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DSS News
D. J. Power, Editor
April 25, 2004 -- Vol. 5, No. 9
A Bi-Weekly Publication of DSSResources.COM
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Check the interview with Randy Fields "Automating
'Administrivia' Decisions" at DSSResources.COM
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Featured:
* Ask Dan! - Is it advantageous to outsource development and operation
of Decision Support Systems?
* DSS News Releases
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Put your ad here! Reach hundreds of people
interested in DSS with information on your product
Email power@dssresources.com for details
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Ask Dan!
by Dan Power
Editor, DSSResources.COM
Is it advantageous to outsource development and operation of Decision
Support Systems?
Sometimes! Currently, outsourcing and especially global outsourcing of
information technology services is one of the most controversial
business, economic, political and social topics in the United States.
The outsourcing debate is often drawn in terms of lost jobs, reduced
costs, economic development, reduced immigration and/or security. The
issue of outsourcing is a topic of conversation in the hallways of
Information Technology departments and in IST classrooms. There has
however been insuffient discussion about outsourcing DSS. This Ask Dan!
about outsourcing Decision Support Systems was moved to the front burner
because of recent developments at Best Buy, a large U.S. discount
retailer of refrigerators, TVs and computers.
Best Buy has been an innovator in deploying IT to support decision
makers and DSSResources.COM was and is preparing a case study about
decision support at Best Buy. Last week, however, Computerworld
(www.computerworld.com) reported that Best Buy was negotiating
outsourcing all of its IT operations to Accenture. Best Buy's IT staff
would be reduced from 820 to 40. The forty remaining staffers would
monitor the outsourcing arrangement. In the bylined article, Carol Sliwa
(April 19, 2004) reported Best Buy is negotiating to outsource all of
its IT operation. The goal is to contract for bottom-line business
results and outcomes. Sliwa writes "Accenture advocates taking 'packaged
vanilla solutions and weaving them together in as simple a fashion as
possible' and changing business processes, rather than heavily
customizing software, as the most cost-effective approach for retailers,
Selden said." Angela Selden, the Accenture managing partner working with
Best Buy, is quoted extensively in the article.
Best Buy has been innovating with distributed, data-driven DSS to
enhance business intelligence (cf., press releases) and its new
corporate headquarters was supposedly an "IT mecca". For example,
Microsoft showcased Best Buy as an early adopter of Tablet PCs in a
wireless environment. Also, in Fall 2003 Best Buy had outsourced help
desk services to EDS. So what's going on at Best Buy? I have been trying
to contact the PR and IT folks at Best Buy, but I'm not getting a
response. BUT let me speculate: too much hype about the possibilities of
IT for business intelligence, unfulfilled promises, resistance to change
by some IT staff, obsolete skills of some IT staff, cost over-runs on IT
projects, a persuasive sales pitch by Accenture, the current "hype" over
outsourcing, and finally competitive cost pressures.
Will Best Buy outsource decision support systems and capabilities? We
don't know yet. In general, my position is that DSS are always "mission
critical" applications and hence should be kept "in-house" whenever
possible. Also, packaged vanilla solutions may work for infrastructure
and for some processes, but companies don't gain any competitive
advantage from "vanilla" decision support solutions.
In Chapter 4 of my DSS Hyperbook titled "Designing and Developing
Decision Support Systems", I briefly addressed the issue of outsourcing
DSS. A similar discussion is in Power (2002). "Outsourcing involves
contracting with outside consultants, software houses or service bureaus
to perform systems analysis, programming or other DSS development
activities. The outsourcer should be evaluated as a long-term asset and
as a source of ongoing value to the company." Some companies also
outsource maintenance of DSS especially data warehouses.
My position is that "Outsourcing DSS projects has a number of risks.
First, a company relinquishes control of an important capability to an
outside organization. Second, contracts for DSS services may be long
term and may lock a company into a particular service provider. Finally,
a reliance on external sources for new systems development can lead to
low technical knowledge among the in-house MIS staff."
There are however benefits to outsourcing DSS projects. "Some of the
benefits of outsourcing include potentially lower cost development;
access to expertise about new technologies; and outsourcing can free up
resources within the firm for other projects. The risks often lead to
in-house DSS development rather than to outsourcing. When does
outsourcing seem to work? Outsourcing can be successful when we need to
turnaround DSS activities quickly and our MIS staff seems unable to
build innovative DSS in-house."
In some industries, especially defense, healthcare, government and high
technology it has become even riskier to outsource decision support and
other "sensitive" IT transaction processing services (cf., Overby,
2004). The risk has increased because of regulations like Health
Insurance Portability and Accountability (HIPA) and U.S. Export
Administration Regulations (EAR).
So is it advantageous to outsource development and operation of Decision
Support Systems? In my opinion ...
It can be advantageous to outsource DSS development using contract staff
or other development services. Many companies can benefit from more
expertise related to designing and developing DSS.
It may be desirable to use Web services maintained by third parties as
part of some company's DSS environment. By breaking down enterprise
decision support applications into shareable Web services it can be
easier to connect applications across companies and it may enhance the
functionality of existing applications. The ownership and maintenance of
Interorganizational DSS will always be an issue of debate. Using Web
services provided by third parties may be desirable in some business
situations.
It may be appropriate for some small and medium-sized firms to outsource
the operation of some decision support services to application service
providers. When this path is taken, maintaining control of decision
support data and having alternative service providers becomes very
important.
Companies have been outsourcing some decision support services since the
early days of DSS. Time sharing provided access to capabilities when
companies couldn't afford to provide DSS in-house. We are perhaps
returning to that approach for some types of DSS, but outsourcing
doesn't solve all current problems for any company that moves in that
direction and it can and does create new problems. From a managerial
perspective, outsourcing avoids the need to directly manage IT and it
may be more cost effective that in-house IT, but outsourcing can create
strategic vulnerabilities. For example, Best Buy may find that a company
like Sears, a competing U.S. retailer, can effectively exploit the
"plain vanilla" IT that evolves to gain a competitive advantage. DSS
innovation will most likely suffer in any massive outsourcing of IT
capabilities. From a shareholder perspective, the outsourcing debate
emphasizes the need to look at long term issues rather than only
short-run costs. Increasing the strategic vulnerability of a company
because of short-sighted outsourcing decisions is definitely
undesirable.
>From an IST staff perspective, the outsourcing debate showcases the
problems inherent in working with information systems and technologies,
including rapid obsolescence of IT skills, staffing problems, declining
costs of technology, exaggerated expectations, etc., etc. From a U.S.
nationalist perspective, domestic outsourcing of DSS is a problem in
some industries; offshore IT/DSS outsourcing may create national
strategic vulnerabilities. For U.S. politicians, the trade-off between
more immigration of technically skilled people to meet critical IT
staffing needs versus offshore outsourcing is a thorny problem. From a
more global perspective, many multinational companies and many
governments benefit from non-U.S. Information Technology operations.
Information technology is one of the enablers of economic globalization
and because of barriers to the "free flow" of labor outsourcing and
off-shoring may assist in global economic development and may help
improve technology infrastructures in less developed nations.
What DSS capablities can and should you outsource and to whom? Or is it
always a bad idea to outsource DSS? Your answers to these questions
should depend upon a company-specific systematic analysis of costs and
benefits and upon your assessment of the "risks". I'm not aware of a
specific DSS to help you make these tough decisions (although some
vendor probably has one), but computer support and general purpose
software for cost/benefit analysis and risk assessment should prove
helpful when you prepare a special study of these decision questions.
Intuition and "gut feel" are definitely NOT the best approach for
answering these questions.
References
Overby, S., "How to Safeguard Your Data in a Dangerous World," CIO
Magazine, January 15, 2004,
http://www.cio.com/archive/011504/outsourcing.html .
Power, D. J. Decision Support Systems Hyperbook. Cedar Falls, IA:
DSSResources.COM, HTML version, Fall 2000.
Power, D. J., Decision Support Systems: Concepts and Resources for
Managers, Westport, CT: Greenwood/Quorum Books, 2002.
Sliwa, C. "Best Buy to Outsource IT to Accenture," Computerworld, Vol.
38, No. 16, April 19, 2004, pps. 1, 14.
The Outsourcing Institute, http://www.outsourcing.com .
Some Relevant Press Releases at DSSResources.COM
October 12, 2000 -- Best Buy Drives Business Growth with MicroStrategy
Platform
Nov. 28, 2000 -- Best Buy to Use Net Perceptions' In-depth Reporting and
Analysis to Help Drive Merchandising Decisions
June 6, 2001 -- Best Buy and MicroStrategy Win The Data Warehousing
Institute’s 2001 Best Practices in Data Warehousing Award
June 6, 2001 -- Best Buy and MicroStrategy Named Finalists in RealWare
Awards by CMP Media’s Business Intelligence Group
April 28, 2003 -- Best Buy to Expand Use of MicroStrategy
Enterprise-Wide
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Dr. Dan Power will be attending the DAMA International
Symposium & Wilshire Meta-Data Conference
May 2-6, 2004 in Los Angeles. Details at
http://www.wilshireconferences.com/MD2004/index.htm
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DSS News - April 12 to April 23, 2004
Read them at DSSResources.COM and search the DSS News Archive
04/23/2004 Lockheed Martin opens new center focused on technology to
improve nation's Homeland Security.
04/22/2004 Cognos in leader quadrant position in Business Intelligence.
04/22/2004 Stellent's SmarterCabinet real estate solution increases
operating efficiencies and reduces costs for Shorenstein.
04/21/2004 General Motors enhances vehicle development process with
industry's fastest supercomputer.
04/20/2004 Fiat Group chooses Hyperion for its Business Performance
Management strategy.
04/20/2004 Retailers upgrading point of sale systems take store
performance to the next level, according to BearingPoint's Tom Johnson.
04/20/2004 United Kingdom Defence Geographic and Imagery Intelligence
Agency accepts into service geospatial data management solution from
Intergraph.
04/20/2004 Siebel Systems and Teradata announce strategic partnership
for analytic applications and enterprise business intelligence.
04/19/2004 Emergency medical associates builds biosurveillance system on
Business Objects.
04/19/2004 Intergraph teams with Haestad Methods to provide integrated
hydraulic solution.
04/19/2004 MicroStrategy selected by Cox Business Services to identify
ideal sales prospects.
04/16/2004 Business Intelligence Professional Services leaders partner
with DataJungle Software following release of latest products.
04/16/2004 Sun Java(TM) System Application Server achieves broad
industry adoption; Downloads of application server SDK exceed one
million.
04/15/2004 Microsoft continues commitment to open and royalty-free XML
schemas.
04/15/2004 RMS(R) risk management tools assist syndicates in responding
to the Lloyd's Realistic Disaster Scenarios.
04/14/2004 SAS public sector to sponsor Institute for Defense and
Business Program.
04/14/2004 Saint-Gobain Weber selects Information Builders' WebFOCUS for
enterprise reporting with SAP BW Data Warehouse.
04/13/2004 Databeacon announces support for Microsoft Analysis Services.
04/13/2004 Demand for data integration moves beyond the data warehouse,
says study from leading analyst firm.
04/12/2004 Oracle(r) Database 10g bests Microsoft SQL Server 2000 in
head-to-head test.
04/12/2004 Business Finance Magazine, Cognos sponsor 2004 Vision awards
to recognize excellence in business performance management.
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DSS News is copyrighted (c) 2004 by D. J. Power. Please send your questions to
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