The assignment would be explaining About Delta bank and its IT needs, the benefit of outsourcing, Risk, Location and Operation of outsourcing.
Delta bank needs to have an excellent system that is secure in place. This means Delta bank would need a large scale computer and server system in place this will allow the company to connect and relay information at anytime. Therefore whether you were in marketing to accounts you can access the information. They would also need internal telephones, which allow people in the entire company to access each other. Although Delta bank would need to have IT support to support these systems these would include the Internet and the intranet.
Delta bank's past system
The Information strategy that resulted from the decision to outsource was based around the on-demand aspect of the relationship between the two companies, which was prompted from what was being called a "virtual pool of computing resources" (Delta bank Case Study). The resources were supplied by both companies and were made available for when required. The Utility Management Infrastructure (UMI) was set up by IBM to refer to the technology that supported the resources supplied (Delta bank Case Study).
Delta bank in the past has adopted a system where its internal environment is more important. Therefore I feel the system they have adopted in the past is an enterprise system, this system deals with the companys associates and the building of the company. Evidence of this can be seen in the case study. "The appeal of its products to customers, its ability to meet the objectives and the needs of clients, its reputation and the ability to attract and retain its personnel"
Although by signing the contract with IBM Delta bank seem to have changed its strategy to looking outside the company although still concentrating on the internal environment therefore I would point out that they may have changed their cross functional system to a supply chain management as they are now looking at the external environment. Please see below a diagram of an enterprise system.
Source: http://docs.sun.com/source/8175764/images/sys_infrastruc2.gif
Although by outsourcing there IT department to IBM, Delta bank have changed their strategy slightly towards a more supply chain management view, this is still customer focused but links them to another company. An example of a chain management system is one below.
Source:www.compiere.org/functionality/images/SupplyChainManagement.gif
Benefits and Risk of Outsourcing
Unfortunately outsourcing can be very risky but if works the benefits can be high as it reduces costs. Outsourcing can be defined as passing of service provision or production to another internal or external party. The main reason for outsourcing is to reduce capital expenditure over a business process and also management gets more time to concentrate over core competencies. Outsourcing also reduces the dependency on internal resources thus increases the flexibility to meet up the varying business and commercial situation.
There are many other reasons can be listed up in favour of outsourcing but we should not ignore the disadvantages of it.
The result of outsourcing a business process, we can lose the managerial control. The main reason for this is; it is harder to manage the outsourcing service provider as compare to managing our own employees.
We generally would be likely to skip or miss to calculate the possible hidden costs of outsourcing which includes legal costs of put together a contract between corporations and time used up on coordinating the contracts; we believe that outsourcing reduces the on the whole expenditure of a business process, this is one of the major reasons why a company goes for outsourcing.
These are the hidden and missed out costs of outsourcing is difficult to forecast and can cause overall costs to be underestimated.
Outsourcing can also be a threat to the security / confidentiality of issues of the organization. If the organization is outsourcing business process such as payroll, than the outsourcing service provider will be familiar with confidential information such as salary and wages. Therefore they must be very careful for choosing; which business process to outsource and which one to not.
Outsourcing might also effect into the possible loss of flexibility in responding to changing business circumstances, be short of internal and external customer focus and contribute to cost savings. Lowering down of internally generated talent is so far, and the another problem associated with the outsourcing as it could be hamper the expansion of an employee by depriving him from the experience he would have added by handling the business matters himself then by passing it to some other external party.
Outsourcing may also cause staff morale to dip which happened to Delta bank , they transferred 4,000 employees onto IBM's payroll, retaining a few of its IT functions, including application delivery and development, desktop support, and other core functions. This left many employees having to re-interview for their own job, with further reductions being made in the next 12 months. This meant productivity for Delta bank fell.
As before a company fixed on to outsource its business process, it must scan all the factors carefully. That because, it may not happen that outsourcing will become a reason for corporation to regret afterwards. Which is the mistake that Delta bank made, and they did regret it later.
IBM Daksha (India)
Delta bank can outsource to IBM Daksha (INDIA), which is world leader in outsourcing and BPO's. An information system, which allowed the two businesses to seem closer together than, they actually were. This is called a virtual pool; this technology used open architecture standards that enabled different components such as storage devices and servers to work together. This process eliminated the need for writing new applications for each system that the client required to run its business. In return for the major deal Delta bank can expect a smooth transition between the two companies, productivity to go up and profits to rise.
Outsourcing and IT
We can describe an information system as technically as a set of interrelated components that collect (or retrieve), store, process and distribution of an information to support decision making and control within company. In addition to supporting decision-making, co-ordination, and control, information systems will also help authorities, managers and worker to analyse and cope with the problems, visualize complex subjects, and creating new products.
Information systems include information about important people, places and things within the company and in the environment surrounding to it. By information I mean data has been formed into a form that is meaningful and useful to human. Data in contrast are streams of raw facts representing events occurring in the company or the physical surroundings before they have be planned into a form that people can identify with and use. These three actions in an information system produce the information that an organization needs for making decisions, analysing problems, controlling operations and for creating new products or services. These are the activities are input, processing, and output. Input captures or collects raw data from the inside of the company or from the external environment. Processing that transfers raw data or inputs into the more meaningful form. Output transfers the processed information to the individuals or activities where it can be used. Information system also needed a feedback, which is output returned to appropriate associates of the company to help them assess or accurate the input stage.
Advantages of an IT
Modern information systems are sophisticated data management tools and powerful user interfaces integrated into conventional data centres. These information systems offer an online, flexible and fast access to the ever-increasing amount of data. To create and operate information systems, special knowledge about storage of data is necessary. This knowledge is concentrated in accessible Meta data. Meta data are descriptions and documentations about data, covering the internal data structure and relations as well as the availability of data.
Disadvantages of an IT
Unemployment - While information systems may have streamlined the business process it has also created job redundancies, downsizing and outsourcing. This means that a lot of lower and middle level jobs have been done away with causing more people to become unemployed.
Privacy - Though information systems may have made communication quicker, easier and more convenient, it has also bought along privacy issues.
Lack of job security - Industry experts believe that information systems has made job security a big issue as since technology keeps on changing with each day. This means that one has to be in a constant learning mode, if he or she wishes for their job to be secure.
Dominant culture - While information systems may have made the world a global village, it has also contributed to one culture dominating another weaker one.
Types of Information Systems
There are four key types of information systems these are as follows:
· Operational level systems
· Knowledge level systems
· Management level systems
· Strategic level systems
An operational system is there to support operational managers by keeping track of the elementary activities and transactions of the company. The principle purpose of systems at this level is to answer routine questions and track the flow of transactions through the company. This covers things like sales, receipts, cash deposits, payroll, credit decisions and flow of materials.
The operational level system normally uses a transaction processing system (TPS). This is a very basic business system; it performs daily routine transactions necessary for the business function. Generally there are five categories to this type of system as shown in the table below.
Source: Laudon, 2005
Knowledge level system is used to support data workers in the company. The purpose of these systems is to help the company discover, organise and integrate new and existing knowledge into the business, and to help control the flow of paperwork. These systems, specifically in the form of collaboration tools, workstations, and office systems, are the fastest growing applications in business today. This type of system is run by an office automation system (OAS). It is targeted at meeting the knowledge needs of data workers within the company. Data worker tend to process rather than create information. They are primarily involved in data use, manipulation or dissemination. This system is typically used to handle and manage documents, scheduling and communication. Under the same heading of knowledge level system there is also the knowledge work system (KWS), which is targeted at meeting the knowledge needs of the knowledge workers within the company. In general, knowledge workers hold degree professional qualifications and their jobs consist mainly in creating new information and knowledge.
Management level systems are designed to serve the monitoring, controlling, decision-making and administrative activities of middle managers. These typically provide periodic reports rather than instant information on operations. Some of these systems support non-routine decision-making, focusing on less structured decisions for which information requirements are not always clear. This will often require information from without the company as well as from normal operational level data. MIS systems provide managers with reports and, in some cases, on-line access to companys current performance and historical records. Typically these systems focus entirely on internal events, providing the information for short-term planning and decision-making. MIS summarise and report on the basic operations of the company, dependant on the underlying TPS for their data.
Strategic level systems are designed to help senior managers tackle and address strategic issues and long-term trends, both within the company and in the external environment. Principle concern is matching companyal capability to changes, and opportunities, occurring in the medium to long term (i.e. 5-10 years) in the external environment. As MIS these serve the needs of the management level of the company. It is focused on helping manager make semi-structured, unique or rapidly changing and not easily specified in advance decisions. I uses the internal information form a TPS and MIS system but also gathers information from external sources. It has greater analytical power over the other systems and supports what if scenarios, which would have been helpful for Delta bank.
Delta bank's IT System
Typically an company may have operational knowledge, management and strategic level systems for each functional area within an company. This means that each part of the company has its own system and they are not run all on the same one. This has higher security as if someone was to try and get into the system who weren't meant to they could only access the information on that system, it also means that each department can only access the information they need, rather than the whole companys.
This is based on a management model (figure 1.3) adopted by the company, so, while he most commonly adopted system structure would simply follow the standard functional model, structures reflecting beaurocratic, product and matrix models are also available. This means that this type of system would suit the company and the user as it is based on a management model adopted by the company. This system is controllable as well as it is not based on the whole company but each system is run individually therefore easier to control. The thing that makes this a good system is that it is controllable, secure and helps the business run on a day-to-day business activity. It suits the user and the company, and therefore can only make the way the company is run more effective. I feel this system is very good although I do feel that the Delta bank could have been helped by the TPS or MIS system which would have helped them forecast into what would happen if they outsourced and therefore would have saved them millions of dollars.
Source: nurseweb.ucsf.edu/www/rcsm-mod2.gif
This framework supports understanding of how different aspects of cognition (intuition, feeling, thinking and sensing) relate the business activities, on a time basis (from a vision of the future, through motivation, planning, action, evaluation, satisfaction to realisation).
Reference: Hurst, D.K., Rush, J.C. and White, R.E. (1991)
Outsourcing Value Chain model
The value chain model highlights specific activities in the business where competitive strategies can be best applied (Porter, 1985) and where information systems are most likely to have a strategic impact. The value chain model can supplement the competitive forces model by identifying specific, critical leverage points where a firm can user information technology most effectively to enhance its competitive position. See figure 1.4 below.
Source: www.themanager.org/.../image002.gif
What an information system must be
An information system must be user and companyal friendly; this means that the information system must meet all the needs of the company and the user. Having the user involved in the designing and operation of information systems means that they have more opportunities to mould the system according to their priorities and business requirements. In addition, they are more likely to react positively to the completed system because they have been active participants in the change process.
Communication problems between end users and designers are a major reason why user requirements are not properly incorporated.
Conclusion
