Matakuliah
Tahun
Versi
: J0422 / Manajemen E-Corporation
: 2005
:1/2
MODULE 9 :
Managing Diverse IT Infrastructure
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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.
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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
Strategy).
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Content
 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
unsatisfactory.
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 marginmaximizing inclinations of their technology providers.

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Managing Diverse IT Infrastructure
 The new approaches compare favorably and in many cases
enhance previous approaches in numerous ways. Today, for
example:
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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 betterperforming technology.
 At last, companies can combine technologies from numerous
vendors and expect them to interconnect seamlessly
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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
customers.
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New Service Models
 Even if actual software applications are not acquired
externally, other increments of outsourcing may make
sense.
 The benefits of increments of outsourcing include the
following:
• Managing the shortage of skilled IT workers
•
•
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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
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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
choices:


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/IPbased 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-ornothing choices.
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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.
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Managing Risk through Incremental Outsourcing
 Incremental Service Levels in Hosting
 Hosting models can be categorized along service level
lines as:
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•
•
•
•
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Co-location hosting
Shared hosting
Dedicated hosting
Simple dedicated hosting
Complex dedicated hosting
Custom dedicated hosting
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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.
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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.
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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.
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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.
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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.
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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.
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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
diffuse.
 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.
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Managing IT Infrastructure Assets
 The variety of asset configurations in modern IT
infrastructures makes certain business questions hard to
answer:
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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.
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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
month.”
 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.
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Ford Motor Company: Supply Chain Strategy
 Case Study :
 Form Motor Company : Supply Chain Strategy
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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
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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
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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
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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.
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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)
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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.
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Ford Motor Company: Supply Chain Strategy
 Recommendation on moving forward
 What is your own recommendation?
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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
partners?
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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
chain?
 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
infrastructure?
 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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