Computer Services IT operations,

Outsourcing and
Supplier management
Management Lecture 5
IT operations
• The job of IT management is to ensure that the IT infrastructure runs cost
effectively, and to participate in the organisations’ quest for technology-
enabling business opportunities.
• In order to effectively manage IT operations, management should:
• Consistently apply management practices to manage IT.
• Any spending on IT should show credible return based on sound investment
principles.
• Any IT project should be managed according to rigorous project management
principles.
• Involve all interested in IT-related operations and hold them accountable for their
decisions and actions. Collaboration is crucial.
• The focus should be on improving productivity, timeliness and quality.
IT operations (2)
• The move toward open-source computing, multiplatform
collaborative systems, cross-border supply-chain management and
insourcing and outsourcing require a fresh view of daily management
of IT resources and assets.
• The organizational boundaries have become transparent, and
management should look at operations management from a global
perspective where tasks can be performed by teams of partners in
the most cost-effective manner.
IT operations (3)
• Systems operations problems are obvious to the entire company
• Response times are slow
• Networks are down
• Data are not available or inaccurate
• What can be done to improve operations?
• Buy more equipment or reassign priorities and resources to business
critical activities or document problems and redesign business
processes and set standards and benchmarks for operations.
Operational measures
• Operational measures can be both external and internal.
• External measures are what customers see and affect directly
customer satisfaction:
• System and network uptime (or downtime)
• Response time
• Turnaround time
• Program failures
• Internal measures are of direct interest to IS people:
• Resource utilisation as a percentage of capacity
• Availability of mission-critical systems
• Job length queue
Operational measures
• Problems reported by external measures can generally be explained by
deviations in the internal measures.
• To help uncover problems related to equipment capacity, quality of applications, or
improper use of systems by users, numerous vendors sell monitoring software and
devices. Other measurement systems log performance of computer and
telecommunications equipment. Storage management systems manage space more
efficiently. Schedulers schedule jobs. Library management systems keep track of
versions and backups of files and programs. Plenty of tools are available to help IS
organizations measure how their equipment is being used.
• Operational measures should be based on the concepts of efficiency (doing
the thing right) and effectiveness (doing the right thing).
• Being efficient does not necessarily lead to being effective. Measures
should be set to support the mission of the organisation.
The importance of good management
• Tools are useless unless IS management has created a culture that
recognises and values good operations.
• The skills required of an operation manager are similar to those needed in
a factory.
• The factory manager must schedule work to meet promised delivery dates,
monitor performance as work flows through the key pieces of equipment,
and respond quickly to production breakdowns.
• The same is true in computer and telecommunications centers where the
“factory equipment” is the disk drives, database machines, host
computers, servers, network gateways, network routers, and the like.
• . The key to managing operations is the same as in any management job:
Set standards, or better yet, desirable goals, and then manage to those
standards by finding an outstanding operations manager.
What’s new in operations?
• Companies have cleaned their operational house
• The approach of “if it isn’t broke, don’t fix it” no longer stands. Companies are being
forced to think strategically of their IT systems.
• Managing open source
• Popular technologies include Linux, Apache and Mysql.
• Getting serious with security
• BYOD, VoIP, collaboration tools have made security more complex and a must
• Large-scale data warehousing
• Data warehousing and availability have been become important as data has become
the new oil
• Enforcing privacy
• There is need to manage the information being captured, stored and disseminated
within the organisation.
What’s new in operations?
• Dealing with Talent shortage
• The supply of IT workers has become an increasing area of concern
• More operations managers are managing outward (outsourcing)
• More IT systems are being managed by third-parties (for example data
centers, networks, etc..)
• Operations are being simplified
• Simplification of operations by centralising applications in one place rather
than distributer them on PCs.
Opensource
software
Open source software
• Open source software is software with source code that anyone can
inspect, modify, and enhance. (opensource.com)
• Much of the Internet itself is built on open source technologies.
• Most companies now run open-source software.
• It is very common to find user environments deploying a mixture of
open source and commercial software platforms and applications to
meet different demands.
Advantages Open source software
• Advantages
• Open source can give businesses new options to develop cost-effective
applications to cost sharing
• It’s continually evolving in real time as developers add to it and modify it,
which means it can be better quality and more secure and less prone to bugs
than proprietary systems, because it has so many users poring over it and
weeding out problems.
• Using open source software also means you are not locked into using a
particular vendor’s system that only work with their other systems.
• You can modify and adapt open source software for your own business
requirements, something that is not possible with proprietary systems.
Disadvantages of open source software
• Because there is no requirements to create a commercial product that will
sell and generate money open source software can tend to evolve more in
line with developers’ wishes than the needs of the end user.
• There may also be less support available for when things go wrong – open
source software tends to rely on its community of users to respond to and
fix problems.
• Although the open source software itself is mostly free, best business
practices for system development should be enforced: good
documentation, professional technical support, and thriving and stable
user
• Although having an open system means that there are many people
identifying bugs and fixing them, it also means that malicious users can
potentially view it and exploit any vulnerabilities.
Key considerations when selecting between open
source software and commercial software
• Licensing
• Open source software is made available under a variety of licensing approaches with
certain common features such as the right to modify and the right to redistribute the
sofware.
• There are 2 principal open source licensing approaches: GNU General Public License
(GPL) and Berkeley Software Distribution (BSD) License
• Under the GPL, all derivative works of the software and subsequent versions down
the chain must be licensed and distributed on the same terms as the original
software.
• In contrast, under the BSD License, developers have the freedom to integrate the
licensed software with the developers’ own source code to create new products with
few restrictions.
• If the software is for the purchaser’s own use, GPL and BSD does not matter.
• Charging fees for system setup, system management, support, maintenance and
other related services is permitted under the GPL.
Advantages of proprietary software
• Single vendor
• Often paid software involves a "one stop shopping" experience whereby a
single vendor can provide all the applications and tools you need.
• Enterprise-grade product
• Products can normally scale well
• Professional interface
• Proprietary software tend to provide a better, more standard interface which
generally fits the needs of most users.
• Routine updates
• No customisation or programming needed
Disadvantages of proprietary software
• Products can contain a number of non-required features
• Microsoft Office, for instance, often installs many components few employees
actually use, such as Access or Publisher.
• Some carry cost surprises such as renewal fees
• Confusing licensing schemes
• Think Microsoft!
• Dependence on vendors
• The flip side to the "one stop shopping" advantage is that you may end up
being overly dependent on the vendor, locked into a closed system.
• Switching can be hard
Key considerations when selecting between open
source software and commercial software
• Intellectual property rights
• You cannot claim the open source software as your own work
• Full range of cost including lifetime costs and migration costs
• Cost considerations should be viewed in totality. While cost is an important issue, it
is usually not the sole determining factor for a procurement decision. In some
situations, such as in mission critical or public safety systems, or in places where
manpower costs are substantially higher than software prices, cost may even be a
subsidiary concern.
• Man–power
• It is essential that the entire range of manpower required be taken into account in
the evaluation and selection of the software product. Such manpower includes
resources required for support, maintenance, training, data migration and
conversion, integration with legacy systems, enhancement of systems, managing
incompatible systems, etc.
Key considerations when selecting between open
source software and commercial software
• Security and flexibility
• To enable the use of a product securely and reliably, there needs to be a
shared responsibility between the customer and the software provider. The
software provider has the responsibility to develop the software in
accordance with best practices in security, to rigorously stress-test the
software and to develop updates and patches rapidly when vulnerabilities are
subsequently uncovered.
• If a security review of the source code is required, appropriate expertise
should be made available to meaningfully scrutinize the source code of the
components to be deployed. It should not be assumed that because the
source code has been made publicly available that it has, in fact, been
sufficiently reviewed.
Outsourcing
Outsourcing
• Outsourcing is the business practice of hiring a party outside a company to
perform services and create goods that traditionally were performed in-
house by the company's own employees and staff. Outsourcing is a practice
usually undertaken by companies as a cost-cutting measure.
(https://www.investopedia.com/terms/o/outsourcing.asp)

• It is not only an IT issue. It is a business issue.

• The 2 drivers are focus and value.
• IS outsourcers perform the same activities for a company that an IS
organization performs in-house. Over time, the amount of work done by
outsiders has increased.
• Outsourcing differs from projects as it is time based.
Outsourcing models
• Best-of-Breed outsourcing
• A recent form of collaborative outsourcing, where one company becomes the prime
contractor for numerous facets of IS operations but some of the work is provided by
other ESPs.
• Shared–services
• Grouping non-core functions into one shared services group in order to improve
efficiency and save money.
• Business process outsourcing
• Outsourcing all or most of a reengineered process that has a large IT component (for
example outsourcing procurement function or booking system)
• E-business outsourcing
• The most common of outsourcing nowadays made possible by the Internet
• Also known as utility computing on on-demand computing
Advantages of E-business outsourcing
• Allows a company to move fast.
• When a firm cannot spend a year developing a system, outsourcing the e-business
infrastructure can help it get a site up and running within months, perhaps weeks.
• Companies can remain flexible
• Companies can focus only on a few mission-critical functions that they possess
unique expertise and know-how.
• Outsourcing does not tie up a firm’s funds in computer and networking
equipment, which could become obsolete fairly soon.
• Unlike traditional IT outsourcing, with e-business outsourcing, machines do
not need to be purchased from the client, personnel do not have to be
moved, and software licenses do not need to be transferred.
Managing Outsourcing
• Organisational structure
• Managing outsourcing is different managing internal staff.
• Governance need to be explicitly addressed in a contract.
• Comprises of a top level team and an operational level team.
• Top level team intervene when there is conflict.
• Operational level team looks after the day-to-day functioning.
• Governance
• Explicit use of contracts with SLAs to gauge the supplier’s performance.
• Metrics are an important part of SLAs but defining metrics can be tricky.
• In a partnership model, trust and agreed-upon rules for the relationship
between client and supplier normally take priority over the contract.
Managing outsourcing
• Day-to-day working
• Manage expectations and not staff as the outsourcer’s staff is no longer under
the purview of the client so command-and-control is not a wise option.
• Realise than informal ways of working may disappear as relationship is strictly
handled according to the contract.
• Loss of informal ways of working can add rigor as users prepare their requests
more rigorously and better processes increase effectiveness and reduce
unnecessary work.
• Integration of the two staffs requires explicit actions for example granting out
outsourcing staff access to appropriate work areas and not unduly restricting
them.
Offshoring
• Offshoring is also now a common practice.
• Offshoring is when a company moves part of its business process to
another country.
• India has become the premier IT and BPO offshoring country because its
huge, highly educated workforce speaks English and is hard working. The
quality of work is often higher, while the labour costs are lower.
• Challenges
• Both parties need cultural training to bridge cultural differences
• Communication issues need to be addressed from the outset
• Communication issues continue throughout Offshore Relationships
• Country laws need to be followed
Supplier management
Supplier management
• In general…
• Making sure that the suppliers meets the terms and conditions of the
contract that they have signed.
• In doing so, increasing the value of the services and products that they are
giving to us.
• IT (from ITIL)
• Ensures that suppliers and the services they provide are managed to support
IT service targets and business expectations.
• Also, it obtains value for money from suppliers and contracts, while ensuring
contracts with suppliers are aligned to business needs.
What is a supplier?
• Any third party help supply part or whole of the service and goods in
order to deliver the services or goods that a company need to deliver
to its customers.
• Eg Microsoft, Vmware, etc..
Underpinning Contracts
• Comprises of
1. Basic Terms and Conditions
2. Service description and Scope
3. Service standards
4. Workload ranges
5. Management information
6. Responsibilities and dependencies
(1) Basic terms and conditions
• How long is the contract for?
• Who are the parties involved in the contract?
• Which locations are involved?
• High level scope of it
• Commercial part
• Assumptions
•…
Service description and scope
• The detailed scope of services or goods to be
delivered usually quantifiable and measurable
• Constraints on the service delivery and what is
not being provided.
• Priorities

• For example in the case of staff outsourcing:

• How many days the person needs to be present?
• What are his/her duties?
Service Standards
• The minimum level of service accepted as defined by the SLA
• Acceptable performance of the service
• What is the bottom line you are willing to consider?
Workload ranges
• Which service standards apply and which particular pricing applies?
• For example
• a normal response and an emergency response may be dealt with and
charged differently
Management information
• Include Critical success factors and key performance indicators
• Depends on the actual services
• For example
• KPIs related to quality (Number of defects observed or supplier defect rate)
• Required response time in case of emergency
• Schedule for delivery of the services
• Compliance to standards (eg health and safety regulations, security, privacy)
• Number of site visits
Responsibilities and
dependencies
• What the responsibilities of all the
parties involved in the contract?
• What are the dependencies for
each party to execute his/her
duties?
• Advisable to use a responsibility
matrix to state the responsibilities
and dependencies in a contract.
Supplier and Contract Management
Information System (SCMIS)
• The Supplier and Contract Management Information System is
database or structured document used to manage suppliers and
contracts throughout their lifecycle.
• The SCMIS contains key attributes of all contracts with suppliers, and
should be part of the Service Knowledge Management System
(SKMS).
SCMIS: Example
• A performance evaluation system utilised by the computer service
team to record and evaluate the performance of a supplier
• An information system to conduct the acceptance of the services or
works carried by the supplier or to cancel or modify the services
provided by the supplier
• An information system to track the amount of payment made to the
supplier against work done
Resources used
• https://entrepreneurhandbook.co.uk/open-source-software/
• https://opensource.org/osforbusiness
• https://www.wipo.int/edocs/mdocs/copyright/en/wipo_ip_cm_07/wi
po_ip_cm_07_www_82575.pdf
• https://docs.microfocus.com/SM/9.60/Codeless/Content/BestPractic
esGuide_PD/ServiceLevelManagementBestPractice/Service_Level_M
anagement_RACI_matrix.htm