MIS Organization

1
MIS Organization

• Define CKO, CIODiscuss the functions
  typically performed in the IS organizationDiscuss
  the advantages, disadvantages and
  characteristics of centralized, decentralized,
  and federalist organizational structuresDiscuss
  the reasons for outsourcingDiscuss disadvantages
  of outsourcingDiscuss conditions when
  outsourcing is appropriateDiscuss structuring
  and managing the outsourcing arrangement

2
Centralization Advantages Disadvantages

• PROS
• Global standards
• Common data
• One voice with suppliers
• Economies of scale
• Access to large capacity
• Better recruitment of IT personnel

• CONS
• Technology may not meet local needs
• Lack of business unit control
• Us vs. They
• Slow support for strategic initiatives

3
Decentralization Advantages Disadvantages

• ADVANTAGES
• Better meet local needs
• Closer partnership between IT and business units
• Greater flexibility
• Better match with decentralized enterprise
  structure
• Better unit control over overhead costs

• DISADVANTAGES
• Difficulty in maintaining global standards
  consistent data
• Higher infrastructure costs
• Loss of control
• Duplication of staff data
• Harder to negotiate preferential supplier
  agreements

4
Federalism

• Hybrid approach
• Amalgamation of decentralized and centralized
  approaches
• May help gain strategic control and synergy

5
Outsourcing

• The purchase of a good or service that was
  previously provided internally
• Farm out data center operations (facilities
  management)
• Farm out tasks and services
• Farm out systems development
• May transfer IS function to vendor

6
Our Survey

• Companies written up in trade press for having
  signed outsourcing agreements (1988 - 1993)
• Telephone interviews
• 34 of 129 companies participated
• 30 financial institutions
• 25 private vs. 9 public
• Provided broad range of services

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Goals Determinants of Outsourcing Success

• Core vs. commodity
• Partner vs. vendor
• Tight vs. loose contract
• Success Economic, Technical, Strategic, Overall
  Satisfaction with Contract

8
Findings Primary Reasons for Outsourcing

• Technological considerations (8)
• Cost Savings (6)
• Strategic considerations (infrastructure building
  - quickly) (5)
• Human resource considerations (3)
• Mandated by central office/Acquired by another
  company (3)
• Consolidate Data Centers (2)
• Efficiency (1)
• Cash Infusion (1)

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Findings Other

• Need tight contracts
• May be successful for core functions especially
  if linked to tight contract
• Can have successful partnerships

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Saving Provider Advantages

• Tighter overhead cost control
• More aggressive use of low-cost labor pools
• More effective bulk purchases and leasing
  arrangements
• Better management of excess hardware capacity
• Better control over software licenses
• Hustle (Staying alive)
• Creative and more realistic structuring of leases
• Leaner management structure because of increased
  competence and critical mass volumes of work

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Outsourcing Disadvantages

• Reliance on vendor/partner
• Loss of control/ownership
• Considerations about security/confidentiality
• Evaporization of cost savings
• Loss of competitive advantage
• Slight of hand with employees
• High switching costs (contract problems)
• Lack of technological innovation

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Outsourcing strategies
13
Outsourcing strategies
14
Structuring the Alliance

• Flexible contract ( a lot can happen over 10
  years)
• Shorten length
• Termination clause
• Detailed performance standards
• Service levels (terminal response times)
• Baseline period measurement
• Growth rates
• Service volume fluctuations
• Resolution of performance disputes

15
Structuring the Alliance

• Selective vs. full outsourcing
• Multiple vendors
• Cost savings
• Multiple evaluations
• Outside consultants

16
Structuring the Alliance

• Supplier stability and quality
• Conflict of interests
• Management fit
• Conversion problems

17
Managing the Alliance

• Strong CIO function
• Partnership/contract management
• Architecture planning
• Emerging technologies
• Continuous learning

18
Managing the Alliance

• Performance measurements continuous
• Low-structured tasks more difficult to outsource
• Low-structured task provide higher margins for
  provider
• Customer-outsourcer interface
• Specified account manager in provider company