Information systems-outsourcingasperp4459

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  • 1. Information Systems Outsourcing/ASP/ERP MIS 503 Management Information Systems MBA Program www.StudsPlanet.com
  • 2. Global Sourcing • The process of deciding where in the world a firm’s activities will be performed and who will perform the activities. – Fundamentally any activities that does not require direct customer contact, extensive local knowledge, or complex interactions can be sourced anywhere www.StudsPlanet.com
  • 3. Global Resourcing www.StudsPlanet.com
  • 4. Outshoring and Outsourcing www.StudsPlanet.com
  • 5. Definition of Outsourcing • IS outsourcing is the commissioning of part or all of the IS activities an organization needs, and/or transferring the associated human and other IS resources, to one or more external IS suppliers • IS Offshoring is the commissioning of part or all of the IS activities an organization needs to one or more other countries • IS Insourcing is the sourcing of a business function within the firm (e.g., Kingland Systems) www.StudsPlanet.com
  • 6. IS Outsourcing • Four Types of Outsourcing Relationships: Support Reliance Alignment Alliance www.StudsPlanet.com
  • 7. Outsourcing Grid Reliance Alliance Support Alignment Strategic Impact of IS Applications ExtentofSubstitutionbyVendors High High Low Low www.StudsPlanet.com
  • 8. Outsourcing Decision Variables • Relationships • Division Among Suppliers and Contracts • Management Structure • Operational Structure • Internal Organization of Outsourcing Coordination www.StudsPlanet.com
  • 9. Backward Vertical Disintegration • Car manufacturer purchasing pre- assembled engines instead of purchasing and assembling the component parts themselves • Decreasing the number of phases a firm performs by commissioning another entity within the production chain to perform those functions www.StudsPlanet.com
  • 10. Horizontal and Vertical Integration • Diversification - increasing the number of products and services • Differentiation - aka ‘disintegration’ - decreasing the number of subsequent phases in the production chain • Specialization - reducing the number of products and services • Integration - performing a larger number of phases in the production chain www.StudsPlanet.com
  • 11. What is ASP? • ASP- Application Service Provider – ASPs buy, install, and manage enterprise applications at remote data centers and host them for customers via a broadband connection, usually over the Internet. – User only purchases “use” of application not an installation license – User pays for “use” depending upon the specific arrangement with the ASP www.StudsPlanet.com
  • 12. ASPs Lee, Huynh, Kwok, and Pi, 2003 www.StudsPlanet.com
  • 13. App Provider Concerns • “The delivery model is only as strong as the service-level agreement for each component, they all have to work in harmony.” Jeff Anderson, Vice President Strategic Development, Sprint Business • Is there a need for 99.9999% uptime? • The cost of going from 99.5% to 99.9999% can be tremendous! www.StudsPlanet.com
  • 14. Determinants of Competitive Advantage Michael Porter • Threat of New Entrants • Intensity of Rivalry Among Direct Rivals Degree of Concentration Rate of Industry Growth Lack of Switching Costs • Pressure of Substitute Products • Bargaining Power of Buyers • Bargaining Power of Suppliers www.StudsPlanet.com
  • 15. Porter’s Competitive Forces Model: How the Internet Influences Industry Structure www.StudsPlanet.com
  • 16. Challenges Across Stages of Ecosytem Development Stage of Ecosystem Development Overall Leadership Challenges Cooperative Challenges Competitive Challenges Pioneering Value Cooperate with Customers/Suppliers to define and provide new value where none previously existed Protect your ideas form other who might be working toward defining similar offers Expansion Critical Mass Cooperate with Customers/Suppliers to increase supply and achieve market penetration Defeat alternative implemenations; ensure your approach as market standard Authority Lead Coevolution Create a vision of the future that encourages cooperation to improve the ecosystem Maintain strong bargaining power in relation to other in the ecosystem Renewal Continuous Performance Improvement Cooperate with innovators to bring new ideas to the existing ecosystem Maintain high entry barriers and switching costs to buy time to evolve your offers www.StudsPlanet.com
  • 17. What is ERP? • Continuation of MRP development • Connects legacy applications, critical business systems and custom applications within a single set of software modules. • Runs on client-server networks • Generally has multi-site management capabilities • Involves migrating from an internally developed & supported legacy system to commercially packaged systems www.StudsPlanet.com
  • 18. ERP Systems • Integration of all business areas of company -Manufacturing -Distribution -Human Resources -Finance www.StudsPlanet.com
  • 19. Functions of ERP • Product Planning • Purchasing • Inventory Management • Order Processing and Order Tracking • Customer Service • Financials • Human Resources • Supply Chain Management www.StudsPlanet.com
  • 20. Potential Benefits of ERP • Cost Savings • More Efficient Sharing of Information • Increased Customer Responsiveness • Supporting decision making through access to consolidated data/information • Transparency across the entire organization • Integration of all standard business process (human resources, financials, operation) www.StudsPlanet.com
  • 21. Potential Benefits of ERP: Cost Savings • Reduced Data Entry • Reduction of Process Duplication • Centralized Data Yields – Better Data Integrity – Lower Data Redundancy • System Training Synergy and Simplification www.StudsPlanet.com
  • 22. Potential Benefits of ERP: Information Sharing • Simultaneous information processing facilitates cycle time reductions • Streamlined Budgeting • Information Inventories Replace Physical Inventories www.StudsPlanet.com
  • 23. Potential Benefits of ERP: Customer Responsiveness • Integrated data provides more accurate and more timely information for customer queries • Problem resolution is expedited and service levels are increased www.StudsPlanet.com
  • 24. Potential Disadvantages of ERP • ERPs can be expensive to install and maintain • ERPs are occasionally too rigid and difficult to adapt to an organization’s workflow and business processes • ERPs can be difficult to use • ERPs are integrated systems, so a problem in one module or department will affect all the other users www.StudsPlanet.com
  • 25. ERP Implementation Requirements • Alignment with firm’s strategic plan • Top management support • Process re-engineering prior to software installation • Adequate employee training is needed • Needs to be developed as an “Enterprise-wide” solution • Abundant testing is needed prior to conversion www.StudsPlanet.com
  • 26. ERP Venders • Epicor • Exact Software • Lawson Software • Microsoft Business Division • NetSuite Inc. • Oracle Applications • The Sage Group • SAP • SSA Global Technologies • QAD www.StudsPlanet.com
  • 27. Quotes from the Field What was your firm’s primary objective in implementing an ERP system? • “Our major focus was on our total supply chain costs. We wanted to drive down the cost of our inventories and improve our customer service. It was our belief that an integrated information system could provide the functionality required to accomplish this goal.” Director Global Transportation, Amway Corporation www.StudsPlanet.com
  • 28. Quotes from the Field • What problems did you experience that you didn’t initially anticipate about the implementation? • “Our first objective was to standardize our processes, leverage that standardization and provide that global set of information across all modules. We wanted a fully integrated manufacturing, financial, as well as sales and marketing system. We phased in a full scope of modules, by location, over a 4 year period. This required complete replacement of legacy systems at each location over 6 to 9 months. We probably underestimated the need and effort required to ensure the cleanliness of data. The information driving your ERP system today demands accurate data from the start. Additionally, I don’t think we understood the scope of training, not only how to push the buttons, but how do I teach someone ERP and how to use it from start to finish. Moving people from a stand-alone task orientation to a fully integrated process orientation. The diversity of firm expertise in sites around the globe added to the complexity of this task.” VP - Information Systems, Molex Corporation www.StudsPlanet.com
  • 29. Quotes from the Field • What problems did you experience that you didn’t initially anticipate about the implementation? • “Some of the problems were getting around traditional ways of thinking versus complete supply chain . . . what I call ‘dust to dust’. The ERP system is a multifaceted, multifunctional system, so the people working with the system on a daily basis need to be multi- skilled to ensure their decisions and data input reflect a total supply chain perspective, in terms of both costs and functionality.” Director Global Transportation, Amway Corporation www.StudsPlanet.com
  • 30. Quotes from the Field • Are there benefits the ERP system provided that you didn’t expect? If so, what were they? • “We, like everyone, did not fully anticipate the explosion of e-commerce, but having a single system platform has substantially helped our ability to implement e-commerce applications. You have all your data in one spot, you have one set of interfaces to write, and you aren’t dealing with 20 different legacy systems. We think the ERP system will allow us to expand into the e- commerce area more quickly. Additionally, we have been able to create a quality notification system that gives us ability to see returns and problems from customers anywhere in the world. We have been able to centralize that within our customer service and field sales groups. Our ability to fully integrate that within our workflow has been much easier given our single system ERP application.” VP - Information Systems, Molex Corporation www.StudsPlanet.com
  • 31. Quotes from the Field • Are there benefits the ERP system provided that you didn’t expect? If so, what were they? • “The system allows us to make decisions quicker and to make better decisions. With customers being more demanding it was imperative that data we provide customers is accurate and our responses are fast. We are getting into a ‘click, click, and ship’ environment. It is no longer JIT, JIT just isn’t good enough. So in a ‘click, click, and ship’ environment if you don’t manage effectively and efficiently your inventory costs, your distribution costs, and your transportation costs will deteriorate your margins. So the ERP system allows us to make better short and long term decisions in supporting our customers.” Director Global Transportation, Amway Corporation www.StudsPlanet.com
  • 32. Quotes from the Field • What advice would you have for others contemplating an ERP implementation? • “You have to make sure what your business strategy is and then drive to that. I give our executives credit, they had a vision and they stuck with it in spite of some rough rides. ERP systems don’t provide everything, they are not a panacea. If we had to do it over we probably would have implemented some of the system’s data warehousing and reporting functionality earlier in the process. We eventually created a ‘site readiness’ review process that we should have implemented in the beginning. We also could have centralized the management and development of the system faster. Finally, management support and the dedication of the firm to provide adequate resources are both key to making an implementation successful.” VP - Information Systems, Molex Corporation www.StudsPlanet.com
  • 33. Quotes from the Field • What advice would you have for others contemplating an ERP implementation? • “All systems are great, but you still need people to perform the functions within the systems. The key is the people you have working with these systems. These people have to be multi-skilled and multi-talented in working with the entire supply chain. It’s just that simple.” Director Global Transportation, Amway Corporation www.StudsPlanet.com
  • 34. Future of ERP Systems • Integration of the entire supply chain • Integration of ERPs across multiple organizations • Wireless access • Real-time updates throughout the system • Outsourcing via ASPs www.StudsPlanet.com