ADMN641 Information Systems Management and Integration
Lesson 7 - Implementing Software Packages and Outsourcing
""Those who say it cannot be done, should not interrupt those who are doing it." Chinese Proverb " 
 

Previous weeks discussions have been of a general nature, dealing with broad based topics dealing with across the board issues such as decision making and performance measures. In analyzing these issues one thing seems certain. All IT managers are looking for ways to reduce the burden associated with creating and maintaining Information Systems.

The need for reducing the IT burden is especially true of software components. Maintaining custom-built in house solutions is a costly and difficult endeavor. In past decades this was seen as the only solution to many organizations information needs. But in the 1990's, rising costs, increased difficulty in hiring and maintaining IT staff, and increased pressure to port needed systems to alternative uses and expanded access has placed the IT manager in a difficult position. Users want better faster and cheaper information systems - now. At the same time the Year 2000 problem has pushed the need to have compliant systems to the top of the priority list. Organizations see the cost of converting legacy systems as greater than a complete conversion of existing software assets.

The specific answer for many managers has been to turn to 1) outsourcing and 2) enterprise level packaged/turnkey systems. Enterprise packages are frequently referred to as Enterprise Resource Planning (ERP) applications. Neither of these methods are new. Outsourcing for common "batch oriented" business applications such as payroll has been around as long as mainframe computers have existed. And vendors specializing in virtually all application specific areas such as systems for schools or restaurants have also been around for decades. Both of these approaches methods typically include:

Users are more savvy about their needs than in past decades. They have typically already worked with one or two other systems. They are also typically more aware of what is on the market, and will make judgments about the quality of the information system(s) available to them.

Adopting Enterprise Resource Planning Systems
 

Workflow structure for an ERP System from Peoplesoft.

Frequently the claims that ERP Vendors provide about the capability of their software are quite extensive. For example some "claims" from vendors drawn off the web include:

It should be obvious that these claims are likely excessive. With so much promise, can large ERP vendors such Peoplesoft and SAP/R3 really deliver the goods? These are just the issues that Christopher Koch has focused upon in his article" Crossing No Mans Land" from CIO Magazine.
 
 Whatever the claims many IS managers are adopting these products.  The Gartner group cites increases in quality, competition, customer satisfaction, regulation, and product diversity as well as decreases in time to market, product cost, personnel, management layers, cost of technology, delivery time in global players as the primary driving factors in ERP adoption. Much of  the goal in enterprise resource planning has been the capability to bring together manufacturing, finance, distribution, and other business functions. Ideally the systems significantly improve distribution and supply chain management as well. Licenses run from $2000 to $10000 per concurrent user and associated professional services $600 to $2000 per day.
 
Outsourcing

Grover et al have provided some "facts" with respect to outsourcing. These are, in most of the cases, the symbiotic relationships that are causing a heightened interest in this area.

It should seem obvious that a decision about outsourcing would be based upon criteria which must be established by both management and those who are effected by the decision. Even outsourcing a simple application like payroll should include careful attention to all the factors that may be relevant such as cost, timeliness, vendor reliability, customization, etc.

The following example looks at an interesting approach for identifying, weighing and synthesizing those factors involved in making an outsourcing decision.  For a full treatment of this subject the reader should refer to Putrus1  The individual or group responsible for the source selection would proceed through the following stages of analysis within an agreed timetable.

1) search and establish possible options / alternatives
2) extract criteria for judging those alternatives
3) set up a hierarchical "tree" model
4) do paired comparison or a group comparison to set weights
5) synthesize the results
6) do sensitivity analysis on the results

Part 3 - The Hierarchical Model - with finished weights
 
 
Part 4a Paired comparison to set weights

Part 4b Grouped comparison to set weights

Part 5 - Synthesis to provide a prioritized list of options &  Sensitivity Analysis

Their are a number of decision support packages available such as this to assist in this evaluation task. The images above are from the package Expert Choice.
 
 
References

"Can a German Software Giant Provide Client/Server Solutions?" in Management Information Systems. Laudon, K and Laudon, J. p 460-1. Prentice Hall. 1998.

Bond, B. and Keller, E. "Enterprise Resource Planning: Optimizing Business Functions" Inside Gartner Group. January 24, 1996.

Putrus R.S."Outsourcing Analysis and Justification Using AHP." Information Strategy: The Executive's Journal 9 p131-36. 1992.

Expert Choice, Expert Choice Inc. http://www.expertchoice.com
 

 
 


Assignments:
No Discussions or Organizational Paper sections due this week
 
(c) John H. Saunders 1998. Permission granted for use in courses at the University of Maryland