Week 7

R. Ching, Ph.D. • MIS Area • California State University, Sacramento 1

Week 7Week 7Monday, March 6Monday, March 6

• Managing Diverse IT InfrastructuresManaging Diverse IT Infrastructures• Outsourcing the IT FunctionOutsourcing the IT Function


Building an IT InfrastructureBuilding an IT Infrastructure

• Every organization Every organization developed its own developed its own communication communication infrastructureinfrastructure

• Technologies did not Technologies did not interoperate wellinteroperate well

• Reliance on proprietary Reliance on proprietary organizations meant that organizations meant that companies were locked companies were locked in to a specific vendor in to a specific vendor technologiestechnologies

Performance Performance and reliability and reliability problemsproblems


Internet Technologies and Open Internet Technologies and Open StandardsStandards

• Organizations can share Organizations can share a communication a communication infrastructure common to infrastructure common to all business partners and all business partners and customerscustomers

• Communication Communication technologies incorporate technologies incorporate well due to TCP/IP well due to TCP/IP standardsstandards

• Organizations are less Organizations are less locked in to specific locked in to specific vendor technologies vendor technologies

Combine Combine technologies from technologies from numerous vendors numerous vendors and expect them to and expect them to interconnect interconnect seamlesslyseamlessly


Incremental Service Providers and Incremental Service Providers and Common InfrastructuresCommon Infrastructures

• As communication technologies improve and As communication technologies improve and become more compatible and modular, become more compatible and modular, businesses can obtain smaller increments of businesses can obtain smaller increments of service from outside vendors with shorter lead service from outside vendors with shorter lead times and contract durationstimes and contract durations– Pay for what you needPay for what you need

• Service partners and new business modelsService partners and new business models– Outsource services that are neededOutsource services that are needed– Leads to diverse IT infrastructures Leads to diverse IT infrastructures – Managing service provider relationships Managing service provider relationships

becomes importantbecomes important• Virtual integrationVirtual integration


New Service Models and BenefitsNew Service Models and BenefitsOpportunitiesOpportunities

• Overcome the shortage of specialized skills by Overcome the shortage of specialized skills by reducing the need for internal staffreducing the need for internal staff

• Network-based service delivery models help Network-based service delivery models help businesses quickly develop new capabilitiesbusinesses quickly develop new capabilities

• Service providers can quickly achieve economies Service providers can quickly achieve economies of scale in IT investments to maintain highly of scale in IT investments to maintain highly available and reliable systemsavailable and reliable systems

• Improves cash-flow by reducing the initial (costly) Improves cash-flow by reducing the initial (costly) IT investmentsIT investments

• Upgrades performed centrally and timelyUpgrades performed centrally and timely• Services available anywhere, anytime over the NetServices available anywhere, anytime over the Net


Vision Service PlanVision Service PlanManaging Accounts OnlineManaging Accounts Online

Internet Internet availabilityavailability


24 x 7 Commercial Banking24 x 7 Commercial Banking


Electronic Data Systems (EDS)Electronic Data Systems (EDS)Service ProviderService Provider


EDSEDS


EDSEDS

(Highlight added)(Highlight added)


EDS, Available ServicesEDS, Available Services


My SAPMy SAP

Enterprise computing servicesEnterprise computing services


For example…For example…


Incremental servicesIncremental services


On Demand, Utility and Grid Computing On Demand, Utility and Grid Computing ModelsModels

Common attributesCommon attributes• Financial models that make IT services easier and Financial models that make IT services easier and

less risky to procure and manageless risky to procure and manage• Restructuring and reengineering of existing Restructuring and reengineering of existing

application s to make them easier to manage and application s to make them easier to manage and useuse

• Enhancements to infrastructure to improve Enhancements to infrastructure to improve interoperability and efficiency in use of computing interoperability and efficiency in use of computing assetsassets


On Demand ComputingOn Demand Computing


Grid ComputingGrid Computing

• ““A computational grid is a hardware and software A computational grid is a hardware and software infrastructure that provides dependable, infrastructure that provides dependable, consistent, pervasive, and inexpensive access to consistent, pervasive, and inexpensive access to high-end computational capabilities.” high-end computational capabilities.” Foster and Foster and

Kesselman, 1998Kesselman, 1998


Grid Checklist: Characteristics of a GridGrid Checklist: Characteristics of a GridFoster, 2002Foster, 2002

• Coordinates resources that are not subject to Coordinates resources that are not subject to centralized controlcentralized control– Integrates and coordinates resources and users that live Integrates and coordinates resources and users that live

within different control domainswithin different control domains

• Standard, open, general-purpose protocols and Standard, open, general-purpose protocols and interfaces usedinterfaces used– Built from multi-purpose protocols and interfaces that Built from multi-purpose protocols and interfaces that

address fundamental issues (i.e., authentication, address fundamental issues (i.e., authentication, authorization, resource discovery, resource access)authorization, resource discovery, resource access)

• Deliver non-trivial qualities of serviceDeliver non-trivial qualities of service– Allow constituent resources to be used in a coordinated Allow constituent resources to be used in a coordinated

fashion to deliver various qualities of service to meet fashion to deliver various qualities of service to meet complex user demandscomplex user demands


(Highlight added)(Highlight added)

Grid.org, Grid ComputingGrid.org, Grid Computing


Grid Computing BenefitsGrid Computing Benefits





• Application layer Application layer includes all different includes all different user applications user applications (science, engineering, (science, engineering, business, financial), business, financial), portals and portals and development toolkits development toolkits supporting the supporting the applications. This is the applications. This is the layer that users of the layer that users of the grid will "see". grid will "see".

Source: gridcafe.web.cern.ch/gridcafe/Source: gridcafe.web.cern.ch/gridcafe/



• Middleware layer provides Middleware layer provides the tools that enable the the tools that enable the various elements various elements (servers, storage, (servers, storage, networks, etc.) to networks, etc.) to participate in a unified participate in a unified Grid environment. The Grid environment. The middleware layer can be middleware layer can be thought of as the thought of as the intelligence that brings intelligence that brings the various elements the various elements together - the "brain" of together - the "brain" of the Grid! the Grid!




• Resource layer, made Resource layer, made up of the actual up of the actual resources that are part resources that are part of the Grid, such as of the Grid, such as computers, storage computers, storage systems, and electronic systems, and electronic data catalogues which data catalogues which can be connected can be connected directly to the networkdirectly to the network

• Network assures the Network assures the connectivity for the connectivity for the resources in the Gridresources in the Grid



Grid Computing, Another ViewGrid Computing, Another View

• User ApplicationsUser Applications– Obtain the necessary authentication Obtain the necessary authentication

credentials to open the files (resource credentials to open the files (resource and connectivity protocols) and connectivity protocols)

– Query an information system and Query an information system and replica catalogue to determine where replica catalogue to determine where copies of the files in question can copies of the files in question can currently be found on the Grid, as well currently be found on the Grid, as well as where computational resources to as where computational resources to do the data analysis are most do the data analysis are most conveniently located (collective conveniently located (collective services) services)

– Submit requests to the fabric - the Submit requests to the fabric - the appropriate computers, storage appropriate computers, storage systems, and networks - to extract systems, and networks - to extract the data, initiate computations, and the data, initiate computations, and provide the results (resource and provide the results (resource and connectivity protocols) connectivity protocols)

– Monitor the progress of the various Monitor the progress of the various computations and data transfers, computations and data transfers, notifying the user when the analysis is notifying the user when the analysis is complete, and detecting and complete, and detecting and responding to failure conditions responding to failure conditions (collective services). (collective services).




• Collective ServicesCollective Services– Keep directories of available Keep directories of available

resources updated at all times resources updated at all times – Broker resources (which like Broker resources (which like

stock broking, is about stock broking, is about negotiating between those negotiating between those who want to "buy" resources who want to "buy" resources and those who want to "sell") and those who want to "sell")

– Monitor and diagnose Monitor and diagnose problems on the Grid problems on the Grid

– Replicate key data so that Replicate key data so that multiple copies are available multiple copies are available at different locations for ease at different locations for ease of use of use

– Provide membership/policy Provide membership/policy services for keeping track on services for keeping track on the Grid of who is allowed to the Grid of who is allowed to do what, when. do what, when.




• Resource and connectivity Resource and connectivity protocols handle all "Grid protocols handle all "Grid specific" network specific" network transactions between transactions between different computers and different computers and other resources on the Grid other resources on the Grid

• Fabric - all the physical Fabric - all the physical infrastructure of the Grid, infrastructure of the Grid, including computers and the including computers and the communication network communication network



Types of GridsTypes of GridsSource: Grid CafeSource: Grid Cafe

• National Grids - couple high-end resources across National Grids - couple high-end resources across a nation a nation

• Private Grids - characterized by a relatively small Private Grids - characterized by a relatively small scale, central management and common purpose scale, central management and common purpose

• Project Grids - created to meet the needs of a Project Grids - created to meet the needs of a variety of multi-institutional research groups and variety of multi-institutional research groups and multi-company "virtual teams", to pursue short- or multi-company "virtual teams", to pursue short- or medium-term projects (scientific collaborations, medium-term projects (scientific collaborations, engineering projects)engineering projects)

• Goodwill Grids - for anyone owning a computer at Goodwill Grids - for anyone owning a computer at home who wants to donate some computer home who wants to donate some computer capacity to a good cause capacity to a good cause


Types of GridsTypes of GridsSource: Grid CafeSource: Grid Cafe

• Peer-to-peer - depends on people sharing data Peer-to-peer - depends on people sharing data (like the now defunct Napster and its many (like the now defunct Napster and its many subsequent imitators) between their computerssubsequent imitators) between their computers– No central controlNo central control

• Consumer Grid - resources are shared on a Consumer Grid - resources are shared on a commercial basis, rather than on the basis of commercial basis, rather than on the basis of goodwill or mutual self-interestgoodwill or mutual self-interest– Companies or other organizations rent Companies or other organizations rent

distributed resources, and the owners of these distributed resources, and the owners of these resources are paid for the computing power or resources are paid for the computing power or data storage capacity they contribute, by a data storage capacity they contribute, by a "middleman" in charge of the middleware "middleman" in charge of the middleware


Managing Risk Through OutsourcingManaging Risk Through OutsourcingInternal vs. External Service DeliveryInternal vs. External Service Delivery

• If unique and provide a significant advantage, If unique and provide a significant advantage, don’t outsourcedon’t outsource

• IT services essential for running a business but IT services essential for running a business but common across competitors can be outsourcedcommon across competitors can be outsourced

Keep internalKeep internal

OutsourceOutsource

Keep internalKeep internal

Is external deliveryIs external deliveryreliable and lower cost?reliable and lower cost?

Does service offer aDoes service offer a competitive advantage? competitive advantage?


Incremental Outsourcing andIncremental Outsourcing andManaging RisksManaging Risks

• Outsourcing a particular function rather than the Outsourcing a particular function rather than the entire operationentire operation

• Consequences of mismanagement are not as far-Consequences of mismanagement are not as far-reachingreaching

• Offers new and attractive choices to managers Offers new and attractive choices to managers seeking to improve the IT infrastructureseeking to improve the IT infrastructure


Drivers of OutsourcingDrivers of OutsourcingSprague and McNurlinSprague and McNurlin

• Breakdown in IT performanceBreakdown in IT performance– Need to retool lacking technologyNeed to retool lacking technology

• Intense supplier pressuresIntense supplier pressures– Sales of surplus supplier capacitySales of surplus supplier capacity

• Simplified general management agendaSimplified general management agenda– Outsource non-core competence operationsOutsource non-core competence operations

• Financial factorsFinancial factors– Reduce sporadic capital investments in ITReduce sporadic capital investments in IT– Downsizing IT operating costsDownsizing IT operating costs– Greater organizational awareness of IT’s costsGreater organizational awareness of IT’s costs– More appealing for takeoversMore appealing for takeovers


• Corporate cultureCorporate culture– Resistance to change within the organizationResistance to change within the organization– Labor unionsLabor unions

• Eliminating an internal irritantEliminating an internal irritant– Conflicts between users and IT staffConflicts between users and IT staff

• Other factorsOther factors– Quick access to current technology and skillsQuick access to current technology and skills– Need to quickly response to changes in the Need to quickly response to changes in the

marketmarket

Drivers of OutsourcingDrivers of Outsourcing


Framework for OutsourcingFramework for Outsourcing

• Position on the strategic gridPosition on the strategic grid

HighHigh

LowLow

HighHighLowLow

FactoryFactoryOperational ITOperational IT

SupportSupportBasic elementsBasic elements

TurnaroundTurnaroundGradual adoptionGradual adoption

StrategicStrategicStrategic IT plan, Strategic IT plan,

initiativesinitiatives

YesYes

YesYes

DependsDepends

DependsDepends

Product differentiationProduct differentiationProduct differentiationProduct differentiation

IT Impact on IT Impact on Business Business

OperationsOperations

IT Impact on StrategyIT Impact on Strategy


Strategic Grid: OutsourcingStrategic Grid: Outsourcing

HighHigh

LowLowHighHighLowLow

IT Impact on IT Impact on Business Business

OperationsOperations

IT Impact on StrategyIT Impact on Strategy

FactoryFactoryOperational ITOperational IT

SupportSupportBasic elementsBasic elements

TurnaroundTurnaroundGradual adoptionGradual adoption

StrategicStrategicStrategic IT plan, initiativesStrategic IT plan, initiatives

• Economies of scaleEconomies of scale• Higher-quality service and Higher-quality service and

backupbackup• Management focus Management focus

facilitatedfacilitated

• Correct internal problemCorrect internal problem• Tap cash sourceTap cash source• Cost flexibilityCost flexibility• DivestitureDivestiture

• Access to IT professionalsAccess to IT professionals• Focus on core Focus on core

competenciescompetencies• Access to current ITAccess to current IT• Reduce risk in IT Reduce risk in IT

investmentsinvestments

• Internal IT shortfallsInternal IT shortfalls• Internal IT development Internal IT development

skill shortfallsskill shortfalls


Framework for OutsourcingFramework for OutsourcingSprague and McNurlinSprague and McNurlin

1.1. Position on strategic grid (Position on strategic grid (cont.cont.))– Outsource operational activitiesOutsource operational activities

• More operationally dependent More operationally dependent organizationsorganizations

– Need for greater analysis when large IT Need for greater analysis when large IT budgets involvedbudgets involved

2.2. Development portfolioDevelopment portfolio– Maintenance vs. development projectsMaintenance vs. development projects

• High structured vs. low structured High structured vs. low structured development workdevelopment work


Framework for OutsourcingFramework for Outsourcing

3.3. Operational learningOperational learning– Organizational assimilation of technologyOrganizational assimilation of technology

4.4. Organization’s IT architecture and infrastructureOrganization’s IT architecture and infrastructure– Currency of architectureCurrency of architecture

5.5. Current technology in the organizationCurrent technology in the organization– Segregated operations more easily Segregated operations more easily

outsourcedoutsourced


Structuring the Alliance between Structuring the Alliance between Outsourcer and “Outsourcee” Outsourcer and “Outsourcee” (Customer)(Customer)

• FactorsFactors– Contract flexibilityContract flexibility– Standards and controlStandards and control– Areas to outsourceAreas to outsource– Cost savingsCost savings– Supplier stability and qualitySupplier stability and quality– Management fitManagement fit– Conversion problemsConversion problems

AllianceAlliance



• Contract flexibilityContract flexibility– Accommodating changes in the environmentAccommodating changes in the environment

• Information needsInformation needs• Competitive needsCompetitive needs• Advances in ITAdvances in IT

• Standards and controlStandards and control– Risk (i.e., lost of control, disruptions) in Risk (i.e., lost of control, disruptions) in

operationsoperations– Risk in introducing innovations to the Risk in introducing innovations to the

organizationorganization– Risk in revealing internal Risk in revealing internal secretssecrets



• Areas to outsourceAreas to outsource– DetermineDetermine

• Are operations segregated or tightly Are operations segregated or tightly embedded?embedded?

• Can specialized competencies be acquired in Can specialized competencies be acquired in the long run?the long run?

• Are operations core to the organization?Are operations core to the organization?• Cost savingsCost savings

– ObjectiveObjective evaluation of costs and savings evaluation of costs and savings



• Supplier Stability and QualitySupplier Stability and Quality– Financial stabilityFinancial stability

• Difficult to insourceDifficult to insource• Difficult to change outsourcersDifficult to change outsourcers

– Incompatibility between the organization and Incompatibility between the organization and outsourceroutsourcer• TechnologyTechnology• Organization cultureOrganization culture• Between technology and organization’s Between technology and organization’s

strategystrategy



• Management fitManagement fit– Compatibility between management styles and Compatibility between management styles and

culturescultures• Conversion problemsConversion problems

– Mergers and acquisitionsMergers and acquisitions• IncompatibilitiesIncompatibilities


Managing IT Infrastructure AssetsManaging IT Infrastructure Assets

• Total cost of ownershipTotal cost of ownership– Cost and benefits associated with service Cost and benefits associated with service

delivery to each client devicedelivery to each client device– Operating costs includes software licensing, Operating costs includes software licensing,

labor and other costs to remain connectedlabor and other costs to remain connected


Strategic ImplicationsStrategic Implications

• What are the strategic implications with on What are the strategic implications with on demand (utility and grid) computing?demand (utility and grid) computing?– Benefits and CostsBenefits and Costs

• What are the strategic implications with out What are the strategic implications with out sourcing?sourcing?– Benefits and CostsBenefits and Costs