Information systems-outsourcingasperp4459
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This document discusses concepts related to global sourcing, outsourcing, ASPs, and ERP systems. It defines key terms, explores different types of outsourcing relationships and the determinants of competitive advantage. Porter's five forces model and Moore's business ecosystem concept are examined. The functions and potential benefits of ERP systems are outlined, along with implementation requirements and challenges. Quotes from industry experts provide real-world perspectives on ERP objectives, problems experienced, and advice for others implementing ERP.
Information systems-outsourcingasperp4459
- 1. Information Systems Outsourcing/ASP/ERP MIS 503 Management Information Systems MBA Program
- 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
- 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)
- 6. IS Outsourcing • Four Types of Outsourcing Relationships: Support Reliance Alignment Alliance
- 7. Extent of Substitution by Vendors Outsourcing Grid High Reliance Alliance Support Alignment Low Low High Strategic Impact of IS Applications
- 8. Outsourcing Decision Variables • Relationships • Division Among Suppliers and Contracts • Management Structure • Operational Structure • Internal Organization of Outsourcing Coordination
- 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
- 10. Horizontal and Vertical Integration • Diversification - • Specialization - increasing the reducing the number number of products of products and and services services • Differentiation - • Integration - aka ‘disintegration’ - performing a larger decreasing the number of phases in number of the production chain subsequent phases in the production chain
- 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
- 12. ASPs Lee, Huynh, Kwok, and Pi, 2003
- 13. ASPs Necessary Changes • Enable existing client/server apps with multiuser display technology • Web-enabled applications, adding browser access • Rewrite applications specifically for a rental or ASP model using OO technology • Add business-to-business technology such as XML, Enterprise Javabeans
- 14. 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!
- 15. 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
- 16. Porter’s Competitive Forces Model: How the Internet Influences Industry Structure
- 17. “The Death of Competition” James F. Moore • “Business Ecosystem. An economic community supported by a foundation of interacting organizations and individuals. • The economic community produces goods and services of value to customers, who are themselves members of the ecosystem.” • “Members include suppliers, competitors, and other stakeholders.”
- 18. “The Death of Competition” James F. Moore “Over time, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles.”
- 19. Scope of Strategic Scope of Strategic Management Core Products and Services Extended Enterprise Coevolving Ecosystem Management Concept of Business A Portfolio of Transactional Managed system of Coevolving, symbiotic, Relationships and Long-term preferred relationships self-reinforcing system of customer and Supplier strategic contributions Relationships Measurement of Products and Processes Organizational Investment in innovation Improvement interactions, extended by members of the processes community Focus of Continual Reduction in product defects; Rate of progress on Rate of progress on Improvement reduction in product improving products creating end-to-end total deviations and processes experiences of dramatic value Most Important Contracts Product specs, process specs, Letters of agreement Community governance Governing the Relationship TQM standards among key systems, quasi-democratic organizations mechanisms Alignment of the Intentions Alignment on the importance Alignment of the Alignment of the of Key Parties of consistency of parties strategic community around a customer/supplier direction and shared vision of a desired satisfaction and performance investments future, and the road map and key contributions required
- 20. Challenges Across Stages of Ecosytem Development Stage of Overall Cooperative Challenges Competitive Challenges Ecosystem Leadership Development Challenges Pioneering Value Cooperate with Protect your ideas form Customers/Suppliers to other who might be define and provide new working toward defining value where none similar offers previously existed Expansion Critical Mass Cooperate with Defeat alternative Customers/Suppliers to implemenations; ensure increase supply and achieve your approach as market market penetration standard Authority Lead Create a vision of the future Maintain strong bargaining Coevolution that encourages cooperation power in relation to other in to improve the ecosystem the ecosystem Renewal Continuous Cooperate with innovators Maintain high entry barriers Performance to bring new ideas to the and switching costs to buy Improvement existing ecosystem time to evolve your offers
- 21. 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
- 22. ERP Systems • Integration of all business areas of company -Manufacturing -Distribution -Human Resources -Finance
- 23. Functions of ERP • Product Planning • Purchasing • Inventory Management • Order Processing and Order Tracking • Customer Service • Financials • Human Resources • Supply Chain Management
- 24. 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)
- 25. 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
- 26. Potential Benefits of ERP: Information Sharing • Simultaneous information processing facilitates cycle time reductions • Streamlined Budgeting • Information Inventories Replace Physical Inventories
- 27. 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
- 28. 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
- 29. 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
- 30. ERP Venders • Epicor • Exact Software • Lawson Software • Microsoft Business Division • NetSuite Inc. • Oracle Applications • The Sage Group • SAP • SSA Global Technologies • QAD
- 31. 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
- 32. 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
- 33. 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
- 34. 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
- 35. 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
- 36. 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
- 37. 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
- 38. 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
Editor's Notes
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