Week 7
Monday, March 6
• Managing Diverse IT Infrastructures
• Outsourcing the IT Function
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
1
Building an IT Infrastructure
• Every organization developed
its own communication
infrastructure
• Technologies did not
interoperate well
• Reliance on proprietary
organizations meant that
companies were locked in to
a specific vendor
technologies
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Performance
and reliability
problems
2
Internet Technologies and Open Standards
• Organizations can share a
communication infrastructure
common to all business
partners and customers
• Communication technologies
incorporate well due to
TCP/IP standards
• Organizations are less locked
in to specific vendor
technologies
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Combine
technologies from
numerous vendors
and expect them to
interconnect
seamlessly
3
Incremental Service Providers and
Common Infrastructures
• As communication technologies improve and become
more compatible and modular, businesses can obtain
smaller increments of service from outside vendors with
shorter lead times and contract durations
– Pay for what you need
• Service partners and new business models
– Outsource services that are needed
– Leads to diverse IT infrastructures
– Managing service provider relationships becomes
important
• Virtual integration
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
4
New Service Models and Benefits
Opportunities
• Overcome the shortage of specialized skills by reducing
the need for internal staff
• Network-based service delivery models help businesses
quickly develop new capabilities
• Service providers can quickly achieve economies of scale
in IT investments to maintain highly available and
reliable systems
• Improves cash-flow by reducing the initial (costly) IT
investments
• Upgrades performed centrally and timely
• Services available anywhere, anytime over the Net
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
5
Vision Service Plan
Managing Accounts Online
Internet
availability
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
6
24 x 7 Commercial Banking
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
7
Electronic Data Systems (EDS)
Service Provider
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
8
EDS
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
9
EDS
(Highlight added)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
10
EDS, Available Services
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
11
My SAP
Enterprise computing services
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
12
For example…
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
13
Incremental services
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
14
On Demand, Utility and Grid Computing
Models
Common attributes
• Financial models that make IT services easier and less
risky to procure and manage
• Restructuring and reengineering of existing application s
to make them easier to manage and use
• Enhancements to infrastructure to improve
interoperability and efficiency in use of computing assets
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
15
On Demand Computing
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
16
Grid Computing
• “A computational grid is a hardware and software
infrastructure that provides dependable, consistent,
pervasive, and inexpensive access to high-end
computational capabilities.” Foster and Kesselman, 1998
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
17
Grid Checklist: Characteristics of a Grid
Foster, 2002
• Coordinates resources that are not subject to centralized
control
– Integrates and coordinates resources and users that live within
different control domains
• Standard, open, general-purpose protocols and
interfaces used
– Built from multi-purpose protocols and interfaces that address
fundamental issues (i.e., authentication, authorization, resource
discovery, resource access)
• Deliver non-trivial qualities of service
– Allow constituent resources to be used in a coordinated fashion
to deliver various qualities of service to meet complex user
demands
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
18
Grid.org, Grid Computing
(Highlight added)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
19
Grid Computing Benefits
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
20
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
21
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
22
Grid Computing
• Application layer includes
all different user
applications (science,
engineering, business,
financial), portals and
development toolkits
supporting the applications.
This is the layer that users
of the grid will "see".
Source: gridcafe.web.cern.ch/gridcafe/
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
23
Grid Computing
• Middleware layer provides
the tools that enable the
various elements (servers,
storage, networks, etc.) to
participate in a unified Grid
environment. The
middleware layer can be
thought of as the
intelligence that brings the
various elements together the "brain" of the Grid!
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Source: gridcafe.web.cern.ch/gridcafe/
24
Grid Computing
• Resource layer, made up of
the actual resources that
are part of the Grid, such
as computers, storage
systems, and electronic
data catalogues which can
be connected directly to
the network
• Network assures the
connectivity for the
resources in the Grid
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Source: gridcafe.web.cern.ch/gridcafe/
25
Grid Computing, Another View
• User Applications
–Obtain the necessary authentication
credentials to open the files (resource
and connectivity protocols)
–Query an information system and replica
catalogue to determine where copies of
the files in question can currently be
found on the Grid, as well as where
computational resources to do the data
analysis are most conveniently located
(collective services)
–Submit requests to the fabric - the
appropriate computers, storage systems,
and networks - to extract the data,
initiate computations, and provide the
results (resource and connectivity
protocols)
–Monitor the progress of the various
computations and data transfers,
notifying the user when the analysis is
complete, and detecting and responding
to failure conditions (collective services).
Source: gridcafe.web.cern.ch/gridcafe/
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
26
Grid Computing, Another View
• Collective Services
– Keep directories of available
resources updated at all times
– Broker resources (which like
stock broking, is about
negotiating between those who
want to "buy" resources and
those who want to "sell")
– Monitor and diagnose problems
on the Grid
– Replicate key data so that
multiple copies are available at
different locations for ease of
use
– Provide membership/policy
services for keeping track on
the Grid of who is allowed to
do what, when.
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Source: gridcafe.web.cern.ch/gridcafe/
27
Grid Computing, Another View
• Resource and connectivity
protocols handle all "Grid
specific" network transactions
between different computers and
other resources on the Grid
• Fabric - all the physical
infrastructure of the Grid,
including computers and the
communication network
Source: gridcafe.web.cern.ch/gridcafe/
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
28
Types of Grids
Source: Grid Cafe
• National Grids - couple high-end resources across a
nation
• Private Grids - characterized by a relatively small scale,
central management and common purpose
• Project Grids - created to meet the needs of a variety of
multi-institutional research groups and multi-company
"virtual teams", to pursue short- or medium-term
projects (scientific collaborations, engineering projects)
• Goodwill Grids - for anyone owning a computer at home
who wants to donate some computer capacity to a good
cause
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
29
Types of Grids
Source: Grid Cafe
• Peer-to-peer - depends on people sharing data (like the
now defunct Napster and its many subsequent imitators)
between their computers
– No central control
• Consumer Grid - resources are shared on a commercial
basis, rather than on the basis of goodwill or mutual selfinterest
– Companies or other organizations rent distributed
resources, and the owners of these resources are
paid for the computing power or data storage
capacity they contribute, by a "middleman" in charge
of the middleware
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
30
Managing Risk Through Outsourcing
Internal vs. External Service Delivery
• If unique and provide a significant advantage, don’t
outsource
• IT services essential for running a business but common
across competitors can be outsourced
Keep internal
Is external delivery
reliable and lower cost?
Outsource
Does service offer a
competitive advantage?
Keep internal
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
31
Incremental Outsourcing and
Managing Risks
• Outsourcing a particular function rather than the entire
operation
• Consequences of mismanagement are not as farreaching
• Offers new and attractive choices to managers seeking
to improve the IT infrastructure
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
32
Drivers of Outsourcing
Sprague and McNurlin
• Breakdown in IT performance
– Need to retool lacking technology
• Intense supplier pressures
– Sales of surplus supplier capacity
• Simplified general management agenda
– Outsource non-core competence operations
• Financial factors
– Reduce sporadic capital investments in IT
– Downsizing IT operating costs
– Greater organizational awareness of IT’s costs
– More appealing for takeovers
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
33
Drivers of Outsourcing
• Corporate culture
– Resistance to change within the organization
– Labor unions
• Eliminating an internal irritant
– Conflicts between users and IT staff
• Other factors
– Quick access to current technology and skills
– Need to quickly response to changes in the market
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
34
Framework for Outsourcing
• Position on the strategic grid
Product differentiation
High
Yes
Strategic Depends
Strategic IT plan,
initiatives
Yes
Depends
Turnaround
Gradual adoption
Factory
Operational IT
IT Impact on
Business
Operations
Support
Basic elements
Low
Low
IT Impact on Strategy
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
High
35
Strategic Grid: Outsourcing
High
IT Impact on
Business
Operations
Factory
Operational IT
• Economies of scale
• Higher-quality service and
backup
• Management focus
facilitated
Support
Basic elements
• Access to IT professionals
• Focus on core
competencies
• Access to current IT
• Reduce risk in IT
investments
•
•
•
•
Strategic
Strategic IT plan, initiatives
Correct internal problem
Tap cash source
Cost flexibility
Divestiture
Turnaround
Gradual adoption
• Internal IT shortfalls
• Internal IT development
skill shortfalls
Low
Low
IT Impact on Strategy
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
High
36
Framework for Outsourcing
Sprague and McNurlin
1. Position on strategic grid (cont.)
– Outsource operational activities
• More operationally dependent organizations
– Need for greater analysis when large IT budgets
involved
2. Development portfolio
– Maintenance vs. development projects
• High structured vs. low structured development
work
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
37
Framework for Outsourcing
3. Operational learning
– Organizational assimilation of technology
4. Organization’s IT architecture and infrastructure
– Currency of architecture
5. Current technology in the organization
– Segregated operations more easily outsourced
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
38
Structuring the Alliance between Outsourcer
and “Outsourcee” (Customer)
• Factors
– Contract flexibility
– Standards and control
– Areas to outsource
– Cost savings
– Supplier stability and quality
– Management fit
– Conversion problems
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Alliance
39
Structuring the Alliance between Outsourcer
and “Outsourcee” (Customer)
• Contract flexibility
– Accommodating changes in the environment
• Information needs
• Competitive needs
• Advances in IT
• Standards and control
– Risk (i.e., lost of control, disruptions) in operations
– Risk in introducing innovations to the organization
– Risk in revealing internal secrets
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
40
Structuring the Alliance between Outsourcer
and “Outsourcee” (Customer)
• Areas to outsource
– Determine
• Are operations segregated or tightly embedded?
• Can specialized competencies be acquired in the
long run?
• Are operations core to the organization?
• Cost savings
– Objective evaluation of costs and savings
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
41
Structuring the Alliance between Outsourcer
and “Outsourcee” (Customer)
• Supplier Stability and Quality
– Financial stability
• Difficult to insource
• Difficult to change outsourcers
– Incompatibility between the organization and
outsourcer
• Technology
• Organization culture
• Between technology and organization’s strategy
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
42
Structuring the Alliance between Outsourcer
and “Outsourcee” (Customer)
• Management fit
– Compatibility between management styles and
cultures
• Conversion problems
– Mergers and acquisitions
• Incompatibilities
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
43
Managing IT Infrastructure Assets
• Total cost of ownership
– Cost and benefits associated with service delivery to
each client device
– Operating costs includes software licensing, labor and
other costs to remain connected
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
44
Strategic Implications
• What are the strategic implications with on demand
(utility and grid) computing?
– Benefits and Costs
• What are the strategic implications with out sourcing?
– Benefits and Costs
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
45