Managing IT Operations

1. Managing IT Operations Dr. Merle P. Martin MIS Department CSU Sacramento

2. Agenda • What is IT Operations? • IT Operation Trends • Data Center Operations • Improving Center Operations • Data Center Economics • Outsourcing • Managing Networks • Contingency Management

3. Deloitte & Touche Study • US and Canadian firms • Late 1995 • 431 CIOs • Abbreviated “DT”

4. What is IT Operations? • Organization • Budget emphasis • Functions

5. IT Department CIO Systems Operations Support Development Computer Systems Data facilities analysis and administration operations design Information Data entry Programming center Information technology

6. CIO Turnover • DT Study, 1995 • 1991 14% • 1992 17.5% • 1993 18.8% • 1994 15.5% • 1995 17.0%

7. Why CIOs Left • Why predecessors left • Dismissed / demoted 34% • New position 23% • Left voluntarily 18% • Lateral move 10% • Retired 19% • Promoted 5% • 44% dismissed from old position

8. IT Operations Budget • 33% Systems and Programming • 85% maintenance • 15% new development • decreasing • 10% Administration / Training • 57% IT Operations

9. Budget by Platform • DT Study, 1995 • Mainframe 44% • Client / Server 36% • Other 20%

10. IT Operations Functions • Systems operators • operate hardware • schedule application runs • input / output preparation • Data-entry operators • Maintenance technicians

11. IT Operations Trends • Decreasing hardware costs • “Lights Out” computer rooms • Increasing PCs / workstations • Expert System (ES) technology • maintenance troubleshooting

12. Trends • Increasing use of automated tools • Increase in complexity • Blaab’s Law: “Old technologies persist in the face of new technologies”

13. Improving Data Centers • Application functional quality • how it meets user needs • Technical quality • how easy to maintain? • how efficient (MIPS)? • tension between these goals

14. Improve Centers • Application age • legacy systems • NNC study (1987) • inefficient centers - 8.7 years • efficient centers - 4.2 years

15. Legacy Systems • DT Study, 1995 • 65% legacy systems slated for replacement were to be replaced over next 2 years • Legacy systems still a problem, but not as significant

16. Improve Centers • Portfolio coverage • what % potential applications are actually developed? • beware of “hidden backlog” • NNC study: • inefficient centers - 24% • efficient centers - 40%

17. Improve Centers • Mix of Center staff: • NNC study: • inefficient centers - more employees • greater % of them were “hands on” • User feedback • Problem detection / correction

18. Issue 17% CIO turnover rate per year AND 44% were dismissed or demoted. • Why would you want to be a CIO? • How can you be a “CIO Survivor”? What do you think?

19. Center Economics • “Charge-back” mode • no operating budget • charge clients for services • clients can shop elsewhere • centers can spend what they collect - NO MORE! • Increasing quality at decreasing cost

20. Center Economics • Economies of scale BIG IS BETTER! • Gorch’s Law IP = IC ** 2 where: IP = increase in computer power IC = increase in computer costs • Used as barrier to PCs in 1980s

21. Center Economics • Gorch’s Law works with Data Centers because: • Mainframes more efficient than PCs for large volumes • 3GL more efficient than 4GL • Telecommunications value = n (n - 1) where n = # nodes • Larger network more effective

22. Center Economics • Typical efficiency measures • Use Millions of Instructions per Second (MIPS) • Hardware Costs per MIPS • Storage Costs per MIPS • Software Costs per MIPS • Teale Data Center “Real Decisions” study - large IBM

23. Center Economics • Hardware • Total Group $31K / MIPS • Comparable Size 27K / MIPS • Govt. Industry 29K / MIPS • Teale Data Center 12K / MIPS

24. Center Economics • Storage costs - Teale 76% of Comparable Size group • Software costs • Total Group 10.0K /MIPS • Comparable Size 9.3K /MIPS • Govt. Industry 11.4K /MIPS • Teale 8.7K /MIPS

25. Center Economics • Teale Quality goals: • > 99.9% availability • 4 hour network Mean Time to Repair (MTTR) • Subsecond transaction response • Immediate Help Desk assistance

26. Center Economics • Strategies • Upgrade to latest equipment / software • Consolidation • Outsourcing

27. Center Consolidation • Chase Manhattan Bank • 100 data centers into 58 • Saved $58 million in 2 years • First Interstate Bank • 13 data centers into 2 • reduced staff 2300 to 700 • lowered overall budget by $93 million

28. Center Consolidation • JC Penny • 20 data centers to 4 • Save $11 million a year • State of Wisconsin • 12 data centers into one • Goal: save $1 to $3 million a year • exempted from state procurement laws

29. Outsourcing IT Functions • WHY? • overall business trend • global competition • value-added criterion • Would customer pay for this? • need for technical specialist • employee costs (fringe benefits)

30. Outsourcing Types • Professional services (consulting) • Services (training / data entry) • Temporary employees • contract programmers • Transactions (credit reports) • Systems integrators

31. When to Outsource • Activity not strategic • Save at least 15% • Need technology specialists • Increase financial flexibility • capital to operating expenses • free personnel for development • acquire new technologies quicker

32. “Best-of-Breed” Consolidate,Transfer Internally Improve,Leverage Quality Redesign(Reengineer) Outsource NeedsImprove-ment Non - Critical Critical Importance

33. What NOT to Outsource • Strategy (IT Plan) • Architecture • tied to firm’s culture • Portfolio (What / When) • Vendor management

34. Outsource Tendencies • DT Study, 1995 • Disaster recovery 75% • Network management 50% • Application development 44% • Application maintenance 40% • Data center operations 30% • Data entry 26%

35. Outsource Failures • DT Study, 1995 • Vendor expertise and sophistication • Cost reduction • Improved delivery quality • Increased focus on core competencies • Balance sheet improvement

36. Issue What IT functions in your company have been or should be outsourced? • Why? • What obstacles were there (or are there) to outsourcing?

37. Network Mgmt Scope • Fault handling • Performance monitoring • Change (project) management • Tactical (future) planning • Cost control

38. Network Mgmt Trends • Emerging standards • Integration as a goal: • different networks (LAN / WAN) • different vendors • Combine with management of computers • “finger pointing”

39. Network (Cont.) • Distributed applications • client / server • Oracle’s Lotus Notes • Increased automation • Increased outsourcing

40. Contingency Mgmt • NOT disaster recovery • reactive, not proactive • Worst case scenario • all our eggs in one basket • natural disaster • human error / sabotage

41. Contingency Mgmt. Methods • Disaster Recovery firm • outsource strategic function? • Off-line storage • Data redundancy • replicated databases • fragmented databases

42. Off-line Storage • Teale Data Center • Airfreight data twice a year to Florida (Colorado) • Send an operator along • Electronic switching • Simulate switchover in Oakland • State of Alaska • At least 10 miles from site

43. Contingency Methods • Back-up power generators • “What if” scenarios • military war games • EDS • Scaled-down manual system • Back-up / recovery procedures • Martin, figure 15-12

44. Transactions Record contents Entry End of day Backup records Off-linelog file Onlinelog files File recovery Recoveredrecord contents

45. Contingency Methods • Parallel systems • Processing backup facility • Foundation Health • Contingency Management Plan How will IT outages affect your firm?

46. Issue Tell us a Contingency Management war story • What happened? • How did the firm recover? • How could the situation have been • averted? • mitigated?

47. Points to Remember • What is “IT Operations”? • IT Operation trends • Improving Data Center operations • Data Center economics • Outsourcing IT functions • Managing networks • Contingency management These are management issues!