from DSSResources.com

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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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          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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