Information Technology Reference
In-Depth Information
including total quality management and Six Sigma. Six Sigma, for example, was used by
Ford-Otosan, a company that makes commercial vehicles, to help save millions of
Table 2.3
Total Quality Management and
Six Sigma
Technique
Description
Examples
Total Quality
Management
(TQM)
Involves developing a keen awareness of
customer needs, adopting a strategic vision
for quality, empowering employees, and
rewarding employees and managers for
The U.S. Postal Service uses the Mail Preparation Total Quality Management
(MPTQM) program to certify leading mail sorting and servicing companies.
MAA Bozell, a communications company in India, used TQM to improve the
quality for all of its business processes.
Transplace, a $57 million trucking and logistics company, uses Six Sigma to
improve quality by eliminating waste and unneeded steps. There are a number
been criticized by some.
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Six Sigma
A statistical term that means products and
services will meet quality standards 99.9997%
of the time. In a normal distribution curve
used in statistics, six standard deviations
(Six Sigma) is 99.9997% of the area under the
curve. Six Sigma was developed at Motorola,
Outsourcing, On-Demand Computing, and Downsizing
A significant portion of an organization's expenses are used to hire, train, and compensate
talented staff. So organizations try to control costs by determining the number of employees
they need to maintain high-quality goods and services. Strategies to contain costs are out-
sourcing, on-demand computing, and downsizing.
Outsourcing
involves contracting with outside professional services to meet specific
business needs. Often, companies outsource a specific business process, such as recruiting
and hiring employees, developing advertising materials, promoting product sales, or setting
up a global telecommunications network. Organizations often outsource a process to focus
more closely on their core business—and target
limited resources to meet strategic goals. A KPMG
survey on global outsourcing revealed that over
40 percent of the survey respondents believe that
outsourcing definitely improved their financial
performance, and almost 50 percent reported that
outsourcing brought business experience to their
companies that they didn't have previously.
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Companies that are considering outsourcing to
cut the cost of their IS operations need to review
this decision carefully, however. A growing num-
ber of organizations are finding that outsourcing
does not necessarily lead to reduced costs. One of
the primary reasons for cost increases is poorly
written contracts that tack on charges from the
outsourcing vendor for each additional task. Other
potential drawbacks of outsourcing include loss of
control and flexibility, overlooked opportunities
to strengthen core competency, and low employee
morale.
On-demand computing is an extension of the outsourcing approach, and many compa-
nies offer it to business clients and customers.
On-demand computing
, also called
on-demand
business
and
utility computing,
involves rapidly responding to the organization's flow of work
as the need for computer resources varies. It is often called utility computing because the
organization pays for computing resources from a computer or consulting company, just as
it pays for electricity from a utility company. This approach treats the information system—
including hardware, software, databases, telecommunications, personnel, and other compo-
outsourcing
Contracting with outside profes-
sional services to meet specific
business needs.
Allergan, a developer of pharma-
ceuticals and medical devices, out-
sources its IS services, including
data center operations and network
monitoring and management.
(Source: Courtesy of AP Photo/Chris
Carlson.)
on-demand computing
Contracting for computer resources
to rapidly respond to an
organization's varying workflow.
Also called on-demand business
and utility computing.
