CHAPTER 19: OUTSOURCING IN THE 21th CENTURY

CHAPTER 19: OUTSOURCING IN THE 21TH CENTURY

Outsourcing Projects

Insourcing (in-house-development) is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.

outsourcing is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.

onshore outsourcing is engaging another company within the same country for services.

nearshore outsourcing is contracting an outsourcing arrangement with a company in a nearby country.

offshore outsourcing is using organizations from developing countries to write code and develop systems.

Outsourcing Benefits

i) includes:

•      increased quality and efficiency
•       reduced operating expenses
•       outsourcing non-core process
•       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

ii) outsourcing challenges include:

 contract length

·                     difficulties in getting out of a contract

·                     problems in foreseeing future needs

·                     problems in reforming an internal IT department after the contract is finished

v  competitive edge

v  confidentiality

CHAPTER 15 : CREATING COLLABORATIVE PARTNERSHIPS

CHAPTER 15 : CREATING COLLABORATIVE PARTNERSHIPS

WEB 2.0: ADVANTAGES OF BUSINESS 2.0

The next generation of Internet use – more mature, distinctive communications platform characterized by new qualities such as collaboration, sharing and free. 

Business 2.0 encourages user participation and the formation of communities that contribute to the content.

CONTENT SHARING THROUGH OPEN SOURCING

Open system consist of nonproprietary hardware and software based on publicly known standards that allow third parties to create add-on-products to plug into or interoperate with the system. 
Source code contains instructions written by a programmer specifying the actions to be performed by computer software.
Open source refers to any software whose source code is made available free (not on a fee or licensing basis as in business) for any third party to review and modify.

USER-CONTRIBUTED CONTENT

User-contributed content is created and updated by many users for many users. Websites move control of online media from the hands of leaders to the hands of users. One of the most popular forms of user-generated content is a reputation system,where buyers post feedback on sellers.

COLLABORATION INSIDE THE ORGANIZATION

Collaboration system is a set of tools that supports the work of teams or groups by facilitating the sharing and flow of information. Business 2.0’s collaborative mind-set generates more information faster from a wider audience. Collective intelligence is collaborating and tapping into the core knowledge of all employees, partners, and customers. Knowledge can be real competitive advantage for an organization.Knowledge Management System (KMS) supports the capturing, organization and dissemination of knowledge throughout an organization. KMS can distribute an organization’s knowledge base by interconnecting people and digitally gathering the expertise.

Explicit and Tacit Knowledge

Explicit knowledge consists of anything that can be documented, archived, and codified, often with the help of IT. Examples of explicit knowledge are assets such as parents, trademarks, business plans, marketing research, and customer lists. Tacit knowledge is the knowledge contained in people’s heads. 

COLLABORATION OUTSIDE THE ORGANIZATION

Crowd sourcing, which refers to the wisdom of the crowd. The idea that collective intelligence is greater than the sum of its individual parts has been around for a long time. With Business 2.0 the ability to efficiently tap into its power is emerging.

NETWORKING COMMUNITIES WITH BUSINESS 2.0

Social media refers to websites that rely on user participation and user-contributed content such as Facebook, Youtube, and Digg. A social network is an application that connects people by matching profile information.. The first is the ability to create and maintain a profile that serves as an online identity within the environment. The second is the ability to create connections between other people within network.

Social Tagging

Describes the collaborative activity of marking shared online content with keywords or tags as a way to organize it for future navigation, filtering, or search. The entire user community is invited to tag, and thus essentially defines, the content. Folksonomy is similar to taxonomy except that crowd sourcing determines the tags or keyword-based classification system.

BUSINESS 2.0 TOOLS FOR COLLABORATING

Blogs

A blog, or web blog, is an online journal that allows users to post their own comments, graphics, and video. Unlike traditional HTML web pages, blog websites let writers communicate-and readers respond-on a regular basis through a simple yet customizable interface that does not require any programming. Blogs are no different from marketing channels such as video, print, audio, or presentations.

Microblogs

Microblogging is the practice of sending brief posts to a personal blog, either publicly or to a private group of subscribers who can read posts as IMs or a text messages. The main advantage of microblogging is that posts can be submitted by a variety of means, such as instant messaging, email, or the web.

Real Simple Syndication (RSS)

Is web format used to publish frequently updated works, such as blogs, news headlines, audio, and video, in a standardized format. An RSS document or feed includes full or summarized text, plus other information such as publication date and authorship.

Wikis

A wiki (the word is Hawaiian for quick) is a type of collaborative web page that allows users to add, remove and change content, which can be easily organized or reorganized as required. While blogs have largely drawn on the creative and personal goals of individual authors, wikis are based on open collaboration with any and everybody. Wikipedia, the open encyclopedia that launched in 2001, has become one of the most 10 most popular web destinations, reaching an estimated 217 million unique visitors a month. The network effect describes how products in an network increase in value to users as the number of users increases.

Mashups

A mashup is a website or web application that uses content from more than one source to create a completely new product or service. The term is typically used in the context of music. The web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries, and so on to create content with a new purpose. Content used in mashup is typically sourced from an application programming interface (API), which is a set of routines, protocols, and tools for building software applications. A programmer then puts these building blocks together.

THE CHALLENGES OF BUSINESS 2.0

Technology Dependence

These days, many people search the information through Internet. Without the Internet, they will find it is difficult to search the information.

Information Vandalism

Allowing anyone to edit anything opens the door for individuals to purposely damage, destroy, or vandalize website content.

Violations of Copyright and Plagiarism

A great deal of copyrighted material tends to find its ways to blogs and wikis where many times blame cannot be traced to a single person

CHAPTER 14 EBUSINESS

Biggest benefit of the internet: how it enables organizations to perform business with anyone, anywhere, anytime

Ecommerce- the buying and selling of goods and services over the internet.It refers only to online transactions.

Ebsuiness- derived from the term Ecommerce. It is the conducting of business on the internet, not only buying and selling, but also serving customers and collaborating with business partners. Also refers to online exchanges if information.

Ebusiness Models

·         Ebusiness Model- is an approach to conducting electronic business on the internet

-  Takes place between two major entities- business and consumers.

   Business-to-business (B2B)

· Applies to business buying from and selling to each other over the internet.
· Electronic marketplaces represent a new wave in B2B ebusiness models.
· Electronic marketplaces or emarketplaces- are interactive business communities providing a central market space where multiple buyers and sellers can engage in business activities.
- They represent structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels.

Business-to-business E market place Overview.
· Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers.
· Existing marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials.

Business-to-consumer (B2C)

· Applies to any business that sells its products or services to consumers over the internet.
Eshop
· Sometimes referred to as an estore or etailer. It is a version of a retail store where customers can shop at any hour of the day without leaving their home or office.
· These online stores sell and support a variety of products and services.
· The other online businesses channeling their goods and services via the internet only, such as Amazon.com, are called pure plays.

Types of Businesses:

·         Brick-and-mortar business- a business that operates in a physical store without an internet presence.

·         Pure-play (virtual) business- a business that operates on the internet only without a physical store. Examples include Amazon.com and Expedia.com

·         Click-and-mortar business- a business that operates in a physical store and on the internet. Examples include REI and Barnes and Noble.

Consumer-to-business (C2B)

· Applies to any consumer that sells a product or service to a business over the internet.
· An example is Priceline.com where bidders (or customers) ser their prices for items such as airline tickets or hotel rooms, and a seller decides whether to supply them.

Consumer-to-consumer (C2C)

·    Applies to sites primarily offering goods and services to assist consumers interacting with each other over the internet.

 The internet’s most successful C2C online auction website, eBay, links like-minded buyers and sellers for a small commission.

 C2C online communities, or virtual communities, interact via email groups, web-based discussion forums, or chat rooms.

Online auctions:

·         Electronic auction (eauction)- sellers and buyers solicit consecutive bids from each other and prices are determined dynamically.

·         Forward auction- an auction that sellers use as a selling channel to many buyers and the highest bid wins.

·         Reverse auction- an auction that buyers use to purchase a product or service, selecting the seller with the lowest bid.

C2C Communities:

·         Communities of interest- people interact with each other on specific topics, such as golfing and stamp collecting.

·         Communities of relations- people come together to share certain life experience, 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.

Ebusiness Benefits and Challenges.

Ebusiness Benefits:

·         Highly Accessible- businesses can operate 24 hours a day, 7 days a week, and 365 days a year.

·         Increased Customer Loyalty- additional channels to contact, respond to, and access customers helps contribute to customer loyalty.

·         Improved Information Content- in the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and web pages present customers with updated information in real time about goods, services, and prices.

·         Increased Convenience- Ebusiness automates and improves many of the activities that make up a buying experience.

·         Increased Global Reach- Business, both small and large, can reach new markets.

·         Decreased Cost- the cost of conducting business on the Internet is substantially less than traditional forms of business communication.

Ebusiness Challenges:

·         Protecting Consumers- consumers must be protected against unsolicited goods and communication, illegal or harmful goods, insufficient information about goods or their suppliers, invasion of privacy, and cyberfraud.

·         Leveraging Existing Systems- most companies already use information technology to conduct business in non-Internet environments, such as marketing, order management, billing, inventory, distribution, and customer service. The internet represents an alternative and complementary way to do business, but it is imperative that ebusiness systems integrate existing sytsems in a manner that avoids duplicating functionality and maintains usability, performance, and reliability.

·         Increasing Liability- Ebsuiness exposes suppliers to unknown liabilities because internet commerce law is vaguely defined and differs from country to country. The internet and its use in ebusiness have raised many ethical, social, and political issues, such as identity theft and information manipulation.

·         Providing Security- The internet provides universal access, but companies must protect their assets against accidental or malicious misuse. System security, however, must not create prohibitive complexity or reduce flexibility. Customer information also needs to be protected from internal and external misuse. Privacy systems should safeguard the personal information critical to building sites that satisfy customer and business needs. A serious deficiency arises from the use of the internet as a marketing means. Sixty percent of internet users do not trust the internet as a payment channel. Making purchases via the internet is considered unsafe by many. The issue affects both the business and the consumer. However, with encryption and the development of secure websites, security is becoming less of a constraint for ebusinesses.

·         Adhering to Taxation Rules- the internet is not yet subject to the same level of taxation as traditional businesses. While taxation should not discourage consumers from using electronic purchasing channels, it should not favor internet purchases over store purchases either. Instead, a tax policy should provide a level playing field for traditional retail businesses, mail-order companies, and internet-based merchants. The internet marketplace is rapidly expanding, yet it remains mostly free from traditional forms of taxation. In one recent study, uncollected state and local sales taxes from ebusiness were projected to exceed $60 billion in 2008.

Mashups

·         Web mashup- a website or web application that uses content from more than one source to create a completely new service.

·         The web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries and so on.

·         Application Programming Interface (API)- set of routines, protocols, and tools for building software applications. A good API makes it easier to develop a program by providing all the building blocks.

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.

ERP Integration Data Flow

 ERP Process Flow

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.

Organization before ERP


ERP- Bringing the Organization Together

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.

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, suchas 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 systemsTo 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

CHAPTER11 BUILDING A CUSTOMER-CENTRIC ORGANIZATION-CUSTOMER RELATIONSHIP MANAGEMENT

CHAPTER11

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. 

Chapter 10 Extending The Organization - Supply Chain Management

Supply Chain Management

- Companies that excel in supply chain operations perform better in almost every financial measure of success, according to a report from Boston-based MR Research Inc.

- These companies understand that value chain performance translates to productivity and market-share leadership.

Basics of Supply Chain

 A supply chain consists of all parties involved, directly or indirectly, in the procedurement of a product or raw material.

- Organization must embrace technologies that can effectively manage and oversee their supply chain.

supply chain management involves the management of information flow between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

Information Technology's Role in the Supply Chain

• The notion of virtually seamless information links within and between organizations is an essential element of integrated supply chain.
• Information technology's primary role in SCM is creating the integration or tight process and information linkages between functions within a firm.
• Considerable evidence shows that this type of supply chain integration results in superior supply chain capabilities and profits.

VISIBILITY

Supply chain visibility is the ability to view all areas up and down the supply chain.

Bullwhip effect occurs when distorted products demand information passes from one entity to the next through the supply chain.

*Information technology allows additional visibility in the supply chain.

CONSUMER BEHAVIOR

Demand planning software generates demand forecasts using statistical tools and forecasting techniques.

Ones an organization understand customer demand and its effect on the supply chain it can begging to estimate the impact that its supply chain will have on its customers and ultimately the organization's performance.

COMPETITION

Supply chain management can be broken down in"

Supply chain planning software: uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory. SCP depends entirely on information for its accuracy.

Supply chain executive (SCE) software automates the different stems and stages of the supply chain.

SPEED

During the past decade, competition has focused on speed. New forms of severs, telecommunications enabling companies to perform activities that were once never thought possible.

Another aspect of speed is the company's ability to satisfy continually changing customer requirements efficiently, accurately, and quickly.

Supply Chain Management Success Factors

To succeed in today's competitive markets, companies must align their supply chains with the demands of the markets key serve.

To achieve success such as reducing operation costs, improving asset productivity, and compressing order cycle time, and organization should follow the seven principles of SCM outlines.

One of the benefits is to know immediately what is being transacted at the customer and of the supply chain instead of waiting days or weeks for the information to flow.

Organizations should study industry best practices to improve their chances of successful implementation of SCM systems. The following are keys to SCM success.

MAKE THE SALE TO SUPPLIERS

The hardest part of any SCM system is its complexity because a large part of the system extends beyond the company's walls.

WEAN EMPLOYEES OF TRADITIONAL BUSINESS PRACTICES

Operations people typically deal with phone calls, faxes, and orders scrawled on paper and will most likely want to keep it that way.

ENSURE THE SCM SYSTEM SUPPORTS THE ORGANIZATIONAL GOALS

It is important to select SCM software that give organizations and advantage in the areas most crucial to their business success.

DEPLOY IN INCREMENTAL PHASES AND MEASURE AND COMMUNICATE SUCCESS

Design the deployment of the SCM system in incremental phases.

BE FUTURE ORIENTED

The supply chain design must anticipate the future state of the business.