BIS10 Service Delivery

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Course Materials for MBA course on Business Information Systems

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  • So why this workshop. Well,m for one reason the world needs service innovations like never before. In the US alone, the last two hundred years have seen an almost complete reversal in agriculture and services – with manufacturing peaking around WW II. And quickly looking at the top ten nations by size of labor force we see they are just time delayed versions of the US economy. Interestingly, Adam Smith and Karl Marx both agreed one thing – services were a parasite on the rest of the economy. Nevertheless the rise of the information economy and the rise of the service economy have come hand and hand… and so now we ask, since we need service innovations, do we need a service science. I will argue, yes. If we are to understand the connection between innovation and productivity, we need a service science. Innovation is more than technology, it can be business model innovation, organizational culture innovation, process innovation ,and even demand innovation. All of these types of innovation can drive productivity, and a service science, properly defined, will shed light on the causal connection of innovation to productivity. Why service science? Growing dominance of all world economies. Service science may ultimately be about understanding how to boost human-technology productivity via four types of innovation. Source: http://www.nationmaster.com OECD reports
  • BIS10 Service Delivery

    1. 1. Business Information Systems Service Management Prithwis Mukerjee, Ph.D.
    2. 2. The Importance of Services Top Ten Nations by Labor Force Size (about 50% of world labor in just 10 nations) A = Agriculture, G = Goods, S = Services 2004 2004 United States . Ref : Emergence of Service Science : James Spohrer Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things. Agriculture: Value from harvesting nature Goods: Value from making products 44 64 33 3 1.4 Germany 30 26 11 63 2.2 Bangladesh 30 20 10 70 2.2 Nigeria 40 70 25 5 2.4 Japan 38 65 23 12 2.5 Russia 20 53 24 23 3.0 Brazil 35 39 16 45 3.9 Indonesia 21 70 27 3 4.8 U.S. 28 23 17 60 17.0 India 191 35 15 50 21.0 China 25 yr % delta S % S % G % A % WW Labor Nation
    3. 3. Services Marketing : A new paradigm ? <ul><li>Services—broadly defined as acts, deeds, performances, or efforts—have different characteristics from goods—defined as articles, devices, materials, objects or thingss </li></ul><ul><li>These characteristics pose an array of vexing marketing problems not faced by goods marketers (many citations) </li></ul><ul><li>Developing marketing strategies to address these problems based on knowledge accumulated from goods marketing is often insufficient and even inappropriate </li></ul><ul><li>A new paradigm began to emerge: Services are different from goods </li></ul>
    4. 4. Outsourcing : The Boom in Services Procurement Perform sales Production Customer service Perform Marketing Manage logistics Develop products Supplier network Customer network I T Services
    5. 5. Information Systems Engineering Software Services Prithwis Mukerjee, Ph.D.
    6. 6. In search of customer satisfaction <ul><li>Too many things to juggle </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Timeliness </li></ul></ul><ul><ul><li>Budget </li></ul></ul><ul><ul><li>Fit for use </li></ul></ul><ul><ul><li>Value </li></ul></ul><ul><ul><li>confusion </li></ul></ul>
    7. 7. Conflict of perceptions … <ul><li>Customer wants </li></ul><ul><ul><li>Bare minimum value of services to be </li></ul></ul><ul><ul><ul><li>Delivered at fair cost and </li></ul></ul></ul><ul><ul><ul><li>In reasonable time frame </li></ul></ul></ul><ul><li>Service Provider believes </li></ul><ul><ul><li>That he is delivering a vast array of services </li></ul></ul><ul><ul><li>At an economic point where </li></ul></ul><ul><ul><ul><li>Prices are low </li></ul></ul></ul><ul><ul><ul><li>Costs are high </li></ul></ul></ul>Provider Perception Customer Perception Value Money Price / value Price / value  Signing of contract
    8. 8. Conflict of perceptions … <ul><li>Customer wants </li></ul><ul><ul><li>Bare minimum value of services to be </li></ul></ul><ul><ul><ul><li>Delivered at fair cost and </li></ul></ul></ul><ul><ul><ul><li>In reasonable time frame </li></ul></ul></ul><ul><li>Service Provider believes </li></ul><ul><ul><li>That he is delivering a vast array of services </li></ul></ul><ul><ul><li>At an economic point where </li></ul></ul><ul><ul><ul><li>Prices are low </li></ul></ul></ul><ul><ul><ul><li>Costs are high </li></ul></ul></ul>Provider Perception Customer Perception Value Money Value rec’d Value del’vd Cheated !! Exploited !! Price paid Price rec’d  At & After delivery
    9. 9. Defining Satisfaction <ul><li>Satisfaction </li></ul><ul><ul><li>Is the product of two factors </li></ul></ul><ul><ul><ul><li>Fitment of the product vis-à-vis their real or perceived benefit </li></ul></ul></ul><ul><ul><ul><li>Quality of service in terms of meeting the service level agreements </li></ul></ul></ul><ul><ul><li>Requirements </li></ul></ul><ul><ul><ul><li>Are inherently fuzzy </li></ul></ul></ul><ul><ul><ul><li>Users “may not know what they want” </li></ul></ul></ul><ul><ul><li>Service Level Agreements </li></ul></ul><ul><ul><ul><li>Timeliness of delivery </li></ul></ul></ul><ul><ul><ul><li>Number of errors detected OR quantum of rework required </li></ul></ul></ul>Value Money Utility X Quality Price = <ul><li>Quality expressed as SLA on </li></ul><ul><li>defects </li></ul><ul><li>schedule </li></ul><ul><li>Functionality </li></ul><ul><li>Relevance </li></ul><ul><li>Importance </li></ul><ul><li>etc </li></ul>
    10. 10. Utility <ul><li>Utility is a “broad” word </li></ul><ul><ul><li>Utility, like beauty, is in the eye of the beholder </li></ul></ul><ul><li>Utility can be decomposed into a set of features that need to be supported </li></ul><ul><ul><ul><li>Ability to Add / View / Modify / Delete a record : customer, product, whatever </li></ul></ul></ul><ul><ul><ul><li>Do far more complex activities like compare, trigger … </li></ul></ul></ul><ul><ul><li>Any feature can be represented as a deliverable component </li></ul></ul><ul><ul><li>Any feature can be supported but with effort </li></ul></ul><ul><ul><li>Effort is associated with a cost and hence price ! </li></ul></ul>Utility Price = Utility Component X Component Effort X Effort Price To be Increased To be Decreased
    11. 11. Utility & Features : the beneficial impact <ul><li>From Intangibles to Tangibles </li></ul><ul><li>Utility is sometimes intangible </li></ul><ul><li>Components are generally more tangible </li></ul><ul><li>Utility </li></ul><ul><ul><li>What does a client really need ? </li></ul></ul><ul><ul><li>Does he know what he needs ? </li></ul></ul><ul><ul><li>What if he is not sure ? </li></ul></ul><ul><ul><li>Is there a quantifiable definition of utility ? </li></ul></ul><ul><ul><ul><li>MOST LIKELY NOT </li></ul></ul></ul><ul><li>Components </li></ul><ul><ul><li>Do we have sufficient clarity in terms of what the component is supposed to do ? </li></ul></ul>Utility Component
    12. 12. Utility Low High Low High Clarity of Utility Beneficial Impact of Incremental Effort Save a life Implementation of an Immunization program Order Tracking system HR welfare system Advertising Programme Community Welfare Programme Utility Component Effort Price
    13. 13. Components Low High Low High Clarity of Features / Specs / Components Beneficial Impact of Incremental Effort Custom Development New Product Development Zero error program Create a work of Fine Art Smart Algorithm ERP Package Implementation “ User Friendly” system Utility Component Effort Price
    14. 14. Service Level Agreements <ul><li>Quality can be expressed in terms of service levels </li></ul><ul><li>There are many kinds of service levels </li></ul><ul><ul><li>Number of bugs in the code, number of defects in the service </li></ul></ul><ul><ul><li>Time required to deliver the service </li></ul></ul><ul><ul><ul><li>The initial product / service </li></ul></ul></ul><ul><ul><ul><li>Subsequent bug fixes </li></ul></ul></ul><ul><ul><li>Time required to respond to a request </li></ul></ul><ul><li>Service levels can in general be met with additional effort </li></ul><ul><li>Effort is associated with a cost and price. </li></ul>Q’SLA Price = Q’SLA Effort X Effort Price
    15. 15. Big Picture Utility Component X Component Effort X Q’SLA Effort X Effort Price Value Money Utility X Quality Price = = Contract Efficiency Process Efficiency Real Fuzzy Bit
    16. 16. Process Efficiency <ul><li>How to reduce effort ? </li></ul><ul><ul><li>Better skills </li></ul></ul><ul><ul><li>Sharing scarce skils </li></ul></ul><ul><li>What if you don’t have the right kind of skills ? </li></ul><ul><ul><li>Better processes </li></ul></ul><ul><ul><li>Better governance </li></ul></ul><ul><li>Quality Processes </li></ul>Q’SLA Effort Component Effort
    17. 17. Methodology Functional Specification Program Review Checklist Complexity Determination / Estimate Technical Specification Test Support Unit Test Plan Program Source Code Code Bundle / Demo Unit Test Results Support (optional) Pre-Production Support Remote Team Review  Client Review  Client Review Remote Team(s) Landed Team Functional Design Estimate Technical Design Deliver Test Support Develop Methodology Component  Communication & Coordination (all teams)  Technical Design Walkthrough  Code Review  Client Sign Off  Legend Task With Deliverable Task Without Deliverable Optional Service Area Process Checkpoint
    18. 18. Processes – SEI CMMi Level 5 Standards <ul><li>Level 3 - Defined </li></ul><ul><ul><li>Processes in place and understood by all </li></ul></ul><ul><li>Level 4 - Managed </li></ul><ul><ul><li>Processes under measurement & control </li></ul></ul><ul><li>Level 5 - Optimising </li></ul><ul><ul><li>Processed under measurable improvement </li></ul></ul>
    19. 19. Contract Efficiency <ul><li>Effort (orCost ) is a fact but Price is determined by the market </li></ul><ul><li>Fixed Price </li></ul><ul><ul><li>Most beneficial for the client as he is assured of a cap on his exposure </li></ul></ul><ul><ul><li>Not so beneficial when service provider is unable to deliver the service because of cost over-runs. </li></ul></ul><ul><ul><ul><li>Penalties are fine but the overall objective was NOT to collect penalties </li></ul></ul></ul><ul><li>Time & Material </li></ul><ul><ul><li>Most beneficial for the service provider as his exposure is limited </li></ul></ul><ul><ul><li>Client will have to pay for the inefficiency and faulty analysis techniques </li></ul></ul><ul><li>Is there a middle way ? </li></ul>Effort Price Effort Effort X Rate
    20. 20. Nature of Services <ul><li>Development Project </li></ul><ul><ul><li>Implementation of certain services </li></ul></ul><ul><ul><ul><li>System development </li></ul></ul></ul><ul><ul><ul><li>System upgrade </li></ul></ul></ul><ul><ul><li>Short(er) duration </li></ul></ul><ul><ul><ul><li>6 – 24 months </li></ul></ul></ul><ul><ul><li>Higher degree of uncertainty </li></ul></ul><ul><ul><ul><li>Dependence on other factors </li></ul></ul></ul><ul><ul><ul><li>Dependence on other system </li></ul></ul></ul><ul><ul><li>More demand on flexibility </li></ul></ul><ul><ul><li>SLA’s are in terms of </li></ul></ul><ul><ul><ul><li>Number of errors </li></ul></ul></ul><ul><ul><ul><li>Time schedule of completion </li></ul></ul></ul><ul><li>Maintenance Project </li></ul><ul><ul><li>Support of certain applications </li></ul></ul><ul><ul><ul><li>Bug fixes </li></ul></ul></ul><ul><ul><ul><li>Enhancements to meet business needs </li></ul></ul></ul><ul><ul><li>Longer duration </li></ul></ul><ul><ul><ul><li>3 – 5 years, extending to 10 years </li></ul></ul></ul><ul><ul><li>More predictable in terms </li></ul></ul><ul><ul><ul><li>People requirements </li></ul></ul></ul><ul><ul><ul><li>Time schedules </li></ul></ul></ul><ul><ul><li>SLA’s in terms of </li></ul></ul><ul><ul><ul><li>Turnaround on multiple small transactions </li></ul></ul></ul>
    21. 21. Pricing Strategy <ul><li>Two stage-pricing strategy </li></ul><ul><ul><li>Fixed Price for analysis and design </li></ul></ul><ul><ul><li>Fixed price for development and deployment determined AFTER the first stage </li></ul></ul><ul><li>Quasi – Flexible Pricing Strategy </li></ul><ul><ul><li>Unit cost for labour </li></ul></ul><ul><ul><li>Determine number of components </li></ul></ul><ul><ul><li>Share effort for each component with client and get agreement on overall effort </li></ul></ul><ul><ul><li>Fixed price based on this effort </li></ul></ul><ul><ul><li>Significant scope change after design phase would be paid for at time and material rates </li></ul></ul>
    22. 22. Contract Negotiations <ul><li>Ethics and Honesty </li></ul><ul><li>Soft Skills </li></ul><ul><li>Creativity </li></ul><ul><li>Contract should be fair to customer and service provider </li></ul><ul><ul><li>Contracts should be fair to both parties otherwise project will never succeed </li></ul></ul><ul><ul><li>New, gullible customers can be initially fooled by ‘escape’ clauses but does not work in the long run. </li></ul></ul><ul><ul><li>Many contracts are too biased towards customer and allow scope of significant corruption </li></ul></ul><ul><li>Two Stage Contracts </li></ul><ul><ul><li>Master Services Agreement : focusing on the various legal aspects </li></ul></ul><ul><ul><li>Appendices that are more technical and focus on actual project requirements, deliverables, timelines and cost </li></ul></ul>Master Services Agreement Appendix - I Appendix - II
    23. 23. Structure of the Contract <ul><li>Master Services Agreement </li></ul><ul><ul><li>Definition of Terms </li></ul></ul><ul><ul><li>Services to be performed </li></ul></ul><ul><ul><li>Compensation, taxes etc </li></ul></ul><ul><ul><li>Warranties </li></ul></ul><ul><ul><li>Indemnities </li></ul></ul><ul><ul><li>Limitation of liability </li></ul></ul><ul><ul><li>Ownership of Intellectual property </li></ul></ul><ul><ul><li>Confidentiality </li></ul></ul><ul><ul><li>Deliverables and Time Schedule </li></ul></ul><ul><ul><li>Scope Change Management </li></ul></ul><ul><ul><li>Force Majeure </li></ul></ul><ul><ul><li>Suspension & Termination of Project </li></ul></ul><ul><ul><li>Arbitration </li></ul></ul><ul><ul><li>General Provisions </li></ul></ul><ul><ul><li>Binding Nature of Agreement </li></ul></ul><ul><ul><li>Choice of Law </li></ul></ul><ul><ul><li>Designated Contact Points </li></ul></ul><ul><li>Appendices / SOW </li></ul><ul><ul><li>Overwiew </li></ul></ul><ul><ul><li>Scope of Work </li></ul></ul><ul><ul><ul><li>Components of the solution </li></ul></ul></ul><ul><ul><ul><li>… </li></ul></ul></ul><ul><ul><li>Methodology to be used </li></ul></ul><ul><ul><li>Deliverables </li></ul></ul><ul><ul><li>Work Plan / Schedule </li></ul></ul><ul><ul><li>Cost / Price </li></ul></ul><ul><ul><ul><li>Fixed Part </li></ul></ul></ul><ul><ul><ul><li>Variable Part ( if any ) </li></ul></ul></ul><ul><ul><ul><li>Payment Milestones </li></ul></ul></ul><ul><ul><ul><li>Out of pocket Expenses </li></ul></ul></ul><ul><ul><li>Project Specific Assumptions </li></ul></ul><ul><ul><ul><li>Exclusions </li></ul></ul></ul>
    24. 24. To Sum Up …. <ul><li>Requirements </li></ul><ul><ul><li>Need to be defined, articulated </li></ul></ul><ul><ul><li>Value and utility has to be defined </li></ul></ul><ul><li>Process Efficiency </li></ul><ul><ul><li>Is the key to striking a balance between </li></ul></ul><ul><ul><ul><li>Client Satisfaction </li></ul></ul></ul><ul><ul><ul><li>Vendor Profitability </li></ul></ul></ul><ul><li>Pricing Strategy </li></ul><ul><ul><li>Has to be such that it is fair to both parties and is seen to be fair to both sides as well </li></ul></ul><ul><li>Client Satisfaction </li></ul><ul><ul><li>Can be only achieved if we can demonstrate value for money </li></ul></ul>Utility Component Q’SLA Effort Component Effort Effort Price Value Money
    25. 25. The Devil is in the Detail <ul><li>Process Efficiency </li></ul><ul><ul><li>Development Projects </li></ul></ul><ul><ul><li>Maintenance Projects </li></ul></ul><ul><ul><li>Project Governance Models </li></ul></ul><ul><li>Contract Efficiency </li></ul><ul><ul><li>Market Drivers </li></ul></ul><ul><ul><li>Estimation Techniques </li></ul></ul><ul><ul><li>Creative Contracting </li></ul></ul>
    26. 26. Thank You

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