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Lesson 3 In-house or outsourced solutions
Objective Describe the advantages and disadvantages of in-house development and hosting

How to move to eBusiness

Once you have answered the important "if," why," and "when" questions concerning the move to eBusiness, the next important question to tackle is "how."
We will examine the planning and implementation phases of development in greater detail later in the course. However, in moving to an eBusiness solution, part of the "how" question is actually a question of "who." When you are deciding who will implement the solution, you have several paths from which to choose. You can stay within the organization and create an eBusiness group. A second alternative is to collaborate with a technology and/or integration partner, or to create an eBusiness subsidiary. A third solution might be a hybrid of the first two routes. No matter your approach, there are some global questions you must consider. You must consider a number of factors to determine who will implement the solution. To make this implementation choice, you should assess four factors, which are described in the Easy Reference below.

Questions to Consider in Deciding who will Implement your eBusiness

Factor Questions to consider
Projected immediate and long-term costs What is the cost of establishing an in-house solution compared to the cost of hiring an external team?
Required service levels Can the organization handle the service levels needed for the in-house solution, such as twenty-four-hours-a-day, seven-days-a-week support?
Time to market Does the infrastructure already exist? If you have to build the infrastructure first, the solution will be longer in the making.
Anticipated response times for changes Does the external partner see the changes and future enhancements with the same level of urgency?
Vendor lock-in What are the costs of being locked-in to a specific software platform? Outsourcing can lock you into thechosen software platform of the external partner. If you decide to move elsewhere or take the function over in-house, it could be difficult and expensive to change software platforms.
Accountability Who will be responsible for monitoring potential challenges and for assigning financial liability shouldproblems arise? The more parties involved in a solution, the more difficult it is to assign accountability for fixing potential problems. In some cases, a fault in an area controlled by one technology partner may lead to additional problems developing in another. It can then become difficult to identify who is financially responsible for fixing the problem.

These factors pose some important questions. Let's consider both the in-house and the outsourcing solutions in detail. The in-house solutions are reviewed in the Slide Show below.

  1. Unless the organization has the resources already in-house with the skills and capacity to build and run the solution
  2. The first approach to an in-house solution is to decide that the eBusiness function will be a strongly controlled extension of the existing business and product/service mix
  3. In this case, the eBusiness group is controlled by an existing executive and is seen as part of the organizations structure.
  4. An alternative in-house solution is to create an eBusiness subsidiary with an entrepreneurial mission
  5. The eBusiness subsidiary alternative can be funded by venture capital and allows the company to establish an in-house eBusiness presence more quickly.
Inhouse ebusiness Development Group
Note that in a bid to gain control over the eBusiness function by creating it entirely in-house, an organization risks of losing the race to keep up with fast-paced changes in technology.

An outsourced solution

If you use an outsourced development and hosting solution, an external integration partner manages the business. These outside agencies are also known as Application Service Providers. [1] The fast-paced changes in the eBusiness world have given rise to a number of Application Service Providers. In fact, DistributedNetworks is an example of an Application Service Provider.

Finding the right eBusiness partner

Finding the appropriate partner is critical to the success of any eBusiness venture. A technology partner will provide the business with the technical foundation for your eBusiness. This will include the hardware infrastructure and connectivity resources and may be wholly or partially located or hosted in a physically remote site. Contractual agreements can specify minimum acceptable transaction throughput times and bandwidth availability. In agreements for co-location (also known as colo), an organization physically hosts a company's equipment in the co-location's secure environment. The company may still control and maintain the server, but use the co-location facilities to ensure the safety and security of their server. Your responsibility as the architect, is to know your site's vulnerabilities.
  1. Hardware infrastructure: Servers, disk arrays and other storage devices, power supply and protection devices and physical communications devices.
  2. Connectivity resources: Connectivity resources refer to the network infrastructure required to connect a computer and its contents to other computers. This includes physical devices like modems, switches, hubs, routers, bridges, cabling and satellite links as well as network protocols, operating systems and security systems.
  3. Transaction throughput: The number of transactions than can take place in a period of time.
  4. Bandwidth: The amount of data that can be transmitted in a fixed amount of time. For digital devices, the bandwidth is usually expressed in bits per second(bps) or bytes per second.

The integration partner's role

An integration partner develops and/or integrates the software application. The business and integration partner need to work closely on the development of the software application. The solution may involve interfacing to existing legacy information systems[2] and will certainly involve interfaces to existing business functions. These interfaces need to be monitored and maintained in-house.

The hybrid solution

It is also possible to consider a mixed development and hosting solution. An external team could develop and implement the solution and then rent it to, or hand it over to, the business. We will consider the options of building, buying, and renting the solution in another module.

InHouse Versus Outsourced Development

Click the Exercise link below to review what you have learned about in-house vs. outsourced development and hosting.
InHouse Versus Outsourced Development
In the next lesson, we will describe the importance and sequence of training staff and users.

[1] Application Service Provider: Application Service Providers are third-party entities that host (manage and distribute) software-based services and solutions to customers across a wide area network from a central data center. Do not confuse this acronym with Active Server Pages (ASP). ASP is a form of applications outsourcing.
[2]Legacy systems: Legacy systems support legacy applications.

ecommerce Business Model