss of control </li></ul><ul><li>High switching costs </li></ul><ul><li>Complex cost conversion (production costs versus coordination costs) </li></ul><ul><li>Vendor incompetencies/ instability/ stagnancy </li></ul><ul><li>Contract inflexibility </li></ul><ul><li>Knowledge loss </li></ul><ul><li>Over reliance on vendor </li></ul>IT and IT-enabled Business Process Outsourcing
    • 21. Avoiding Outsourcing Pitfalls <ul><li>Do not focus negotiation solely on price </li></ul><ul><li>Craft full life-cycle services contracts that occur in stated </li></ul><ul><li>Establish short-term supplier contracts </li></ul><ul><li>Use multiple, best-of-breed suppliers </li></ul><ul><li>Develop skills in contract management </li></ul><ul><li>Carefully evaluate your company’s own capabilities </li></ul>IT and IT-enabled Business Process Outsourcing
    • 22. Avoiding Outsourcing Pitfalls (continued) <ul><li>Thoroughly evaluate outsourcers’ capabilities </li></ul><ul><li>Choose an outsourcer whose capabilities complement yours </li></ul><ul><li>Base a choice on cultural fit as well as technical expertise </li></ul><ul><li>Determine whether a particular outsourcing relationship produces a net benefit for your company </li></ul><ul><li>Plan transition to offshoring </li></ul>IT and IT-enabled Business Process Outsourcing

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