DETERMINING INVESTMENT LEVELS

In document Business Information Systems 2T (Page 137-142)

INFORMATION SYSTEMS MANAGEMENT

9.4 DETERMINING INVESTMENT LEVELS

How much an organisation will spend on IS will depend both on the size of the organisation and on the nature of its business operations. Spending as a proportion of turnover will also vary over time depending on the maturity of an organisation’s systems and on the organisation itself.

Further Reading

For additional reading on Determining investment levels, turn to pp. 540-543 of Bocij et al.

ACTIVITY

Do self assessment questions 1 and 2 on page 566 of Bocij et al.

MANCOSA – BCom ITM Year 2 137 9.5 LOCATING THE INFORMATION SYSTEMS MANAGEMENT FUNCTION

There are two basic approaches to locating the information system function in an organisation that operates at more than one location. These are the centralisation of all IS services at one office (usually the head office) and decentralisation. It is unusual for a company to choose one extreme or the other;

typically, the approach will vary for the different types of services. The approach chosen is significant, since it will have a direct correspondence to the quality of service available to the end- user departments and the cost of providing this service.

9.5.1 What needs to be managed?

It is useful to make a distinction between information systems and information technology. As has been stated before, we can view IT as the infrastructure and an enabler, while information systems give a business the applications that produce the information for decision-making purposes. IS cannot exist without the IT to support them, but IT on its own does not of itself confer any business benefits.

For information technology the following must be managed:

 Hardware platforms.

 Network architectures.

 PCs

 Development tools.

 Legacy systems.

 Operations management.

 Business systems development.

 Migration and conversion strategy.

 Database administration.

 User support and training.

 End-user application development.

 Shared services.

 IS/IT staffing.

MANCOSA – BCom ITM Year 2 138 Further Reading

For further reading on what needs to be managed, turn to pp.543 of Bocij et al

9.6 OUTSOURCING

Outsourcing is the process of hiring another organization to perform a service. Just about any business activity in the value chain can be outsourced, from marketing and sales, to logistics, manicuring, or customer service. Support functions, such as accounting and HR, can be outsourced as well. In this section, we will focus on the outsourcing of IS and IT services but please realize that companies also outsource most other business activities.

The outsourced vendor can be domestic or international. Some companies choose to outsource overseas because labour is cheaper and to take advantage of time differences.

9.6.1 Reasons for outsourcing

According to the Outsourcing Institute, the top 10 reasons companies outsource are:

1. Accelerate re-engineering benefits 2. Access to world class capabilities 3. Cash infusion

4. Free resources for other purposes 5. Function difficult to manage out of control 6. Improve company focus

7. Make capital funds available 8. Reduce operating costs 9. Reduce risk

10. Resources not available internally (Source: Bocij et al. 2008:550)

ACTIVITY

Attempt essay question 3 on p. 567 of Bocij et al.

MANCOSA – BCom ITM Year 2 139 Organizations should consider outsourcing in order to achieve the following benefits:

 Financial savings

 Increased technical abilities

 Market agility

9.6.2 Developing strategic outsourcing partnerships

Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Business process outsourcing is increasingly becoming the strategic choice of companies looking to achieve cost reductions while improving their service quality, increasing shareholder value, and focusing on their core business capabilities. Many organizations are looking beyond traditional IT outsourcing to business process outsourcing as the next logical step.

Implementing BPO can save costs for tasks that an organization requires but does not depend upon to maintain its position in the marketplace. BPO is divided into two categories: (1) back-office outsourcing that includes internal business functions such as billing or purchasing, and (2) front-office outsourcing, which includes customer-related services such as marketing or technical support.

Business process outsourcing is not a new field. Paychex, based in Rochester, New York, for example, has been outsourcing payroll processing for small businesses since 1971. However, the market is heating up these days, as companies’ need for strategic cost cutting, desire to improve business methods, and comfort with outsourcing arrangements grow.

The Gartner Group estimated that the worldwide market for business process outsourcing would grow to $178 billion in 2005. Management consulting and technology services company Accenture is a BPO player. Accenture’s first BPO deal came in the early 1990s, when it outsourced finance and accounting functions for British Petroleum. Accenture now handles a variety of outsourcing tasks, such as airline ticket processing and call centre staffing for AT&T.

MANCOSA – BCom ITM Year 2 140 9.6.3 Offshore outsourcing

Offshore outsourcing is using organizations from developing countries to write code and develop systems. Numerous countries have substantially well-trained IT professionals and clerical staff who have lower salary expectations compared to their U.S. counterparts. Offshore outsourcing has become a small but rapidly growing sector in the overall outsourcing market. Nearly half of all businesses use offshore providers, and two-thirds plan to send work overseas in the near future, according to Forrester Research. India receives most of the outsourcing functions from all over the world. However, as more American companies seek to source globally, more countries are emerging to benefit from that demand—from Canada to Malaysia—each with its own particular strengths and weaknesses.

Organizations have much to gain from offshore outsourcing.

Additional Reading

Study the paragraph making outsourcing work on p. 553 of Bocij et al.

ACTIVITY

Attempt Examination questions 1 & 2 on page 567 of Bocij et al

MANCOSA – BCom ITM Year 2 141 Suggested answers

In document Business Information Systems 2T (Page 137-142)

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