Introduction
Auctionwire conducts online auctions on behalf of some of the world’s largest corporations, foundations and non-profit organisations. The company aims to create successful auctions to raise money, brand awareness and publicity for its clients. Common transactions for Auctionwire include selling off excess inventory and stock for large businesses and running fundraisers online for charitable organisations. The online auctions are performed on eBay tapping into the famous online auction sites 233 million users. Auctionwire manages the complete auction process for their clients, from listing the item to collecting payment, charging them a commission ranging from 5 to 20 percent on successful auctions. [1]
Auctionwire’s Business Plan
The basis for Auctionwire’s business model was to maximise the sale of each item by leveraging three core strengths: the reach of eBay, Auctionwire’s efficient auction management process and Auctionwire’s experience in conducting successful online auctions. I think this is profitable idea, if the team at Auctionwire could learn to conduct efficient auctions by listing their goods effectively and spotting trends in the eBay user base they could maximise the price for each item. This maximising of the sale price would increase the amount of commission Auctionwire received upon successful auction. In addition, becoming a power seller would encourage companies to approach them realising they could make more profit if Auctionwire handled the bidding process. This would increase the number of items Auctionwire would be selling as well as the commission received on each item. [2]
I think the potential market for Auctionwire is huge as companies are now beginning to see the benefits of selling unwanted inventory on eBay (e.g. IBM is one of the biggest eBay sellers in the world). The company’s main focus was on corporate businesses that had excess inventory items and out of date equipment and online charity auctions in the fundraising sector. Companies that had excess stock would in a lot of cases just have to scrap or hold the extra stock resulting in additional costs. I feel companies would be more than happy to pay for Auctionwire to perform their online auctions on behalf of themselves, as it would involve little input from them but would generate extra profit that they would in most cases never see. In my opinion charities would benefit from using the services of Auctionwire as they may not have the expertise or level of staff to perform large scale auctions. Additionally they would want to use the experience of Auctionwire to maximise the amount of money they would raise in the auction. Auctionwire at present has no direct competition, which should allow them to hold a strong position in the market.
Auctionwire’s Software Requirements
For Auctionwire to conduct efficient profit maximising auctions they must choose the right software to perform their auctions. This software package must have certain requirements for it to run effectively.
I felt the most important requirement for Auctionwire’s software was that it could manage multiple listing for different clients. As the company looked to represent multiple companies simultaneously it was essential the software could cope with this. When listing the sale items the software should be able to maximise the number of views each item gets by staggering identical items over time and researching eBay user trends. The software should also be able to help when trying to set the price of new sale listings. Software that could do both these processes would capitalize on the eBay market generating the most profit for Auctionwire.
I think the software chosen should be user friendly and help reduce costs and employee hours. It is important the system installed should automate a lot of the auction processes. Payment and shipping for example are common processes that if automated would significantly reduce operating costs. It would also be useful if the software could help improve customer service. The people at Auctionwire predicted receiving large amounts of emails from clients regarding their items. Many of these queries will be similar so software that could provide standard responses would be beneficial. If the right software is installed many aspects of the business would run itself and operating costs would greatly be reduced.
Which software package to choose?
To achieve the best results I feel Auctionwire should buy an already developed software package. Building their own package would increase the suitability of the system as it would be customised to Auctionwire’s individual needs but the effort and money needed to do this successfully would be too high. eBay is constantly changing so the software designed by Auctionwire would also need to evolve, this would mean a constant expense resulting from paying software designers to modify the system. In addition there is no guarantee that the newly designed software would be successfully and in the end an “off the shelf “ product would need to be purchased anyway. The risk and expense would therefore be too great so I think the best option would be to buy already available software.
All of the online auction software on the market had their individual flaws and problems but most would allow Auctionwire to operate somewhat effectively. I think the best option for Auctionwire would be to choose Canauction Inc. Unlike the competition Canauction already has in place all the requirements that Auctionwire needs. Canauction allows multiple client listings, is operable cross borders and has very little downtime due to the online and offline systems. The other companies have still to develop some of these essential requirements or modification of the existing system would be needed. Hence it is unclear if companies like SuperAuction could handle these essential requirements. Therefore for a small start up fee of $5000 Auctionwire could be up and running with all their software needs. The operating cost of the Canauction is also low at just $250 per month.
As the Canauction software is newly designed the software is still having some early problems that need ironed out but the Canauction designers are a team of former power sellers so they understand what their clients are looking for. Once these teething problems are fixed I believe Canauction will be by far the best system on offer to the market.
Conclusion
I believe Auctionwire has an opportunity to really make an impact on the online auction market. A lot of companies now realise the benefits resulting from selling unwanted stock online but just don’t have the resources available to do it theirself. The potential market is therefore huge for Auctionwire to break into. Picking Canauction Inc as its software supplier will satisfy all Auctionwire’s software needs. I think using Canauction would allow for effective selling online and for Auctionwire to make a substantial profit.
References
[1] http://auctionwire.com/
[2] Ivey: Creating Auctionwire (2006) by Ken Mark and Michael B. Comisarow
Saturday 22 December 2007
Saturday 15 December 2007
Mars Incorporated Case – The advantages and disadvantages of online procurement.
Introduction
Mars Inc is one of the world’s largest privately owned businesses producing confectionary, pet food and state-of-the-art electronic payment systems. [1] In 2006 alone Mars had annual sales of $21 billion dollars. Globally Mars Inc employs 40,000 people and operates in over 100 countries. [2] Mars is still owned by the Mars family and continues to trade using five key family held values (Quality, Responsibility, Mutuality, Efficiency and Freedom). With such a large amount of different products, including the eponymous Mars and Snickers bars, Mars Inc purchases more than $4 billion direct materials annually. This has lead Mars to introduce online procurement of materials in the hope of driving down prices. Other major firms that have switched to online marketplace auctions have recorded savings of around 5%, if Mars Inc developed similar reductions they could save in excess of $200 million per year.
The Internet is now a cost effective and reliable medium for performing business transactions. Consequently companies are starting to use the Internet to procure their goods. Businesses using online procurement can offer contracts to multiple qualified suppliers simultaneously resulting in a “reverse” auction (when the lowest bid wins the auction). With suppliers competing against each other the price of the contract is driven down resulting in the purchasing firm making a saving. Mars is looking to lower the price its paying for large contracts by making its suppliers compete on the online marketplace.
Advantages and disadvantages of online procurement
The main reason for a company to switch to online procurement is to drive down the cost of contracts from suppliers. By allowing pre-qualified suppliers to compete for contracts Mars will encourage suppliers to quote their best price. This means Mars will be receiving the same quality of materials but will be purchasing them at their lowest price. Online procurement can also be used to aid Mars when they are not sure how to value a contract. By letting suppliers bid for a contract the market will essentially value the contract for them, this will result in Mars always purchasing at a fair rate and stop them getting over charged. Comparisons between suppliers can also be made easier as all bidders can be stored on a single database. This allows Mars to evaluate many different suppliers quickly to ensure the best company is chosen.
However by changing to e-purchasing Mars could very well affect the values they hold so dear. Making the supply firms reduce the price of their contracts is going to have a large affect on their profit margins. Eventually Mars may grind down the supply firms so much that they could be in danger of not making a satisfactory profit in order to secure contracts. Obviously this would affect the relationship Mars has with its suppliers, the mutual benefits Mars wants to experience with its suppliers would no longer be going two ways. If the companies Mars are purchasing from feel they are not getting paid adequately the standard of service Mars receives will drop. In addition, the time pressure for bidding companies to submit a bid lower than the one on screen could lead to errors of judgement. [5] The subsequently awarded contracts are therefore more likely to have disputes and bad faith during the life of the contract. This again would affect the family values held at Mars.
Online procurement is much faster than traditional purchasing methods. Traditional procurement methods involve a lot of man hours i.e. faxes, phone calls and paperwork to suppliers. [4] With Mars being such a large company with many divisions that all have their own purchasing situations, traditional methods of procurement were slow and costly. Switching to online procurement dramatically reduced purchasing time at Mars. Contracts with a deadline date are sent to suppliers and they have to get their bid in by this time if they want to secure the contract. Therefore, it is now easier for Mars to push contracts through the system, which will increase the efficiency of the firm.
Negotiating contracts faster may have a negative side for Mars. Online procurement only decides the price the supplier receives for the contract. Using traditional methods buyers at Mars typically spent a long time working with the suppliers to agree on the issues for a contract. For example delivery conditions, quality specifications and payment terms were all discussed. This allows for the contract to be drawn up with both parties satisfied. However these extra conditions are not discussed using online procurement. The perception of online bidding is based upon ‘lowest price’ rather than the ‘best value’ consequently Mars may not be entering into the most suitable contracts using online procurement, this could lead to problems during the life of the contract. [5]
Prior to online procurement employees at Mars buying division would have to go looking for new suppliers their selves. Using online purchasing, suppliers effectively come to them. Mars can advertise contracts on online procurement websites allowing possible new buyers to get involved. This again helps to reduce costs as Mars can evaluate contracts with a lot more companies than they could with traditional procurement thus making sure they get the best deal. Faster transaction times and reduced supplier searching times will result in employees having more time for maintaining relationships with high value suppliers. This would help Mars reinforce their family values culture.
Conclusion
Switching to online procurement will benefit Mars, as it will lower its purchasing costs due to the extra competition between suppliers. The procurement process at Mars will also become more efficient allowing for easier supplier comparisons and reducing transaction times and employee hours. There could also be some drawbacks from introducing online bidding. Mars’s family values could be affected, as Mars would be encouraging its suppliers to lower their profit margins. Client relationships could then become strained and a poorer supplier service received. Faster contract negotiating could also reduce the suitability of the contracts entered into by Mars.
References
[1] Ivey. Mars Incorporated: Online Procurement
[2] Mars Incorporated article on Wikipedia http://en.wikipedia.org/wiki/Mars,_Incorporated
[3] Mars Inc website http://www.mars.com/
[4] Online Purchasing Gains (2001)
http://www.internetnews.com/bus-news/article.php/726831
[5] Contruction Industry Council: Online Bidding
http://www.construct-it.org.uk/pages/sources/CIC_online_bidding_briefing_note.pdf
Mars Inc is one of the world’s largest privately owned businesses producing confectionary, pet food and state-of-the-art electronic payment systems. [1] In 2006 alone Mars had annual sales of $21 billion dollars. Globally Mars Inc employs 40,000 people and operates in over 100 countries. [2] Mars is still owned by the Mars family and continues to trade using five key family held values (Quality, Responsibility, Mutuality, Efficiency and Freedom). With such a large amount of different products, including the eponymous Mars and Snickers bars, Mars Inc purchases more than $4 billion direct materials annually. This has lead Mars to introduce online procurement of materials in the hope of driving down prices. Other major firms that have switched to online marketplace auctions have recorded savings of around 5%, if Mars Inc developed similar reductions they could save in excess of $200 million per year.
The Internet is now a cost effective and reliable medium for performing business transactions. Consequently companies are starting to use the Internet to procure their goods. Businesses using online procurement can offer contracts to multiple qualified suppliers simultaneously resulting in a “reverse” auction (when the lowest bid wins the auction). With suppliers competing against each other the price of the contract is driven down resulting in the purchasing firm making a saving. Mars is looking to lower the price its paying for large contracts by making its suppliers compete on the online marketplace.
Advantages and disadvantages of online procurement
The main reason for a company to switch to online procurement is to drive down the cost of contracts from suppliers. By allowing pre-qualified suppliers to compete for contracts Mars will encourage suppliers to quote their best price. This means Mars will be receiving the same quality of materials but will be purchasing them at their lowest price. Online procurement can also be used to aid Mars when they are not sure how to value a contract. By letting suppliers bid for a contract the market will essentially value the contract for them, this will result in Mars always purchasing at a fair rate and stop them getting over charged. Comparisons between suppliers can also be made easier as all bidders can be stored on a single database. This allows Mars to evaluate many different suppliers quickly to ensure the best company is chosen.
However by changing to e-purchasing Mars could very well affect the values they hold so dear. Making the supply firms reduce the price of their contracts is going to have a large affect on their profit margins. Eventually Mars may grind down the supply firms so much that they could be in danger of not making a satisfactory profit in order to secure contracts. Obviously this would affect the relationship Mars has with its suppliers, the mutual benefits Mars wants to experience with its suppliers would no longer be going two ways. If the companies Mars are purchasing from feel they are not getting paid adequately the standard of service Mars receives will drop. In addition, the time pressure for bidding companies to submit a bid lower than the one on screen could lead to errors of judgement. [5] The subsequently awarded contracts are therefore more likely to have disputes and bad faith during the life of the contract. This again would affect the family values held at Mars.
Online procurement is much faster than traditional purchasing methods. Traditional procurement methods involve a lot of man hours i.e. faxes, phone calls and paperwork to suppliers. [4] With Mars being such a large company with many divisions that all have their own purchasing situations, traditional methods of procurement were slow and costly. Switching to online procurement dramatically reduced purchasing time at Mars. Contracts with a deadline date are sent to suppliers and they have to get their bid in by this time if they want to secure the contract. Therefore, it is now easier for Mars to push contracts through the system, which will increase the efficiency of the firm.
Negotiating contracts faster may have a negative side for Mars. Online procurement only decides the price the supplier receives for the contract. Using traditional methods buyers at Mars typically spent a long time working with the suppliers to agree on the issues for a contract. For example delivery conditions, quality specifications and payment terms were all discussed. This allows for the contract to be drawn up with both parties satisfied. However these extra conditions are not discussed using online procurement. The perception of online bidding is based upon ‘lowest price’ rather than the ‘best value’ consequently Mars may not be entering into the most suitable contracts using online procurement, this could lead to problems during the life of the contract. [5]
Prior to online procurement employees at Mars buying division would have to go looking for new suppliers their selves. Using online purchasing, suppliers effectively come to them. Mars can advertise contracts on online procurement websites allowing possible new buyers to get involved. This again helps to reduce costs as Mars can evaluate contracts with a lot more companies than they could with traditional procurement thus making sure they get the best deal. Faster transaction times and reduced supplier searching times will result in employees having more time for maintaining relationships with high value suppliers. This would help Mars reinforce their family values culture.
Conclusion
Switching to online procurement will benefit Mars, as it will lower its purchasing costs due to the extra competition between suppliers. The procurement process at Mars will also become more efficient allowing for easier supplier comparisons and reducing transaction times and employee hours. There could also be some drawbacks from introducing online bidding. Mars’s family values could be affected, as Mars would be encouraging its suppliers to lower their profit margins. Client relationships could then become strained and a poorer supplier service received. Faster contract negotiating could also reduce the suitability of the contracts entered into by Mars.
References
[1] Ivey. Mars Incorporated: Online Procurement
[2] Mars Incorporated article on Wikipedia http://en.wikipedia.org/wiki/Mars,_Incorporated
[3] Mars Inc website http://www.mars.com/
[4] Online Purchasing Gains (2001)
http://www.internetnews.com/bus-news/article.php/726831
[5] Contruction Industry Council: Online Bidding
http://www.construct-it.org.uk/pages/sources/CIC_online_bidding_briefing_note.pdf
Case Study 2: Lotus Notes introduction at Compound UK
1 – Introduction
Compound UK is a multinational pharmaceutical company based in the United Kingdom. Compound concentrates primarily on selling its products to hospitals and general medical practices in the UK. It also looks to develop new drugs by participating in clinical trials with trusted doctors. In the late 1980s the NHS underwent a huge reform with the introduction of an internal market place. As Compound mainly operates in the UK health sector this had a significant effect on how the company operated. The new internal market place and budgetary responsibilities for hospitals resulted in the sales situations for Compound becoming more complex.
Compound’s response was to split the company up into eight regions with the aim of giving each of them greater autonomy in planning and responding in its own area. In addition to this Compound introduced a system to encourage knowledge sharing between departments and employees. The system they used was Lotus Notes. Compound had four main uses for Lotus Notes.
1. E-mail – to enable one-to-one communication;
2. Strategic Selling – to enable employees from different functions to share information on selling techniques;
3. Discussion Databases – to enable employees to talk about the topical issues within the company; and
4. Contact recording – to enable employees to record customer specific information.
The initiation of Lotus Notes did improve knowledge sharing within Compound but a different implementation and usage strategy could have made the introduction more successful.
2 – Benefits arising from the use of Lotus Notes
Prior to the introduction of Lotus Notes only a few groups within the company (such as area managers) worked across boundaries. After the introduction groups (such as the medical staff) who had previously not worked with those in other functions were able to communicate through the system. Whilst this may not have been to the liking of some of the medical staff (as they now were expected to work on complex sales situations and the development of new products) there were those in the company, James Black being one, who saw the potential benefits. Lotus Notes allowed him to liaise more with the representatives themselves, detail what it was he did and what he expected of them and it also afforded him the opportunity to visit doctors with the representatives occasionally.
The actions of people like James Black and others within the company (in no small part due to Lotus notes) made the representatives more comfortable in what was expected of them as part of their job description and encouraged them to contact the medical staff if ever they needed assistance. The system also had benefits for the medical staff themselves in that they themselves were able to see what it was like to be a representative – something they would not have done prior to the introduction of Lotus Notes.
3 – Areas that Compound could have improved
One area that could have been improved was how the directors used Lotus Notes, mainly contact recording, to monitor representative productivity. By launching a performance league table for the representatives in each region an increased amount of pressure was placed on each member of the sales force. This resulted in representatives recording false contacts and selling sheets, which they believed would improve their position in the league tables. Inaccuracies would then be present when directors evaluated potential sales. In addition, if representatives feel they are only being monitored by head office on one part of their job this is the only area they will focus on. The affect of this is that other areas of the company could suffer resulting in an overall lose in efficiency.
Using this kind of performance measurement has proven to be an inefficient means of recording the true performance of sales representatives and could prove harmful to the company in the long term. Therefore the directors should consider alternative means of measuring the performance of its representatives. Essentially whilst recording details of their meetings with doctors and such like may be of some benefit to the company it is not the best way of recording the actual performance of sales representatives. The directors at the company should investigate creating a system that would take into account the sales revenue (and cost of goods sold particularly if the sales price is negotiable) as at the end of the day revenue is what keeps the company alive and not the number of sales meetings or contacts that a representative has.
Directors at Compound could have found more success if they used contact recording to evaluate representative performance but in a more hidden manner. By not informing representatives of their surveillance they would continue to work normally and this would enable their true performance to be monitored. Also without the league tables the representatives would be more likely to record only relevant sales, which is the purpose of contact recording. As it stands contact recording at Compound is just a means for ambitious representatives to make a name for themselves and the figures and numbers present cannot be relied upon.
4 – Conclusion
The introduction of Lotus Notes had its advantages and disadvantages for the company. It was advantageous in that it opened up communications across different job functions – the medical staff could liaise with the representatives and vice versa. This enabled prominent members of staff, such as James Black, the opportunity to be in touch more often with the representatives and identify what he expected of them. However, when it came to recording the performance of the representatives the system was highly flawed. Representatives feeling under pressure by a performance table had a tendency to create false contacts and selling sheets and this resulted in potential sales becoming inaccurate and ultimately a loss of efficiency within the company. To combat this, directors should consider using alternative means of performance measurement (such as actual sales) and perhaps a more hidden approach to monitoring the performance of representatives (rather than something like a performance table).
5 – References
Title: Sharing Knowledge through Lotus Notes in a Pharmaceuticals Company
Author(s): Professor Geoff Walsham and Doctor Niall Hayes
Year: 2000
This project was a collaboration between Rory Linwood and Stuart Nibloe
Compound UK is a multinational pharmaceutical company based in the United Kingdom. Compound concentrates primarily on selling its products to hospitals and general medical practices in the UK. It also looks to develop new drugs by participating in clinical trials with trusted doctors. In the late 1980s the NHS underwent a huge reform with the introduction of an internal market place. As Compound mainly operates in the UK health sector this had a significant effect on how the company operated. The new internal market place and budgetary responsibilities for hospitals resulted in the sales situations for Compound becoming more complex.
Compound’s response was to split the company up into eight regions with the aim of giving each of them greater autonomy in planning and responding in its own area. In addition to this Compound introduced a system to encourage knowledge sharing between departments and employees. The system they used was Lotus Notes. Compound had four main uses for Lotus Notes.
1. E-mail – to enable one-to-one communication;
2. Strategic Selling – to enable employees from different functions to share information on selling techniques;
3. Discussion Databases – to enable employees to talk about the topical issues within the company; and
4. Contact recording – to enable employees to record customer specific information.
The initiation of Lotus Notes did improve knowledge sharing within Compound but a different implementation and usage strategy could have made the introduction more successful.
2 – Benefits arising from the use of Lotus Notes
Prior to the introduction of Lotus Notes only a few groups within the company (such as area managers) worked across boundaries. After the introduction groups (such as the medical staff) who had previously not worked with those in other functions were able to communicate through the system. Whilst this may not have been to the liking of some of the medical staff (as they now were expected to work on complex sales situations and the development of new products) there were those in the company, James Black being one, who saw the potential benefits. Lotus Notes allowed him to liaise more with the representatives themselves, detail what it was he did and what he expected of them and it also afforded him the opportunity to visit doctors with the representatives occasionally.
The actions of people like James Black and others within the company (in no small part due to Lotus notes) made the representatives more comfortable in what was expected of them as part of their job description and encouraged them to contact the medical staff if ever they needed assistance. The system also had benefits for the medical staff themselves in that they themselves were able to see what it was like to be a representative – something they would not have done prior to the introduction of Lotus Notes.
3 – Areas that Compound could have improved
One area that could have been improved was how the directors used Lotus Notes, mainly contact recording, to monitor representative productivity. By launching a performance league table for the representatives in each region an increased amount of pressure was placed on each member of the sales force. This resulted in representatives recording false contacts and selling sheets, which they believed would improve their position in the league tables. Inaccuracies would then be present when directors evaluated potential sales. In addition, if representatives feel they are only being monitored by head office on one part of their job this is the only area they will focus on. The affect of this is that other areas of the company could suffer resulting in an overall lose in efficiency.
Using this kind of performance measurement has proven to be an inefficient means of recording the true performance of sales representatives and could prove harmful to the company in the long term. Therefore the directors should consider alternative means of measuring the performance of its representatives. Essentially whilst recording details of their meetings with doctors and such like may be of some benefit to the company it is not the best way of recording the actual performance of sales representatives. The directors at the company should investigate creating a system that would take into account the sales revenue (and cost of goods sold particularly if the sales price is negotiable) as at the end of the day revenue is what keeps the company alive and not the number of sales meetings or contacts that a representative has.
Directors at Compound could have found more success if they used contact recording to evaluate representative performance but in a more hidden manner. By not informing representatives of their surveillance they would continue to work normally and this would enable their true performance to be monitored. Also without the league tables the representatives would be more likely to record only relevant sales, which is the purpose of contact recording. As it stands contact recording at Compound is just a means for ambitious representatives to make a name for themselves and the figures and numbers present cannot be relied upon.
4 – Conclusion
The introduction of Lotus Notes had its advantages and disadvantages for the company. It was advantageous in that it opened up communications across different job functions – the medical staff could liaise with the representatives and vice versa. This enabled prominent members of staff, such as James Black, the opportunity to be in touch more often with the representatives and identify what he expected of them. However, when it came to recording the performance of the representatives the system was highly flawed. Representatives feeling under pressure by a performance table had a tendency to create false contacts and selling sheets and this resulted in potential sales becoming inaccurate and ultimately a loss of efficiency within the company. To combat this, directors should consider using alternative means of performance measurement (such as actual sales) and perhaps a more hidden approach to monitoring the performance of representatives (rather than something like a performance table).
5 – References
Title: Sharing Knowledge through Lotus Notes in a Pharmaceuticals Company
Author(s): Professor Geoff Walsham and Doctor Niall Hayes
Year: 2000
This project was a collaboration between Rory Linwood and Stuart Nibloe
Saturday 8 December 2007
MySQL Database Case – The Advantages and Disadvantages of Open Source Software.
Introduction
Open source software is a type of software that is open and free to use. Users of open source software are able to modify and customise the software to meet their individual needs. Companies that develop open source software look to create a large user base of their product by making it readily available to the market. This makes the software understandable, modifiable and accessible to its users, which is the aim of the open source format. [1]
MySQL AB is the world’s most popular open source database software provider with over 100 million copies of its software downloaded in its history. Its database MySQL is fast, reliable and easy to use quickly making it a real competitor to the traditional closed source systems of Microsoft, IBM and Oracle. MySQL looks to provide a high quality service and satisfy its customer’s needs while upholding its open source values. [2]
Advantages of the open source format
The main advantage of open sourcing MYSQL is the increased accessibility of the product. Breaking into the database market is extremely hard as huge multi-million dollar firms (Microsoft, IBM etc.) dominate the industry. On many occasions new and acclaimed software have not made an impact on the market, as customers are reluctant to buy products outside the tradition firms. By making MySQL free to download it encouraged users to try out the database without being locked into the product. This resulted in MySQL fast and reliable system getting installed on millions of computers worldwide. For a relatively small company MySQL AB had thousands of users that understood how to operate their system and could appreciate its benefits first hand. [3]
Open source software allows for constant modification and fine-tuning of the product as users are allowed access to the applications code, this in turn greatly extends the lifetime of the application. Closed source applications have a very short functional life, as they cannot change with time, as a result upgrades and new software constantly has to be bought. Having software available in source forms means the applications can change with varying conditions and be improved easily. This gives MySQL an advantage over its competitors as small low budget companies could potentially run MySQL for a decade with little addition cost. [4]
Being able to customise the database software also enables businesses to modify the application to their individual needs. Each business using MySQL could tailor the system, using the open source code, making it more efficient in their own particular market. As a consequence for most small business’s MySQL can outperform the one-dimensional products offered by the large closed source firms. So not only are companies saving money by installing free open source software the system they are receiving a system that they can integrate better into their business. [7]
Another benefit to MyQSL is that open source software tends to have far less ‘bugs’ than closed source systems; this is an advantage that MySQL should be keen to highlight to potential customers. Most applications that are developed contain bugs and even with testing some make it to the final product.
"If builders built houses the way programmers built programs, the first woodpecker to come along would destroy civilization." -- Gerald Weinberg
With open source software, users can see the code enabling them to spot and correct problems their self before any damage occurs to the data. Bugs are therefore more visible and rapidly corrected this results in maintenance costs being lower for companies that install open source database software. With closed source products the only way to correct problems is to pay the original developer, as they are the only ones with access to the software code. These fees can be high and may encourage small businesses towards the open source route. [5][6]
Disadvantages of the open source format
The problem MySQL AB has is how can it generate substantial revenue if its product is essentially free to operate. In traditional closed source firm’s revenue is 60% software sales and 40% service support. For open source firms this dramatically switches to 0% sales and 100% support. Free software will attract more users, which should result in drastic increase in the amount of support fees. Companies like Digital Domain experienced a 100-fold increase in the amount of users of their applications when they open sourced their products. Consequently even if a small fraction of new users needed support they would expect a significant rise in revenue. The problem is most users don’t seem to need (or want to pay for) service support. [5]
The conversion funnel states that only 1% of people downloading an application will go on to be a paying customer. Executives at MySQL AB have figures calculating their percentage of paying customers from number of downloads to be drastically lower with just 0.0001%. Consequently MySQL AB needs a gigantic amount of installations to create substantial revenue. By having the software code available to all users means that the installer can solve most problems their self thus reducing the need for service support.
MySQL AB may also find new problems if they can manage to get a large amount of paying customers. Open source software can at times be more complicated than normal software. Due to high competition closed source products are designed for easy installation but some open source products need a certain level of expertise for installation. If a customer does not understand the code he may not be able to use the product easily and reap the potential benefits. This could lead to multiple complaints that could take up most of MySQL AB’s staff time. Less energy could then be put into developing the software as customer service takes a more central role. [8]
Conclusion
In general, MySQL AB has benefited from supplying open source products. Due to it being open source MySQL has been installed on millions of computers worldwide making it a household name. If there was a purchase fee on the software it would be unlikely that MySQL would have been able to break into the database market so successfully but instead they may have joined the long line of failed products. Small businesses now understand how open source products like MySQL can bring the customisation level they need at a low price. As long as MYSQL keeps developing and adding new features the amount of installations are only going to increase bringing with it a rise in revenue.
References
[1] Open- Source Software article on Wikipedia http://en.wikipedia.org/wiki/Open_source_software
[2] About MySQL http://www.mysql.com/company/
[3] MYSQL Open Source Database in 2006 (B)
[4] Advantages of Open Source Software (2000) by Jesus M. Gonzalez http://eu.conecta.it/paper/Advantages_open_source_soft.html
[5] The Economics of open Source Software (1999) by Philip E. Varner http://www.cs.virginia.edu/~pev5b/writing/econ_oss/advantages.html
[6] Benefits of Open Source Code (2007) by James A. J. Wilson
http://www.oss-watch.ac.uk/resources/whoneedssource.xml
[7] Benefits of Using Open Source Software
http://open-source.gbdirect.co.uk/migration/benefit.html
[8] Disadvantages of Open Source by Dmitri Rotow http://www.gismonitor.com/articles/comment/061903_Dmitri.php
Open source software is a type of software that is open and free to use. Users of open source software are able to modify and customise the software to meet their individual needs. Companies that develop open source software look to create a large user base of their product by making it readily available to the market. This makes the software understandable, modifiable and accessible to its users, which is the aim of the open source format. [1]
MySQL AB is the world’s most popular open source database software provider with over 100 million copies of its software downloaded in its history. Its database MySQL is fast, reliable and easy to use quickly making it a real competitor to the traditional closed source systems of Microsoft, IBM and Oracle. MySQL looks to provide a high quality service and satisfy its customer’s needs while upholding its open source values. [2]
Advantages of the open source format
The main advantage of open sourcing MYSQL is the increased accessibility of the product. Breaking into the database market is extremely hard as huge multi-million dollar firms (Microsoft, IBM etc.) dominate the industry. On many occasions new and acclaimed software have not made an impact on the market, as customers are reluctant to buy products outside the tradition firms. By making MySQL free to download it encouraged users to try out the database without being locked into the product. This resulted in MySQL fast and reliable system getting installed on millions of computers worldwide. For a relatively small company MySQL AB had thousands of users that understood how to operate their system and could appreciate its benefits first hand. [3]
Open source software allows for constant modification and fine-tuning of the product as users are allowed access to the applications code, this in turn greatly extends the lifetime of the application. Closed source applications have a very short functional life, as they cannot change with time, as a result upgrades and new software constantly has to be bought. Having software available in source forms means the applications can change with varying conditions and be improved easily. This gives MySQL an advantage over its competitors as small low budget companies could potentially run MySQL for a decade with little addition cost. [4]
Being able to customise the database software also enables businesses to modify the application to their individual needs. Each business using MySQL could tailor the system, using the open source code, making it more efficient in their own particular market. As a consequence for most small business’s MySQL can outperform the one-dimensional products offered by the large closed source firms. So not only are companies saving money by installing free open source software the system they are receiving a system that they can integrate better into their business. [7]
Another benefit to MyQSL is that open source software tends to have far less ‘bugs’ than closed source systems; this is an advantage that MySQL should be keen to highlight to potential customers. Most applications that are developed contain bugs and even with testing some make it to the final product.
"If builders built houses the way programmers built programs, the first woodpecker to come along would destroy civilization." -- Gerald Weinberg
With open source software, users can see the code enabling them to spot and correct problems their self before any damage occurs to the data. Bugs are therefore more visible and rapidly corrected this results in maintenance costs being lower for companies that install open source database software. With closed source products the only way to correct problems is to pay the original developer, as they are the only ones with access to the software code. These fees can be high and may encourage small businesses towards the open source route. [5][6]
Disadvantages of the open source format
The problem MySQL AB has is how can it generate substantial revenue if its product is essentially free to operate. In traditional closed source firm’s revenue is 60% software sales and 40% service support. For open source firms this dramatically switches to 0% sales and 100% support. Free software will attract more users, which should result in drastic increase in the amount of support fees. Companies like Digital Domain experienced a 100-fold increase in the amount of users of their applications when they open sourced their products. Consequently even if a small fraction of new users needed support they would expect a significant rise in revenue. The problem is most users don’t seem to need (or want to pay for) service support. [5]
The conversion funnel states that only 1% of people downloading an application will go on to be a paying customer. Executives at MySQL AB have figures calculating their percentage of paying customers from number of downloads to be drastically lower with just 0.0001%. Consequently MySQL AB needs a gigantic amount of installations to create substantial revenue. By having the software code available to all users means that the installer can solve most problems their self thus reducing the need for service support.
MySQL AB may also find new problems if they can manage to get a large amount of paying customers. Open source software can at times be more complicated than normal software. Due to high competition closed source products are designed for easy installation but some open source products need a certain level of expertise for installation. If a customer does not understand the code he may not be able to use the product easily and reap the potential benefits. This could lead to multiple complaints that could take up most of MySQL AB’s staff time. Less energy could then be put into developing the software as customer service takes a more central role. [8]
Conclusion
In general, MySQL AB has benefited from supplying open source products. Due to it being open source MySQL has been installed on millions of computers worldwide making it a household name. If there was a purchase fee on the software it would be unlikely that MySQL would have been able to break into the database market so successfully but instead they may have joined the long line of failed products. Small businesses now understand how open source products like MySQL can bring the customisation level they need at a low price. As long as MYSQL keeps developing and adding new features the amount of installations are only going to increase bringing with it a rise in revenue.
References
[1] Open- Source Software article on Wikipedia http://en.wikipedia.org/wiki/Open_source_software
[2] About MySQL http://www.mysql.com/company/
[3] MYSQL Open Source Database in 2006 (B)
[4] Advantages of Open Source Software (2000) by Jesus M. Gonzalez http://eu.conecta.it/paper/Advantages_open_source_soft.html
[5] The Economics of open Source Software (1999) by Philip E. Varner http://www.cs.virginia.edu/~pev5b/writing/econ_oss/advantages.html
[6] Benefits of Open Source Code (2007) by James A. J. Wilson
http://www.oss-watch.ac.uk/resources/whoneedssource.xml
[7] Benefits of Using Open Source Software
http://open-source.gbdirect.co.uk/migration/benefit.html
[8] Disadvantages of Open Source by Dmitri Rotow http://www.gismonitor.com/articles/comment/061903_Dmitri.php
Friday 7 December 2007
Long Essay - The Open Document Format
1 – An introduction to the OpenDocument format
The OpenDocument format (ODF) is an alternative document file format to the one predominantly used in Microsoft Office. Unlike Microsoft’s proprietary document file format ODF is open source. This effectively means that the source code used in the creation of the format is freely available to anyone under a General Public Licence (GPL) and they may do with it as they wish (i.e. modify it for their own needs or redistribute it). Microsoft’s proprietary document file format does not allow users the same freedoms (such as modifying the format) that ODF does.
ODF was originally developed by the Organisation for the Advancement of Structured Information Standards (OASIS). The organisation represents companies from around the globe that have a desire to develop and implement standards within the IT world. The format itself is XML (a computer language whose primary purpose is to make it easier to share data across different applications) based and as such is promoted as an independent file format. This means that users will be able to view and edit files (saved in ODF) across different applications and on different operating systems should they desire to do so.
The initial version of the file format – OpenDocument 1.0 (Second Edition) – was approved by the International Organisation for Standardisation (ISO) and the International Electrotechnical Commission (IEC) on 04/05/2006 (ISO/IEC 26300:2006 refers). As a result of this achievement and through the continued ownership of the file format by OASIS it truly can be said to be an open standard. This means that users are not restricted in any way by what they do with it (such as modifying it or redistributing it).
As it stands this is the only file format that is an open standard and as such it has been implemented through various vendors (mainly through OpenOffice) and is slowly, but surely, beginning to find its way onto the public domain. Governments (such as those of France and Germany) are either evaluating ODF or have already implemented it to some degree with more likely to follow. ODF is highly desirable for governments as it will ensure that data saved in present times will not be inaccessible in the future due to different technological specifications. Microsoft clearly sees ODF as a threat to its dominance of electronic office applications and as such is currently trying to push through its own apparent open sourced based document file format called Office Open XML (OOXML).
However, a key obstacle for ODF is that the vast majority know how to use and are comfortable with Microsoft Office and as such they will be unwilling to switch to a different office suite. Microsoft Office suites up until Office 12 (2007) do not include native support of ODF but plug-ins, with the permission of Microsoft, have been developed. One such plug-in has already been released by the OpenDocument Foundation.
2 – The standardisation process of ODF
Whilst ODF was submitted to the ISO in September 2005 and approved as a standard in May 2006 the whole process started out several years before in 1999. In that year StarDivision decided to begin the development of a XML default file format. This decision was primarily based on the limitations of the older file formats. StarDivision’s ambition was to create an interoperable file format that would not be limited to one application or operating system and as such be used by other software companies. After Sun acquired StarDivision the project was expanded to include the open source community (in October 2000) primarily through the website OpenOffice.org. The idea behind this was for the open source community to be involved in defining a specification for the open file format.
In 2002 the OASIS Open Office Technical Committee had its first conference on the open file format’s specification and that year also saw two office applications (OpenOffice.org 1.0 and StarOffice 6) using the open file format as the default file format for the first time. The period of 2003 to 2004 saw the open file format being adapted to reflect recent technical developments in XML and office applications. The result of these adaptations saw the open file format become more refined and consistent. By the end of 2004 the open file format was first called the OpenDocument Format (ODF).
2005 resulted in further refinements of ODF as well as a public review being carried out. In May 2005 ODF was finally approved as an OASIS standard, which would allow it to be submitted to the ISO to be approved as an international standard.
3 – Application support for ODF
Whilst there is no native support (as of yet) in any versions of Microsoft Office there are a number of applications out there that support ODF as the default file format and there are plug-ins available for Microsoft Office (available from sources like the OpenDocument Foundation or Sun) that enables it to support ODF. There are currently eight applications (such as OpenOffice.org and StarOffice) that include ODF as the default file format and further to this there are numerous applications that can convert to and from ODF as well as online office applications (like Google Docs) that include support for ODF.
Whilst many of these applications both work in a very similar manner to Microsoft Office (up to 2003 (version 11)) and are either free (such as OpenOffice.org) or relatively cheap to buy (such as StarOffice) a huge problem remains in that Microsoft Office in effect has a near monopoly over the office application market. If ODF is to truly take off then it will need to be supported in the Microsoft Office application. There are plug-ins (as mentioned previously) that will include support for ODF in Microsoft Office but this is the next best thing to Microsoft actually including ODF has one of the file formats in the program. As governments begin to see the advantages of ODF they will apply pressure on Microsoft to include support for the format in Microsoft Office. Microsoft reported in July 2006 that it would include support for open formats like ODF in its latest office suite (Office 2007 (version 12)) though as of December 2007, nearly a year after Office 2007's release, Microsoft has yet to include support for ODF in the application.
4 - Adoption of ODF
2007 has seen the start of many governments evaluating the adoption of ODF. As ODF guarantees long term access to data without technical or legal barriers many governments now view ODF as a public policy issue. ODF would allow governments to access any policies made in the present day in the future, without having to change the file format as technologies and restrictions evolve. This is because ODF standardises file formats giving users better control over their documents. This advantage over traditional proprietary formats has resulted in many governments including those of France, Belgium and Germany adopting ODF in some form.
The aforementioned governments are starting to exchange documents in their current file format to ODF and are recommending that any future documentation be created using open standards (i.e. ODF). With these leading governments realising the benefits of ODF it is only a matter of time before other governments follow suit. It is likely that in the near future ODF will be the main format in the public domain and with this position of power it could start to make an impact on the private sector.
Even now businesses are responding to the needs of governments and their customers by implementing ODF in their products. In the market today there are multiple applications (both open source and commercial) that support ODF. With the increasing use by governments the pressure on companies to implement ODF into their products is only going to increase.
5 – Benefits and criticisms of ODF
There are many key benefits that come from using ODF over closed source formats. The users of ODF have improved ownership and access to the data they save. Using closed source formats users may not actually own their documents making them dependent on the technology vendors they purchase the products from. This is not the case with open source, as you cannot get technologically locked out of ODF files. The open nature of ODF allows for long term access to files without the worry of changing technologies.
As ODF aims to separate the document (information) from the application that created it a greater choice is available to open source users. This is because the document can be used by other applications without restriction or interference from proprietary code. This interoperability of ODF is a big advantage over closed source rivals. Due to this standardised base for interoperable document formats, it openly encourages innovation. Any company can design and distribute new applications and services but access to the documents will remain after this innovation because of the standardised base.
Many open source enthusiasts would argue that criticisms of ODF are only arising because Microsoft is backing the people making the complaints. However, there are some legitimate criticisms of ODF.
One criticism is the implementation of MathML as the standard to represent mathematical formula in OpenDocument form. Most mathematicians do not use or like this standard and would much prefer the use of the older TeX format for typesetting complex mathematical formula. TeX is the de facto standard used by mathematicians and is thought to be far more accurate than MathML. It is therefore unclear why MathML has been chosen as the standard for mathematical code.
The open source nature of ODF is the main benefit but it has also caused a few problems. ODF does not contain a defined formula language, which means some files are not compatible. OASIS is currently creating a standard for formula language (Open Formula) but until then some inaccuracies may occur. Applications using ODF as their standard document format do not use the same methods of providing scripting capabilities. A standard here would again be required to produce some level of consistency between different applications using ODF.
The functionality of ODF has also come under attack. ODF still has a few missing features like the ability to include tables in presentations. Microsoft also claims that ODF handles new extensions in a complex manner compared to their own open source format OOXML.
6 – Microsoft’s rival Office Open XML
Due to the threat posed by ODF to its proprietary office suite and the increased pressure from consumers to provide an open source product Microsoft has created its own open source rival to ODF called Office Open XML (OOXML).
Prior to the 2007 edition of Microsoft Office, its applications like Word and Excel used binary file formats for storing data. This restrictive manner of storing data has been under fire recently with the development of open source office equivalents like ODF. The benefits of open source file formats have attracted the interest of many governments and businesses and in response Microsoft began to develop OOXML.
So far OOXML has not managed to get approval for ISO standard. This is because there are concerns about the limitations to OOXML’s openness and the complexity of its standard document. The ISO does not want to create an incompatible rival to ODF that will allow the non-interoperable environment to continue. If OOXML and ODF were compatible then OOXML may find it easier to earn standard status. As it stands ODF meets all the definitions of open standard and is already in use worldwide, so the ISO see OOXML as unnecessary.
With the might of Microsoft behind it the adoption of OOXML could be quicker and more extensive than ODF. Many large companies have already backed OOXML and have started incorporating OOXML translators into their applications. However, OOXML is still an entirely new format so existing Microsoft Office files will have to be translated anyway so many companies may chose the ODF ISO standard.
7 – Conclusion
The use of ODF is only going to increase in the next couple of years, as organisations now understand the benefits of implementing open source applications. The better flexibility and choice that comes from using ODF will result in more governments and companies choosing ODF as their main file format. Competition from Microsoft’s OOXML will increase but if it continues to fail at getting ISO approval ODF will continue to compete with OOXML in the market.
8 – References
ODF Alliance – ODF Resources
http://www.odfalliance.org/resources.php
Wikipedia – The OpenDocument Format
http://en.wikipedia.org/wiki/OpenDocument
Free/Libre/Open Source Software: Policy Support
An Economic Basis for Open Standards
http://pascal.case.unibz.it/retrieve/3327/FLOSSPOLS-D04-openstandards-v6.pdf
Google’s Position on OOXML as a Proposed ISO Standard
http://www.odfalliance.org/resources/Google%20XML%20Q%20%20A%20(2).pdf
ISO welcomes Open Document Format
http://www.pcpro.co.uk/news/86931/iso-welcomes-open-document-format.html
History of OpenDocument
http://opendocument.xml.org/milestones
“Why ODF?” – The Importance of OpenDocument Format for Governments
http://www.odfalliance.org/resources/whyODF.pdf
ODF Alliance Hails Record Growth in Application Support for ODF
http://www.odfalliance.org/press/Release20071026.pdf
Application support for the OpenDocument format
http://opendocumentfellowship.com/applications
Microsoft Expands Document Interoperability
http://www.microsoft.com/presspass/press/2006/jul06/07-06OpenSourceProjectPR.mspx
Open or Closed? The ODF debate spills in LinuxWorld
http://searchenterpriselinux.techtarget.com/originalContent/0,289142,sid39_gci1179223,00.html
This project was a collaboration between Rory Linwood and Stuart Nibloe
The OpenDocument format (ODF) is an alternative document file format to the one predominantly used in Microsoft Office. Unlike Microsoft’s proprietary document file format ODF is open source. This effectively means that the source code used in the creation of the format is freely available to anyone under a General Public Licence (GPL) and they may do with it as they wish (i.e. modify it for their own needs or redistribute it). Microsoft’s proprietary document file format does not allow users the same freedoms (such as modifying the format) that ODF does.
ODF was originally developed by the Organisation for the Advancement of Structured Information Standards (OASIS). The organisation represents companies from around the globe that have a desire to develop and implement standards within the IT world. The format itself is XML (a computer language whose primary purpose is to make it easier to share data across different applications) based and as such is promoted as an independent file format. This means that users will be able to view and edit files (saved in ODF) across different applications and on different operating systems should they desire to do so.
The initial version of the file format – OpenDocument 1.0 (Second Edition) – was approved by the International Organisation for Standardisation (ISO) and the International Electrotechnical Commission (IEC) on 04/05/2006 (ISO/IEC 26300:2006 refers). As a result of this achievement and through the continued ownership of the file format by OASIS it truly can be said to be an open standard. This means that users are not restricted in any way by what they do with it (such as modifying it or redistributing it).
As it stands this is the only file format that is an open standard and as such it has been implemented through various vendors (mainly through OpenOffice) and is slowly, but surely, beginning to find its way onto the public domain. Governments (such as those of France and Germany) are either evaluating ODF or have already implemented it to some degree with more likely to follow. ODF is highly desirable for governments as it will ensure that data saved in present times will not be inaccessible in the future due to different technological specifications. Microsoft clearly sees ODF as a threat to its dominance of electronic office applications and as such is currently trying to push through its own apparent open sourced based document file format called Office Open XML (OOXML).
However, a key obstacle for ODF is that the vast majority know how to use and are comfortable with Microsoft Office and as such they will be unwilling to switch to a different office suite. Microsoft Office suites up until Office 12 (2007) do not include native support of ODF but plug-ins, with the permission of Microsoft, have been developed. One such plug-in has already been released by the OpenDocument Foundation.
2 – The standardisation process of ODF
Whilst ODF was submitted to the ISO in September 2005 and approved as a standard in May 2006 the whole process started out several years before in 1999. In that year StarDivision decided to begin the development of a XML default file format. This decision was primarily based on the limitations of the older file formats. StarDivision’s ambition was to create an interoperable file format that would not be limited to one application or operating system and as such be used by other software companies. After Sun acquired StarDivision the project was expanded to include the open source community (in October 2000) primarily through the website OpenOffice.org. The idea behind this was for the open source community to be involved in defining a specification for the open file format.
In 2002 the OASIS Open Office Technical Committee had its first conference on the open file format’s specification and that year also saw two office applications (OpenOffice.org 1.0 and StarOffice 6) using the open file format as the default file format for the first time. The period of 2003 to 2004 saw the open file format being adapted to reflect recent technical developments in XML and office applications. The result of these adaptations saw the open file format become more refined and consistent. By the end of 2004 the open file format was first called the OpenDocument Format (ODF).
2005 resulted in further refinements of ODF as well as a public review being carried out. In May 2005 ODF was finally approved as an OASIS standard, which would allow it to be submitted to the ISO to be approved as an international standard.
3 – Application support for ODF
Whilst there is no native support (as of yet) in any versions of Microsoft Office there are a number of applications out there that support ODF as the default file format and there are plug-ins available for Microsoft Office (available from sources like the OpenDocument Foundation or Sun) that enables it to support ODF. There are currently eight applications (such as OpenOffice.org and StarOffice) that include ODF as the default file format and further to this there are numerous applications that can convert to and from ODF as well as online office applications (like Google Docs) that include support for ODF.
Whilst many of these applications both work in a very similar manner to Microsoft Office (up to 2003 (version 11)) and are either free (such as OpenOffice.org) or relatively cheap to buy (such as StarOffice) a huge problem remains in that Microsoft Office in effect has a near monopoly over the office application market. If ODF is to truly take off then it will need to be supported in the Microsoft Office application. There are plug-ins (as mentioned previously) that will include support for ODF in Microsoft Office but this is the next best thing to Microsoft actually including ODF has one of the file formats in the program. As governments begin to see the advantages of ODF they will apply pressure on Microsoft to include support for the format in Microsoft Office. Microsoft reported in July 2006 that it would include support for open formats like ODF in its latest office suite (Office 2007 (version 12)) though as of December 2007, nearly a year after Office 2007's release, Microsoft has yet to include support for ODF in the application.
4 - Adoption of ODF
2007 has seen the start of many governments evaluating the adoption of ODF. As ODF guarantees long term access to data without technical or legal barriers many governments now view ODF as a public policy issue. ODF would allow governments to access any policies made in the present day in the future, without having to change the file format as technologies and restrictions evolve. This is because ODF standardises file formats giving users better control over their documents. This advantage over traditional proprietary formats has resulted in many governments including those of France, Belgium and Germany adopting ODF in some form.
The aforementioned governments are starting to exchange documents in their current file format to ODF and are recommending that any future documentation be created using open standards (i.e. ODF). With these leading governments realising the benefits of ODF it is only a matter of time before other governments follow suit. It is likely that in the near future ODF will be the main format in the public domain and with this position of power it could start to make an impact on the private sector.
Even now businesses are responding to the needs of governments and their customers by implementing ODF in their products. In the market today there are multiple applications (both open source and commercial) that support ODF. With the increasing use by governments the pressure on companies to implement ODF into their products is only going to increase.
5 – Benefits and criticisms of ODF
There are many key benefits that come from using ODF over closed source formats. The users of ODF have improved ownership and access to the data they save. Using closed source formats users may not actually own their documents making them dependent on the technology vendors they purchase the products from. This is not the case with open source, as you cannot get technologically locked out of ODF files. The open nature of ODF allows for long term access to files without the worry of changing technologies.
As ODF aims to separate the document (information) from the application that created it a greater choice is available to open source users. This is because the document can be used by other applications without restriction or interference from proprietary code. This interoperability of ODF is a big advantage over closed source rivals. Due to this standardised base for interoperable document formats, it openly encourages innovation. Any company can design and distribute new applications and services but access to the documents will remain after this innovation because of the standardised base.
Many open source enthusiasts would argue that criticisms of ODF are only arising because Microsoft is backing the people making the complaints. However, there are some legitimate criticisms of ODF.
One criticism is the implementation of MathML as the standard to represent mathematical formula in OpenDocument form. Most mathematicians do not use or like this standard and would much prefer the use of the older TeX format for typesetting complex mathematical formula. TeX is the de facto standard used by mathematicians and is thought to be far more accurate than MathML. It is therefore unclear why MathML has been chosen as the standard for mathematical code.
The open source nature of ODF is the main benefit but it has also caused a few problems. ODF does not contain a defined formula language, which means some files are not compatible. OASIS is currently creating a standard for formula language (Open Formula) but until then some inaccuracies may occur. Applications using ODF as their standard document format do not use the same methods of providing scripting capabilities. A standard here would again be required to produce some level of consistency between different applications using ODF.
The functionality of ODF has also come under attack. ODF still has a few missing features like the ability to include tables in presentations. Microsoft also claims that ODF handles new extensions in a complex manner compared to their own open source format OOXML.
6 – Microsoft’s rival Office Open XML
Due to the threat posed by ODF to its proprietary office suite and the increased pressure from consumers to provide an open source product Microsoft has created its own open source rival to ODF called Office Open XML (OOXML).
Prior to the 2007 edition of Microsoft Office, its applications like Word and Excel used binary file formats for storing data. This restrictive manner of storing data has been under fire recently with the development of open source office equivalents like ODF. The benefits of open source file formats have attracted the interest of many governments and businesses and in response Microsoft began to develop OOXML.
So far OOXML has not managed to get approval for ISO standard. This is because there are concerns about the limitations to OOXML’s openness and the complexity of its standard document. The ISO does not want to create an incompatible rival to ODF that will allow the non-interoperable environment to continue. If OOXML and ODF were compatible then OOXML may find it easier to earn standard status. As it stands ODF meets all the definitions of open standard and is already in use worldwide, so the ISO see OOXML as unnecessary.
With the might of Microsoft behind it the adoption of OOXML could be quicker and more extensive than ODF. Many large companies have already backed OOXML and have started incorporating OOXML translators into their applications. However, OOXML is still an entirely new format so existing Microsoft Office files will have to be translated anyway so many companies may chose the ODF ISO standard.
7 – Conclusion
The use of ODF is only going to increase in the next couple of years, as organisations now understand the benefits of implementing open source applications. The better flexibility and choice that comes from using ODF will result in more governments and companies choosing ODF as their main file format. Competition from Microsoft’s OOXML will increase but if it continues to fail at getting ISO approval ODF will continue to compete with OOXML in the market.
8 – References
ODF Alliance – ODF Resources
http://www.odfalliance.org/resources.php
Wikipedia – The OpenDocument Format
http://en.wikipedia.org/wiki/OpenDocument
Free/Libre/Open Source Software: Policy Support
An Economic Basis for Open Standards
http://pascal.case.unibz.it/retrieve/3327/FLOSSPOLS-D04-openstandards-v6.pdf
Google’s Position on OOXML as a Proposed ISO Standard
http://www.odfalliance.org/resources/Google%20XML%20Q%20%20A%20(2).pdf
ISO welcomes Open Document Format
http://www.pcpro.co.uk/news/86931/iso-welcomes-open-document-format.html
History of OpenDocument
http://opendocument.xml.org/milestones
“Why ODF?” – The Importance of OpenDocument Format for Governments
http://www.odfalliance.org/resources/whyODF.pdf
ODF Alliance Hails Record Growth in Application Support for ODF
http://www.odfalliance.org/press/Release20071026.pdf
Application support for the OpenDocument format
http://opendocumentfellowship.com/applications
Microsoft Expands Document Interoperability
http://www.microsoft.com/presspass/press/2006/jul06/07-06OpenSourceProjectPR.mspx
Open or Closed? The ODF debate spills in LinuxWorld
http://searchenterpriselinux.techtarget.com/originalContent/0,289142,sid39_gci1179223,00.html
This project was a collaboration between Rory Linwood and Stuart Nibloe
Friday 30 November 2007
Information Technology Outsourcing at the BBC
Introduction
The BBC (British Broadcasting Corporation) is the largest broadcasting corporation in the world and holds international respect. In the UK alone it employees over 26,000 people and has an annual budget of £4 billion. It is renowned for its impartial and reliable reporting by broadcasting without political and commercial influence. [1] However the BBC like any other business is always striving to become more efficient and reduce its operating costs. This led the BBC to outsource its technology sector (BBCTL) in October 2004.
Outsourcing is the transfer or delegation to an external service provider the operation and day-to-day management of a business process. [2] In this case SBS (Siemens Business Services) bought the contract from BBC and agreed to provide the company with IT services for the following 10 years. Outsourcing occurs when a company calculates that selling off sections of the business to a external party can reduce operation costs. In addition outsourcing allows employees to concentrate on the core (‘value adding’) functions of the company. By allowing SBS to provide all IT services the BBC expected to save around £35 million per year. With extra funding and employee hours, new and innovative programmes were to be developed during the ten year contract.
The supplier selection process at the BBC.
The process of selling BBCTL began in November 2003. As stated by the European Union Procurement Process (EUPP) the sale of services worth over £154,477 must be advertised on the OJEC (Official Journal of the European Communities) website. By doing so the contract was open to all bidders. The contract stated that the purchasing company had to provide technology support and services to the BBC for ten years. This part of the contract was criticised. Committing itself to ten years with the purchaser the BBC would leave the corporation in real trouble if the service received were poor. A more sensible approach may have been to allow the termination of the contract if the agreed standards were not met, perhaps even including some compensation sum for the BBC if the situation occurred. Due to this ten year deal, the BBC had to be sure they picked the right company for the job.
The sale of BBCTL attracted the interest of 80 companies; these companies were to be evaluated by a team consisting of 26 BBC employees. The bidding companies were sent a questionnaire that looked to analyse the suitability of each firm to the roll. As the BBC historically works to high standards this was an essential step as it allowed the BBC to decide if the purchasing company could continue these standards. By evaluating their financial position and knowledge of the broadcasting market the BBC was able to highlight the firms that were best for the job, not just the firms with the highest bid. After an extensive review of the returned questionnaires a short list of eight bidders was selected.
The nominated eight then had to provide even more information relating to their plan for outsourcing the IT services and their knowledge of broadcasting technology and changes taken place in the market. The purpose of this again was to evaluate how suitable each firm was but instead looking more closely at how the company operates and what beliefs it upholds. This extra information allowed the BBC to cut the list down to three companies (Accenture, SBS, CSC). To make the final decision on who would win the contract the BBC increased the evaluation team to over 100 employees from many different departments. By doing the BBC were able to decide what purchasing firm could be integrated into the BBC and work with their values and standards.
In the end the BBC decided that SBS was most suited to supply the IT services. SBS understood what the BBC was trying to achieve but also had an understanding of the BCC’s culture and values. It took just over 6 months to decide that SBS was the firm for the job which is a relatively short time considering the size of the contract (£1.9 billion). This seems rather hasty due to the complex IT systems being transferred and the length of the contract. The BBC should have maybe spent longer evaluating the different bidding firms to ensure they selected the best one. However according to the BBC’c CTO John Varney “it’s possible to do a complex outsourcing programme rapidly if enough people are put on it”. [3] By increasing the evaluation team to 100 the BCC must have felt they analysed the situation enough to pick the winner of the contract.
Was the outsourcing a success?
The outsourcing to SBS has had mixed results. By transferring over IT services to a technology specialist the BBC has became a forerunner in technology broadcasting in Europe. Working with SBS has allowed the BBC to engage in forward-looking technology projects. [5] Examples include the highly successful 2005 General Election coverage and sports coverage using broadband technology. SBS is meeting almost all of its performance targets showing the switch over has been carried out relatively smoothly. This has resulted in the BBC being able to concentrate on programme development and improving efficiency. Technologically the outsourcing seems to have been a success and this looks to continue and improve over time.
However, according to a report by the National Audit Office financially the contract has not quite delivered. Prior to accepting the project guaranteed savings of £35 million a year was quoted. During the first year of the contract savings of only £22 million were recorded. [6] This has been blamed on higher than expected expenditure and inaccuracy in calculating the variable costs. The use of the word ‘guaranteed’ was in the end not appropriate when putting the contract to the board. That said savings have been made, if not to the calculated rate, and the BBC have forecasted that these savings will increase over the forthcoming years. Another criticism of the contract was that the BBC did not include a clause to allow them to receive a share of SBS’s profits if returns exceeded a certain level. [7] In future the BBC should include a provision in any contract to permit the sharing of profits and the right to open book access of the contract purchaser.
References
[1] Wikipedia article on the BBC. http://en.wikipedia.org/wiki/BBC
[2] The Outsourcing Management Zone http://www.theoutsourcerzone.com/index.htm
[3] BCC taps Siemens in $3.7B outsourcing pact http://www.sharedxpertise.com/file/1954/bbc-taps-siemens-in-37b-outsourcing-pact.html
[4] Information Technology Outsourcing at BBC (2006) by M Vinaya Kumar
[5] National Audit Office: BBC Outsourcing: The contrast between the BBC and Siemens Business Services for the provision of technology services. (2006) http://www.bbcgovernorsarchive.co.uk/docs/reviews/vfm_outsourcingreport.pdf
[6] BBC’s £1.5B outsourcing costs under fire (2007) by Andy McCue http://www.silicon.com/publicsector/0,3800010403,39167659,00.htm
[7] House of Commons Committee of Public Accounts: BBC Outsourcing: the contract between the BBC and Siemens Business Service (2007) http://www.publications.parliament.uk/pa/cm200607/cmselect/cmpubacc/118/118.pdf
The BBC (British Broadcasting Corporation) is the largest broadcasting corporation in the world and holds international respect. In the UK alone it employees over 26,000 people and has an annual budget of £4 billion. It is renowned for its impartial and reliable reporting by broadcasting without political and commercial influence. [1] However the BBC like any other business is always striving to become more efficient and reduce its operating costs. This led the BBC to outsource its technology sector (BBCTL) in October 2004.
Outsourcing is the transfer or delegation to an external service provider the operation and day-to-day management of a business process. [2] In this case SBS (Siemens Business Services) bought the contract from BBC and agreed to provide the company with IT services for the following 10 years. Outsourcing occurs when a company calculates that selling off sections of the business to a external party can reduce operation costs. In addition outsourcing allows employees to concentrate on the core (‘value adding’) functions of the company. By allowing SBS to provide all IT services the BBC expected to save around £35 million per year. With extra funding and employee hours, new and innovative programmes were to be developed during the ten year contract.
The supplier selection process at the BBC.
The process of selling BBCTL began in November 2003. As stated by the European Union Procurement Process (EUPP) the sale of services worth over £154,477 must be advertised on the OJEC (Official Journal of the European Communities) website. By doing so the contract was open to all bidders. The contract stated that the purchasing company had to provide technology support and services to the BBC for ten years. This part of the contract was criticised. Committing itself to ten years with the purchaser the BBC would leave the corporation in real trouble if the service received were poor. A more sensible approach may have been to allow the termination of the contract if the agreed standards were not met, perhaps even including some compensation sum for the BBC if the situation occurred. Due to this ten year deal, the BBC had to be sure they picked the right company for the job.
The sale of BBCTL attracted the interest of 80 companies; these companies were to be evaluated by a team consisting of 26 BBC employees. The bidding companies were sent a questionnaire that looked to analyse the suitability of each firm to the roll. As the BBC historically works to high standards this was an essential step as it allowed the BBC to decide if the purchasing company could continue these standards. By evaluating their financial position and knowledge of the broadcasting market the BBC was able to highlight the firms that were best for the job, not just the firms with the highest bid. After an extensive review of the returned questionnaires a short list of eight bidders was selected.
The nominated eight then had to provide even more information relating to their plan for outsourcing the IT services and their knowledge of broadcasting technology and changes taken place in the market. The purpose of this again was to evaluate how suitable each firm was but instead looking more closely at how the company operates and what beliefs it upholds. This extra information allowed the BBC to cut the list down to three companies (Accenture, SBS, CSC). To make the final decision on who would win the contract the BBC increased the evaluation team to over 100 employees from many different departments. By doing the BBC were able to decide what purchasing firm could be integrated into the BBC and work with their values and standards.
In the end the BBC decided that SBS was most suited to supply the IT services. SBS understood what the BBC was trying to achieve but also had an understanding of the BCC’s culture and values. It took just over 6 months to decide that SBS was the firm for the job which is a relatively short time considering the size of the contract (£1.9 billion). This seems rather hasty due to the complex IT systems being transferred and the length of the contract. The BBC should have maybe spent longer evaluating the different bidding firms to ensure they selected the best one. However according to the BBC’c CTO John Varney “it’s possible to do a complex outsourcing programme rapidly if enough people are put on it”. [3] By increasing the evaluation team to 100 the BCC must have felt they analysed the situation enough to pick the winner of the contract.
Was the outsourcing a success?
The outsourcing to SBS has had mixed results. By transferring over IT services to a technology specialist the BBC has became a forerunner in technology broadcasting in Europe. Working with SBS has allowed the BBC to engage in forward-looking technology projects. [5] Examples include the highly successful 2005 General Election coverage and sports coverage using broadband technology. SBS is meeting almost all of its performance targets showing the switch over has been carried out relatively smoothly. This has resulted in the BBC being able to concentrate on programme development and improving efficiency. Technologically the outsourcing seems to have been a success and this looks to continue and improve over time.
However, according to a report by the National Audit Office financially the contract has not quite delivered. Prior to accepting the project guaranteed savings of £35 million a year was quoted. During the first year of the contract savings of only £22 million were recorded. [6] This has been blamed on higher than expected expenditure and inaccuracy in calculating the variable costs. The use of the word ‘guaranteed’ was in the end not appropriate when putting the contract to the board. That said savings have been made, if not to the calculated rate, and the BBC have forecasted that these savings will increase over the forthcoming years. Another criticism of the contract was that the BBC did not include a clause to allow them to receive a share of SBS’s profits if returns exceeded a certain level. [7] In future the BBC should include a provision in any contract to permit the sharing of profits and the right to open book access of the contract purchaser.
References
[1] Wikipedia article on the BBC. http://en.wikipedia.org/wiki/BBC
[2] The Outsourcing Management Zone http://www.theoutsourcerzone.com/index.htm
[3] BCC taps Siemens in $3.7B outsourcing pact http://www.sharedxpertise.com/file/1954/bbc-taps-siemens-in-37b-outsourcing-pact.html
[4] Information Technology Outsourcing at BBC (2006) by M Vinaya Kumar
[5] National Audit Office: BBC Outsourcing: The contrast between the BBC and Siemens Business Services for the provision of technology services. (2006) http://www.bbcgovernorsarchive.co.uk/docs/reviews/vfm_outsourcingreport.pdf
[6] BBC’s £1.5B outsourcing costs under fire (2007) by Andy McCue http://www.silicon.com/publicsector/0,3800010403,39167659,00.htm
[7] House of Commons Committee of Public Accounts: BBC Outsourcing: the contract between the BBC and Siemens Business Service (2007) http://www.publications.parliament.uk/pa/cm200607/cmselect/cmpubacc/118/118.pdf
Sunday 18 November 2007
Case Study 1 - SAP R/3 Implementation at Sandoz (formerly Geneva Pharmaceuticals)
Geneva Pharmaceuticals (now rebranded as Sandoz), a subsidiary of Novartis, is one of the world’s foremost manufacturers of generic drugs and operates within the North American market. The company has a large portfolio of generic drugs and outputs in excess of seven billion units annually (as of 2007). However, prior to 1996 the company’s computer systems were outdated, unreliable and no longer met the future ambitions of the company.
The company relied on various computer systems for different functions and due to this there was a lack of integration. This resulted in data having to be entered manually more than once and often led to the risk of dirty data. As a result the company decided to invest in a new system that would be better integrated, more efficient, reduce error rates, reduce maintenance costs and generally be flexible enough to meet any future requirements. Eventually the company decided to adopt the SAP R/3 system.
2 – Phase I
Sandoz looked to implement the chosen ERP system R/3 in three phases. Phase I concentrated on the supply side processes which included purchase management, supply capacity etc. Before R/3 these processes were handled manually which was labour intensive, this resulted in the risk of input error and large costs. The implementation of R/3 looked to automate the supply side process and integrate all supply-side data into a single real time database.
To implement R/3 Geneva set up a team of 20 full and part time employees from within Sandoz (all of whom had no R/3 experience) and a team of 5 consultants from Whitman-Hart who had previous R/3 experience. Verne Evans, Director of Supply Chain Management, was assigned project leader. The team decided to use SAP’s implementation methodology Accelerated SAP (ASAP) for its promised quick results.
The consultants Whitman-Hart were technology specialists and had an understanding of R/3 but they had little business experience. They therefore did not know how to customise the system properly in order to meet the required needs of Sandoz. There was a lack of communication between the different groups that lead to problems defining the system as the requirements were not clear or shared between parties. The ASAP methodology was also a mistake, as it did not allow time for the system to be modified which was essential due to Geneva’s extremely complex manufacturing process.
To resolve the situation Geneva appointed a new project leader Randy Weldon, Weldon had implemented an R/3 system in his previous job. Weldon knew that successful implementation relied on the different groups collaborating together. His new team consisted of one IS manager, one functional manager and a senior R/3 consultant. The smaller team allowed for better communication, which resulted in faster progress. He also recruited a team of employees that all had R/3 experience. This team of R/3 professionals were able to customise the system to get it ready for implementation. The new team did not agree with the ASAP methodology but were brought in too late to enforce a change.
Within a year Weldon’s new look team had the MM (Materials Management) module of R/3 up and running. The successful implementation resulted in an improved performance in Sandoz's manufacturing sector. In addition, as data did not need to be retyped or checked the inventory control unit was shut down and the unit’s employees were taught new skills to help in other areas.
3 – Phase II
The purpose of the second phase was to implement new demand-side processes like accounts receivable and order fulfilment. This phase had to take into account the many variables (such as customer production combinations and customer rebates) that would have to be included in the system.
If this phase was to be successful it was clear project management would have to face a fundamental shake up from phase I. As such Anna Bourgeois was assigned overall responsibility for this stage of the project. Whitman-Hart were replaced by Arthur Andersen Business Consulting to assist. Given the complexities involved with designing the system to meet Sandoz’s manufacturing needs Oliver White (another consulting firm) were brought in due to their experience in the field.
A team of twenty full-time IS employees were initially committed to this phase along with thirty users on a part time basis. The full-time team were split into groups of five to look at the various functions. This process identified thirteen areas (with four in particular) as needing improvement. A conference room was used to display the system plan on a wall (using “post-it” notes). This allowed others to view it and make comments.
This phase also involved the training of staff. Advertisements were posted around the company to make employees aware of the new system. Each employee received between three and five days of training although the process itself revealed that a large majority of users were not fully aware of what their actual job description was and as such the process had to take account of this. The company also sought to educate its customers upon its new system.
4 – Phase III
The final phase of the project involved integrating supply and demand side processes. In 1999 SAP released a new Advanced Purchase Optimiser module that met the company’s requirement for a SOP (sales and operations planning process) module that would integrate with the company’s R/3 implementation. Successful implementation of this module finally allowed the company to provide accurate real-time information to its customers on stock levels and better predict when backorders should be filled. The company saw improving the reliability of stock and backorder information as ones of the key ways of improving customer satisfaction levels.
5 – Conclusion
The implementation of the R/3 system has been a huge success for Sandoz. The company has become far more efficient enabling it to reduce costs and improve customer service. However, the implementation process could have been better thought out. A more suitable methodology and original IS team structure are areas that could have been improved. These changes would have allowed the system to be implemented quicker and perhaps with even more success.
References
This is the company's (which has changed its name to Sandoz) "about us" page on their website:
http://www.us.sandoz.com/site/en/company/profile/about_us/content.shtml
This is a brief history of the company:
http://www.us.sandoz.com/site/en/company/profile/history/content.shtml
SAP R/3 Implementation at Geneva Pharmaceuticals (2005) Alan Wilson
This project was a collaboration between Rory Linwood and Stuart Nibloe
The company relied on various computer systems for different functions and due to this there was a lack of integration. This resulted in data having to be entered manually more than once and often led to the risk of dirty data. As a result the company decided to invest in a new system that would be better integrated, more efficient, reduce error rates, reduce maintenance costs and generally be flexible enough to meet any future requirements. Eventually the company decided to adopt the SAP R/3 system.
2 – Phase I
Sandoz looked to implement the chosen ERP system R/3 in three phases. Phase I concentrated on the supply side processes which included purchase management, supply capacity etc. Before R/3 these processes were handled manually which was labour intensive, this resulted in the risk of input error and large costs. The implementation of R/3 looked to automate the supply side process and integrate all supply-side data into a single real time database.
To implement R/3 Geneva set up a team of 20 full and part time employees from within Sandoz (all of whom had no R/3 experience) and a team of 5 consultants from Whitman-Hart who had previous R/3 experience. Verne Evans, Director of Supply Chain Management, was assigned project leader. The team decided to use SAP’s implementation methodology Accelerated SAP (ASAP) for its promised quick results.
The consultants Whitman-Hart were technology specialists and had an understanding of R/3 but they had little business experience. They therefore did not know how to customise the system properly in order to meet the required needs of Sandoz. There was a lack of communication between the different groups that lead to problems defining the system as the requirements were not clear or shared between parties. The ASAP methodology was also a mistake, as it did not allow time for the system to be modified which was essential due to Geneva’s extremely complex manufacturing process.
To resolve the situation Geneva appointed a new project leader Randy Weldon, Weldon had implemented an R/3 system in his previous job. Weldon knew that successful implementation relied on the different groups collaborating together. His new team consisted of one IS manager, one functional manager and a senior R/3 consultant. The smaller team allowed for better communication, which resulted in faster progress. He also recruited a team of employees that all had R/3 experience. This team of R/3 professionals were able to customise the system to get it ready for implementation. The new team did not agree with the ASAP methodology but were brought in too late to enforce a change.
Within a year Weldon’s new look team had the MM (Materials Management) module of R/3 up and running. The successful implementation resulted in an improved performance in Sandoz's manufacturing sector. In addition, as data did not need to be retyped or checked the inventory control unit was shut down and the unit’s employees were taught new skills to help in other areas.
3 – Phase II
The purpose of the second phase was to implement new demand-side processes like accounts receivable and order fulfilment. This phase had to take into account the many variables (such as customer production combinations and customer rebates) that would have to be included in the system.
If this phase was to be successful it was clear project management would have to face a fundamental shake up from phase I. As such Anna Bourgeois was assigned overall responsibility for this stage of the project. Whitman-Hart were replaced by Arthur Andersen Business Consulting to assist. Given the complexities involved with designing the system to meet Sandoz’s manufacturing needs Oliver White (another consulting firm) were brought in due to their experience in the field.
A team of twenty full-time IS employees were initially committed to this phase along with thirty users on a part time basis. The full-time team were split into groups of five to look at the various functions. This process identified thirteen areas (with four in particular) as needing improvement. A conference room was used to display the system plan on a wall (using “post-it” notes). This allowed others to view it and make comments.
This phase also involved the training of staff. Advertisements were posted around the company to make employees aware of the new system. Each employee received between three and five days of training although the process itself revealed that a large majority of users were not fully aware of what their actual job description was and as such the process had to take account of this. The company also sought to educate its customers upon its new system.
4 – Phase III
The final phase of the project involved integrating supply and demand side processes. In 1999 SAP released a new Advanced Purchase Optimiser module that met the company’s requirement for a SOP (sales and operations planning process) module that would integrate with the company’s R/3 implementation. Successful implementation of this module finally allowed the company to provide accurate real-time information to its customers on stock levels and better predict when backorders should be filled. The company saw improving the reliability of stock and backorder information as ones of the key ways of improving customer satisfaction levels.
5 – Conclusion
The implementation of the R/3 system has been a huge success for Sandoz. The company has become far more efficient enabling it to reduce costs and improve customer service. However, the implementation process could have been better thought out. A more suitable methodology and original IS team structure are areas that could have been improved. These changes would have allowed the system to be implemented quicker and perhaps with even more success.
References
This is the company's (which has changed its name to Sandoz) "about us" page on their website:
http://www.us.sandoz.com/site/en/company/profile/about_us/content.shtml
This is a brief history of the company:
http://www.us.sandoz.com/site/en/company/profile/history/content.shtml
SAP R/3 Implementation at Geneva Pharmaceuticals (2005) Alan Wilson
This project was a collaboration between Rory Linwood and Stuart Nibloe
Friday 16 November 2007
Will offshoring affect UK based accountants?
In today’s highly competitive market accountancy firms are constantly trying to drive down costs and overheads this has lead firms into introducing offshoring. Offshoring is a technique where firms outsource particular business processes to countries where labour is cheaper and overhead costs are lower. Blue collar offshoring (manufacturing sector) is already well established and it has had a huge affect on the world’s economy, with a significant percentage of industrial manufacturing now taking place in China. Recently white collar offshoring (service sector) has started to be introduced and this move has the potential to greatly affect UK accountants.
The catalyst for this growth in offshoring has been the advancement in communication technology. The world has effectively become a “smaller” place and this means jobs are no longer geographically dependent. With the Internet, files and applications can be easily shared resulting in offices throughout the world being able to use the same tools and programmes. The education of the developing world has also been a factor in the increase of offshoring. India for example has an abundance of well-educated, English speaking young people who will work for a salary far less than that of their European or American counterparts (on average an annual salary for a person working in India is 4 times less than a worker in the UK) [5]. In addition there are businesses that are solely dedicated to help companies outsource their business processes e.g. Outsource Partners International (OPI). Companies like OPI are only going to encourage more outsourcing in the future.
These factors would suggest that offshoring is only going to increase. In fact a report by PricewaterhouseCoopers (PWC) says the U.S. financial sector is set to double offshoring by 2008 [1] Deloitte also stated in 2003 that it was looking to move 2 million jobs offshore by 2008 with estimated savings in the millions. [2] It is inevitable that offshoring is going to result in decline in job opportunities for UK accountants.
The benefits for companies that outsource business processes are numerous. Offshoring is a relatively painless process because for the most part a full integrated IT system is not required. [3] Very quickly a company can start to outsource to a cheap and reliable workforce with almost instantaneous savings. The main driver for offshoring is obviously reducing costs but there are other advantages. If labour intensive functions i.e. audit checks, tax returns are being outsourced this gives the UK based accountant more time for ‘value adding’ activities. The accountant can now spend time maintaining client relations, looking for new contracts, finding ways to improve efficiency. These tasks can be carried out freely because of offshoring and thus increasing the overall potential of an accounting firm. Time differences could also be a benefit to a company offshoring. USA and UK based companies could leave work to be done overnight letting them move forward the following day. An almost 24 hour continuous service could be provided by the firm which no doubt would be appreciated by the firms clients.
The services that offshoring threaten most are the labour and time intensive processes. These low skilled and highly repetitive services can easily be offshored as places like Mumbai are ideally equipped to deal with such workloads. Bookkeeping, VAT preparation, tax returns, payroll services and the preparation of financial statements are prime services that would suit offshoring. [4] These more tedious jobs of an accountant do not need the full level of training other services do so by offshoring these jobs it leaves the UK trained accountant ready to focus on more skilled tasks.
Table 1: American tax returns prepared in India
2002 ..... 1,000
2003 ..... 20,000
2004 ..... 150-200,000
2006 ..... 360,000
This table illustrates the exponential growth in the number of American tax returns prepared in India. Tax returns are a service ideal for offshoring and based on this table India will be providing this service to a large percentage of the world in the near future.
Companies are online to save too much money for the amount of offshoring to slow down, it is more than likely going to increase. The service sector is just like any other; it will look to drive down costs, as competition remains fierce.
The key to UK accountants surviving offshoring is to change the way they operate. As mentioned not all services are suitable for outsourcing so it therefore these areas that UK based accountants should focus on. By acting in a more strategic way an accountant can be used as a consultant helping with decision making and the efficiency of clients firms. This is a move away from the stereotypical number cruncher but the modern accountant should aim to use his time performing ‘value adding’ activities to maximise his potential and help the growth of his firm.
References
[1] Offshoring Opportunities: Strategies and Tactics for Global Competitiveness (2005) by John Berry
[2] Deloitte Says 2 Million Jobs Moving Offshore by Sharon Gaudin (2003) http://itmanagement.earthweb.com/career/article.php/2196601
[3] Offshore Accounting Bpo - Myths and Realities by Mani Malarvannan http://www.articlesbase.com/advice-articles/offshore-accounting-bpo-myths-and-realities-211753.html
[4] Top 5 Services Your Company's Accounting Department Should Outsource by Vinodh Pushparaj http://ezinearticles.com/?Top-5-Services-Your-Companys-Accounting-Department-Should-Outsource&id=46112
[5] http://tcpmag.com/international/
The catalyst for this growth in offshoring has been the advancement in communication technology. The world has effectively become a “smaller” place and this means jobs are no longer geographically dependent. With the Internet, files and applications can be easily shared resulting in offices throughout the world being able to use the same tools and programmes. The education of the developing world has also been a factor in the increase of offshoring. India for example has an abundance of well-educated, English speaking young people who will work for a salary far less than that of their European or American counterparts (on average an annual salary for a person working in India is 4 times less than a worker in the UK) [5]. In addition there are businesses that are solely dedicated to help companies outsource their business processes e.g. Outsource Partners International (OPI). Companies like OPI are only going to encourage more outsourcing in the future.
These factors would suggest that offshoring is only going to increase. In fact a report by PricewaterhouseCoopers (PWC) says the U.S. financial sector is set to double offshoring by 2008 [1] Deloitte also stated in 2003 that it was looking to move 2 million jobs offshore by 2008 with estimated savings in the millions. [2] It is inevitable that offshoring is going to result in decline in job opportunities for UK accountants.
The benefits for companies that outsource business processes are numerous. Offshoring is a relatively painless process because for the most part a full integrated IT system is not required. [3] Very quickly a company can start to outsource to a cheap and reliable workforce with almost instantaneous savings. The main driver for offshoring is obviously reducing costs but there are other advantages. If labour intensive functions i.e. audit checks, tax returns are being outsourced this gives the UK based accountant more time for ‘value adding’ activities. The accountant can now spend time maintaining client relations, looking for new contracts, finding ways to improve efficiency. These tasks can be carried out freely because of offshoring and thus increasing the overall potential of an accounting firm. Time differences could also be a benefit to a company offshoring. USA and UK based companies could leave work to be done overnight letting them move forward the following day. An almost 24 hour continuous service could be provided by the firm which no doubt would be appreciated by the firms clients.
The services that offshoring threaten most are the labour and time intensive processes. These low skilled and highly repetitive services can easily be offshored as places like Mumbai are ideally equipped to deal with such workloads. Bookkeeping, VAT preparation, tax returns, payroll services and the preparation of financial statements are prime services that would suit offshoring. [4] These more tedious jobs of an accountant do not need the full level of training other services do so by offshoring these jobs it leaves the UK trained accountant ready to focus on more skilled tasks.
Table 1: American tax returns prepared in India
2002 ..... 1,000
2003 ..... 20,000
2004 ..... 150-200,000
2006 ..... 360,000
This table illustrates the exponential growth in the number of American tax returns prepared in India. Tax returns are a service ideal for offshoring and based on this table India will be providing this service to a large percentage of the world in the near future.
Companies are online to save too much money for the amount of offshoring to slow down, it is more than likely going to increase. The service sector is just like any other; it will look to drive down costs, as competition remains fierce.
The key to UK accountants surviving offshoring is to change the way they operate. As mentioned not all services are suitable for outsourcing so it therefore these areas that UK based accountants should focus on. By acting in a more strategic way an accountant can be used as a consultant helping with decision making and the efficiency of clients firms. This is a move away from the stereotypical number cruncher but the modern accountant should aim to use his time performing ‘value adding’ activities to maximise his potential and help the growth of his firm.
References
[1] Offshoring Opportunities: Strategies and Tactics for Global Competitiveness (2005) by John Berry
[2] Deloitte Says 2 Million Jobs Moving Offshore by Sharon Gaudin (2003) http://itmanagement.earthweb.com/career/article.php/2196601
[3] Offshore Accounting Bpo - Myths and Realities by Mani Malarvannan http://www.articlesbase.com/advice-articles/offshore-accounting-bpo-myths-and-realities-211753.html
[4] Top 5 Services Your Company's Accounting Department Should Outsource by Vinodh Pushparaj http://ezinearticles.com/?Top-5-Services-Your-Companys-Accounting-Department-Should-Outsource&id=46112
[5] http://tcpmag.com/international/
Friday 2 November 2007
Taurus & Crest case - why did Taurus fail and Crest succeed?
For the London Stock Exchange to run effectively it must have the right technology put in place. However, this has been a problem for the LSE and has greatly damaged its reputation around the world since the early 1990's.
In 1986 the "Big Bang" changed the way the stock market operated. There were less regulations to follow and deals were now performed through automated systems instead of face-to-face on the trading floor. This increased the trading volume of the LSE dramatically but they now had to improve the business behind the scenes. After a deal was struck the share certificates and money still had to change hands, which could take weeks using the LSE system at the time. The LSE quickly decided to develop an automated system to tackle this problem.
In 1989 there was a proposal to develop a system called TAURUS (Transfer and Automated Registration of Uncertified Stock). This system looked to automate the settlement business transactions. It would also aim to dematerialise stock certificates and instead stock ownership would run on a computer database. If TAURUS were successful it would have saved the LSE millions per year and decreased the risk of purchasers going bankrupt before settlement. However, the implementation of TAURUS did not go according to plan.
The main factor that resulted in TAURUS's failure was that the design team tried to adhere to too many needs. All firm members would have to use TAURUS so each firm demanded that the system was designed to allow them to trade using their individual methods. This was on top of the huge size and complexity of system needed to deal with so many transactions. This lead to the design team trying to design a system that carried out the standard method but also performed differently for the multiple firms. In addition the government wanted their say in the design of TAURUS, which resulted in the design team being issued a 150 page legal document of complex regulations to follow. The end result was the TAURUS tried to meet to many needs and ended up meeting none. Delays occurred as the system was constantly getting redesigned because of outside pressure. Delays obviously lead to mounting costs that did not look like slowing. During this time other bourses were successfully implementing automated systems so eventually the project was terminated in 1993.
Another mistake made by the design team was that the software they choose to operate TAURUS needed extensive modification to meet all the different demands. Due to all these modifications TAURUS was basically relying on unproven software, which is obviously very risky. This also added to the extra costs and delays that lead to termination. The size of the project team was also criticised as they had hundreds of staff working on the design. With so many staff it is important to have rigorous structure to prevent coding mistakes this was not done in the case of TAURUS.
With the failure of TAURUS the problem of implementing an electronic processing system was still there. The Bank of England now looked to solve the problem and regain the credibility of the LSE. Learning from the mistakes made by the LSE the Bank of England set up a small ten-man task force and within 3 months they had come up with a new system called CREST.
The CREST system looked to follow a minimal approach using tried and tested software. CREST was designed independently from the LSE so unlike TAURUS the design team had no need to adhere to the different firms needs. Their minimalist approach meant they designed CREST to perform only 2 processes, which made up nearly 90% of all transactions of the LSE. This compared to the 21 attempted by TAURUS. They also had a smaller design team of just 20 with 4 more experienced members supervising the whole project. This resulted in all modifications being closely examined before getting turned into code.
CREST went live on 1996 on schedule and within budget and it is still being used today. Other stock exchanges have tried to buy the system as a result of its effectiveness but it is not for sale. Keeping to a minimal approach and using tested software meant the system was implemented with only a few problems that were solved. TAURUS tried to be too many things to too many people, which resulted in its failure. Constant modification lead to delays and increasing costs resulting in the LSE terminating the project.
References
TAURUS and CREST, Failure and Success in Technology Project Management by Christopher H Head
http://www.practicallaw.com/7-100-4206
http://commentisfree.guardian.co.uk/daniel_davies/2006/09/dont_just_do_something_stand_t.html
In 1986 the "Big Bang" changed the way the stock market operated. There were less regulations to follow and deals were now performed through automated systems instead of face-to-face on the trading floor. This increased the trading volume of the LSE dramatically but they now had to improve the business behind the scenes. After a deal was struck the share certificates and money still had to change hands, which could take weeks using the LSE system at the time. The LSE quickly decided to develop an automated system to tackle this problem.
In 1989 there was a proposal to develop a system called TAURUS (Transfer and Automated Registration of Uncertified Stock). This system looked to automate the settlement business transactions. It would also aim to dematerialise stock certificates and instead stock ownership would run on a computer database. If TAURUS were successful it would have saved the LSE millions per year and decreased the risk of purchasers going bankrupt before settlement. However, the implementation of TAURUS did not go according to plan.
The main factor that resulted in TAURUS's failure was that the design team tried to adhere to too many needs. All firm members would have to use TAURUS so each firm demanded that the system was designed to allow them to trade using their individual methods. This was on top of the huge size and complexity of system needed to deal with so many transactions. This lead to the design team trying to design a system that carried out the standard method but also performed differently for the multiple firms. In addition the government wanted their say in the design of TAURUS, which resulted in the design team being issued a 150 page legal document of complex regulations to follow. The end result was the TAURUS tried to meet to many needs and ended up meeting none. Delays occurred as the system was constantly getting redesigned because of outside pressure. Delays obviously lead to mounting costs that did not look like slowing. During this time other bourses were successfully implementing automated systems so eventually the project was terminated in 1993.
Another mistake made by the design team was that the software they choose to operate TAURUS needed extensive modification to meet all the different demands. Due to all these modifications TAURUS was basically relying on unproven software, which is obviously very risky. This also added to the extra costs and delays that lead to termination. The size of the project team was also criticised as they had hundreds of staff working on the design. With so many staff it is important to have rigorous structure to prevent coding mistakes this was not done in the case of TAURUS.
With the failure of TAURUS the problem of implementing an electronic processing system was still there. The Bank of England now looked to solve the problem and regain the credibility of the LSE. Learning from the mistakes made by the LSE the Bank of England set up a small ten-man task force and within 3 months they had come up with a new system called CREST.
The CREST system looked to follow a minimal approach using tried and tested software. CREST was designed independently from the LSE so unlike TAURUS the design team had no need to adhere to the different firms needs. Their minimalist approach meant they designed CREST to perform only 2 processes, which made up nearly 90% of all transactions of the LSE. This compared to the 21 attempted by TAURUS. They also had a smaller design team of just 20 with 4 more experienced members supervising the whole project. This resulted in all modifications being closely examined before getting turned into code.
CREST went live on 1996 on schedule and within budget and it is still being used today. Other stock exchanges have tried to buy the system as a result of its effectiveness but it is not for sale. Keeping to a minimal approach and using tested software meant the system was implemented with only a few problems that were solved. TAURUS tried to be too many things to too many people, which resulted in its failure. Constant modification lead to delays and increasing costs resulting in the LSE terminating the project.
References
TAURUS and CREST, Failure and Success in Technology Project Management by Christopher H Head
http://www.practicallaw.com/7-100-4206
http://commentisfree.guardian.co.uk/daniel_davies/2006/09/dont_just_do_something_stand_t.html
Sunday 21 October 2007
Thursday 18 October 2007
How can the ICAS website be improved?
The Internet is essential in today's business world and it is therefore important for any large organisation to have an easy to use and informative website. A company's website may be the first point of contact for any new clients so this website must portray the organisation's image and provide the information looked for by the browser. ICAS (Institute of Chartered Accountants of Scotland) is one of the world's leading professional body of accountants and its website is a prime example of one that could be redesigned to improve its effectiveness.
When first entering the ICAS homepage the first you get impression is an overload of information. This information is all relevant but as there is so much of it browsers may find it hard to locate the information that is relevant to them. Navigating the site is not straight forward as the twelve links on the left hand side open up with more various subsections when clicked on. This again makes life difficult for the browser when trying to find a particular article. A way of solving this problem would be to split the website up for different users such as members, students etc. This would allow the various groups to go straight to their area of interest. When a visitor clicks on their group the website can then be tailored towards the browsers needs allowing ICAS to communicate more effectively. A great example of this is on the homepage of ACCA before you fully enter the site you are required to pick what group you are form which enables you the get the information you seek quicker. The usability of a website is the most important feature, therefore by splitting the website up and helping the browsers navigate the ICAS website would be greatly improved.
Another problem I noticed right away was that the ICAS website seemed to run very slow compared to other sites. This was highlighted even more so when trying to perform a search on the site, just a basic search took over thirty seconds. This situation should definitely be investigated to find out the underlying problem of this slow connection speed. Perhaps ICAS host network is not up to running such a busy and complicated website. It could even be a by-product of the extensive information shown on the pages. The slow speed is a poor representation of the organisation and may result in browsers leaving the website before they have found out what they are looking for.
The addition of a blog service would improve the communication between browsers and ICAS. Having a blog would mean visitors would be able to make comments on new articles which would give ICAS feedback to the relevance of their posts. The blog could also be used by browsers who are having trouble with the site as the blog could be used as a direct means of communication to ICAS representatives. ICAS trainees or students could use the blog as somewhere to go for help and exchange ideas as information could be shared.
In conclusion the ICAS website could be improved by first increasing the running time of the website. Then the usability should be looked at as the website holds a large amount of relevant information but it can prove hard to locate specific articles. Therefore making the site easier to navigate would help in this area. Finally the addition of a blog as a form of online communication would improve the ICAS website.
References:
http://www.icas.org.uk/
http://www.axxiem.com/effective-website.php
http://www.acca.co.uk/
http://www.hypercyde.com/effective-website.htm
http://en.wikipedia.org/wiki/RSS_(file_format)
http://www.feedburner.com/fb/a/feed101
When first entering the ICAS homepage the first you get impression is an overload of information. This information is all relevant but as there is so much of it browsers may find it hard to locate the information that is relevant to them. Navigating the site is not straight forward as the twelve links on the left hand side open up with more various subsections when clicked on. This again makes life difficult for the browser when trying to find a particular article. A way of solving this problem would be to split the website up for different users such as members, students etc. This would allow the various groups to go straight to their area of interest. When a visitor clicks on their group the website can then be tailored towards the browsers needs allowing ICAS to communicate more effectively. A great example of this is on the homepage of ACCA before you fully enter the site you are required to pick what group you are form which enables you the get the information you seek quicker. The usability of a website is the most important feature, therefore by splitting the website up and helping the browsers navigate the ICAS website would be greatly improved.
Another problem I noticed right away was that the ICAS website seemed to run very slow compared to other sites. This was highlighted even more so when trying to perform a search on the site, just a basic search took over thirty seconds. This situation should definitely be investigated to find out the underlying problem of this slow connection speed. Perhaps ICAS host network is not up to running such a busy and complicated website. It could even be a by-product of the extensive information shown on the pages. The slow speed is a poor representation of the organisation and may result in browsers leaving the website before they have found out what they are looking for.
The addition of a blog service would improve the communication between browsers and ICAS. Having a blog would mean visitors would be able to make comments on new articles which would give ICAS feedback to the relevance of their posts. The blog could also be used by browsers who are having trouble with the site as the blog could be used as a direct means of communication to ICAS representatives. ICAS trainees or students could use the blog as somewhere to go for help and exchange ideas as information could be shared.
In conclusion the ICAS website could be improved by first increasing the running time of the website. Then the usability should be looked at as the website holds a large amount of relevant information but it can prove hard to locate specific articles. Therefore making the site easier to navigate would help in this area. Finally the addition of a blog as a form of online communication would improve the ICAS website.
References:
http://www.icas.org.uk/
http://www.axxiem.com/effective-website.php
http://www.acca.co.uk/
http://www.hypercyde.com/effective-website.htm
http://en.wikipedia.org/wiki/RSS_(file_format)
http://www.feedburner.com/fb/a/feed101
Subscribe to:
Posts (Atom)