� 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.

� The technologies did not interoperate well.

� Reliance on proprietary technologies meant that

companies were locked in to specific vendor

technologies.

� Companies can share a communication

infrastructure common to all business partners

and customers. Customers and business partners

can interact via common interfaces (usually web

browsers). This seamless interaction dramatically

reduces complexity and confusion.

� Because of the open transmission control

protocol/internet protocol (TCP/IP) standard,

communication technologies interoperate well.

Software that bridges systems is simple,

standardized, and inexpensive. In some cases it

can be 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 better-performing

technology.

Demand

Purchase

Requisition

Vendor

Purchase

Order

Goods Receipt

& Inventory Mgmt.

Accounts

Payable

Goods IssueShop Floor

Goods ReceiptOrder Settlement

Schedule/Release

S A P A G

R

P re -S a le s A c tiv it ie sP re -S a le s A c tiv it ie s

S a le s O rd e r P ro c e s s in gS a le s O rd e r P ro c e s s in g

In v e n to ry S o u rc in gIn v e n to ry S o u rc in g

D e liv e ryD e liv e ry

B illin gB illin g

P a y m e n tP a y m e n t

In v o ic e

O rd e r M a n a g e m e n t: B u s in e s s P ro c e s s e s in

C O M C y c le

Course

CreditRecruitmentHiring

Training and

Personnel

Development

Payroll

Administration

Managing Work

TimeCompensation &

Benefits

Travel Planning

Employee Self-Service

Cost

Planning

&

Reporting

ESSENTIALS OF ENTERPRISE SYSTEMS

AND SUPPLY CHAINS

� Incremental Outsourcing

1. Managing the shortage of specialized IT workers

2. Reducing time to market

3. The shift to 24 x 7 operations

4. Favorable cash flow profiles

5. Cost reduction in IT service chains

6. Making applications globally accessible

� IT services that are unique to a company and

provide it with significant advantages over

competitors tend not to be outsourced, at least

not to vendors that are trying to sell similar

services to all of their customers.

� Such services are so core to a company’s business

that an internal capability to manage and extend

them must be maintained.

� The exception to this rule arises when companies

find themselves unable to develop a vital

capability internally and must therefore rely on

outsourcing to acquire the capability.

� Incremental outsourcing decisions cannot be

taken lightly, because can have serious across the

company implications if there are service

problems.

� Selecting Service Partners

1. Descriptive information

2. Financial information

3. Proposed plan for meeting service requirements

4. Mitigation of critical risks

5. Service guarantees

6. Pricing

� Relationship Management

1. Relationship with service provider partners require

ongoing attention.

2. Processes must be in place so that partners can share

information and problems in the service chain can be

solved quickly.

3. Procedures and technical interfaces between partner

systems must be properly designed and maintained.

� Why companies enter into large-scale

outsourcing relationships?

1. Cost savings

2. Dissatisfaction with existing IT capabilities

3. Desire to focus firm strategy in other areas

4. Forcing major organizational changes

5. Access to skills and talent

6. Other factors

� Designing large-scale outsourcing alliances

1. Contract flexibility

2. Standards and control

3. The scope of outsourcing

4. Expected cost savings and rate of technology

renewal and improvement

� Managing the alliance

1. The CIO function

2. Performance measurement

3. Relationship interface

1. Technology problems

2. Residual process complexity

3. Local adaptation

4. Nonstandard data definitions

1. How are IT investments deployed across

business lines or units?

2. How are IT assets being used?

3. Are they being used efficiently?

4. Are they deployed to maximum business

advantage?

5. How can we adjust their deployment to create

more value?

1. What services within our IT infrastructure are

candidates for incremental outsourcing? Are there

opportunities to convert large up-front IT investments

into spread-over-time subscription services?

2. Are our service delivery partners technically and

financially capable of supporting our evolving IT service

needs? Do we have well-define processes for partner

selection to ensure that we will continue to have highly

capable partners?

3. Do we have detailed service-level agreements in place

with our service providers? Have we made sure that the

SLAs in our service delivery 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?

4. Have we retained an internal CIO function to perform

the IT planning and contract monitoring functions that

cannot be delegated? Have we adequately funded and

staffed this internal group?

5. What are our short-term and long-term strategies for

dealing with legacy system issues? What systems

should we replace, and when should we replace them?