Introduction to

E- Gov Project Costing

Dr. Srinivas Josyula

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 Agenda
• Project Costing
• Cost Components
• Classification of costs
• Cost Categories in e-Governance Projects
• Consultancy Services
• Software Design, Development and Maintenance
• IT infrastructure creation and maintenance
• Citizen Service Delivery

Illustrative Templates
Margins in System Integrator Engagements

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Project ?

• A project is “a temporary endeavor undertaken to create a unique

product, service, or result” (PMBOK® Guide, 2017).

• Operations is work done to sustain the business.

• Projects end when their objectives have been reached or the

project has been terminated
Project Attributes
• A project
– has a unique purpose
– is temporary
– drives change and enable value creation
– requires resources, often from various areas
– should have a primary customer or sponsor
– involves uncertainty
• The project sponsor usually provides the direction and funding for
the project
• Project managers work with project sponsors, team, and other
people involved in a project to achieve project goals
Project Management

• “Project management is “the application of knowledge, skills,

tools and techniques to project activities to meet project
requirements” (PMBOK® Guide, Sixth Edition, 2017).

• Project managers strive to meet the triple constraint (project

scope, time, and cost goals) and also facilitate the entire process
to meet the needs and expectations of project stakeholders
E-Gov Project Life Cycle

1. e-Governance 4. Implementation 5. Develop and

2. Current State 3. Future State 6. Operate and
Strategy approach and implement IT
Assessment Definition sustain
Development sourcing system

Project Management Office/Unit

Change Management and Communications

Project goals
Project constraints
Project Management

• A 2011 study published in the Harvard Business

Review examined IT change initiatives in almost 1,500 projects
and reported an average cost overrun of 27 percent.

• One in six of all projects studied contained a “black swan”: a

high-impact event that is rare and unpredictable, but not
improbable in retrospect
Disasters
• The United Kingdom‟s National Health Service (NHS) IT modernization program was called
“the greatest IT disaster in history” by one London columnist.

• This 10-year program, which started in 2002, was created to provide an electronic patient records
system, appointment booking, and a prescription drug system in England and Wales.

• Britain‟s Labor government estimates that the program will eventually cost more than $55
billion, a $26 billion overrun.

• The program has been plagued by technical problems due to incompatible systems, resistance
from physicians who say they were not adequately consulted about system features, and
arguments among contractors about who‟s responsible for what.

• A government audit in June 2006 found that the program, one of the largest civilian IT projects
undertaken worldwide, was progressing despite high-profile problems.

• In an effort to reduce cost overruns, the NHS program would no longer pay for products until
delivery, shifting some financial responsibility to prime contractors, including BT Group,
Accenture, and Fujitsu Services.

• On September 22, 2011, government officials in the United Kingdom announced that they were
scrapping the National Programme for Health IT. Health Secretary Andrew Lansley said that the
program “let down the NHS and wasted taxpayers‟ money.”
Cost and Project Cost Management
• Cost is a resource sacrificed or foregone to achieve a
specific objective or something given up in exchange.

• Project Cost Management, is primarily concerned

with the cost of the resources needed to complete
project activities.

• And should consider the effect of project decisions on

the subsequent recurring cost of using, maintaining,
and supporting the product, service, or result of the
project
Classification of Costs

created
Classification
Based on Whether or not Asset is
of Costs
Based on Variability
•Fixed Costs
•Capital Costs [Capex] •Variable Costs
•Operating Costs [Opex] •Semi-Variable costs

Based on Directness From Economics perspective

•Direct Costs •Production Costs
•Indirect Costs •Transaction Costs
Cost concepts for decision making
•Incremental costs Opportunity Costs
•Sunk Costs

There are other classifications too…

Classification by nature of Costs

Direct cost Indirect cost

uts uts
Direct costs are expenses that are billed directly to the project. Examples of direct costs
are team travel expenses, team wages, costs incurred for recognition and awards for
employees, etc.

Indirect costs are costs that are shared and allocated among several or all projects.
Examples include fringe benefits and taxes. Another example of indirect costs would be
the salary of an architect or a project manager who is partially allocated across many
projects. Their team members' salaries would be direct costs since each of them is
directly working on a particular project and their salary is a direct cost to the project.
But since the project manager is allocated to several projects, the costs incurred on his
salary are indirect costs to the project.
Cost classification by Behaviour?

Fixed cost Variable cost Semi Variable cost

uts uts Tools ad uts Outputs
Techniques
Fixed Cost: Fixed cost is the cost which does not vary with the change in the volume of
activity in the short run. These costs are not affected by temporary fluctuation in activity
of an enterprise. Example: Rent, Depreciation...etc.

Variable Cost: Variable cost is the cost of elements which tends to directly vary with
the volume of activity. Variable cost has two parts (i) Variable direct cost (ii) Variable
indirect costs. Variable indirect costs are termed as variable overheads. Example: Direct
labour, Outward Freight...etc.

Semi-Variable Costs: Semi-variable costs contain both fixed and variable elements.
They are partly affected by fluctuation in the level of activity. These are partly fixed and
partly variable costs and vice versa. Example: Factory supervision, Maintenance...etc.
Project Costs - Types
CAPEX focuses on the long term. CAPEX is an expense a project/business incurs to
create a benefit in the future.

OPEX covers the short term. OPEX is an expense required for the day-to-day
functioning of a project/business.

Capital expenditure or capital expense (CAPEX) is the money a project/company

spends to buy, maintain or improve fixed assets. Fixed assets are buildings, vehicles,
equipment, or land

CAPEX is the capital the project/company invested in hardware (concrete structures,

wells, pumps, pipes, toilets) and in the software (preparation costs with stakeholders
before construction or implementation, such as planning, community mobilisation or
hygiene education).

Acquisition efforts may be largely CapEx while development efforts may be largely
OpEx.
Project Cost Management

• Plan Cost Management: The process of defining how the project

costs will be estimated, budgeted, managed, monitored, and
controlled.

• Estimate Costs: The process of developing an approximation of

the monetary resources needed to complete project work.

• Determine Budget: The process of aggregating the estimated costs

of individual activities or work packages to establish an authorized
cost baseline.

• Control Costs: The process of monitoring the status of the project

to update the project costs and manage changes to the cost baseline.
Project Cost Management Processes

Scope Schedule
Baseline Baseline

Estimate Project
bases Funding
Determine Req.
Estimate Costs Control Costs
Budget
Activity
Cost
Cost
Baseline
Estimates
Tools and Techniques ?

Inputs Tools and Outputs

Techniques

Project Charter Expert Judgement

[Link] management plan Outputs
Schedule Mgt plan
Risk Mgt plan
[Link] environmental
factors
[Link] process
Assets
 Basic rules of Estimation.
• Assume that resources will only be productive for, say, 80 percent of their time.

• Resources working on multiple projects take longer to complete tasks because of time
lost switching between them.

• People are generally optimistic and often underestimate how long tasks will take.

• Make use of other people’s experiences and your own.

• Ensure that the person responsible for creating the product is also responsible for
creating the effort estimates.

• Always make provision for problem-solving, meetings and other unexpected events.

• Cost each activity rather than trying to cost the plan as a whole.

• Communicate any assumptions, exclusions or constraints you have to the user(s).

Estimating cannot guarantee accuracy but, when applied, provides a view of the
overall cost and time required to complete the plan.
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Estimates will inevitably change as more is discovered about the project
 Costs

• Because projects cost money and consume resources that

could be used elsewhere, it is very important for project
managers to understand project cost management.
• Many of the original cost estimates for IT projects are low or
based on unclear project requirements, so naturally, there will
be cost overruns.
• Another perceived reason for cost overruns is that many IT
projects involve new technology or business processes. Any
new technology or business process is untested and has
inherent risks. Thus, costs grow and failures are to be expected

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 E-Gov Project Life Cycle

For determining the right business model, it is important

to understand the project costs right…across the project
lifecycle…

Let us understand the project costs/investments needed in

e-Governance Projects….
 Sample Revenues Options

• Commerce revenues

• Content revenues

• Community revenues

• Infrastructure revenues

Source: Applegate, Austin, McFarlan, Harvard Business School

Cost Categories in e-Gov Projects

1. Consultancy Services

2. Software Design, Development and Maintenance

3. IT Infrastructure creation and maintenance

4. Citizen Service Delivery

 Cost Categories in e-Gov Projects

Software Design, IT Infrastructure

Consultancy Citizen Service
Development and creation and
Services Delivery
Maintenance maintenance

Consultancy Services

1. e-Governance Vision and Strategy Development

2. Process Study, Process Reengineering
3. Requirements Definition and System Design
4. Change Management, Capacity Building and Project Communications for e-Governance
implementations
5. Development of Business Model & DPR
6. RFP Development and Bid Process Management Support
7. Project Audits, Quality
 Cost Categories in e-Gov Projects

Software Design, IT
Consultancy Development Infrastructure Citizen Service
Services and creation and Delivery
Maintenance maintenance

Consultancy Services (contd..)

8. Project and Programme Management

9. Third Party Audits, Governance, Risk, Compliance, and Assurance
10. SLA Monitoring and Evaluation
 Cost Categories in e-Gov Projects

Software Design, IT Infrastructure

Consultancy Citizen Service
Development and creation and
Services Delivery
Maintenance maintenance

Software Design, Development and Maintenance

1. Definition of detailed functional and technical requirements Software Project

Categories:
2. System design and development
1. COTS/ERP
3. Procurement and supply of software (system software,
Implementations
ERP..)
2. Bespoke/Custom
4. Software Testing
Application Software
5. Data Digitization Development
6. Training and capacity building
7. Project documentation
8. Software Operations and Maintenance
 Cost Categories in e-Gov Projects

Software Design, IT Infrastructure

Consultancy Citizen Service
Development creation and
Services Delivery
and Maintenance maintenance

IT Infrastructure creation and maintenance

1. IT Infrastructure Procurement IT Infrastructure

Categories:
2. Installation & Configuration of IT
Infrastructure 1. Data Centre
Infrastructure (e.g. SDC)
3. IT Infrastructure Operations, Monitoring and
2. Network Infrastructure
Management
(e.g. SWAN)
3. End-user equipment
(PCs, printers, Scanner..)
 Cost Categories in e-Gov Projects

Software Design, IT
Consultancy Development Infrastructure Citizen Service
Services and creation and Delivery
Maintenance maintenance

Citizen Service Delivery

1. Establishment , operations & management of Citizen Service

Delivery Centres
2. Establishment , operations & management of Call Centres
 Cost Categories in e-Gov Projects
Project Conceptulisation and Design:
Vision &
1. E-Governance Vision and Strategy Development Strategy
2. Process Study, Process Reengineering Development

3. Functional Requirements Definition and System Design

Current State
4. Development Change Management, Capacity Building and Assessment
Communications Strategy
5. Development of Business Model & DPR Future State
Definition
6. RFP Development and Bid Process Management Support
Implementation
Systems Development/IT Infrastructure creation Phase: approach and
sourcing
1. Project and Programme Management
2. Software and Data Quality Assurance Develop and
implement IT
3. Infrastructure Quality Assurance system
4. Capacity Building, Change Management ,and Communications...
Operate and
sustain
Project Operations Phase:
1. SLA Audits
2. Monitoring and Evaluation
3. Capacity Building, Change Management and Communications...
Project Phases
 Cost Categories - Software Design,
Development and Maintenance
One time costs..
1. System Software for Application Server, Database Vision &
Strategy
Server, Integration Server Development
2. Application Software
Current State
3. Workflow automation, Documentation Management Assessment
Systems..
4. Requirements study and finalization Future State
Definition
5. Software Design and Development
6. ERP Customisation and configuration Implementation
7. Project Documentation approach and
sourcing
8. Data digitization and migration
Develop and
implement IT
Recurring Costs: system

1. AMC for software licenses

Operate and
2. Training and Capacity Building sustain

3. Software maintenance and support, Software change

management, Project documentation..

Project Phases
 Cost Categories – IT Infra Creation and
Maintenance
One-time costs..
Data Center and Network Infrastructure (IT and Non-IT): Vision &
Strategy
1. Data center site cost, preparation cost, supporting facilities (power, Development
cooling, physical security, fire and environmental controls)
2. Computing infrastructure (servers) Current State
3. Storage Infrastructure (SAN Switches, SAN storage, tape library, Assessment
backup solutions.,,)
4. LAN and WAN (Switches, Routers, Modems, VPN) Future State
5. Security (Firewall, IPS/IDS, Antivirus, IDM..) Definition
6. Cabling
7. Insurance.. Implementation
approach and
End User Computing Infrastructure IT Infrastructure: sourcing
1. PCs ,Printers, Scanners, LAN, UPS, generators, LAN and power
cabling… Develop and
implement IT
System Software: system
1. Network/Enterprise Management Software, Storage management
solution, Server Operating Systems, Antivirus gateway and end-client Operate and
software, email suite… sustain
Services cost:
1. Requirements assessment, solution design, documentation
2. Installation and configuration
3. Testing and go-live
Project Phases
 Cost Categories - Software Design,
Development and Maintenance
Vision &
Strategy
Development

Current State
Assessment
Recurring costs..
Data Center and Network Infrastructure (IT and Non-IT): Future State
1. AMC/ Warranty for system software and hardware Definition

2. Facilities Management Services

Implementation
3. IT Infrastructure monitoring and management services approach and
4. Insurance sourcing

5. Consumables Develop and

implement IT
6. Leased lines/ISDN – connectivity charges system
7. Power, fuel
Operate and
sustain

Project Phases
E- Gov Project Costs – Template (illustrative)

[Link] Cost Item Cost Y1 Y2 Y3 Y4 Y5 Y6

1 Application Software
2 System Software
3 Data Center Infrastructure Cost
4 Network Infrastructure cost
5 DR Capacity of SDC (at 40% of SDC load)
6 End User computing infrastructure
7 Capacity Building & Change Management
8 Data Digitization
9 Software Quality Assurance Cost
10 Data Quality Assurance
11 Total Cost (one time) INR 0 INR 0 INR 0 INR 0 INR 0 INR 0 INR 0
E- Gov Project Costs – Template (illustrative)

Recurring Cost Y2 Y3 Y4 Y5 Y6
1 Network connectivity costs
2 System Software AMC
3 IT Infrastructure Hardware Maintenance
4 Application Software Change Management
5 Application Software Maintenance
6 Hardware Insurance
7 Data Entry Operators
8 Project Management Unit/Services
9 Monitoring and Evaluation Cost
10 Consumables
11 Total Recurring Costs per year INR 0 INR 0 INR 0 INR 0 INR 0
10 Overall Project contigency cost INR 0 INR 0 INR 0 INR 0 INR 0 INR 0
11 Grand Total

12 Total Project Cost - Year Wise Expenditure INR 0 INR 0 INR 0 INR 0 INR 0 INR 0
E- Gov Project Costs – Template (illustrative)
Cost Component Per Unit Price (Rs.) No. of Units Cost per Item (Rs.)
Application Servers
Web or Portal Servers
E-Mail Server
Database Servers
Firewall
IPS
Directory Server
Antivirus Server/gateway
Infrastructure Management Servers
Document Management Server
Staging & Testing Servers
PCs - Monitoring
Servers Cost
Aggregation router- SDC
Aggregation router- District Center
Internet Router
Proxy Server
24 Port Manageable Switch
SAN Solution with SAN Switches
Tape Library
24 Port Patch Panel
Modems 2 Mbps - Two Pairs
Network& Security Cost
Laser Printers
42 U Racks
Peripherals Cost
Total Hardware Cost
E- Gov Project Costs – Template (illustrative)
Cost Component Per Unit Price (Rs.) No. of Units Cost per Item (Rs.)
System Software
Application Server Software
Database Server - Enterprise Edition (including RAC)
Antivirus Server
Enterprise Management Software
Document Management System
Directory Solution
Collaboration suite (e-mail)
Data Backup Management software
Total cost
Application Software
License Management
Birth & Death Registration
Scheme Management
Drug Distribution Management (including asset mgmt)
Patient Care Management
Decision Support Systems & MIS

Disease Surveillance System (including GIS system sot)

Call Centre Management & GR System
HR System
E-Learning
Knowledge Management System
Total Cost
Total Software Cost
E- Gov Project Costs – Template (illustrative)

Infrastructure Component No. of Units Per Unit Cost Total

Personal Computers
Printers
Scanners
Digital Certificate
UPS
Modems
LAN Switch
Total Cost for End User Infrastructure 0
E- Gov Project Costs – Template (illustrative)

Indicative Avg
Duration No. of Users Batch Total no. of Per batch
S.N Name of the Training Programme (Days) for training Size batches cost Total Cost

1 Orientation to change management

2 Change Management
3 Communication Skills
4 Teamwork Skills
5 Presentation Skills
6 Project Management
7 IT Training
8 Application Training
Total Cost
E- Gov Project Costs – Template (illustrative)

Number of Man months

needed Costs
Total
Man
Role Y1 Y2 Y3 Y4 Y5 Months Man-month cost Total cost
Change Management - GM
Change Team Memebers
Contracts Manager
Accountant
Technical Manager
Software Architects
Infrastructure Architects
QA Team
Testing Team
Healthcare Manager
Clinical SMEs
Public Health Experts
SLA Team
Service SLA Monitoring Team
Total Cost for PMU
Revenue sources in e- Gov Projects

• Various projects undertaken by the government have significant revenue

generation potential

• Revenue referred here is different from the taxes and duties expected to be
paid by the citizen under the constitution

• These revenue sources are new money to the government

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Illustrative Revenue sources
e-Governance Projects: Non e-Governance Projects:

• Portal registration/subscription • Toll charges – Roads

charges
• Development charges – Airports…
• Transaction fees for the online
services

• Advertising revenue from the portal

• Advertising revenues from service

center

• Fees for delivery of B2C and B2G

services through common service
centers

• Convenience fees – enhancement in

the current fees/charges
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When and in which phase of project do
we prepare Cost estimates?
Detailed Project Report (DPR)

• The Detailed Project Report is an essential building block for firming up a

proposed project initiative

• The DPR contains details about the proposed project to enable appraisal,
approval, and subsequently implementation

• Usually prepared according to funding agencies‟ templates and guidelines

e.g. MeitY guidelines for NeGP projects, World Bank guidelines…

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What is DPR used for?

It is a comprehensive proposal prepared for all types of projects and used as a

basis for:

• Investment decision making

DPR involves a detailed
• Approval of plans and designs study on various aspects
of the project and should
• Project planning be prepared before the
Selection of Vendors.
• Implementation scheduling and budgeting

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 When is DPR prepared?
e-Governance Project Lifecycle (eGLC)

Implementation Develop and

Vision & Strategy Current State Future State
approach and implement IT Operate and sustain
Development Assessment Definition
sourcing system

Stakeholder Needs Critical assessment of Process reengineering Define implementation Definition of detailed System operations
Assessment current business and to –be process approach and phasing functional and and maintenance
processes and pain definition plan (functional and technical requirements
Define clear vision & areas geographic) The highlighted activities in
Software change
objectives Identity IT enablement System design and management
Best practices in opportunities and
Assess detailed funding the EGLC provide inputs to
development
Prioritization of requirements and Rollout services and
services and projects
similar environments requirements
business model the DPR
Software quality systems (functionality
Assess legal framework Define changes to the Prepare DPR assurance, and geography)
Incorporate domestic and current limitations legal and regulatory acceptance testing
Develop vendor
and global learnings environment
evaluation and selection
However, the DPR may
and auditing Objectives and
Assess current ICT benefits evaluation
Identify institutional systems and their Develop People change criteria make provisions of detailed
Training and capacity and reinforcement
structures & capacities ability to support and capacity building Develop KPIs and building
for implementation future plans plan performance levels for study or implementation in
Sustained change,
services and systems Change management capacity building and
Define funding Assessment of current Develop project some of these areas e.g.
and project communications..
requirements capacities at all levels awareness and Develop RFP communications
and their preparedness communication Bid evaluation and
Legal reforms may be a
Define monitoring and requirements… Project documentation
evaluation approach.
for e-governance. vendor selection separate project
Project go-live
Understanding Business model…

A Business model for a project should address/answer the following:

• How much does it cost to create and maintain the project?
• Is the project feasible?
• Who is funding for the Project?
• Who is developing or implementing the project?
• Who is paying for the project?
• What are payment terms?
• Roles and responsibilities of the parties concerned with the business model
• Duration of the contract.... etc.
Business model Canvas
Business model Canvas

Together these elements provide a pretty coherent view of a business‟ key drivers–

• Customer Segments: Who are the customers? What do they think? See? Feel? Do?

• Value Propositions: What‟s compelling about the proposition? Why do customers buy, use?

• Channels: How are these propositions promoted, sold and delivered? Why? Is it working?

• Customer Relationships: How do you interact with the customer through their „journey‟?

• Revenue Streams: How does the business earn revenue from the value propositions?

• Key Activities: What uniquely strategic things does the business do to deliver its proposition?

• Key Resources: What unique strategic assets must the business have to compete?

• Key Partnerships: What can the company not do so it can focus on its Key Activities?

• Cost Structure: What are the business‟ major cost drivers? How are they linked to revenue?
Business Model - 1
Business Model - 2
Business Model - 3
Identifying suitable business models

Conventional

Outsource
Government Control

PPP

BOO(T)

Risk Transferred to the Private Sector Privatise

Various models for private sector participation
Conventional • Government maintains complete control on
the project creation, execution and assets

Outsource • Government funds the project investments

for the capital and operational expenditure
during the project tenure
PPP • Government creates/develops the project
• Government Maintains the project
including operations and maintenance of
the project
BOO(T)
• 100% of the project risk and returns are
accrued to government only

Privatise
Various models for private sector participation
Conventional
• Government maintains complete control on the
project creation, execution and assets
• Government funds the project investments for the
Outsource
capital and operational expenditure during the
project tenure
• Government leverages private sector strengths for
PPP
creation of the project or maintenance of the project
or both
• Risks are allocated to the government and private
BOO(T) sector based on the responsibilities (e.g. government
will have the risk of project demand, the private
sector will carry the risk of performance and quality
of the services delivered to the government)
Privatise
Various models for private sector participation
• The government does not need to own infrastructure to
Conventional deliver services
• The government retains political
responsibility/accountability to deliver services for the
community;
Outsource
• The government defines the timeframe in which the services
must be delivered; and the quality and quantity of services
needed;
PPP
• The private sector delivers the services and finances or part
finances the project;
• Government provides the concessions for the private party,
if
BOO(T) needed
• Private sector remunerated through services
charges/transaction fees/gap funding..

Privatise • Risks are allocated between the public and private sectors;
• Various flavors of PPP exist with varying roles and
responsibilities of public and private sectors
Various models for private sector participation
Conventional
• The government retains political
responsibility/accountability to deliver services for the
community;
Outsource
• The government defines the timeframe in which the
services must be delivered; and the quality and quantity of
services needed;
PPP • Private entity receives concession from government to
finance, design, construct, implement and operate the
project
BOO(T) • Private sector is remunerated through services
charges/transaction fees/gap funding..
• The assets of the project are transferred to the government
at the end of the concession period
Privatise
Various models for private sector participation

Conventional

Outsource
• The responsibility for delivery of services is
completely transferred to the private sector
PPP • The ownership of the project or a business is
completely transferred to the private sector
• Government only regulates the functioning of
BOO(T) the private sector

Privatise
Typical project risks

• Land acquisition, planning and

permissions
• Demand (volume)
• Design
• Residual value
• Construction
• Inflation
• Commissioning
• Regulatory
• Latent defects
• Taxation
• Operating performance
• Force Majeure
• Operating and maintenance costs
• Changes in requirement
• Third party revenue
Risk allocation

Risks should be allocated to the party best able to understand and manage them..

Public Shared Private

Risk

• Land acquisition, • Inflation • Design and construction

planning/permissions
• Regulatory • Commissioning
• Demand risk (?)
• Taxation • Operating and maintenance costs
• Changes in
• Force majeure • Operating performance
requirements
• Latent defects (new)
• Latent defects (existing)
• Third party revenue
6 problems facing large Govt IT Projects
1. Lack of good governance Structures
2. The “ Waterfall” method for Systems Design
3. “All at once” funding
4. Scope Creep
5. Automating before redesigning
6. Failing to budget for Clean up

Source: Six Problems Facing Large Government IT Projects (And Their Solutions), By:
Rita Gunther McGrath, HBR Oct 2008
The Truths about IT Costs
1. Enhancements don‟t deliver results
2. Projects are too big and often take too long, partly because
unnecessary functionality is built into the projects
3. Previously purchased applications and infrastructure technology
are often underutilized
4. Project failures are too high
5. Tech teams do not have incentives for high quality and quality is
often not measured
6. Managers do not know enough about the systems that support
their areas.
7. IT is too risk averse.

Source: The truths about IT costs by, By: Susan Cramm, HBR Oct 2009
 Agenda
• IT Infrastructure
• IT infrastructure
• Components of IT infrastructure?
• Trends in computer hardware platforms?
• Trends in computer software platforms
• Challenges of managing IT infrastructure
• COTs vs Custom Development Vs Cloud
• Implementation Plan

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 IT infrastructure

Set of physical devices and software required to operate an

enterprise
Set of firm-wide services including:
• Computing platforms providing computing services
• Physical facilities management services
• IT management, education, and other services
“Service platform” perspective
• More accurate view of value of investments
Evolution of IT infrastructure

• General-purpose mainframe and minicomputer era:

1959 to present
• Personal computer era: 1981 to present
• Client/server era: 1983 to present
• Enterprise computing era: 1992 to present
• Cloud and mobile computing: 2000 to present
Technology Drivers of Infrastructure Evolution

1. Moore‟s law and micro processing power

• Computing power doubles every 2 years

2. Law of Mass Digital Storage

• The amount of data being stored each year doubles.

3. Metcalfe‟s Law and network economics

• Value or power of a network grows exponentially as a
function of the number of network members.
Technology Drivers of Infrastructure Evolution

1. Declining communication costs and the Internet

• Exponential growth in size of the Internet

2. Standards and network effects

• Technology standards
• Specifications that establish the compatibility of
products and the ability to communicate in a network
• Unleash powerful economies of scale and result in price
declines
Components of IT Infrastructure

1. Computer hardware platforms

2. Operating system platforms

3. Enterprise software applications

4. Data management and storage

5. Networking/telecommunications platforms

6. Internet platforms

7. Consulting & System integration services

IT Infrastructure Ecosystem
Computer Hardware Platforms

• Client machines
• Desktop PCs, laptops
• Mobile computing: smartphones, tablets
• Desktop chips vs. mobile chips

• Servers

• Mainframes
Operating System Platforms

Corporate servers
• Windows Server
• Unix
• Linux

Client level
• Microsoft Windows
• Android, iOS, Windows 10 (mobile/multitouch)
• Google‟s Chrome OS (cloud computing)
Enterprise Software Applications

In 2018, firms spent $389 billion on software for enterprise

applications.

Largest providers: SAP and Oracle

Middleware providers: IBM, Oracle

Data Management and Storage

Database software providers

• IBM (DB2)
• Oracle
• Microsoft (SQL Server)
• Sybase (Adaptive Server Enterprise),
• My SQL
• Apache Hadoop
Physical data storage for large-scale systems
• Dell EMC
• Hewlett Packard Enterprise (H3C)
Networking & Telecommunication Platforms

Network operating systems

• Windows Server, Linux, Unix

Network hardware providers

• Cisco, Juniper Networks

Telecommunication services
• Telecommunications, cable, telephone company charges for
voice lines and Internet access
• AT&T, Verizon
Internet Platforms

Hardware, software, management services to support company

websites, intranets
• Web-hosting services
• Routers
• Cabling or wireless equipment

Internet hardware server market

• IBM, Dell, Oracle, HP

Web development tools/suites

• Microsoft (Visual Studio and .NET), Oracle-Sun (Java),
Adobe
Consulting & SI Services

Even large firms do not have resources for full range of support for
new, complex infrastructure.

Leading consulting firms: Accenture, I B M Global Services, H P,

TCS, Infosys, Wipro Technologies etc.,

Software integration: ensuring new infrastructure works with

legacy systems.

Legacy systems: Older T P S created for mainframes that would be

too costly to replace or redesign
Trends in Hardware Platforms

The mobile digital platform

• Smartphones
• Netbooks
• Tablet computers
• Digital e-book readers and apps (Kindle)
• Wearable devices

Consumerization of I T and B Y O D (bring your own device)

forces businesses and I T departments to rethink how I T
equipment and services are acquired and managed
Trends in Hardware Platforms

Quantum computing
• Uses quantum physics to represent and operate on data
• Dramatic increases in computing speed

Virtualization
• Allows single physical resource to act as multiple resources
(i.e., run multiple instances of OS)
• Reduces hardware and power expenditures
• Facilitates hardware centralization
• Software-defined storage (SDS)
Trends in Hardware Platforms

Cloud computing
On-demand computing services obtained over network
• Infrastructure as a service (IaaS)
• Software as a service (SaaS)
• Platform as a service (PaaS)

Cloud can be public or private

Allows companies to minimize IT investments
Drawbacks: Concerns of security, reliability
Hybrid cloud computing model

Edge computing
• Servers at the edge of the Internet
• Reducing latency, and network traffic
Cloud Computing Platforms
Amazon Web services (illustrative)
Trends in Hardware Platforms

Green computing (Green IT)

Practices and technologies for manufacturing, using, disposing
of computing and networking hardware
Reducing power consumption a high priority
Data centres

High performance, power-saving processors

Multicore processors
Power-efficient microprocessors
Trends in Software Platforms

Linux and open-source software:

Produced by community of programmers
Examples: Apache web server, Mozilla Firefox browser, OpenOffice
Linux
Software for the web:
Java, HTML, and HTML5
Java Virtual Machine
Web browsers
Python
Web services and Service-oriented architecture (SOA) :
Web services
X M L : Extensible Markup Language
S O A : Service-oriented architecture
• Set of self-contained services that communicate with one
another to create a working software application
• Software developers reuse these services in other combinations
to assemble other applications as needed
Trends in Software Platforms

Web services and service-oriented architecture

Web services
XML: Extensible Markup Language
SOA: service-oriented architecture
Set of self-contained services that communicate with one
another to create a working software application
Software developers reuse these services in other combinations
to assemble other applications as needed
Dealing with Platform and Infrastructure Changes

As firms shrink or grow, IT needs to be flexible and scalable.

Scalability
• Ability to expand to serve larger number of users

For mobile computing and cloud computing:

• New policies and procedures for managing these new
platforms
• Contractual agreements with firms running clouds and
distributing software required
Management and Governance

Governance
Who controls IT infrastructure?

How should IT department be organized?

Centralized
Central IT department makes decisions
Decentralized
Business unit IT departments make own decisions.

How are costs allocated between divisions, departments?

Making Investment decisions

Under-investment and over-investment can hamper firm

performance

• Make /Rent-versus-buy

• Cloud computing
Security requirements
Impact on business processes and workflow

• Outsourcing
TCO Model

Analyze direct and indirect costs

Hardware, software account for only about 20% of TCO

Other costs: Installation, training, support, maintenance,

infrastructure, downtime, space, and energy

TCO can be reduced

Use of cloud services, greater centralization and
standardization of hardware and software resources
Competitive Forces Model for IT investments

• Market demand for firm‟s services

• Firm‟s business strategy
• Firm‟s IT strategy, infrastructure, and cost
• Information technology assessment
• Competitor firm services
• Competitor firm IT infrastructure investments
Competitive Forces Model for IT infrsatructure
Business Value of Enterprise Systems

• Increase operational efficiency

• Provide firm-wide information to support decision
making
• Enable rapid responses to customer requests for
information or products
• Include analytical tools to evaluate overall
organizational performance and improve decision-
making
Enterprise Applications Challenges
Expensive to purchase and implement enterprise applications
• Multi-million dollar projects in 2018
• Long development times

• Technology changes
• Business process changes
• Organizational learning, changes
• Switching costs, dependence on software vendors
• Data standardization, management, cleansing
Next Generation Applications

Enterprise solutions/suites
• Make applications more flexible, web-
enabled, integrated with other systems

• Open-source applications
• On-demand solutions
• Cloud-based versions
• Functionality for mobile platform
Next Generation Applications
Social CRM
• Incorporating social networking technologies
• Company social networks
• Monitor social media activity; social media analytics
• Manage social and web-based campaigns

Business intelligence
• Inclusion of BI with enterprise applications
• Flexible reporting, ad hoc analysis, “what-if” scenarios,
digital dashboards, data visualization
Implementation Strategy

• Project management structure

 Steering Committee structure
 Project Management structure
• Identify the project phases
 Project inception
 Requirement definition
 Design
 Implementation
 Stabilization
 Support
• Identify project milestones in each of the phases
• Define the deliverables for each of the mile stones
Implementation Strategy

• Payment structure
• Payment linked to mile stones
• Budget provisioning
• Financing model
• Year wise allocation of funds
• Resource deployment
• Capacity building
• New recruitments
• Transition from private sector to
department
Q&A

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