Managing Diverse IT Infrastructures

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Chapter 7

• Managing Diverse IT Infrastructures

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Before the Internet...

• Each firm had its own communication
  infrastructure
• Poor interoperability of technologies
• Proprietary technologies locked in firms to
  specific vendor technologies
• IT Managers were blamed for systems that
  performed poorly or not at all

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Then came the Internet

• Firms share a communication infrastructure common
  to all partners
• Excellent interoperability of technologies
  (TCP/IP)
• Less locking in to vendor technologies
  increases competition
• Smaller increments of service

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Smaller Increments of Service

• Provide standard and specialized functions (e.g.,
  currency conversion credit card transaction)
• Less risk involved (many smaller projects, not a
  big bang large, risky one)
• Makes new business models possible

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Evolving Service Models Existing Corporate
Systems

• Diverse IT infrastructure
• Variety of service delivery models and
  technologies
• Legacy systems still very prominent
• With diverse, distributed, complex information
  and technology assets, management challenges arise

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New Service Models

• Then Local software taken care of by local IT
  department
• Now specialized service providers operating in
  geographically distant facilities
• End user firm owns little of service delivery
  infrastructure

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Advantages of Incremental Outsourcing

• Overcome the shortage of skilled IT workers
• Reduces the need for internal staff
• Rapid deployment of business models, products and
  services
• Early mover advantage
• 24/7 service availability
• Specialized vendors often can afford higher
  levels of availability and security than
  individual firms
• Reduction in support costs through centralized
  service delivery
• Making applications globally accessible
• Different cash flow profile than traditional IT
  investment
• Subscription-based limited up-front investments
  (see next slide)
• More efficient ability to make local the
  priority
• Able to focus on task

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On-Demand, Utility, and Grid Computing Models

• What is it?
• Dont build a huge software project, just
  subscribe to smaller, less risky parts
• Restructure existing applications to make them
  easier to use
• Enhance them to link to interoperate with variety
  of other components
• Vendor bills only for processing that is used
  (e.g., per transaction)

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Incremental Outsourcing

• Benefits of incremental outsourcing?
• No longer all or nothing decision outsource
  only expense reporting!
• Lower economic stakes and potential consequences
  of mismanagement
• More experimentation possible
• Potential drawbacks?
• Serious across the firm implications
• Several good individual incremental decisions can
  lead to significant negative overall impact

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Hosting Example of Incremental Outsourcing

• Move files to host, not on your servers
• Use some incremental outsourcing functions (such
  as shopping cart, checkout, credit card
  transactions)
• IDC study found that downtime was reduced by 87
  when using hosting

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Hosting Levels of Service

• Business operating services (administer and
  operate an application)
• Application support services (support,
  performance monitoring, system design)
• Platform services (support hardware, software,
  reboot services)
• Network services (connectivity from within and
  without)
• Real estate services (just the bricks and mortar)

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Service Levels

• Colocation hosting basics floor space rented
  by customers inside cages customer runs
  equipment
• Shared hosting servers owned by provider
  customer purchases space
• Dedicated hosting each server is dedicated to
  individual customer

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Managing Relationships with Service Providers

• Critical skills choosing reliable provider and
  managing strong vendor relationships
• Need procedures to maintain partner relationships
• Service-level agreement (SLA)
• how much downtime delay data loss etc.
• If excessive, host owes refund

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Selecting Service Partners

• Most common process RFP submitted to a list of
  candidate vendors
• RFP asks for information about financial,
  technical, operational issues to be covered in a
  proposal
• Companies also count on information other than
  what is in the proposals (experience, hearsay,
  news reports)
• An outsourcing deal that is too one-sided, too
  favorable to one party at the expense of the
  other, usually ends up as a bad deal for both
  sides

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Managing the Relationship

• Key is to align the incentives among partners
• Win-win situation is key
• SLA is helpful for aligning incentives (making
  for a fair situation)
• Problems outside of hosts control are not
  charged against the host
• Disputes in a service chain are not healthySLAs
  in the overall chain should be designed and
  aligned
• If penalties are too low, they will have no
  effect. If too high, they might be beyond hosts
  ability and willingness
• Control over data must be established (to prevent
  customer from being locked in)

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Managing Legacy Systems

• Still perform vital functions
• Are sometimes inflexible
• Need to be maintained and supported
• Dilemmas arise due to
• Technology problems
• Interoperability issues
• Local adaptation
• Were not designed with expansion or new
  capabilities in mind
• Nonstandard data definitions
• Use of a variety of conventions

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Questions in Managing Legacies

• Systems themselves
• How will new infrastructure exchange data with
  legacy systems?
• Can real-time interaction be possible?
• Are there reasonable work-arounds?
• What is a reasonable long-term strategy?
• Organizational Processes and Culture
• How will work procedures be changed?
• Should technology drive org and cultural change?
• Should org and culture be protected from
  technology?
• What criteria will be used to decide when systems
  will be tailored versus procedures will be
  changed if incompatible?

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The Shift

• Once all IT assets were locked in a single room
  and easily assessed
• Now IT assets are distributed among people, often
  leave the building in bags, and often never
  reaches the premises (outsourced)
• Resulting complexity is high
• One approach to simplify is TCO (total cost of
  ownership)
• Examine costs and benefits of each client device
• Benefits are especially difficult to measure
  many simply explain uses

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Summary

• Greater number of service delivery options
• Has led to creation and restructuring of service
  provider industry
• Shift in management focus
• Move toward incremental sourcing
• Multiple, collaborating service delivery partners
• Assessing a firms opportunities and risks
• What services could be incrementally outsourced?
• Large up-front IT investments ? spread-over-time
  subscription services
• Well-defined processes to select partners?
• Detailed SLA with service providers?
• Systems in place to virtually integrate with
  service delivery partners?
• Short- and long-term strategies for dealing with
  legacy systems?