Process Improvement

Drawing from your own experience, select a process (a set of specified steps to accomplish a task) used at your place of work or in your interaction with a business that you would like to see improved and briefly describe the process. 1) Explain why you picked that process. 2) Explain how you would go about improving it. 3) Who should be involved with you? 4) What are some of the questions you should ask about the current process? 5) How will you know if the process was actually improved? First, we need to be sure you can identify a process; many students have difficulty with that, so refer to your textbook readings. Be sure to pick a fairly narrow scope for your process – for example, processing an invoice for payment vs. Accounts Payable. I am also interested in the method to be used to improve the process, not a solution. (For example, I am not looking for something like: “The Café where I work is not selling enough coffee. We should use social media to advertise more.” The discussion here is about identifying a specific process and how a business would go about deciding how to improve that process, who should be involved, what should be considered, and what steps should be taken to be able to analyze the current process and plan for improvement) . Please use all of the following references: (1) Please use information from attchements (2) (3) (4) See information below: Solution Building V. Total Cost of Ownership When we purchase items in our personal lives, such as new electronics or appliances, we know that the purchase price is not the total expense of that acquisition. In most cases, however, we never consider these ancillary expenses, although intuitively we know that they are there. In some situations, we do explicitly consider them, performing a business case analysis in our heads before the purchase by weighing the total costs against the tangible and intangible benefits associated with the acquisition. Sometimes we don’t think about the business case until after the acquisition is complete, and we experience “buyer’s remorse” because we did not consider all of the costs involved or do not realize all of the expected benefits. To fully understand the financial ramifications of our decisions, we must consider the total cost of ownership before we make any acquisitions. This concept is something we are very familiar with when we are making a major purchase in our daily lives. In general terms, the total cost of ownership (TCO) is the sum of all costs associated with an acquisition that will accumulate over the life of the asset. One of the personal acquisitions for which we use the TCO is the purchase of a new car. Clearly, the purchase price is not the only consideration. Today, automakers recognize the importance of the TCO to their customers; in their advertising, they talk about gas mileage, resale value, length of warranty, free servicing over some period of time, and special financing terms. You can see an example of a basic TCO for a Toyota Prius in table 2.1, below. Table 2.1 Total Cost Analysis for a Toyota Prius Depreciation $6,752 Financing $3,458 Insurance $7,696 State fees $344 Fuel $3,594 Maintenance $1,444 (Detail) Repairs $524 Hybrid tax credit -$1,575 Total five-year ownership costs $22,239 Vehicle class Midsize 5-year ownership cost $22,239 5-year cost, similar vehicles $33,758 Difference $-11,519 Source: Intellichoice, 2007 When buying a car, people use the TCO to help them decide among different vehicles and manufacturers based on their needs and the benefits the vehicle will provide. When we do this, we are comparing the TCO to the total benefits of ownership (TBO) (business case analysis) before making a final decision. The TBO comprise tangible and intangible benefits. The TCO also comprises tangible and intangible costs. It is important to note that determining the TCO and TBO is not an exact science because neither the benefits nor the costs can be forecast with absolute certainty. In many types of business analysis, this is recognized by assigning a probability to factor into the analysis. A probability of 1.0 defines certainty, or 100 percent probability, and is the highest probability value. Something that has a probability of 1.0 is that if, on Earth, you drop a large rock, it will move downward, toward Earth. The other extreme is a probability of 0.00, which means that something will never happen. Using the same example, there is a probability of 0.00 that if you drop a large rock on Earth, it will move upward, away from Earth. Most situations do not happen at the extremes of probability and have probabilities somewhere between the two extremes. The probability can be used to determine an expected value, or the validity of the value of the cost or benefit. To take this concept into account, we use expected- value calculations. In layman’s terms, the expected value is a calculation that serves as the best prediction of a value. In financial gobbledygook, it is the probability-weighted average value of all possible outcomes. Understanding the expected value of a possible future event allows us to make mathematically sound decisions. We can decide if we want to make an investment. We can assign a reasonable price for our services. We can prioritize requirements. We should use expected value when we calculate return on investment, or ROI (Tyner Blain, 2006). Think About It Think About It 2.1: Expected Value Because there are many different components, structures, probabilities, and interrelated cost alternatives, determining the TCO of IT infrastructures can be both complex and difficult. Each alternative, with its TCO, also has TBO that must be considered. The importance of this analysis cannot be overemphasized because of the interrelationship and required coordination among the infrastructure elements and the time span over which the decisions will affect the business. Figure 2.12, below, depicts the IT infrastructure as it relates to the TCO. Figure 2.12 IT Infrastructure Related to TCO IT Infrastructure Related to TCO The colored circles in figure 2.12 represent the different elements of the infrastructure, and the colored background represents the required coordination of the elements, because coordination can have a significant impact on the costs associated with any single element. Table 2.2, below, identifies the cost categories of an IT TCO. Although the list in your textbook may be more detailed, this list contains some of the often overlooked and crucial costs that are important to understand. Table 2.2 Cost Categories of an IT TCO Cost Categories Description acquisition the costs of acquiring IT assets, including research, travel, freight, and tax installation the costs of making IT assets operational; could include building modifications, increased cooling requirements, and increased utility capacity training the total cost of training for personnel involved with IT assets; could include users, technical staff, customers, or business partners support the cost of keeping the infrastructure functioning as planned; could include a help desk, hardware technicians, telecommunications specialists, programmers, and maintenance support staff maintenance the cost of keeping IT assets current and in a condition that can meet their planned functions; could include maintenance contracts, programmers, and telecommunications specialists communications the cost of all communications, including network costs, wiring, service provider fees, communications hardware, and software downtime the costs associated with the loss of an infrastructure service, including user lost time, lost sales or business, loss of user or customer confidence, and lost production disaster recovery the costs of ensuring continued operation of the infrastructure, including maintenance of a current plan, cost of backup sites and equipment, costs of emergency power, and costs of practice exercises security the costs of ensuring security of the infrastructure, including security software, usage monitoring, and facility security costs other costs the costs of non-IT resources needed for the operation of the infrastructure, such as disks, tapes, paper, recruiting and contract negotiation, and administration coordination costs the costs related to keeping the infrastructure tuned to maintain optimal performance when changes to an infrastructure element are required Not all of the costs listed above are applicable to all of the infrastructure elements. Figure 2.13, below, aligns the cost categories with the five elements of the infrastructure where they would most commonly be found. Figure 2.13 IT Infrastructure with Cost Categories IT Infrastructure with Cost Categories Most of these items or services can be achieved in different ways that can affect the level of service and the costs, for example, outsourcing the entire IT function (or some parts of it) to gain cost benefits. This adds to the complexity of managing an IT TCO while ensuring that optimum TBO are achieved. This is an example of why management of the IT infrastructure is a key component of both the IT strategy and the operating budget in both the IT department and the business organization. As we have seen, the actual components of the infrastructure can be contingent on business structure and operation. Regardless of organization size or objective, however, all of the elements will be present. If the architecture selected is mainframe, the specific components of the infrastructure will be different from the client server or enterprise Internet architectures; however, many of the decisions that affect costs will be the same. Support of the infrastructure and its components can be done with a mix of resources (employees and contractors). These staff members can be on site or at other locations, or even outsourced to a foreign country like India or the Philippines. The actual mix that a company uses will be based on costs, service level required, and reliability. We have only to look at how we manage the costs of supporting our own home computer systems to understand the costs of supporting an IT infrastructure in an organization. For our homes: We can purchase a computer, rent a computer, or perhaps rely on the public library’s computer system, our employer’s computer, or UMUC’s computer labs. If we own or lease the computer hardware, support will be required. We may decide that the computer will not likely fail, but if it does, we will call a local technician. We may pay for a maintenance contract with the computer manufacturer or a third party. We may even rely on our own skill to repair the hardware. We make decisions about software that we need and our own upgrade policy. We may decide that we will never upgrade our software because we know how it works and we need no additional features. Think about what the impact of these decisions is when a business has to make them, particularly when the business has critical systems, without which it cannot function. For instance, Walmart’s very competitive advantage lies in its supply chain management system. (5) See information below: Solution Building IV. Composition of the IT Infrastructure As we have seen, the planning activities that we have been discussing are designed to get the most from a company’s resources in an effort to achieve its objectives over some time period. The composition of a company’s IT infrastructure is the result of managerial decisions, based on the IT plan and its maintenance. As we noted above, Strnadl (2006, p. 67) states that “information systems (IS) and the organization’s IT infrastructure have evolved into an ‘IT fabric,’ or ‘nervous system,’ inextricably entangled and intertwined with the business processes and information processing activities they support (Strndal, 2001; Calvano and John, 2004; Field and Stoddard, 2004).” We will redefine the major components of infrastructure as hardware, software, telecommunications, services, and facilities so that they conform to the categories that are standards for the industry. It is imperative that all of these areas are coordinated so that they work together. As new business requirements arise, the solutions developed must fit into that framework and all facets must be adjusted accordingly so that they remain in sync with one another. We are all familiar with the concept of infrastructures because we use them every day in our normal daily activities. Let’s look at an infrastructure with which we are all familiar but don’t think much about—the electrical infrastructure, as shown in figure 2.9. Figure 2.9 Electrical Infrastructure Electrical Infrastructure We buy electrical devices or appliances, plug them in, and expect them to work. The reason they do work is that there is a standard electrical infrastructure. This means that there had been a plan put in place, with which everyone is familiar and the design and procurement of new devices conforms. When an infrastructure exists, it is because there was recognition that for a system (a group of equipment and processes) to function efficiently, there must be a long-term plan with which the key participants are familiar and comply. This is true for an electrical or an IT infrastructure. Figure 2.10 shows the five major components of the IT infrastructure that will be used to support business strategy. Figure 2.10 IT Infrastructure Components IT Infrastructure Components For the infrastructure to perform its tasks, all of these elements must be present to varying degrees based on the IT plan that is supporting the strategic business model of a company. In order for the infrastructure to function optimally, the components must be coordinated effectively. The major components of the IT infrastructure are: services—the people or organizations that run, support, and manage the other infrastructure components; can be internal staff or external contractors or service providers hardware—devices that perform the input, storage, processing, and output functions software—instructions that enable the hardware to perform its functions, enabling these assets to meet the needs of the business; includes (1) operating systems that control the hardware, (2) data management software that accesses and moves data to storage, and (3) application software, which supports the business processes telecommunications—the tools that provide connectivity and communication among individuals, companies, governments, or hardware assets; includes networking hardware and software and telecommunications services, both audio and data facilities—the buildings or spaces that house the equipment and staff that provide service and support We have selected these categories of components to facilitate your understanding and because they are consistent with standard industry categories used by the Gartner Group. All IT infrastructures contain all five of these components, regardless of the organization’s size. Even in your home, you have an IT infrastructure, albeit a small one, as shown in figure 2.11. Figure 2.11 Home IT Infrastructure Home IT Infrastructure Source: Cisco Systems, Inc. (2007) Figure 2.11 represents a modern home with a true IT infrastructure containing all of the components that the largest businesses use to support their business strategies. Because you may own one personal computer and use it, you recognize the need for stability and upgrading the equipment and software. You also know that it is flexible because you can add a printer or an external DVD drive to provide backup of critical data. You have also encountered devices that caused problems because they did not provide a smooth upgrade path, like ZIP drives or devices that have only a parallel port capability. You also are aware of the potential problems that may occur when you make changes to your infrastructure, and probably plan them for times that will have the smallest impact on your strategy, or objective. The degree to which the actual components are used varies among industries and companies, and it must be balanced to provide the greatest benefit to the organization. Referring to figure 2.11, the home infrastructure became out of balance because of the availability of music, movies, graphics, and games on the Internet. Although hardware and software were capable of supporting these types of information, users and hardware were constrained because they had to wait so long for the communications process to occur with dial-up communication. To bring the infrastructure into balance, telecommunications had to improve. This has led home users to migrate from dial-up to broadband or DSL as their preferred method of communicating with the Internet. Because a business’s IT infrastructure can be regarded as its “nervous system,” it is imperative that it be stable, robust, secure, and flexible so that it can support business requirements reliably, especially in times of heavy usage. Before any IT decision is made, it must be consistent with the infrastructure. The infrastructure must be able to accept both changes in the business and radical changes in technology. This may sound contradictory, but think back to our electrical system model. Radically different electrical or electronic devices are constantly becoming available, but the electrical infrastructure stays relatively constant and the devices operate as designed. Changes to a component of the infrastructure could require special efforts and added costs if they are made. In the past, printers were connected to PCs using a parallel connector, but today’s new computers no longer have parallel ports. To maintain the printing capability, you must purchase either a new printer that connects using a USB port or an adapter that will allow the old printer to connect to the new computer. Because of the constant changes in technology, an infrastructure must change to take advantage of those changes that will provide a business benefit to the company. This must be part of the IT plan so that transitions to newer technology can be integrated smoothly, with no disruption or degradation of service level. Suppose a new computer is under evaluation to replace an aging computer to gain the advantages of increased speed and more storage. The impact on all of the components of the infrastructure must be considered: Will our existing peripherals operate with the new computer? Will our existing software work on the new computer? If it does, will it still permit us to achieve the benefits of the new computer? If not, will new software have to be purchased? Will our applications run on the new computer, or will changes have to be made? Will our communication protocols work? Will our networks support the higher volume of data, or will there be a bottleneck that will prevent the new computer from functioning as well as we planned? Will users or the technical staff require training to support the new computer hardware and software? The interrelationship that must be coordinated indicates just how important the IT plan is, because the infrastructure cannot provide the support for the business strategy without planning and coordination. We pointed out earlier that the planning process must be coordinated with the budgeting process because businesses have limited financial resources, and those resources must be allocated among prospective projects based on the benefits to be obtained from the investment. This leads us to our next section, in which we will discuss the costs of supporting the infrastructure.

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