Chapter 8Chapter 8
Information Technology Operations
N
What is Total Cost of What is Total Cost of Ownership (TCO)?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.
TM -2
An Example of Four Metrics An Example of Four Metrics for TCO Modelfor TCO Model
CapitalTechnical SupportAdministrationEnd-user operations
Each category is further divided into desktop and network components
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and …Costs of Downtime
The Driving Forces Behind The Driving Forces Behind OutsourcingOutsourcing
• Two drivers – focus
on core business
– value shareholder
TM -4TM -4
The Changing Operations The Changing Operations EnvironmentEnvironment
• 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
– highly volatile technology– specialized labor– dynamic markets– changing industry structure
Dr. Chen, IT Operations and Management Processes TM -5
Developing an Operations Developing an Operations StrategyStrategy
• 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 …
NDr. Chen, IT Operations and Management Processes TM -6
Technology PlanningTechnology 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
Userreadiness
Businessobjectives
Current IToperation
delivery capacity
ITplanning/technology
awareness
Phased programof innovation
NDr. Chen, IT Operations and Management Processes TM -7
Table 8-1: Characteristics of Effective Management of Emerging-Technology (ET) by Phase
Organization Organic (ET) Mechanistic (traditional IT)
Management control Loose, informal Tight
Leadership Participating Directive (telling, delegating)
Management Issue Innovation-Phase Control-Phase Concerns: (Effectiveness) (Efficiency)
Characteristics
Ability to support the new technology
Resources of diffusion of the technology
General management
approves
E.T. Group
NDr. Chen, IT Operations and Management Processes TM -8
IT Planning: The relationship between business, IS, and IT Planning: The relationship between business, IS, and IT strategiesIT strategies
Dr. Chen, IT Operations and Management Processes TM -9
IT Planning: Basic four-stage modelIT Planning: Basic four-stage model
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Major activities and outputs in the four stage of IT Major activities and outputs in the four stage of IT planningplanning
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Business Systems Planning (BSP) ApproachBusiness Systems Planning (BSP) Approach
Dr. Chen, IT Operations and Management Processes TM -12
Charge-OutCharge-Out System System(Charge-Back, Cost-Recover)(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)
Dr. Chen, IT Operations and Management Processes TM -13
IT Planning: Stages, Methods, and OutputsIT Planning: Stages, Methods, and Outputs
NDr. Chen, IT Operations and Management Processes TM -14
Nolan’s Six Stages of IS GrowthNolan’s Six Stages of IS Growth
Dr. Chen, IT Operations and Management Processes TM -15
CRITICAL SUCCESS FACTORSCRITICAL 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
*
Dr. Chen, IT Operations and Management Processes TM -17
EXAMPLE GOALS CSFs
PROFIT EARNINGS/SHARE AUTOMOTIVE INDUSTRY:
CONCERN RETURN ON INVESTMENT STYLING
MARKET SHARE QUALITY DEALER SYSTEM
NEW PRODUCT 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
CRITICAL SUCCESS FACTORSCRITICAL SUCCESS FACTORS (CSFs) (CSFs) & GOALS& GOALS
Dr. Chen, IT Operations and Management Processes TM -18
Dr. Chen, IT Operations and Management Processes TM -19
USING CSFs TO DEVELOP SYSTEMSUSING 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
Dr. Chen, IT Operations and Management Processes TM -20
Five-Step Model for Information Requirements Five-Step Model for Information Requirements AnalysisAnalysis
Dr. Chen, IT Operations and Management Processes TM -21
Measuring and Managing CapacityMeasuring 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
NDr. Chen, IT Operations and Management Processes TM -22
Managing the IT Operations Managing the IT Operations WorkforceWorkforce
• 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
NDr. Chen, IT Operations and Management Processes TM -23
Production Planning and ControlProduction 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
NDr. Chen, IT Operations and Management Processes TM -24
SecuritySecurity• 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
NDr. Chen, IT Operations and Management Processes TM -25
PrivacyPrivacy• 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
NDr. Chen, IT Operations and Management Processes TM -26
Chapter 9Chapter 9
Information TechnologyManagement Processes
Management ControlManagement 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.”
Dr. Chen, IT Operations and Management Processes TM -28
PlanningProcessing
System
Inputof
DataResources
Output of
InformationProducts
People Resources: End Users and IS Specialists
Data Resources: Data Knowledge Bases
Management Control System
Project Management System
So
ftware R
esou
rces: Pro
gram
s and
Pro
cedu
resHar
dw
are
Res
ou
rces
: M
ach
ines
an
d M
edia
Network Resources: Communications Media and Network Support
IT Management Process ModelIT Management Process Model
Dr. Chen, IT Operations and Management Processes TM -29
Relationship among Planning Relationship among Planning and Control Effortsand 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
Dr. Chen, IT Operations and Management Processes TM -30
Charge-OutCharge-Out(Charge-Back, Cost-Recover) (Charge-Back, Cost-Recover)
SystemSystem
• 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)
TM -31
Objectives of Objectives of IT Management ControlIT 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 ConsiderFactors 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
NDr. Chen, IT Operations and Management Processes TM -33
ITIT Evolution and Management Evolution and Management ControlControl
• 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
NDr. Chen, IT Operations and Management Processes TM -34
Results Control ArchitecturesResults Control Architectures
• Unallocated Cost Center
• Allocated Cost Center and Charge-Out Procedures
• Profit Center
Dr. Chen, IT Operations and Management Processes TM -35
Unallocated Cost CenterUnallocated 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 tradeoffsNDr. Chen, IT Operations and Management Processes TM -36
Allocated Cost Center and Allocated Cost Center and Charge-Out Procedures ICharge-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
NDr. Chen, IT Operations and Management Processes TM -37
Allocated Cost Center and Allocated Cost Center and Charge-Out Procedures IICharge-Out Procedures II
• Desirable Characteristics (for an IT charge-out 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
NDr. Chen, IT Operations and Management Processes TM -38
Allocated Cost Center and Allocated Cost Center and Charge-Out Procedures IIICharge-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)
NDr. Chen, IT Operations and Management Processes TM -39
Profit CenterProfit 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?
NDr. Chen, IT Operations and Management Processes TM -40
Budget Process
BudgetObjectives
1. Fine-tuning
2. Trigger a dialogue
3. Warning system
1. Appropriate people are involved
2. Appropriate controls
3. Education
BudgetTargets
1. Establish benchmark dates
2. Personnel types and levels
3. Milestones and completion dates
Outputs
1. Planned service levels
2. Costs of central operations
Financial Reporting Process
NDr. Chen, IT Operations and Management Processes TM -41
Nonfinancial Reporting ProcessNonfinancial 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
Dr. Chen, IT Operations and Management Processes TM -42
IT Audit FunctionIT 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
NDr. Chen, IT Operations and Management Processes TM -43
Information Technology Information Technology PlanningPlanning
“Communicating viewpoints and discussing problems and potential opportunities may be as important as selecting appropriate
projects.”
Dr. Chen, IT Operations and Management Processes TM -44
Pressures Toward IT Planning Pressures Toward IT Planning II
• 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
NDr. Chen, IT Operations and Management Processes TM -45
Pressures Toward IT Planning Pressures Toward IT Planning IIII
• IT Process Pressures– During Phase I:
new technologieshuman resource skills
– During Phase II:develop potential users’ interest in the technologyinitiate a series of user-supported pilot projects
– During Phase III:efficiency focusshort term
– During Phase IVmanaged evolutionlong-term exploitation of the technology
1. Identification/Investments
(Technical-oriented)
2. Learning/ Adaptation
(User-oriented)
3. Rationalization/Management Control
4. Maturity/Technology Transfer
NDr. Chen, IT Operations and Management Processes TM -46
Limitations on the Limitations on the Effectiveness of IT PlanningEffectiveness 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
NDr. Chen, IT Operations and Management Processes TM -47
HighLow
High
Low
Figure 9-1: Information Technology Strategic Grid
Strategic impact of application development portfolio
Strategic impact of existing
operating systems
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
Factory
Support
Strategic
Turnaround
C EB
G
F
H
A, 1992 A, 1988
D
NDr. Chen, IT Operations and Management Processes TM -48
HighLow
High
Low
Figure: Information Technology Strategic Grid
Strategic impact of application development portfolio
Strategic impact of existing
operating systems
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
Factory
Support
Strategic
Turnaround
C EB
G
F
H
A, 1992 A, 1988
D
NDr. Chen, IT Operations and Management Processes TM -49
•IT support•Cost-effective•No disruption
•IT support•Un-interruptive cost-effectiveis NOT necessary
•IT support•Little strategic impact
Improving IT Planning SuccessImproving 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
NDr. Chen, IT Operations and Management Processes TM -50
That’s All, FolksThat’s All, Folks
The IT ArchitectureThe 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.
*
Dr. Chen, The Challenge of the Information Systems Technology TM -TM -5353
Consists of ...Consists of ...
ManagementManagement
IT ManagementIT ManagementUSERS USERS ManagementManagement
GENERAL GENERAL ManagementManagement
Partnership of Three Partnership of Three ConstituenciesConstituencies
Plus ...Plus ...
ImaginationImaginationChallenge ...Challenge ...
Figure 8-1: Forces (and tensions) to be Managed in IT Innovation
Technology
Userreadiness
Businessobjectives
Current IToperation
delivery capacity
ITplanning/technology
awareness
Phased programof innovation
Table 8-1: Characteristics of Effective Management of Emerging-Technology (ET) by Phase
Organization Organic (ET) Mechanistic (traditional IT)
Management control Loose, informal Tight
Leadership Participating Directive (telling, delegating)
Management Issue Innovation-Phase Control-Phase (Effectiveness) (Efficiency)
Characteristics
• 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.