Chapter 7: Managing Diverse IT Infrastructures Before 1990s, companies used proprietary technologies to achieve what they have achieved now by using the public network. However, the old proprietary approach was expensive and unsatisfactory for several reasons: To reach business partners and customers, every company had to develop its own communication infrastructure. A process which led to massive duplication of infrastructure investment The communication technologies did not interoperate well, which force companies to add bridge programs Reliance on proprietary technologies meant that companies were locked in specific vendor technologies thereby reducing company bargaining power against technology providers

Chapter 7: Background Cont. Companies that installed hardware and software from many vendors suffered performance and reliability difficulties Since the 1990s, the emergence of accessible public Internet based on open standards changed the way companies build IT capabilities Corporate systems now gain leverage from their connections to public infrastructure Benefits of the new approach of public infrastructure Companies, partners, customers can share a communication infrastructure Private infrastructure can interoperate using the standard communication protocol TCP/IP Companies are much less locked in to specific vendor technologies

Chapter 7: Background Cont. IT management now is better in that they deliver expensive systems but highly performing systems Services historically delivered by the ID department, now it can be acquired from service providers (outsourcing) As communication technologies improve, and become compatible and modular, companies can obtain smaller increments from outside vendors with shorter lead times and contracts, thereby reducing IT investment cost The underlying trend towards external acquisition of increasingly incremental services appears irresistible Infrastructure that lends itself to incremental improvement enjoys favorable management attributes

Chapter 7: Background Cont. For example investment and implementation risk are easier to manage when improvements involve many smaller steps than few large steps incremental service delivery also makes new business models possible More IT services are delivered by collections of service partners Working with IT service providers requires careful management of the working relationship, one aspect of which is contract administration Connecting new service models to old legacy corporate systems, result in diverse IT infrastructure

Chapter 7: Background Cont. The variety of service models and technologies creates complexity, which generates management challenges Thus, new ways of thinking are needed to manage diverse, distributed, and complex information and technology assets

Chapter 7: New Service Models With the advent of reliable, high capacity networks, local software execution and data storage is no longer the only alternative or the best alternative from a business standpoint Increasingly, software is designed to operate from geographically distant facilities that can belong to a service provider who delivers common service to many clients Servers and storage devices are shared among applications and users Such service delivery offer efficiency and flexibility advantages but poses management challenges for the client company The client (end-user) company owns little of the infrastructure involved in service delivery and instead pays a monthly fee for a service bundle, which includes technical support services

Chapter 7: New Service Models Cont. when software applications are not run and managed externally, components of the infrastructure that delivers IT services may be outsourced A company might rent a space in a vendor-owned (service provider) hosting facility rather build its own data center or It might employ a specialized outside firm to monitor its intrusion detection systems and guard against sophisticated new security threats The benefits of this kind of “incremental outsourcing” include the following:

Benefits of Incremental Outsourcing Managing the shortage of specialized IT workers Reduced time to market The shift to 24x7 operations Favorable cash flow profiles Cost reduction in IT service chains Making applications globally accessible

Managing the shortage of specialized IT workers Incremental outsourcing helps companies overcome the shortage of specialized skills by reducing the need for internal staff a firm must hire This is especially important to small and medium size businesses that have difficulty attracting and retaining top IT talent personnel

Reduced Time to Market Network-based delivery models help companies develop new capabilities quickly For example, existing companies can use externally hosted retailing packages to sell over the Web without having to purchase equipment or develop software

The Shift to 24x7 Operations Real-time 24x7 website service availability, requires that company’s computers to remain always on, but in many enterprises, facilities and equipment are not designed for high levels of availability High availability requires large investments in redundant infrastructure Because service providers or vendors are able to spread investments across many customers, they can achieve economies of scale that justify large investments Vendors often can invest in levels of availability and security that individual firms cannot afford

Favorable Cash Flow Profiles Traditionally, IT investments required large up-front or initial cash outlays that only yielded differed and often uncertain benefits (because of high project failure rates) Subscription-based IT services have a different cash flow profile, where firms pays a monthly fee to acquire service equivalent to those provided by internal systems in the past With limited and low up-front purchases or investments, payback flow in more quickly, which is important for small and medium size businesses who cannot afford the large up- front investments associated with some IT services Figure 7.1 compares the cash flow profile of a traditional IT investment with that of a subscription-based service delivered through pre-built external infrastructure

Chapter 7: Managing Diverse IT Infrastructures

Cost Reduction in IT Service Chains Centralized service delivery can reduce support costs in many ways Upgrades to new versions of the software are done centrally, eliminating the need for support personnel to upgrade individual client computers This will reduce the risk of software piracy because the software is never physically distributed Also, there is no software inventory to manage by systems administrators

Making Applications Globally Accessible A company’s services is now available for any customer with valid access any where at any computer with a Web browser Traveling employees can access the same virtual workspace regardless of where they are in the world Because the IT infrastructure is geographically neutral, and employees can work from anywhere, much of the transportation cost are eliminated This advantage is combined with the continuing evolution in client devices such as cell phones and PDAs to create new value opportunities

Over-the-net Service Delivery Models Over-the-net service delivery models that have the previously mentioned advantages, may take different forms. For example, many companies now manage certain corporate functions such as human resource administration by purchasing over-the-net services Many employees manage investment of their retirement plan contributions using a Website owned and operated by a financial services company. Salesforce.com provides sales force automation to many companies via the “application services provider (ASP) model, Which entails renting software functionality from a vendor for a monthly fee and accessing the functionality via a Web browser. Data is stored securely in a central location

Over-the-net Service Delivery Models Cont. The “Web services” model allows for highly dynamic provision of IT services Instead of establishing a long-term relationship with specific services providers, firms negotiate and purchase services in real-time from an ever-changing market composed of companies offering those services Models of computing asset use now coming to the fore include “on demand, “utility computing,” and “grid computing” Figure 7.2(a) depicts an on demand computing environment that includes applications residing on an enabling middleware layer that provides virtualized and performance managed access to storage, server, and network resources

Chapter 7: Managing Diverse IT Infrastructures FIGURE 7.2(a) An “On Demand” Computing Environment

Residual Process Complexity Some difficulties with legacy systems arise because the legacy system address problems that are no longer exist One example is the substantial amount of batch processing some companies still perform Legacy systems were designed to operate in batch mode because processing power needed to be rationed Also, because the bandwidth available at that time did not allow computers to operate in real time Now the computing power and bandwidth are relatively plentiful, but many batch systems have not been redesigned or replaced because of the priorities