Managing IT Operations

3.0 Managing IT Operations (Yeoh Jia Han TP026238) 3.1 Amazon Web Service Power Outage In October 2012, Amazon Web Services (AWS) one of the world leading provider of cloud service had suffered an outage. As a results, it caused a long list of popular websites went dark. However, this AWS outage it was not first time because back in June 2012, a powerful thunderstorm knocked out the Amazon hosting server thus caused the backup generator failed and leads to software failed as the same time. According to Amazon’s Service Health Dashboard, the outage started out as degraded performance of a small number of Elastic Bloc Store (EBS) storage units in the US-EAST-1 Region, then evolved to include problems with the Relational Database Service and Elastic Beanstalk as well.

Figure X. AWS outage takes down Reddit and other popular websites. 3.1.1 Solution The solution given by Amazon was offers reimbursement to its customers based on the amount of downtime the customer experiences. Besides, Amazon advice customers whose sites are still offline can try re-launch them in different zone of its infrastructure. However, if the sites are based on its storage service may take 24-48 hours to fully recover. At the same time, Amazon is bringing additional hardware online to try and speed up the recovery process. -

Add More Data Centre as Backup

According to newspaper of UK named The Independent, Amazon has bought a former supermarket warehouse near Dublin and plans to convert the building into a data centre to expand its rapidly-growing cloud computing operation. The building acquisition in Dublin

appears to be part of a broader effort to line up real estate that can be converted into additional capacity for Amazon Web Services. According to Hamilton the vice president of Amazon, mentioned that increasing the amount of data centre in different locations, the rate of effected user will be decreased. Moreover, it also helps user to get more availability to choose or shift the workload to other availability zone if any incident occurred.

Figure X. The interior of a building reportedly purchased by Amazon to house a new data centre near Dublin. -

Regular Maintenance and Testing of Power Generator

According to Amazon the generators and electrical switching equipment that failed and caused power outage were all the same brand and all installed in late 2010 and early 2011, and had been tested regularly and maintained. “The generators and electrical equipment in this data centre are less than two years old, maintained by manufacturer representatives to manufacturer standards, and tested weekly. In addition, these generators operated flawlessly, once brought online Friday night, for just over 30 hours until utility power was restored to this data centre. The equipment will be repaired, recertified by the manufacturer, and retested at full load onsite or it will be replaced entirely.” In the meantime, Amazon said it would adjust several settings in the process that switches the electrical load to the generators, making it easier to transfer power in the event the generators start slowly or experience uneven power quality as they come online. The company will also

have additional staff available to start the generators manually if needed. According to Amazon recruitment, Amazon are desperately looking for operation technician – Night to make sure the generator is well maintained 24hr. 3.2 Offshore 3.2.1 Offshore Into South Africa Besides outsourcing, offshoring is one of the IT operation which done by Amazon as well. In year 2005, Amazon did offshore their business to South Africa name Amazon Cape Town mainly to grow the numbers of employees. (The Economic Times, 2005) The involved departments are customer services and software development centre. According to The Shared Service & Outsourcing Network Amazon Cape Town is a major delivery hub by servicing:

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All inbound customer service for the US, UK and German retail businesses

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Support for Amazon’s Kindle e-reader for end-users in the US, UK and Germany,

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including basic “how-to” assistance as well as technical troubleshooting Support for the company’s US digital business, including the MP3 store, Amazon’s Cloud Drive and Cloud Player applications, and the Kindle Fire tablet device.

According to McKinsey, a consultancy, South Africa is well placed to benefit from the trend of firms shifting business processes, such as customer care and payroll administration, to cheaper places. This could create 100,000 jobs in South Africa as well as attracting a modest but useful $90m-175m in foreign investment by 2008. Several benefits Amazon gained from offshoring to South Africa such as cost saving and recruit skilled employees. 3.2.2 Cost Saving Amazon in British and American firm could cut the cost of some service by 30-40% by providing them in South Africa because in South Africa the labour cost is lower and set up price is fairer as well. -

Reduce the cost of labour

In South Africa, the wages of working hour pay rate is lower compared to US and some modern developing country. By using this opportunity, Amazon aimed to grow 1400 numbers of employees at the end of 2005 by only offshoring in Cape Town. (SSON, 2005)

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Reduce the cost of setting up

In South Africa, the cost of setting up IT infrastructure is cheaper as well. Since Amazon offshored customer service to South Africa, the department still able keep contact with all the customers around the world because Amazon has a team that provides support in phone, email and live chat around customer product review in five languages such as German, French, Spanish, English and Italian. (SSON, 2005) 3.2.3 Skilled Manpower Reasons of Amazon choose South Africa as their offshore because South Africa is high calibre IT worker and good IT infrastructure is available here such as high speed internet which can reach 100 megabit per seconds and cheap with international calls. Skilled IT workers can be found with cheap labours in South Africa because now less country offshored to South Africa which makes Amazon gain the opportunity to hire those unemployed labours by having less competitors. (The Economist, 2005) IBM also offshored their call centre for international corporate into South Africa before Amazon and IBM is working great therefore, offshoring to South Africa for Amazon a great opportunity for Amazon to expand its business. According to SSON, Amazon did provides employees in South Africa with better care such as higher salary and door to door transportation for those staffs that working at night. 3.3 Outsourcing According to Chartered Institute of Procurement and Apply, Outsourcing may be considered following a skills analysis for example a company may not have the necessary skills or technical expertise for a particular function or a project or the time to carry it out. Outsourcing certain tasks allows you to scale up or down relative to demand without the permanent overheads. In this scenario, Amazon outsource their Amazon Web Service – Cloud Service to Auxis. Auxis creates and implements strategies to streamline any area and improve efficiency, reduce costs and increase profitability of Amazon cloud service. While another outsourcing is Amazon outsource their Inventory System to Appath. Appath provides multichannel order which makes the AWS operates completely automated.

3.3.1 IT Operation of Auxis to Amazon Nowadays, cloud service is getting important because most of the company runs their server in cloud to increase its availability in order to move the company worldwide and the capacity is getting huge from day to day. In order to solve this issue, Auxis support AWS in designing their cloud solution at Amazon from architecture, technical and security perspective. Auxis AWS Cloud Services include:  

Design services, resources, security and networking platform Design of Multi zone, Multi Region solutions for high availability and business

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continuity Design different environments (Dev, Test, UAT and Production) with required services and availability (Auxis, 2015)

For migration, Auxis did helps AWS in migration planning and implementation. In migration planning, Auxis provide technical & project management skills with knowledge on Amazon services to plan the migration of data centre to the cloud while migration implementation includes: 

Implementation of scripts for Release Management (Automated deployment) of the

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environments Implementation of scripts/cron jobs as needed by the applications (Auxis, 2015)

Lastly, Auxis monitor the AWS service and security 24x7x365 to make sure the AWS operate all the time without errors. 3.3.2 IT Operation of Appath to Amazon Amazon Inventory System plays a vital role in Amazon. Inventory system can cause a lot of problems if not work efficiently. Amazon inventory system has proven has earned “Great customer service” after being enhanced by Appath software. Appath software provides Amazon with several benefits such as:    

Reduce redundant inventory Blockage of working capital Low inventory turnover Inventory goals – right products in the right quantity to the right place at the right

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time. Cost of holding > cost of outsourcing. (Appath, 2014)

Appath also manage orders with full transaction details from each of the selling channels and automation settings will provide easy batch orders handling with pick lists, fully customized packing slips, and shipping labels – with tracking updated to channel and customer. Lastly, every transaction as order shipment tracking details are instantly updated to the associated to Amazon selling channel. (Appath, 2014) Justification -

Core Activities can be focused

Amazon not only runs on AWS, Amazon still running EC2, online sales and much more. Thus, outsourcing did helps Amazon a lot in managing their IT operations while focusing on their core activities. According to UKEssays, by outsourcing inventory system to Appath, Amazon can leave the shipping service to them and concentrate on their e-commerce enterprise which are more important section of Amazon. -

Cost and Time Saved

By outsourcing, Amazon can save time and cost on staffs training, server purchasing, hardware purchasing and operation time. Auxis did helps in managing IT operation of cloud service thus, this makes Amazon can use their technician and programmer in other necessary department for more development.(Auxis, 2015) -

The problem of staff can be minimized

Auxis did outsource their skills not only Amazon but others companies as well. For cloud service, Amazon staffs might find difficulties managing them but Auxis is expertise in this field therefore they are more reliable for this section since managing cloud is their professional. Moreover, experienced technician in this field are not easily found and Amazon might spend more in order to hire them as well. According to Auxis, Auxis not only provides cloud managing service but they also managing security for cloud service at the same time.

Conclusion Based on the research above, Amazon did face a lot of issues regarding IT operations, however, Amazon always got their ways to solve it in a professional ways in order to serves customer better. Power outage is not a small issues. Being a huge company like Amazon, Amazon always need to ready the backup plan when facing the problems or else they will lose trustworthy of their customers. By increasing the numbers of data centres allow customer choose another available data centre if any crash or incident happens. Offshore to South Africa is a wise choice done by Amazon as well. By offshoring, Amazon able to provides customer service with lower cost while opportunity to hire those unemployed expertise in South Africa. Outsourcing inventory management is a risky choice done by Amazon. Auxis managing Cloud service of Amazon because Auxis is a famous company who serves more than 300 companies and built a lot of unique business service that empower the quality. Managing cloud service is not an easy task and could not be done by expertise therefore, outsource cloud service to Auxis is definitely a correct choice done by Amazon. In the other hand, inventory system only can be allowed access by trusted partner because misuse or mistakes done in inventory system could cause the whole system collapse and lost reputation. However, since Appath is not only do inventory system for Amazon but for famous companies as well such as FeDex, Google Cloud, United Parcel Service(Ups) and others. Therefore Appath can be trusted to run the inventory system.

References Auxis.com, (2015). Auxis | Amazon Web Services – Cloud Services. [online] Available at: http://www.auxis.com/amazon-web-services-%E2%80%93-cloud-services [Accessed 2nd Jan. 2015]. Buyya, R., Yeo, C., Venugopal, S., Broberg, J. and Brandic, I. (2009). Cloud computing and emerging IT platforms: Vision, hype, and reality for delivering computing as the 5th utility. Future Generation Computer Systems, 25(6), pp.599-616. Charania, N. (2014). Why Amazon Outsourced its Inventory Management? - Online Inventory & Order Management Software for Amazon & Ebay Multichannel Sellers. [online] Online Inventory & Order Management Software for Amazon & Ebay Multichannel Sellers. Available at: http://appath.com/blog/why-amazon-outsourced-its-inventorymanagement/ [Accessed 1st Jan. 2015]. Cips.org, (2015). Outsourcing / Offshoring and Insourcing - The Chartered Institute of Procurement and Supply. [online] Available at: https://www.cips.org/en/Knowledge/Procurement-topics-and-skills/Understand-Need--Market-and-options-assessment/Outsourcing--Offshoring-and-Insourcing/ [Accessed 22 Dec. 2014]. Inventory Management. (2010). Vox Sanguinis, 98(3p1), pp.e295-e363. Julianne Pepitone, (2011). Amazon EC2 Outage Downs Reddit, Quora, Miller, R. (2011). Amazon Buys Dublin Site for Data Center | Data Center Knowledge. [online] Data Center Knowledge. Available at: http://www.datacenterknowledge.com/archives/2011/02/09/amazon-buys-dublin-site-fordata-center/ [Accessed 27 Dec. 2014].

Miller, R. (2011). Outage in Dublin Knocks Amazon, Microsoft Data Centers Offline | Data Center Knowledge. [online] Data Center Knowledge. Available at: http://www.datacenterknowledge.com/archives/2011/08/07/lightning-in-dublin-knocksamazon-microsoft-data-centers-offline/ [Accessed 3 Jan. 2015]. Miller, R. (2012). Amazon Data Center Loses Power During Storm | Data Center Knowledge. [online] Data Center Knowledge. Available at: http://www.datacenterknowledge.com/archives/2012/06/30/amazon-data-center-losespower-during-storm/ [Accessed 3 Jan. 2015]. Miller, R. (2012). Multiple Generator Failures Caused Amazon Cloud Outage. [online] Data Center Knowledge. Available at: http://www.datacenterknowledge.com/archives/2012/07/03/multiple-generator-failurescaused-amazon-outage/ [Accessed 3 Jan. 2015]. Online Inventory & Order Management Software for Amazon & Ebay Multichannel Sellers, (2015).Online Shipping Management Software for Ecommerce | Appath. [online] Available at: http://appath.com/features/shipping-management/ [Accessed 30 Dec. 2014]. Ssonetwork.com, (2015). New Offshore Markets: Amazon delivers customer service from South Africa by Barbara Hodge. [online] Available at: http://www.ssonetwork.com/global-business-services/articles/new-offshore-marketsamazon-delivers-customer-ser/ [Accessed 2 Jan. 2015].

The Economist, (2005). Into Africa. [online] Available at: http://www.economist.com/node/4324938 [Accessed 7 Jan. 2015]. Zeynep Aksin, O. and Masini, A. (2008). Effective strategies for internal outsourcing and offshoring of business services: An empirical investigation. Journal of Operations Management, 26(2), pp.239-256.

Strength Through IT operation, Amazon able to provide consistent service to all the customers without errors without wasting customer time because gaining trust from customer is the key of success. In the other hand, IT operation able to reduce the cost of operation and human resources as well. Weakness Every IT operation requires electricity without electricity it will be a junk. Electric source is vital for Amazon, without a proper emergency power supply or power generator will cause heavy damage not only to Amazon but to their customers business at the same time. Without electric, internet is unable to work means all the server will be dead. Opportunity Every country have their own talented people. By setting up IT infrastructure in different country, Amazon gain the opportunity to hire the expertise from different background into Amazon to manage and expand the business together. Threats For IT operation, working in different country is not an easy task. Customer service might able to speak the foreign languages with the foreigner thus they only can read from notes prepared. Another threats is exchange rate of foreign currency might change from time to time and might increase the expenses spent. Group Evaluation IT operation enable Amazon to provide better service to customers while saving cost of infrastructure and human resource. Moreover, IT operation also shows how to prevent the unexpected power outage and try to reduce the damage done by it. Outsourcing gives Amazon opportunity to focus more on their core business which is e-commerce mainly generate income than paying attention on small matters. On the other hand, offshore gives opportunity for Amazon to explore the foreign country and recruit their experts.