Paragraph on Balanced capacity
It should come as no surprise that software companies in today’s world need to excel in innovation and customer focusing in order to achieve competitive advantage. The software industry is highly competitive and in constant change. Software companies need to effectively learn how to change and adapt to the new challenges and to the different markets moved by rapid technologic advance. More than ever before, Operations Managers are required to focus on improving operational efficiency.
This is usually accomplished by cutting costs of resources used in the production transformation process and by increasing flexibility of an operation to adapt to changes quickly, thereby avoiding unnecessary increasing costs of not adapting in a timely manner. This report will analyse and evaluate the Operations Management of Computer Associates Software Products covering four interlinked areas: 1. An analysis of type of operations carried out and operating processes chosen by Computer Associates. 2. An identification and evaluation of the major strengths and weaknesses of the Operations Function in Computer Associates.
3. An analysis of the extent to which the operations function supports the broader Business Strategy of the organisation. 4. Recommendations for improving the operations function, whilst leaving the broader business policy unchanged. Weaknesses from section 2 will be the subject of improvement recommendations, provided that they are required competencies of the business strategy. Computer Associates is a software manufacturer company that produces large volumes of standard products for the mass market using a type of operating processes commonly known as Mass Processes (Slack at al.2001, p. 106).
Each product is produced in high volume but little variety (it might differ in the language used – one for each country, for packaging, on-line help, documentation, etc). Since 1976, the company has expanded rapidly in the software market through a very successful policy of acquisitions, some of them from its own supplier network (upstream vertical integration – (Slack at al. 2001, p. 156)). Other than the traditional supply-chain system including retailers, distributors and wholesalers, CA also uses a direct sales model, selling its products directly to customers.
Figure 1. Traditional Business supply-chain mixed with direct sale to customers All operations involve taking inputs (raw materials, human resources, etc) and transforming them using technology, processes and rules, into consumable outputs (i. e. finished products or services). However they do differ in four types of dimensions (Slack at al. 2001, p. 21): The Volume of CA’s output is high. It serves organisations in more than 100 countries, including 95% of Fortune 500 companies. The development process is in continuous change and improvement.
Software products are bundled according to versions and licensed and sold in high volumes according to the current version of each product. The Variety of CA’s output is high. CA’s strategy is known has “3 x 6”. The company’s more than 1000 different software products are grouped into 3 strategic categories: Information Management, Infrastructure Management, and Business Process Management. Across these 3 different categories, CA delivers solutions in 6 different core focus areas: Application Life Cycle Management, Data Management and Application Development, Enterprise Management, Portal and Business Intelligence, Security, and Storage.
CA adopted recently a new innovative business model offering totally flexible customer licensing, including traditional up-front, month-to-month and over-a-term licensing payments. Customers can now choose what best suits them and do not have to pay out large lump sums up-front. They are not buying and then later having to part-exchange or sell, instead, customers are well aware of their current cashflow position and in an ideal position to budget accordingly. Industry analysts started calling this “pay as you go software”.
The Variation in the demand of CA’s output is high. There are good quarters and bad quarters. However, the company does not change its capacity over periods of low demand so costs remain the same. Internally, support, services and sales staff are encouraged to take holidays during the period where demand is low, typically, during the Christmas and New Year, summer holidays and near or just before the end of the fiscal year where software customers do not usually buy anything.
The degree of Visibility which CA’s customers have of the production (also known as the degree of customer contact) is high. CA believes that the software market demands good customer service and good customer relations in order to gain customer satisfaction and competitive advantage. The company created a Customer Relations Organisation (CRO) – a non-quota carrying group of service professionals, completely separate from the sales reporting structure, with a single mission: to make sure CA does the right thing for customers.
Each Customer Relations Manager (CRM) is responsible to make it easy for customers to navigate through all of CA’s functional areas, providing a single point of contact within CA – “a human CA browser” (O’Connel, 2001). This helps customers to gain maximum value from CA’s manufactured products and keeps CA in close contact with customers. Internally, the company introduced five well-defined core values, the first being: putting customers first in everything you do. The idea was to make sure employees were focused in everything they do. Figure 2. Computer Associates’ Five Core Values introduced in 2000
Section 2. An identification and evaluation of the major strengths and weaknesses of the Operations Function in Computer Associates. According to Slack at al. (2001), the Operations Function can provide competitive advantage through its performance at five competitive objectives depicted in Figure 2. Figure 3. Five Performance Objectives adapted from Slack at al. (2001, p. 57) Over the past four years, CA has developed a comprehensive and consistent view of the IT market place and went through several internal reorganisations to align its business more closely with the interests of customers.
One of the main strengths of the company is the fact that it is still at time of writing the only global enterprise software company with ISO 9002 worldwide certification (acquired in 2000). This is certainly an order winner for many customers since there are no other competitors offering the same worldwide qualification. CA’s Quality policy is visible to customers so that customers can judge quality standards for themselves. Externally, it means satisfying customers by providing error-free goods and services which are fit for their purpose.
Internally, quality provides stability and efficiency and is all about doing the correct things for customers. It reduces cost and increases dependability (Slack at al. 2001). ISO 9002 worldwide certification addressed and fixed past internal problems of poor quality discipline and less incentive to cooperate in quality improvements, from in-house suppliers, characteristics of a vertically integrated company like CA (Slack at al. 2001, p. 158). CA wants to do things on time, so as to keep the delivery promises.
This applies to new product version releases and also potential fixes to specific software faults (usually known as software bugs). Most new product versions are released according to the project’s specified deadlines. When a customer logs a bug fix request, CA immediately prioritises the importance of the bug fix according to customer needs and depending if it is a “show-stopper” or if there is a work around the bug that will allow the customer continue working. Bug fixes are then worked according to the priority given and respective expected fix date.
Unfortunately, due to the large diversity of problems, customers’ environments and lack of CA’s internal resources, it is not always possible to deliver a fix in the initial specified estimated fix date. Dependability fosters trust and stability and saves time and money. CA’s upstream vertical integration provides better dependability performance in the sense that in-house suppliers are able to anticipate delivery problems and those can then easily be transmitted to customers at an early stage before or immediately after the order has taken place.
Speed is one of CA’s strengths and order qualifiers. Speed is important to CA because the faster the customer can be provided with the goods or service; the more likely they are to make the purchase. CA’s products are largely available from the main software retailers and can be also purchased directly from CA sales force. In the software industry, what takes longer is the development process of the product. Once a product version is ready and released for the first time, it takes next to no time to produce stocks ready to sell. All CA needs is to burn the CDs and package the product ready to sell.
Speed is relevant because supply-chains benefit from reducing flow time, lowering lead-time and lowering work-in-process inventory levels, and, consequently, reducing risks associated with inventories. In terms of flexibility, CA has got strong product and services flexibility. The fast technologic advance in terms of both hardware and software forces CA to be in constant change and update, by introducing new products and services according to market demands and by adapting current projects to the changes of the surround technologies.
It also has strong mix flexibility by being able to stock and provide a large range of products and services. However, CA is heavily committed to its more than 1000 different products and it cannot concentrate properly on key products where it is clearly easier to achieve better success and better profits. This, in my view, is a weakness which needs to be addressed. CA’s volume flexibility (the ability to change level of output and the need to cope with ‘variation’) and delivery flexibility (the ability of the operation to delay or bring forward delivery dates) are both low as a result of CA’s huge range of products.
It is difficult to concentrate on particular and specific products that require immediate attention. Flexibility speeds up response, saves time and maintains dependability. The ownership of some suppliers provide the potential to dictate volume and delivery flexibility (Slack at al. 2001, p. 158) CA’s new business model (‘pay as you go software’) described in section 1, provides high flexibility to customers by allowing them to choose the type of scheme best suited to them.
This can be seen as an order winner as well because very few software manufactures (if not CA alone) offer this option. No longer are customers required to pay a lump-sum upfront. Now they can vary their software mix according to their business needs and change their orders according to the growth of their business. Last but definitely not least in a highly competitive market, the need to be cost effective is CA’s major operations’ objective. All types of costs associated with a specific CA product are directly linked with the market demand and sales forecast of that product.
If demand drops for a certain product, CA automatically adjusts that product’s resources (raw materials, human resources, etc). In house suppliers (from an upstream vertically oriented operation) allow sharing of costs and balanced capacity utilization as well as a share in the potential profits when supplier margins are high (Slack at al. 2001, p. 159). Cost can be reduced by improving performance of the other four operations objectives, i. e. cost is affected by the other performance objectives (Slack at al. 2001, p. 56).