Transcript Document 7406874

Chapter 8
Information Technology
Operations
N
What is Total Cost of
Ownership (TCO)?
• is collective (and usually annualized) cost
(both direct and indirect) of providing and
maintaining corporate information services
• Goals of TCO is to help enterprises
understand many of components involved in
both the budgeted and unbudgeted costs of
acquiring, operating, and managing their IT
infrastructures throughout its life cycle.
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An Example of Four Metrics
for TCO Model
 Capital
 Technical Support
 Administration
 End-user operations
and …
Costs of Downtime
Each category is further
divided into desktop and
network components
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The Driving Forces Behind
Outsourcing
• Two drivers
– focus
on core business
– value
shareholder
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•
•
•
•
•
•
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The Changing Operations
Environment
1. On-line systems and networks
2. Diversity of performance measures
3. Efficiency–effectiveness balance
4. Changes in staffing needs
5. Changes in technology
6. Trend toward outside sourcing
7. Similar to manufacturing with
–
–
–
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highly volatile technology
specialized labor
dynamic markets
changing industry structure
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Developing an Operations
Strategy
• Ensure that an architecture has been conceived
and is being implemented.
• Ensure that new systems are being developed
in ways that appropriately address their long
term maintainability.
• Ensure that internal/external sourcing
decisions are carefully considered.
• Determine the extent to which IT operations
should be managed as a single entity or be
broken into a series of … focused subunits …
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Technology Planning
• Review: how long since development or last total rewrite?
• Planning (see Figure below: “Forces (and tensions) to be
Managed in IT Innovation”
– inventory of the uses of existing technology
– ongoing appraisal of user readiness
– awareness of where technology is going
– program of appropriate pilot technology projects
Technology
IT
planning/technology
awareness
User
readiness
Business
objectives
Dr. Chen, IT Operations and Management Processes
Phased program
of innovation
Current IT
operation
delivery capacity
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Table 8-1: Characteristics of Effective Management of EmergingTechnology (ET) by Phase
Characteristics
Management Issue
Concerns:
Organization
Management control
Leadership
Ability to
support the
new
technology
Dr. Chen, IT Operations and Management Processes
Innovation-Phase Control-Phase
(Effectiveness)
(Efficiency)
Organic (ET)
Loose, informal
Participating
General
management
approves
E.T.
Group
Mechanistic (traditional IT)
Tight
Directive (telling, delegating)
Resources of
diffusion of
the
technology
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IT Planning: The relationship between business, IS, and
IT strategies
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IT Planning: Basic four-stage model
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Major activities and outputs in the four stage of IT
planning
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Business Systems Planning (BSP) Approach
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Charge-Out System
(Charge-Back, Cost-Recover)
• Users pay for the computing and
information services they use, by
charging the corporate IT expenditures to
the users.
– “We tried chargeback for 6 months, we found
that computers had viruses, backups weren’t
completed, and services wasn’t maintained
because department managers didn’t want to
pay for it. It was a terrible idea for us.”
(Turban, p. 582)
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IT Planning: Stages, Methods, and Outputs
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Nolan’s Six Stages of IS Growth
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CRITICAL SUCCESS FACTORS
SMALL NUMBER, EASILY IDENTIFIABLE
OPERATIONAL GOALS
SHAPED BY INDUSTRY, MANAGER,
ENVIRONMENT
BELIEVED TO ASSURE FIRM’S SUCCESS.
USED TO DETERMINE ORGANIZATION’S
INFORMATION REQUIREMENTS
*
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CRITICAL SUCCESS FACTORS
(CSFs) & GOALS
EXAMPLE
GOALS
CSFs
PROFIT
EARNINGS/SHARE
AUTOMOTIVE INDUSTRY:
CONCERN
RETURN ON INVESTMENT
STYLING
MARKET SHARE
NEW PRODUCT
QUALITY DEALER SYSTEM
COST CONTROL
ENERGY STANDARDS
NONPROFIT
EXCELLENT HEALTH CARE
REGIONAL INTEGRATION WITH
OTHER HOSPITALS
MEETING GOVERNMENT REGULATIONS
EFFICIENT USE OF RESOURCES
FUTURE HEALTH NEEDS
IMPROVED MONITORING OF
REGULATIONS
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Dr. Chen, IT Operations and Management Processes
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USING CSFs TO DEVELOP SYSTEMS
• COLLECT MANAGERS’ CSFs
• AGGREGATE, ANALYZE INDIVIDUALS’
CSFs
• DEVELOP AGREEMENT ON COMPANY CSFs
• DEFINE COMPANY CSFs
• USE CSFs TO DEVELOP INFORMATION
SYSTEM PRIORITIES
• DEFINE DSS & DATABASES
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Five-Step Model for Information Requirements
Analysis
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Measuring and Managing Capacity
• 1. Capacity comes in much smaller, less-expensive
increments than it did a decade ago.
• 2. A capacity “crunch” develops with devastating suddenness.
• 3. Explosion of diagnostic tools
• 4. Suppliers of computer peripherals are increased
• 5. Complex trade-offs must be made between innovation and
conservatism
• 6. The cost and disruption caused by change may outweigh
the specific advantages with a particular technology.
• 7. As investments in the products of small software and
hardware vendors increase …
• 8. A hidden set of capacity decisions focuses on appropriate
infrastructure back up
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Managing the IT Operations
Workforce
• Human issues
–
–
–
–
staff availability and quality
linkage between the users and the IT development group
a long-term IT operations staff development plan
quality of work life
• Unionization
– a small number of individuals strike can virtually paralyze
an organization
• Selection factors for operations manger and staff
– scope of activities
– criticality of IT operations unit
– technical sophistication of the shop
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Production Planning and Control
• Setting goals
• Establishing priorities
– established goals might be conflicted
– organization of capacity
– consistent operating policies
• Strategic impact of IT operations
– cost efficiency, error or capacity dimension
• Implementing production control and
measurement
– indexes and standards of performance
Dr. Chen, IT Operations and Management Processes
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Security
• 1. perfect security is unobtainable at any price
• 2. organizations band together
• 3. organizations with critical IT establish multiple
data centers
• 4. organizations with less-critical IT establish
secondary sites without hardware
• 5. within a single site, steps to follow:
–
–
–
–
–
–
–
–
limit physical access
complex access codes
surround the data center with physical measures and monitorings
uninterrupted power supply (UPS)
off-site data storage
Halon gas system for fire protection
rotation of personnel with jobs and enforcement of mandatory vacations
certification of new and changed programs
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Privacy
• The capabilities of new technology
– increasing intrusiveness into privacy
• Ethical Issues: PAPA
• Implications
–
–
–
–
–
–
–
–
–
information storage
information use
information sharing
human judgment
combining of information
error detection and correction
long vs. short term concerns
education of public (e.g., clients)
organizational control
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Chapter 9
Information Technology
Management Processes
Management Control
“The IT management control system is a
critical network and set of activities that
integrates IT activities with the rest of the
firm’s operations and ensures that IT is
being managed in a cost-efficient, reliable
fashion.”
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People Resources: End Users and IS Specialists
Software Resources: Programs and Procedures
Hardware Resources: Machines and Media
IT Management Process Model
Management Control System
Input
of
Data
Resources
Planning
Processing
System
Output
of
Information
Products
Project Management System
Data Resources: Data Knowledge Bases
Network Resources: Communications Media and Network Support
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Relationship among Planning
and Control Efforts
• Firm’s planning process
– multi-year view in assimilating technologies
and systems
• Management control system
– guides IT department on year-to-year basis
• Project management system
– guides life cycle of individual projects
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Charge-Out
(Charge-Back, Cost-Recover)
System
• Users pay for the computing and
information services they use, by
charging the corporate IT expenditures to
the users.
– “We tried chargeback for 6 months, we found
that computers had viruses, backups weren’t
completed, and services wasn’t maintained
because department managers didn’t want to
pay for it. It was a terrible idea for us.”
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Objectives of
IT Management Control
• Facilitate communication
• Encourage effective utilization of IT
department resources
• Provide means for efficient management of
IT resources
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Factors to Consider
• Sensitive to mix of phase of technology
adoptions
• Specific to corporation’s situation: user IT
sophistication, geographic dispersion
• Consonant with organization’s overall
control system
• Appropriate to strategic significance of IT
in firm
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IT Evolution and Management
Control
•
•
•
•
•
•
Software issues
Operation issues
Growth in user influence
Corporate control process
Strategic impact of IT on corporation
Others
– control architecture
– control process, financial and non-financial
– audit function
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Results Control Architectures
• Unallocated Cost Center
• Allocated Cost Center and Charge-Out
Procedures
• Profit Center
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Unallocated Cost Center
•
•
•
•
•
Essentially free
Lack of red tape
No charge-out system
Appropriate when IT budget relatively small
but … (due to no financial pressure)
•
•
•
•
Irresponsible requests for service
Politicization of resource-allocation decisions
Insulates IT from competitive pressures
Blurs revenue/cost tradeoffs
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Allocated Cost Center and
Charge-Out Procedures I
• Allocation Problems:
– comparison with other companies and vendors
leads to misleading and invidious conclusions (not
a true free market)
– discourages innovation
– “technically correct” charges may be unintelligible
and unpredictable
– artificially high since they cover overhead in
addition to operations
– do not hold IT responsible for inefficient
operations
– administration of charge-out system expensive
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Allocated Cost Center and
Charge-Out Procedures II
• Desirable Characteristics (for an IT chargeout system to be effective):
– users understand it: standard cost per unit of
output, user-understood transactions
– perceived as fair and reasonable
– distinguish IT efficiency from user utilization
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Allocated Cost Center and
Charge-Out Procedures III
• Maintenance and Development Charges
– professional contract between IT and user
IT estimates of job costs and responsibility for
excess costs
procedures for reestimating and canceling the job if
job scope changes
change in scope defined
– problem defining proportion of usage on a
multi-user system (e.g., database)
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Profit Center
• Pressures of the marketplace on IT
• Leads to IT marketing function
• Controls excess capacity of IT — either
eliminated or marketed outside firm
• but …
• Should a service department be a profit
center, especially if no outside revenue?
• Do users really have alternative of going
outside?
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Financial Reporting Process
Budget
Objectives
1. Fine-tuning
2. Trigger a dialogue
3. Warning system
Budget
Process
1. Appropriate
people are
involved
Outputs
1. Planned service
levels
Budget
Targets
2. Appropriate
controls
1. Establish benchmark dates
3. Education
2. Personnel types and levels
2. Costs of central
operations
3. Milestones and completion dates
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Nonfinancial Reporting Process
• Survey user attitudes toward the IT support
regularly
• Staff turnover trend
– critical early insight into the problems of this
notoriously unstable group
– leadership, salary levels, workplace climate
• Others
– network up time,
– response time
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IT Audit Function
• Provide a vital check and balance on IT
activity.
• 1. Standards are developed and installed
• 2. Operating units adhere to the standards
• 3. Active involvement
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Information Technology
Planning
“Communicating viewpoints and discussing
problems and potential opportunities may
be as important as selecting appropriate
projects.”
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Pressures Toward IT Planning
I
• Corporate (External) Pressures:
– (support) of corporate plan rapid changes in
technology
– scarcity of (experienced) IT personnel
– scarcity of other corporate resources
– trend to database design and integrated systems
– validation
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Pressures Toward IT Planning
II
• IT Process Pressures
– During Phase I:
new technologies
human resource skills
– During Phase II:
1. Identification/
Investments
(Technical-oriented)
2. Learning/
Adaptation
(User-oriented)
develop potential users’ interest in the technology
initiate a series of user-supported pilot projects
– During Phase III:
efficiency focus
short term
– During Phase IV
3. Rationalization/
Management Control
4. Maturity/
Technology Transfer
managed evolution
long-term exploitation of the technology
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Limitations on the
Effectiveness of IT Planning
• Planning is a resource drain
• Planning’s fit with corporate culture
• Strategic relevance of IT
– cost-effective, useful role
– distinctly supportive role
• Mismatch between actual and perceived
importance of IT
Dr. Chen, IT Operations and Management Processes
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Figure 9-1: Information Technology Strategic Grid
High
A, 1992
Factory
Strategic impact
of existing
operating systems
C
A, 1988
E
B
Strategic
H
F
G
Low
Turnaround
D
Support
Key:
A:Major bank 1988-1992
B: Major insurance company
C: Medium-size grocery chain
D: $100 million distributor
E: Major airline
F: Major chemical company
G: Major process industry
manufacturers
H: Insurance broker
Low
High
Strategic impact of application
development portfolio
N
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Figure: Information Technology Strategic Grid
•IT support
High
•Cost-effective
•No disruption
Strategic impact
of existing
operating systems
A, 1992
Factory
C
A, 1988
B
Strategic
H
E
F
G
Low
Key:
A:Major bank 1988-1992
B: Major insurance company
C: Medium-size grocery chain
D: $100 million distributor
E: Major airline
F: Major chemical company
G: Major process industry
manufacturers
H: Insurance broker
Turnaround
D
Support
•IT support
•Little
Lowstrategic impact
•IT support
•Un-interruptive cost-effective
High
is NOT necessary
Strategic impact of application
development portfolio
N
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Improving IT Planning Success
• 1. Make status of IT manager congruent
with importance of IT to strategy
• 2. Put the IT group in physical proximity to
the general management team
• 3. Make IT planning as formal as the
remainder of the organization
• 4. Increase formality of IT planning as size
of organization increases
N
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That’s All, Folks
The IT Architecture
• IT architecture is the field of study and
practice devoted to understanding and
deploying information systems components
in the form of an organizational
infrastructure.
• IT architecture consists of a description of
the combination of hardware, software,
data, personnel, and telecommunications
elements within an organization, along with
procedures to employ them.
*
Partnership of Three
Constituencies
Consists of ...
USERS
Management
Plus ...
IT Management
Management
Challenge ...
Imagination
GENERAL
Management
Dr. Chen, The Challenge of the Information Systems Technology
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Figure 8-1: Forces (and tensions) to be Managed in IT Innovation
Technology
IT
planning/technology
awareness
User
readiness
Business
objectives
Phased program
of innovation
Current IT
operation
delivery capacity
Table 8-1: Characteristics of Effective Management of EmergingTechnology (ET) by Phase
Characteristics
Management Issue
Organization
Management control
Leadership
Innovation-Phase Control-Phase
(Effectiveness)
(Efficiency)
Organic (ET)
Loose, informal
Participating
Mechanistic (traditional IT)
Tight
Directive (telling, delegating)
•
•
•
•
Privacy: What information about one's self or one's associations must a person
reveal to others, under what conditions, and with what safeguards? What things
can people keep to themselves and not be forced to reveal to others?
Accuracy: Who is responsible for the authenticity, fidelity, and accuracy of
information? Similarly, who is to be held accountable for errors in information, and
how is the injured party to be made whole?
Property: Who owns information? What are the just and fair prices for its
exchange? Who owns the channels, especially the airways, through which
information is transmitted? How should access to this scarce resource be
allocated.
Accessibility: What information does a person or organization have a right or a
privilege to obtain, under what conditions, and with what safeguards. In an
information society a citizen must posses at least three things to be literate :
–
–
–
•
•
1.One must have the intellectual skills to deal with information.
2.One must have access to the information technology.
3.One must have access to the information itself.
At stake with the increased use of information technology is the quality of our
lives should we, or our children, survive. If we are unwise, many people will
suffer information bankruptcy or desolation.
Our moral imperative is clear. We must insure that information technology, and
the information it handles, are used to enhance the dignity of mankind. To
achieve these goals we must formulate a new social contract, one that insures
everyone the right to fulfill his or her own human potential.