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									Matakuliah     : J0422 / Manajemen E-Corporation
Tahun          : 2005
Versi          :1/2

                       MODULE 9 :
             Managing Diverse IT Infrastructure

              Learning Outcomes

 In this chapter, we will study:
    The benefits of increments of outsourcing.
    Choose hosting models for IT infrastructure
    How to select Service Provider Partners
    Cost and benefit analysis for IT assets and platforms
     provides a basis for evaluating a company’s current IT
     services against new service alternatives.
    Case Study : Ford Company : Supply Chain Strategy.

                 Outline Topic

 New Services Models.
 Managing Risk through Incremental Outsourcing.
 Managing Relationships with Service Providers.
 Managing Legacies.
 Managing IT Infrastructure Assets.
 Case Study : Ford Motor Company (Supply Chain


 Before emergence of the commercial Internet in 1990s,
  companies accomplished much now achieved through public
  Internetworks by using proprietary technologies installed and
  managed inside each firm. This approach was expensive and
    To reach business partners and customers, every company had to
      develop its own communication infrastructure, a process that led
      to massive duplication in infrastructure investment. Often the
      multiplicity of technologies confused and confounded the
      partners and customers businesses wanted to reach.
    The technologies did not interoperate well. Many companies
      maintained complex software programs that had no purpose
      except to serve as a bridge between other incompatible systems.
    Reliance on proprietary technologies meant that companies were
      locked in to specific vendor technologies. Once locked in, firms
      had little bargaining power and were at the mercy of the margin-
      maximizing inclinations of their technology providers.

        Managing Diverse IT Infrastructure

 The new approaches compare favorably and in many cases
  enhance previous approaches in numerous ways. Today, for
      Companies can share a communication infrastructure common to
       all business partners and customers. Customers and business
       partners can interact via common interfaces This seamless
       interaction dramatically reduces complexity and confusion.
      Because of the open Transmission Control Protocol/Internet
       Protocol (TCP/IP) standard, communication technologies
       interoperate very well. Software that bridges systems is simple,
       standardized, and inexpensive. In some cases, acquired for free.
      Companies are much less locked in to specific vendor
       technologies, a fact that creates more competition among
       vendors. More competition leads to lower prices and better-
       performing technology.
 At last, companies can combine technologies from numerous
  vendors and expect them to interconnect seamlessly

                   New Service Models

 Since the emergence of PC and client-server computing, end-user
  software has been designed to execute on PCs or on servers that
  are housed locally.
 Saved work--documents and other data--usually remains on a PCs
  hard drive or on storage devices connected to a nearby server or
  mainframe. In this scenario, when the software malfunctions, the
  user contacts his or her IT department, which owns and operates
  most, if not all of the IT infrastructure.
 With advent of reliable, high-capacity networks, however, local
  software execution no longer is the only alternative, nor is it
  necessarily the best alternative.
 Increasingly, software is designed to operate in geographically
  distant facilities that belong to specialized service providers, each of
  which deliver software services across the Internet to many different

               New Service Models

 Even if actual software applications are not acquired
  externally, other increments of outsourcing may make
 The benefits of increments of outsourcing include the
       • Managing the shortage of skilled IT workers
      •   Reduced time to market
      •   The shift to 24 x 7 operations
      •   Favorable cash flow profiles
      •   Cost reduction in IT service chains
      •   Making applications globally accessible

 Managing Risk through Incremental Outsourcing

 Increments of outsourcing offers new and attractive choices to
  managers seeking to improve IT infrastructure. In the past,
  managers often felt they faced two equally unpleasant
      Do nothing and risk slipping behind competitors
      Wholesale replacement of major components of computing
        infrastructure, which risks huge cost overruns and
        potential business disruptions as consequences of an
       implementation failure.
 Decisions to replace wholesale legacy networks with TCP/IP-
  based networks have run this second risk as have decisions
  about whether to implement enterprise systems.
 With the TCP/IP networks installed today, however,
  managers have intermediate options that lie between all-or-
  nothing choices.

Managing Risk through Incremental Outsourcing

 An Incremental Outsourcing Example: Hosting
    Outsource hosting of a company’s systems involves
     deciding where they should be located physically.
 The Hosting Service Provider Industry
    Proponents of service provider-based infrastructures
     describe a world in which companies routinely obtain a
     majority of the IT functionality needed for day-to-day
     business from over-the-Net service chains.

Managing Risk through Incremental Outsourcing

 Incremental Service Levels in Hosting
    Hosting models can be categorized along service level
     lines as:
      •   Co-location hosting
      •   Shared hosting
      •   Dedicated hosting
      •   Simple dedicated hosting
      •   Complex dedicated hosting
      •   Custom dedicated hosting

Managing Risk through Incremental Outsourcing

  Managing Relationships with Service Providers
     When they acquire IT services externally, companies inevitably
      find themselves engaged in relationships with a growing
      number of service provides.
     Services are only as good as the weakest link in the service
      provider chain. Choosing reliable services providers and
      managing strong vendor relationships therefore are critical
      skills for an IT manager.
  Selecting Service Provider Partners
     The most critical step in assembling an IT service chain is the
      selection of providers.
     The most common process for selecting service providers
      involves writing a “request for proposal” (RFP) and submitting
      it to a set of apparently qualified vendors.

Managing Risk through Incremental Outsourcing

   Selecting Service Provider Partners
      Typically RFPs request information in the following categories:
        • Descriptive information
             –    How it describes its business reveals much about a service
                  provider’s priorities and future direction.
         •   Financial information
              – A service provider’s financial strength is a critical factor in
                evaluating the continuity of service and service quality a
                vendor is likely to provide.
         •   Proposed plan for meeting service requirements
             – How the provider offers to meet the requirements laid out in the
               RFP indicates whether it truly understand the requirements.

Managing Risk through Incremental Outsourcing

 Selecting Service Provider Partners
    Typically RFPs request information in the following categories:
       • Mitigation of critical risks
            – A good RFP asks specific questions about potential service
              risks. Availability and security are two areas for customers to
              be sure they understand a service provider’s approach.
       •   Service guarantees.
            – A service provider’s guarantees (levels of performance it is
              willing to back with penalty clauses in a contract) are important
              signals of the real level of confidence vendor managers have in
              their services.
       •   Pricing
            – Pricing usually includes one-time and variable components and
              may be structured in other ways as well.

Managing Risk through Incremental Outsourcing

  Relationships with service provider partners require
   ongoing attention.
  The most formidable obstacles are sometimes not
   technical but “political.”
  A service-level agreement (SLA) is the prevalent
   contractual tool used to align incentives in relationships
   with service providers.

                Managing Legacies

 The difficulties that arise from legacy systems can be
  categorized as
      • Technology problems
        Sometimes constraints embedded in legacy systems result
        from inherent incompatibilities in older technologies.
      • Residual process complexity
        Some difficulties with legacy systems arise because the
        systems address problems that no longer exist.

                Managing Legacies

 The difficulties that arise from legacy systems (Cont’d)
      • Local Adaptation
        Many legacy systems were developed for very focused
        business purposes within functional hierarchies.
      • Non standard data definitions
        Throughout most companies, business units and divisions
        have used different conventions for important data elements.

       Managing IT Infrastructure Assets

 In the mainframe era, keeping track of the assets that
  made up a company’s IT infrastructure was relatively
  easy. The majority consisted of a small number of large
  mainframe machines in the corporate date center.
 After emergency of PCs, clients and servers, the Web,
  portable devices, and distributed network infrastructure,
  a company’s investments in IT became much more
 Computing assets were scattered in a large number of
  small machines located in different buildings. Some
  moved around with their users and left the company’s
  premises on a regular basis.

        Managing IT Infrastructure Assets

 The variety of asset configurations in modern IT
  infrastructures makes certain business questions hard to
      How are IT investments deployed across business lines/units?
      How are IT assets being used?
      Are they being used efficiently?
      Are they deployed to maximum business advantage?
      How can we adjust their deployment to create more value?

 One approach to this problem is called total cost of
  ownership (TCO) analysis.
 IT services are analyzed in terms of costs and benefits
  associated with service delivery to each client device.

       Managing IT Infrastructure Assets

 For example, the total cost of delivering office
  productivity services to a PC desktop within an
  enterprise might be expressed as “$250 per client per

 Cost and benefit analysis for IT assets and platforms
  provides a basis for evaluating a company’s current IT
  services against new service alternatives. Outsourcing
  vendors often are asked to bid on a per platform basis.
  These prices can be compared to study results to
  evaluate a company’s options and identify incremental
  opportunities for service deliver improvement.

 Ford Motor Company: Supply Chain Strategy

 Case Study :
    Form Motor Company : Supply Chain Strategy

 Ford Motor Company: Supply Chain Strategy

 What are the roadblocks that make the direct model
  difficult to implement at Ford
    What historical “legacies” affect Ford’s ability to move to a
     BTO model
      • Ford is 100 yrs old Founded 1903, Dell on the other hand
        was founded 15 years ago

      • Product variety
          – Necessitates the management of large number of individual
            component inventories
          – Production capacity for individual components get set long in
            advance and cannot be changed quickly

 Ford Motor Company: Supply Chain Strategy

 What historical “legacies” affect Ford’s ability to move to
  a BTO model
    Process Complexity
       •   A large number of suppliers
       •   3 tiers of suppliers
       •   Business was usually over the phone and fax
       •   Ford a $150billion company enjoy a tremendous leverage
           over its suppliers
            – Annual component price decrease and open book

 Ford Motor Company: Supply Chain Strategy

 What historical “legacies” affect Ford’s ability to move to
  a BTO model
    Powerful independent dealer network

    Unionized labor force

    Incompatible systems
       • Ford credit – DEC
       • Parts and service – IBM
       • Suppliers and dealers – Variety of systems

 Ford Motor Company: Supply Chain Strategy

 What practical challenges must Ford address as it tries
  to establish Internet linkages with its supply base
    Difficulties in establishing B2B linkages
    Lack of technology and technological sophistication that
     prevail in the supply chain, especially at lower tiers.

 Ford Motor Company: Supply Chain Strategy

 How should Ford use Internet technologies to interact
  with suppliers

    To address this problem Ford must think about its relationships
     not only with suppliers but also with dealers and customers.

    As supply chain systems staff members study the Dell model in
     particular, they come to appreciate that “virtual integration” must
     include design not only of the supply chain but also of fulfillment,
     forecasting, purchasing, and a variety of other functions that had
     long been considered separately within the Ford hierarchy.

    The question is in fact explosive in its implications, because it
     inevitably leads to fundamental questions about the way Ford
     has historically operated internally and how it has interacted with
     important partner constituencies (including dealers)

 Ford Motor Company: Supply Chain Strategy

 Recommendation on moving forward
   One group are enthusiastic about the technology and think
    that the only appropriate way to answer the question is to
    consider, evaluate and recommend radical changes to
    Ford overall business model; this group considers Dell a
    serious model for Ford’s business
   Another group is more cautious and believes that the
    fundamental differences between Dell’s industry and
    Ford’s industry necessitate significant differences in
    business models.

 Ford Motor Company: Supply Chain Strategy

 Recommendation on moving forward

   What is your own recommendation?

                 Chapter Summary

 The following questions should help a company assess
  the opportunities and the risks:
    What services within our IT infrastructure are candidates
     for incremental outsourcing?
    Where are there opportunities to convert large up-front IT
       investments into spread-over-time subscription services?
    Are our service delivery partners technically and financially
     capable enough to support our evolving IT service needs?
    Do we have well-defined processes for partner selection
     to ensure that we will continue to have highly capable

             Chapter Summary

 Do we have detailed service-level agreements in place
  with our service providers?
 Have we made sure the SLAs in our service deliver chains
  interlock and that incentives are aligned up and down the
 Do we have systems in place for virtually integrating with
  service delivery partners?
 Have we specified contract terms with service providers
  that preserve our options for incrementally improving our
 What our short-term and long-term strategies for dealing
  with legacy system issues?
 What systems should we replace, and when should we
  replace them?


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