MIS COURSE’S Review Questions CHAPTER 1:...............................................................................................................................................1CHAPTER 2................................................................................................................................................5CHAPTER 3..............................................................................................................................................13CHAPTER 4..............................................................................................................................................20CHAPTER 5..............................................................................................................................................25CHAPTER 6..............................................................................................................................................33CHAPTER 7..............................................................................................................................................39CHAPTER 8..............................................................................................................................................44CHAPTER 9..............................................................................................................................................52CHAPTER 10............................................................................................................................................58CHAPTER 11............................................................................................................................................63CHAPTER 12............................................................................................................................................69CHAPTER 13............................................................................................................................................74CHAPTER 14............................................................................................................................................82CHAPTER 15............................................................................................................................................88

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CHAPTER 1:1-1 How are information systems transforming business and why are they so essential for running and managing a business today?

Wireless communications, including computers and mobile handheld computing devices, are keeping managers, employees, customers, suppliers, and business partners connected in every way possible. E-mail, online conferencing, the Web, and the Internet, are providing new and diverse lines of communication for all businesses, large and small. Through increased communication channels and decreased costs of the communications, customers are demanding more of businesses in terms of service and product, at lower costs. E-commerce is changing the way businesses must attract and respond to customers.

Identify three major new information system trends.

Emerging mobile digital platforms, growth of business use of big data, and the growth of cloud computing.

Describe the characteristics of a digital firm.

Significant business relationships with customers, suppliers, and employees are digitally enabled and mediated.

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Core business processes are accomplished through digital networks spanning the entire organization or linking multiple organizations.

Key corporate assets—intellectual property, core competencies, and financial and human assets—are managed through digital means.

They sense and respond to their environments far more rapidly than traditional firms.

They offer extraordinary opportunities for more flexible global organization and management, practicing time-shifting and space-shifting.

Describe the challenges and opportunities of globalization in a “flattened” world.

Customers no longer need to rely on local businesses for products and services. They can shop 24/7 for virtually anything and have it delivered to their door or desktop. Companies can operate 24/7 from any geographic location around the world. Jobs can just as easily move across the state or across the ocean. Employees must continually develop high-level skills through education and on-the-job experience that cannot be outsourced. Business must avoid markets for goods and serves that can be produced offshore much cheaper. The emergence of the Internet into a full-blown international communications system has drastically reduced the costs of operating and transacting business on a global scale.

List and describe six reasons why information systems are so important for business today.

Six reasons why information systems are so important for business today include:

(1) Operational excellence

(2) New products, services, and business models

(3) Customer and supplier intimacy

(4) Improved decision making

(5) Competitive advantage

(6) Survival

Information systems are the foundation for conducting business today. In many industries, survival and even existence without extensive use of IT is inconceivable, and IT plays a critical role in increasing productivity. Although information technology has become more of a commodity, when coupled with complementary changes in organization and management, it can provide the foundation for new products, services, and ways of conducting business that provide firms with a strategic advantage.

1-2 What is an information system? How does it work? What are its management, organization and technology components and why are complementary assets essential for ensuring that information systems provide genuine value for organizations?

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An information system is a set of interrelated components that work together to collect, process, store, and disseminate information to support decision making, coordination, control, analysis, and visualization in an organization. In addition to supporting decision making, information systems may also help managers and workers analyze problems, visualize complex subjects, and create new products.

List and describe the organizational, management, and technology dimensions of information systems.

Organization: The organization dimension of information systems involves issues such as the organization’s hierarchy, functional specialties, business processes, culture, and political interest groups.

Management: The management dimension of information systems involves setting organizational strategies, allocating human and financial resources, creating new products and services, and re-creating the organization if necessary.

Technology: The technology dimension consists of computer hardware, software, data management technology, and networking/telecommunications technology.

Distinguish between data and information and between information systems literacy and computer literacy.

Data are streams of raw facts representing events occurring in organizations or the physical environment before they have been organized and arranged into a form that people can understand and use.

Information is data that have been shaped into a form that is meaningful and useful to human beings.

Information systems literacy is a broad-based understanding of information systems. It includes a behavioral as well as a technical approach to studying information systems.

In contrast, computer literacy focuses primarily on knowledge of information technology. It is limited to understanding how computer hardware and software works.

Explain how the Internet and the World Wide Web are related to the other technology components of information systems.

The Internet and World Wide Web have had a tremendous impact on the role that information systems play in organizations. These two tools are responsible for the increased connectivity and collaboration within and outside the organization. The Internet, World Wide Web, and other technologies have led to the redesign and reshaping of organizations. They have helped transform the organization’s structure, scope of operations, reporting and control mechanisms, work practices, work flows, and products and services.

Define complementary assets and describe their relationship to information technology. 3/92

Complementary assets are those assets required to derive value from a primary investment. Firms must rely on supportive values, structures, and behavior patterns to obtain a greater value from their IT investments. Value must be added through complementary assets such as new business processes, management behavior, organizational culture, and training.

Describe the complementary social, managerial, and organizational assets required to optimize returns from information technology investments.

Table 1.3 lists the complementary social, managerial, and organization assets required to optimize returns from information technology investments. Here are a few of them:

Organizational assets:

Supportive culture that values efficiency and effectiveness

Appropriate business model

Efficient business processes

Decentralized authority

Managerial assets:

Strong senior management support for technology investment and change

Incentives for management innovation

Teamwork and collaborative work environments

Social assets:

The Internet and telecommunications infrastructure

IT-enriched educational programs raising labor force computer literacy

Standards (both government and private sector)

1-3 What academic disciplines are used to study information systems and how does each contribute to an understanding of information systems?

A technical approach to information systems emphasizes mathematically-based models to study information systems and the physical technology and formal capabilities of information systems. Students should know the differences between computer science (theories of computability, computation methods, and data storage and access methods), management science (development of models for decision making and managerial practice), and operations research (mathematical techniques for optimizing organizational parameters such as transportation, inventory control, and transaction costs).

A behavioral approach to information systems focuses on questions such as strategic business integration, behavioral problems of systems utilization, system design and implementation, social and organizational impacts of information systems, political impacts of information

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systems, and individual responses to information systems. Solutions to problems created by information technology are primarily changes in attitudes, management, organizational policy, and behavior.

A sociotechnical perspective combines the technical approach and behavioral approach to achieve optimal organizational performance. Technology must be changed and designed to fit organizational and individual needs and not the other way around. Organizations and individuals must also change through training, learning, and allowing technology to operate and prosper.

CHAPTER 22-1 What are business processes? How are they related to information systems?

A business process is a logically related set of activities that define how specific business tasks are performed. Business processes are the ways in which organizations coordinate and organize work activities, information, and knowledge to produce their valuable products or services.

How well a business performs depends on how well its business processes are designed and coordinated. Well-designed business processes can be a source of competitive strength for a company if it can use the processes to innovate or perform better than its rivals. Conversely, poorly designed or executed business processes can be a liability if they are based on outdated ways of working and impede responsiveness or efficiency.

Describe the relationship between information systems and business processes.

Information systems automate manual business processes and make an organization more efficient. Data and information are available to a wider range of decision makers more quickly when information systems are used to change the flow of information. Tasks can be performed simultaneously rather than sequentially, speeding up the completion of business processes. Information systems can also drive new business models that perhaps wouldn’t be possible without the technology.

2-2 How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance?

Transaction processing systems (TPS) are computerized systems that perform and record daily routine transactions necessary in conducting business; they serve the organization’s operational level. The principal purpose of systems at this level is to answer routine questions and to track the flow of transactions through the organization.

At the operational level, tasks, resources, and goals are predefined and highly structured.

Managers need TPS to monitor the status of internal operations and the firm’s relationship with its external environment.

TPS are major producers of information for other types of systems.

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Transaction processing systems are often so central to a business that TPS failure for a few hours can lead to a firm’s demise and perhaps that of other firms linked to it.

Describe the characteristics of management information systems (MIS) and explain how MIS differ from TPS and from DSS.

Middle management needs systems to help with monitoring, controlling, decision making, and administrative activities.

MIS provide middle managers with reports on the organization’s current performance. This information is used to monitor and control the business and predict future performance.

MIS summarize and report the company’s basic operations using data supplied by TPSs. The basic transaction data from TPS are compressed and usually presented in reports that are produced on a regular schedule.

MIS serve managers primarily interested in weekly, monthly, and yearly results, although some MIS enable managers to drill down to see daily or hourly data if required.

MIS generally provide answers to routine questions that have been specified in advance and have a predefined procedure for answering them.

MIS systems generally are not flexible and have little analytical capability.

Most MIS use simple routines, such as summaries and comparisons, as opposed to sophisticated mathematical models or statistical techniques.

MIS differs from TPS in that MIS deals with summarized and compressed data from the TPS.

Although MIS have an internal orientation, DSS will often use data from external sources, as well as data from TPS and MIS. DSS supports “what-if” analyses rather than a long-term structured analysis inherent in MIS systems. MIS are generally not flexible and provide little analytical capabilities. In contrast, DSS are designed for analytical purposes and are flexible.

Describe the characteristics of decision-support systems (DSS) and how they benefit businesses.

Decision-support systems (DSS) support nonroutine decision making for middle managers.

DSS provide sophisticated analytical models and data analysis tools to support semistructured and unstructured decision-making activities.

DSS use data from TPS, MIS, and external sources, in condensed form, allowing decision makers to perform “what-if” analysis.

DSS focus on problems that are unique and rapidly changing; procedures for arriving at a solution may not be fully predefined.

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DSS are designed so that users can work with them directly; these systems include interactive, user-friendly software.

Describe the characteristics of executive support systems (ESS) and explain how these systems differ from DSS.

Executive support systems (ESS) help senior managers address strategic issues and long-term trends, both in the firm and in the external environment.

ESS address nonroutine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution.

ESS provide a generalized computing and communications capacity that can be applied to a changing array of problems.

ESS are designed to incorporate data about external events, such as new tax laws or competitors, but they also draw summarized information from information from internal MIS and DSS.

ESS are designed for ease-of-use and rely heavily on graphical presentations of data.

Explain how enterprise applications improve organizational performance.

An organization operates in an ever-increasing competitive and global environment. The successful organization focuses on the efficient execution of its processes, customer service, and speed to market. Enterprise applications provide an organization with a consolidated view of its operations across different functions, levels, and business units. Enterprise applications allow an organization to efficiently exchange information among its functional areas, business units, suppliers, and customers.

Define enterprise systems, supply chain management systems, customer relationship management systems, and knowledge management systems and describe their business benefits.

Enterprise systems integrate the key business processes of an organization into a single central data repository. This makes it possible for information that was previously fragmented in different systems to be shared across the firm and for different parts of the business to work more closely together.

Business benefits include:

Information flows seamlessly throughout an organization, improving coordination, efficiency, and decision making.

Gives companies the flexibility to respond rapidly to customer requests while producing and stocking only that inventory necessary to fulfill existing orders.

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Increases customer satisfaction by improving product shipments, minimizing costs, and improving a firm’s performance.

Improves decision making by improving the quality of information for all levels of management. That leads to better analyses of overall business performance, more accurate sales and production forecasts, and higher profitability.

In short, supply chain management (SCM) systems help businesses better manage relationships with their suppliers. Objective of SCM: Get the right amount of products from the companies’ source to their point of consumption with the least amount of time and with the lowest cost. SCM provide information to help suppliers, purchasing firms, distributors, and logistics companies share information about orders, production, inventory levels, and delivery of products and services so that they can source, produce, and deliver goods and services efficiently. SCM helps organizations achieve great efficiencies by automating parts of these processes or by helping organizations rethink and streamline these processes. SCM is important to a business because through its efficiency it can coordinate, schedule, and control the delivery of products and services to customers.

Business benefits include:

Decide when and what to produce, store, and move Rapidly communicate orders Track the status of orders Check inventory availability and monitor inventory levels Reduce inventory, transportation, and warehousing costs Track shipments Plan production based on actual customer demand Rapidly communicate changes in product design

Customer relationship management (CRM) systems enable a business to better manage its relationships with existing and potential customers. With the growth of the Web, potential customers can easily comparison shop for retail and wholesale goods and even raw materials, so treating customers better has become very important.

Business benefits include:

CRM systems provide information to coordinate all the business processes that deal with customers in sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention. This information helps firms identify, attract, and retain the most profitable customers; provide better service to existing customers; and increase sales.

CRM systems consolidate customer data from multiple sources and provide analytical tools for answering questions such as: What is the value of a particular customer to the firm over his/her lifetime?

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CRM tools integrate a business’s customer-related processes and consolidate customer information from multiple communication channels, giving the customer a consolidated view of the company.

Detailed and accurate knowledge of customers and their preferences helps firms increase the effectiveness of their marketing campaigns and provide higher-quality customer service and support.

Knowledge management systems (KMS) enable organizations to better manage processes for capturing and applying knowledge and expertise. These systems collect all relevant knowledge and experience in the firm, and make it available wherever and whenever it is needed to improve business processes and management decisions. They also link the firm to external sources of knowledge.

Business benefits include:

KMS support processes for acquiring, storing, distributing, and applying knowledge, as well as processes for creating new knowledge and integrating it into the organization.

KMS include enterprise-wide systems for managing and distributing documents, graphics, and other digital knowledge objects; systems for creating corporate knowledge directories of employees with special areas of expertise; office systems for distributing knowledge and information; and knowledge work systems to facilitate knowledge creation.

KMS use intelligent techniques that codify knowledge and experience for use by other members of the organization and tools for knowledge discovery that recognize patterns and important relationships in large pools of data.

Explain how intranets and extranets help firms integrate information and business processes.

Because intranets and extranets share the same technology and software platforms as the Internet, they are easy and inexpensive ways for companies to increase integration and expedite the flow of information within the company (intranets alone) and with customers and suppliers (extranets). They provide ways to distribute information and store corporate policies, programs, and data. Both types of nets can be customized by users and provide a single point of access to information from several different systems. Businesses can connect the nets to transaction processing systems easily and quickly. Interfaces between the nets and TPS, MIS, DSS, and ESS provide input and output for users.

2-3 Why are systems for collaboration and social business so important and what technologies do they use?

Define collaboration and social business and explain why they have become so important in business today.

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Collaboration is working with others to achieve shared and explicit goals. It focuses on task or mission accomplishment and usually takes place in a business, or other organizations, and between businesses. Collaboration can be short-lived or longer term, depending on the nature of the task and the relationship among participants. It can be one-to-one or many-to-many.

Social business is part of an organization’s business structure for getting things done in a new collaborative way. It uses social networking platforms to connect employees, customers, and suppliers. The goal of social business is to deepen interactions with groups inside and outside a company to expedite and enhance information sharing, innovation, and decision making.

Collaboration and social business are important because:

Changing nature of work. More jobs are becoming “interaction” jobs. These kinds of jobs require face-to-face interaction with other employees, managers, vendors, and customers. They require systems that allow the interaction workers to communicate, collaborate, and share ides.

Growth of professional work. Professional jobs in the service sector require close coordination and collaboration.

Changing organization of the firm. Work is no longer organized in a hierarchical fashion as much as it is now organized into groups and teams who are expected to develop their own methods for accomplishing tasks.

Changing scope of the firm. Work is more geographically separated than before.

Emphasis on innovation. Innovation stems more from groups and teams than it does from a single individual.

Changing culture of work and business. Diverse teams produce better outputs, faster, than individuals working on their own.

List and describe the business benefits of collaboration and social business.

The general belief is that the more a business firm is collaborative in nature, the more successful it will be and that collaboration within and among firms is more essential than in the past. The overall economic benefits of collaboration and social business are significant.

The business benefits of collaboration and social business are listed in Table 2.3:

Productivity: people working together accomplish tasks faster, with fewer errors, than those working alone.

Quality: people can communicate errors and correct them faster when working together versus working alone.

Innovation: people working in groups can generate more innovative ideas than if they were working alone.

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Customer service: people working in teams can solve customer complaints and issues faster and more effectively versus working in isolation.

Financial performance: collaborative firms have superior sales, sales growth, and financial performance.

Describe a supportive organizational culture and business processes for collaboration.

Historically, organizations were built on hierarchies which did not allow much decision making, planning, and organizing at lower levels of management or by employees. Communications were generally vertical through management levels rather than horizontal between groups of employees.

A collaborative culture relies on teams of employees to implement and achieve results for goals set by senior managers. Policies, products, designs, processes, and systems are much more dependent on teams at all levels of the organization to devise, to create, and to build. Rather than employees being rewarded for individual results, they are rewarded based on their performance in a team. The function of middle managers in a collaborative business culture is to build the teams, coordinate their work, and monitor their performance. In a collaborative culture, senior management establishes collaboration and teamwork as vital to the organization, and it actually implements collaboration for the senior ranks of the business as well.

List and describe the various types of collaboration and social business tools.

Some of the more common enterprise-wide information systems that businesses can use to support interaction jobs include:

Internet-based collaboration environments such as IBM Notes and WebEx provide online storage space for documents, team communications (separated from e-mail), calendars, and audio-visual tools members can use to meet face-to-face.

E-mail and instant messaging (IM) are reliable methods for communicating whenever and wherever around the globe.

Cell phones and wireless handhelds give professionals and other employees an easy way to talk with one another, with customers and vendors, and with managers. These devices have grown exponentially in sheer numbers and in applications available.

Social networking is no longer just “social.” Businesses are realizing the value of providing easy ways for interaction workers to share ideas and collaborate with one another.

Wikis are ideal tools for storing and sharing company knowledge and insights. They are often easier to use and cheaper than more proprietary knowledge management systems. They also provide a more dynamic and current repository of knowledge than other systems.

Virtual worlds house online meetings, training sessions, and “lounges” where real-world people meet, interact, and exchange ideas.

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Google tools, cyberlockers, and cloud collaboration allow users to quickly create online group-editable Web sites that include calendars, text, spreadsheets, and videos for private, group, or public viewing and editing.

Microsoft SharePoint software makes it possible for employees to share their Office documents and collaborate on projects using Office documents as the foundation.

2-4 What is the role of the information systems function in a business?

The information systems department is the formal organizational unit responsible for information technology services. The information systems department is responsible for maintaining the hardware, software, data storage, and networks that comprise the firm’s IT infrastructure.

Compare the roles played by programmers, systems analysts, information systems managers, the chief information officer (CIO), chief security officer (CSO), chief data officer (CDO) and chief knowledge officer (CKO).

Programmers are highly trained technical specialists who write the software instructions for computers.

Systems analysts constitute the principal liaisons between the information systems groups and the rest of the organization. The systems analyst’s job is to translate business problems and requirements into information requirements and systems.

Information systems managers lead teams of programmers and analysts, project managers, physical facility managers, telecommunications mangers, or database specialists.

Chief information officer is a senior manager who oversees the use of information technology in the firm.

Chief security officer is responsible for information systems security in the firm and has the principle responsibility for enforcing the firm’s information security policy. The CSO is responsible for educating and training users and IS specialists about security, keeping management aware of security threats and breakdowns, and maintaining the tools and policies chosen to implement security.

Chief data officer is responsible for enterprise-wide governance and utilization of information to maximize the value the organization can realize from its data. The CDO ensures the firm is collecting appropriate data, analyzing it appropriately, and using the results to support business decisions.

Chief knowledge officer helps design programs and systems to find new sources of knowledge or to make better use of existing knowledge in organizational and management processes.

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CHAPTER 33-1 Which features of organizations do managers need to know about to build and use information systems successfully?

Define an organization and compare the technical definition of organizations with the behavioral definition.

The technical definition defines an organization as a stable, formal social structure that takes resources from the environment and processes them to produce outputs. This definition of an organization focuses on three elements: capital, labor, and production and products for consumption. The technical definition also implies that organizations are more stable than an informal group, are formal legal entities, and are social structures.

The behavioral definition states that an organization is a collection of rights, privileges, obligations, and responsibilities that are delicately balanced over a period of time through conflict and conflict resolution. This definition highlights the people within the organization, their ways of working, and their relationships.

The technical definition shows us how a firm combines capital, labor, and information technology. The behavioral definition examines how information technology impacts the inner workings of the organization.

Identify and describe the features of organizations that help explain differences in organizations’ use of information systems.

Common features for organizations include:

Routines and business processes: Standard operating procedures have been developed that allow the organization to become productive and efficient thereby reducing costs over time.

Organizational politics: Divergent viewpoints about how resources, rewards, and punishments should be distributed bring about political resistance to organization change.

Organizational culture: Assumptions that define the organizational goals and products create a powerful restraint on change, especially technological change.

Organizational environments: Reciprocal relationships exist between an organization and environments; information systems provide organizations a way to identify external changes that might require an organizational response.

Organizational structure: Information systems reflect the type of organizational structure—entrepreneurial, machine bureaucracy, divisionalized bureaucracy, professional bureaucracy, or adhocracy.

3-2 What is the impact of information systems on organizations?

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Describe the major economic theories that help explain how information systems affect organizations.

The two economic theories discussed in the book are transaction cost theory and agency theory. The transaction cost theory is based on the notion that a firm incurs transaction costs when it buys goods in the marketplace rather than making products for itself. Traditionally, firms sought to reduce transaction costs by getting bigger, hiring more employees, vertical and horizontal integration, and small-company takeovers.

Information technology helps firms lower the cost of market participation (transaction costs) and helps firms shrink in size while producing the same or greater amount of output.

The agency theory views the firm as a nexus of contracts among interested individuals. The owner employs agents (employees) to perform work on his or her behalf and delegates some decision-making authority to the agents. Agents need constant supervision and management, which introduces management costs. As firms grow, management costs rise. Information technology reduces agency costs by providing information more easily so that managers can supervise a larger number of people with fewer resources.

Describe the major behavioral theories that help explain how information systems affect organizations.

Behavioral theories, from sociology, psychology, and political science, are useful for describing the behavior of individual firms. Behavioral researchers theorize that information technology could change the decision-making hierarchy by lowering the costs of information acquisition and distribution. IT could eliminate middle managers and their clerical support by sending information from operating units directly to senior management and by enabling information to be sent directly to lower-level operating units. It even enables some organizations to act as virtual organizations because they are no longer limited by geographic locations.

One behavioral approach views information systems as the outcome of political competition between organizational subgroups. IT becomes very involved with this competition because it controls who has access to what information, and information systems can control who does what, when, where, and how.

Explain why there is considerable organizational resistance to the introduction of information systems.

There is considerable organizational resistance to new information systems because they change many important organizational dimensions, such as culture, structure, politics, and work. Leavitt puts forth a model that says that changes in technology are absorbed, deflected, and defeated by organizational task arrangements, structures, and people. In this model the only way to bring about change is to change the technology, tasks, structure, and people

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simultaneously. In a second model, the authors speak of the need to unfreeze organizations before introducing an innovation, quickly implementing the new system, and then refreezing or institutionalizing the change.

Describe the impact of the Internet and disruptive technologies on organizations.

The Internet increases the accessibility, storage, and distribution of information and knowledge for organizations; nearly any information can be available anywhere at any time. The Internet increases the scope, depth, and range of information and knowledge storage. It lowers the cost and raises the quality of information and knowledge distribution. That is, it lowers transaction costs and information acquisition costs. By using the Internet, organizations may reduce several levels of management, enabling closer and quicker communication between upper levels of management and the lower levels. The Internet also lowers agency costs.

Disruptive technologies caused by technological changes can have different effects on different companies depending on how they handle the changes. Some companies create the disruptions and succeed very well. Other companies learn about the disruption and successfully adopt it. Other companies are obliterated by the changes because they are very efficient at doing what no longer needs to be done. Some disruptions mostly benefit the firm. Other disruptions mostly benefit consumers.

3-3 How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies develop competitive strategies using information systems?

This model provides a general view of the firm, its competitors, and the firm’s environment. Porter’s model is all about the firm’s general business environment. In this model, five competitive forces shape the fate of the firm: Traditional competitors; New market entrants; Substitute products and services; Customers; Suppliers

Some firms do better than others because they either have access to special resources that others do not, or they are able to use commonly available resource more efficiently. It could be because of superior knowledge and information assets. Regardless, they excel in revenue growth, profitability, or productivity growth, ultimately increasing their stock market valuations compared to their competitors.

List and describe four competitive strategies enabled by information systems that firms can pursue.

The four generic strategies, each of which often is enabled by using information technology and systems include:

Low-cost leadership: Lowest operational costs and the lowest prices.

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Product differentiation: Enable new products and services, or greatly change the customer convenience in using existing products and services.

Focus on market niche: Enable a specific market focus and serve this narrow target market better than competitors.

Strengthen customer and suppliers: Tighten linkages with suppliers and develop intimacy with customers.

Describe how information systems can support each of these competitive strategies and give examples.

Low-cost leadership: Use information systems to improve inventory management, supply management, and create efficient customer response systems. Example: Walmart.

Product differentiation: Use information systems to create products and services that are customized and personalized to fit the precise specifications of individual customers. Examples: Google, eBay, Apple, Lands’ End.

Focus on market niche: Use information systems to produce and analyze data for finely tuned sales and marketing techniques. Analyze customer buying patterns, tastes, and preferences closely in order to efficiently pitch advertising and marketing campaigns to smaller target markets. Examples: Hilton Hotels, Harrah’s.

Strengthen customer and supplier intimacies: Use information systems to facilitate direct access from suppliers to information within the company. Increase switching costs and loyalty to the company. Examples: IBM, Amazon.com.

Explain why aligning IT with business objectives is essential for strategic use of systems.

The basic principle of IT strategy for a business is to ensure the technology serves the business and not the other way around. The more successfully a firm can align its IT with its business goals, the more profitable it will be. Businesspeople must take an active role in shaping IT to the enterprise. They cannot ignore IT issues. They cannot tolerate failure in the IT area as just a nuisance to work around. They must understand what IT can do, how it works, and measure its impact on revenues and profits.

Define and describe the value chain model.

The value chain model highlights specific activities in the business where competitive strategies can best be applied and where information systems will most likely have a strategic impact. The model identifies specific, critical leverage points where a firm can use information technology most effectively to enhance its competitive position. The value chain model views the firm as a series of basic activities that add a margin of value to a firm’s products or services. The activities are categorized as either primary or support activities. Primary activities are most directly related to production and distribution of the firm’s products and services, which create

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value for the customer. Support activities make the delivery of primary activities possible and consist of organization infrastructure. A firm’s value chain can be linked to the value chains of its suppliers, distributors, and customers.

Explain how the value chain model can be used to identify opportunities for information systems.

Information systems can be used at each stage of the value chain to improve operational efficiency, lower costs, improve profit margins, and forge a closer relationship with customers and suppliers. Organizations can use information systems to help examine how value-adding activities are performed at each stage of the value chain. Information systems can improve the relationship with customers (customer relationship management systems) and with suppliers (supply chain management systems) who may be outside the value chain but belong to an extended value chain. Information systems can help businesses track benchmarks in the organization and identify best practices of their particular industries. After analyzing various stages in the value chain, an organization can devise a list of candidate applications for information systems.

Define the value web and show how it is related to the value chain.

A value web is a collection of independent firms that use information technology to coordinate their value chains to collectively produce a product or service. It is more customer driven and operates in a less linear fashion than the traditional value chain. The value web is a networked system that can synchronize the business processes of customers, suppliers, and trading partners among different companies in an industry or in related industries.

Explain how the value web helps businesses identify opportunities for strategic information systems.

Information systems enable value webs that are flexible and adaptive to changes in supply and demand. Relationships can be bundled or unbundled in response to changing market conditions. Firms can accelerate their time to market and to customers by optimizing their value web relationships to make quick decisions on who can deliver the required products or services at the right price and location. Information systems make it possible for companies to establish and operate value webs.

Describe how the Internet has changed competitive forces and competitive advantage.

The Internet has nearly destroyed some industries and severely threatened others. The Internet has also created entirely new markets and formed the basis of thousands of new businesses. The Internet has enabled new products and services, new business models, and new industries to rapidly develop.

Because of the Internet, competitive rivalry has become much more intense. Internet technology is based on universal standards that any company can use, making it easy for rivals to compete

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on price alone and for new competitors to enter the market. Because information is available to everyone, the Internet raises the bargaining power of customers, who can quickly find the lowest-cost provider on the Web.

Explain how information systems promote synergies and core competencies.

A large corporation is typically a collection of businesses that are organized as a collection of strategic business units. Information systems can improve the overall performance of these business units by promoting synergies and core competencies.

Describe how promoting synergies and core competencies enhances competitive advantages.

The concept of synergy is that when the output of some units can be used as inputs to other units, or two organizations can pool markets and expertise, these relationships lower costs and generate profits. In applying synergy to situations, information systems are used to tie together the operations of disparate business units so that they can act as a whole.

A core competency is an activity for which a firm is a world-class leader. In general, a core competency relies on knowledge that is gained over many years of experience and a first-class research organization or simply key people who stay abreast of new external knowledge. Any information system that encourages the sharing of knowledge across business units enhances competency.

Explain how businesses benefit by using network economics.

In a network, the marginal costs of adding another participant are almost zero, whereas the marginal gain is much larger. The larger the number of participants in a network, the greater the value to all participants because each user can interact with more people.

The availability of the Internet and networking technology has inspired strategies that take advantage of the abilities of the firm to create networks or network with one another. In a network economy, information systems facilitate business models based on large networks of users or subscribers that take advantage of network economies. Internet sites can be used by firms to build communities of users that can result in building customer loyalty and enjoyment and build unique ties to customers, suppliers, and business partners.

Define and describe a virtual company and the benefits of pursuing a virtual company strategy.

A virtual company uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations. One company can use the capabilities of another company without being physically tied to that company. The virtual company model is useful when a company finds it cheaper to acquire products, services, or capabilities from an external

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vendor or when it needs to move quickly to exploit new market opportunities and lacks the time and resources to respond on its own.

3-4 What are the challenges posed by strategic information systems and how should they be addressed?

Information systems are closely intertwined with an organization’s structure, culture, and business processes. New systems disrupt established patterns of work and power relationships, so there is often considerable resistance to them when they are introduced.

Implementing strategic systems often requires extensive organizational change and a transition from one sociotechnical level to another. Such changes are called strategic transitions and are often difficult and painful to achieve. Moreover, not all strategic systems are profitable. They are expensive and difficult to build because they entail massive sociotechnical changes within the organization. Many strategic information systems are easily copied by other firms so that strategic advantage is not always sustainable. The complex relationship between information systems, organizational performance, and decision making must be carefully managed.

Explain how to perform a strategic systems analysis.

Managers should ask the following questions to help them identify the types of systems that may provide them with a strategic advantage.

1. What is the structure of the industry in which the firm is located? Analyze the competitive forces at work in the industry; determine the basis of competition; determine the direction and nature of change within the industry; and analyze how the industry is currently using information technology.

2. What are the business, firm, and industry value chains for this particular firm? Decide how the company creates value for its customers; determine how the firm uses best practices to manage its business processes; analyze how the firm leverages its core competencies; verify how the industry supply chain and customer base are changing; establish the benefit of strategic partnerships and value webs; clarify where information systems will provide the greatest value in the firm’s value chain.

3. Have we aligned IT with our business strategy and goals? Articulate the firm’s business strategy and goals; decide if IT is improving the right business processes and activities in accordance with the firm’s strategy; agree on the right metrics to measure progress toward the goals.

CHAPTER 44-1. What ethical, social, and political issues are raised by information systems?

Figure 4.1 can be used to answer this question. Information technology has raised new possibilities for behavior for which laws and rules of acceptable conduct have not yet been

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developed. The introduction of new information technology has a ripple effect, raising new ethical, social, and political issues that must be dealt with on the individual, social, and political levels. Ethical, social, and political issues are closely related. Ethical issues confront individuals who must choose a course of action, often in a situation in which two or more ethical principles are in conflict (a dilemma). Social issues spring from ethical issues as societies develop expectations in individuals about the correct course of action. Political issues spring from social conflict and are mainly concerned with using laws that prescribe behavior to create situations in which individuals behave correctly.

In giving examples, students can identify issues surrounding the five moral dimensions of the information age. These include: information rights and obligations, property rights and obligations, accountability and control, system quality, and quality of life.

List and describe the key technological trends that heighten ethical concerns.

Table 4.2 summarizes the four key technological trends responsible for heightening ethical concerns. These trends include:

Computing power doubles every 18 months

Data storage costs rapidly declining

Data analysis advances

Networking advances and the Internet

Increasing computer power, storage, and networking capabilities including the Internet can expand the reach of individual and organizational actions and magnify their impacts. The ease and anonymity with which information can be communicated, copied, and manipulated in online environments are challenging traditional rules of right and wrong behavior.

Differentiate between responsibility, accountability, and liability.

Responsibility is a key element of ethical actions. Responsibility means that you accept the potential costs, duties, and obligations for the decisions you make.

Accountability is a feature of systems and social institutions. It means that mechanisms are in place to determine who took responsible action.

Liability is a feature of political systems in which a body of laws is in place that permits individuals to recover the damages done to them by other actors, systems, or organizations.

4-2. What specific principles for conduct can be used to guide ethical decisions?

The five steps in ethical analysis include:

Identify and describe clearly the facts.

Define the conflict or dilemma and identify the higher-order values involved.

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Identify the stakeholders.

Identify the options that you can reasonably take.

Identify the potential consequences of your options.

Identify and describe six ethical principles.

Six ethical principles are available to judge conduct. These principles are derived independently from several cultural, religious, and intellectual traditions and include:

Golden Rule—Do unto others as you would have them do unto you.

Immanuel Kant’s Categorical Imperative—If an action is not right for everyone to take, it is not right for anyone.

Descartes’ rule of change—If an action cannot be taken repeatedly, it is not right to take at all.

Utilitarian Principle—Take the action that achieves the higher or greater value.

Risk Aversion Principle—Take the action that produces the least harm or the least potential cost.

“No free lunch” rule—Assume that virtually all tangible and intangible objects are owned by someone else unless there is a specific declaration otherwise.

These principles should be used in conjunction with an ethical analysis to guide decision making. The ethical analysis involves identifying the facts, values, stakeholders, options, and consequences of actions. Once completed, you can consider which ethical principle to apply to a situation to arrive at a judgment.

4-3. Why do contemporary information systems technology and the Internet pose challenges to the protection of individual privacy and intellectual property?

Privacy is the claim of individuals to be left alone, free from surveillance or interference from other individuals or organizations, including the state. Claims of privacy are also involved at the workplace.

Fair information practices are a set of principles governing the collection and use of information about individuals. FIP principles are based on the notion of a mutuality of interest between the record holder and the individual.

Explain how the Internet challenges the protection of individual privacy and intellectual property.

Contemporary information systems technology, including Internet technologies, challenges traditional regimens for protecting individual privacy and intellectual property. Data storage and data analysis technology enable companies to easily gather personal data about individuals from

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many different sources and analyze these data to create detailed electronic profiles about individuals and their behaviors. Data flowing over the Internet can be monitored at many points. The activities of Web site visitors can be closely tracked using cookies, Web beacons, and other Web monitoring tools. Not all Web sites have strong privacy protection policies, and they do not always allow for informed consent regarding the use of personal information.

Explain how informed consent, legislation, industry self-regulation, and technology tools help protect the individual privacy of Internet users.

The online industry prefers self-regulation rather than having state and federal governments passing legislation that tightens privacy protection.

In February 2009, the FTC began the process of extending its fair information practices doctrine to behavioral targeting. The FTC held hearings to discuss its program for voluntary industry principles for regulating behavioral targeting. The online advertising trade group Network Advertising Initiative, published its own self-regulatory principles that largely agreed with the FTC. Nevertheless, the government, privacy groups, and the online ad industry are still at loggerheads over two issues. Privacy advocates want both an opt-in policy at all sites and a national Do Not Track list. The industry opposes these moves and continues to insist on an opt-out capability being the only way to avoid tracking (Federal Trade Commission, 2009). Nevertheless, there is an emerging consensus among all parties that greater transparency and user control (especially making opt-out of tracking the default option) is required to deal with behavioral tracking.

Privacy protections have also been added to recent laws deregulating financial services and safeguarding the maintenance and transmission of health information about individuals. The Gramm-Leach-Bliley Act of 1999, which repeals earlier restrictions on affiliations among banks, securities firms, and insurance companies, includes some privacy protection for consumers of financial services. All financial institutions are required to disclose their policies and practices for protecting the privacy of nonpublic personal information and to allow customers to opt out of information-sharing arrangements with nonaffiliated third parties.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), which took effect on April 14, 2003, includes privacy protection for medical records. The law gives patients access to their personal medical records maintained by healthcare providers, hospitals, and health insurers and the right to authorize how protected information about themselves can be used or disclosed. Doctors, hospitals, and other healthcare providers must limit the disclosure of personal information about patients to the minimum amount necessary to achieve a given purpose.

List and define three different regimes that protect intellectual property rights?

Intellectual property is subject to a variety of protections under three different legal traditions:

Trade secrets

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Copyright

Patent law

Traditional copyright laws are insufficient to protect against software piracy because digital material can be copied so easily. Internet technology also makes intellectual property even more difficult to protect because digital material can be copied easily and transmitted to many different locations simultaneously over the Net. Web pages can be constructed easily using pieces of content from other Web sites without permission.

4-4. How have information systems affected laws for establishing accountability, liability, and the quality of everyday life?

Explain why it is so difficult to hold software services liable for failure or injury.

In general, insofar as computer software is part of a machine, and the machine injures someone physically or economically, the producer of the software and the operator can be held liable for damages. Insofar as the software acts like a book, storing and displaying information, courts have been reluctant to hold authors, publishers, and booksellers liable for contents (the exception being instances of fraud or defamation), and hence courts have been wary of holding software authors liable for book-like software.

In general, it is very difficult (if not impossible) to hold software producers liable for their software products that are considered to be like books, regardless of the physical or economic harm that results. Historically, print publishers, books, and periodicals have not been held liable because of fears that liability claims would interfere with First Amendment rights guaranteeing freedom of expression.

Software is very different from books. Software users may develop expectations of infallibility about software; software is less easily inspected than a book, and it is more difficult to compare with other software products for quality; software claims actually to perform a task rather than describe a task, as a book does; and people come to depend on services essentially based on software. Given the centrality of software to everyday life, the chances are excellent that liability law will extend its reach to include software even when the software merely provides an information service.

List and describe the principal causes of system quality problems?

Three principle sources of poor system performance are:

Software bugs and errors

Hardware or facility failures caused by natural or other causes

Poor input data quality

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Zero defects in software code of any complexity cannot be achieved and the seriousness of remaining bugs cannot be estimated. Hence, there is a technological barrier to perfect software, and users must be aware of the potential for catastrophic failure. The software industry has not yet arrived at testing standards for producing software of acceptable but not perfect performance. Although software bugs and facility catastrophes are likely to be widely reported in the press, by far the most common source of business system failure is data quality. Few companies routinely measure the quality of their data, but individual organizations report data error rates ranging from 0.5 to 30 percent.

Name and describe four quality-of-life impacts of computers and information systems.

Four quality of life impacts of computers and information systems include:

Jobs can be lost when computers replace workers or tasks become unnecessary in reengineered business processes.

Ability to own and use a computer may be exacerbating socioeconomic disparities among different racial groups and social classes.

Widespread use of computers increases opportunities for computer crime and computer abuse.

Computers can create health problems, such as repetitive stress injury, computer vision syndrome, and technostress.

Define and describe technostress and RSI and explain their relationship to information technology.

Technostress is defined as stress induced by computer use; symptoms include aggravation, hostility toward humans, impatience, and fatigue.

Repetitive stress injury (RSI) is avoidable. Three management actions that could reduce RSI injuries include:

Designing workstations for a neutral wrist position, using proper monitor stands, and footrests all contribute to proper posture and reduced RSI.

Using ergonomically designed devices such as keyboards and mice are also options.

Promoting and supporting frequent rest breaks and rotation of employees to different jobs.

CHAPTER 55-1 What is IT infrastructure and what are the stages and drivers of IT infrastructure

evolution?

Technical perspective is defined as the shared technology resources that provide the platform for the firm’s specific information system applications. It consists of a set of physical devices and software applications that are required to operate the entire

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enterprise.

Service perspective is defined as providing the foundation for serving customers, working with vendors, and managing internal firm business processes. In this sense, IT infrastructure focuses on the services provided by all the hardware and software. IT infrastructure is a set of firm-wide services budgeted by management and comprising both human and technical capabilities.

List each of the eras in IT infrastructure evolution and describe its distinguishing characteristics.

Five stages of IT infrastructure evolution include:

General-purpose mainframe and minicomputer era (1959 to present): Consists of a mainframe performing centralized processing that could be networked to thousands of terminals and eventually some decentralized and departmental computing using networked minicomputers.

Personal computer era (1981 to present): Dominated by the widespread use of standalone desktop computers with office productivity tools.

Client/server era (1983 to present): Consists of desktop or laptop clients networked to more powerful server computers that handle most of the data management and processing.

Enterprise computing era (1992 to present): Defined by large numbers of PCs linked together into local area networks and the growing use of standards and software to link disparate networks and devices into an enterprise-wide network so that information can flow freely across the organization.

Cloud and mobile computing era (2000 to present): A model of computing where firms and individuals obtain computing power and software applications over the Internet, rather than purchasing their own hardware and software.

Define and describe the following: Web server, application server, multitiered client/server architecture.

Web server: Software that manages requests for Web pages on the computer where they are stored and that delivers the page to the user’s computer.

Application server: Software that handles all application operations between browser-based computers and a company’s back-end business applications or databases.

Multitiered client/server architecture: Client/server network in which the work of the entire network is balanced over several different levels of servers.

Describe Moore’s Law and the Law of Mass Digital Storage

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Moore’s Law: The number of components on a chip with the smallest manufacturing costs per component (generally transistors) has doubled each year. Moore later reduced the rate of growth to a doubling every two years.

Law of Mass Digital Storage: The amount of digital information is roughly doubling every year. The cost of storing digital information is falling at an exponential rate of 100 percent a year.

Both of these concepts explain developments that have taken place in computer processing, memory chips, storage devices, telecommunications and networking hardware and software, and software design that have exponentially increased computing power while exponentially reducing costs.

Describe how network economics, declining communications costs, and technology standards affect IT infrastructure.

Network economics: Metcalfe’s Law helps explain the mushrooming use of computers by showing that a network’s value to participants grows exponentially as the network takes on more members. As the number of members in a network grows linearly, the value of the entire system grows exponentially and theoretically continues to grow forever as members increase.

Declining communication costs: Rapid decline in communication costs and the exponential growth in the size of the Internet is a driving force that affects the IT infrastructure. As communication costs fall toward a very small number and approach zero, utilization of communication and computing facilities explodes.

Technology standards: Growing agreement in the technology industry to use computing and communication standards that define specifications that establish the compatibility of products and the ability to communicate in a network. Technology standards unleash powerful economies of scale and result in price declines as manufacturers focus on the products built to a single standard. Without economies of scale, computing of any sort would be far more expensive than is currently the case.

5-2 What are the stages and technology drivers of IT infrastructure evolution?

IT infrastructure includes hardware, software, and services:

Computing platforms: Includes mainframes, midrange computers, desktop and laptop computers, and mobile handheld devices—anything that connects employees, customers, and suppliers into a coherent digital environment.

Telecommunications services: Data, voice, and video connectivity among employees, customers, and suppliers.

Data management: Store, manage, and analyze data.

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Application software: Includes enterprise resource planning, customer relationship management, supply chain management, and knowledge management systems.

Physical facilities management: Develop and manage the physical installations for computing, telecommunications, and data management.

IT management: Planning and developing the infrastructure, coordinate IT services among business units, managing accounting for IT expenditures, and provide project management.

IT standards: Policies that determine which information technology will be used, when, and how.

IT education: Employee training in system use and management training for IT investments.

IT research and development: Research future IT projects and investments that can help the firm differentiate itself from competitors.

5-3 What are the current trends in computer hardware platforms?

Describe the evolving mobile platform, quantum computing, and cloud computing.

Mobile platform: More and more business computing is moving from PCs and desktop machines to mobile devices such as cell phones and smartphones. Data transmissions, Web surfing, e-mail and instant messaging, digital content displays, and data exchanges with internal corporate systems are all available through a mobile digital platform. Netbooks, small low-cost lightweight subnotebooks that are optimized for wireless communication and Internet access, are included. The mobile platform is expanding to include tablet computers (iPad) and digital e-book readers.

Quantum computing: Gains enormous processing power through the ability to be in many different states at once, allowing it to perform multiple operations simultaneously and solve scientific and business problems millions of times faster than can be done today.

Cloud computing: A model of computing where firms and individuals obtain computing capacity, data storage, and software applications over the Internet, rather than purchasing their own hardware and software. Data are stored on powerful servers in massive data centers, and can be accessed by anyone with an Internet connection and standard Web browser. Public clouds are maintained by external service providers while private clouds are restrained inside a proprietary network or a data center.

Explain how businesses can benefit from virtualization, green computing, and multicore processors.

Virtualization

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Benefits of server virtualization include:

Run more than one operating system at the same time on a single machine.

Increase server utilization rates to 70 percent or higher.

Reduce hardware expenditures. Higher utilization rates translate into fewer computers required to process the same amount of work.

Mask server resources from server users.

Reduce power expenditures.

Run legacy applications on older versions of an operating system on the same server as newer applications.

Facilitates centralization of hardware administration.

Green computing

Businesses can minimize their impact on the environment by adopting better practices and technologies for designing, manufacturing, using, and disposing of computers, servers, and other computing devices. Reducing power consumption in data server centers is the leading practice in the green computing movement.

Multicore processors

Benefits of multi-core processors:

Cost savings by reducing power requirements and hardware sprawl.

Less costly to maintain as fewer systems need to be monitored.

Performance and productivity benefits beyond the capabilities of today’s single-core processors.

Run applications more efficiently than single-core processors—giving users the ability to keep working even while running the most processor intensive task in the background.

5-4 What are the current trends in computer software platforms?

Define and describe open source software and Linux and explain their business benefits.

Open-source software provides all computer users with free access to the program code so they can modify the code, fix errors in it, or to make improvements. Open-source software is not owned by any company or individual. A global network of programmers and users manage and modify the software. By definition, open-source software is not restricted to any specific operating system or hardware technology.

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Linux is the most well-known open-source software. It’s a UNIX-like operating system that can be downloaded from the Internet, free of charge, or purchased for a small fee from companies that provide additional tools for the software. It is reliable, compactly designed, and capable of running on many different hardware platforms, including servers, handheld computers, and consumer electronics. Linux has become popular during the past few years as a robust low-cost alternative to UNIX and the Windows operating system.

Thousands of open-source programs are available from hundreds of Web sites. Businesses can choose from a range of open-source software including operating systems, office suites, Web browsers, and games. Open-source software allows businesses to reduce the total cost of ownership. It provides more robust software that’s often more secure than proprietary software.

Define Java and HTML5 and explain why they are important.

Java is used for building applications that run on the Web and HTML is used for creating Web pages. Java is an operating system that is processor-independent. Its object-oriented programming language has become the leading interactive programming environment for the Web. Java enables users to manipulate data on networked systems using Web browsers, reducing the need to write specialized software.

Hypertext markup language (HTML) is a page description language for specifying how text, graphics, video, and sound are placed on a Web page and for creating dynamic links to other Web pages and objects. HTML programs can be custom written, but they also can be created using the HTML authoring capabilities of Web browsers or of popular word processing, spreadsheet, data management, and presentation graphics software packages. HTML editors are more powerful HTML authoring tool programs for creating Web pages.

HTML5 makes it possible to embed images, audio, video, and other elements directly into a document without processor-intensive add-ons. It also makes it easier for Web pages to function across different display devices, including mobile devices as well as desktops, and it will support the storage of data offline for apps that run over the Web. Web pages will execute more quickly, and look like smartphone apps.

Define and describe Web services and the role played by XML.

Web services offer a standardized alternative for dealing with integration across various computer platforms. Web services are loosely coupled software components based on XML and open Web standards that are not product specific and can work with any application software and operating system. They can be used as components of Web-based applications linking the systems of two different organizations or to link disparate systems of a single company. Web services are not tied to a particular operating system or programming

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language. Different applications can use them to communicate with one another in a standard way without time-consuming custom coding.

Businesses use Web services to tie their Web sites with external Web sites creating an apparently seamless experience for users. The benefit derives from not having to re-create applications for each business partner or specific functions within a single company.

XML provides a standard format for data exchange, enabling Web services to pass data from one process to another. It performs presentation, communication, and storage of data whereas HTML simply describes how data is presented on Web pages. XML allows computers to manipulate and interpret data automatically and perform operations on data without human intervention.

Name and describe the three external sources for software.

Software packages and enterprise software: Prewritten commercially available set of software programs that eliminate the need for a firm to write its own software program for certain functions such as payroll processing or order handling. Large-scale enterprise software systems provide a single, integrated, worldwide software system for firms at a cost much less than they would pay if they developed it themselves.

Cloud-based software services and tools: A business that delivers and manages applications and computer services from remote computer centers to multiple users using the Internet or a private network. Instead of buying and installing software programs, subscribing companies can rent the same functions from these services. Users pay for the use of this software either on a subscription or a per-transaction basis. The business must carefully assess the costs and benefits of the service, weighing all people, organizational, and technology issues. It must ensure it can integrate the software with its existing systems and deliver a level of service and performance that is acceptable for the business.

Outsourcing custom application development: An organization contracts its custom software development or maintenance of existing legacy programs to outside firms, frequently firms that operate offshore in low-wage areas of the world An outsourcer often has the technical and management skills to do the job better, faster, and more efficiently. Even though it’s often cheaper to outsource the maintenance of an IT infrastructure and the development of new systems to external vendors, a business must weight the pros and cons carefully.

Define and describe software mashups and apps.

Mashups are new software applications and services based on combining different online software applications. Users create new software applications and services by combining different online software applications into a new application. The idea is to take different sources and produce a new work that is “greater than” the sum of its parts. Web mashups

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combine the capabilities of two or more online applications to create a kind of hybrid that provides more customer value than the original sources alone.

Apps are small pieces of software programs that are downloaded to computers or cell phones. Apps turn mobile handheld devices into general-purpose computing tools. They cost much less than full-fledged software programs and perform one particular task. They tie customers to a specific hardware platform such as the Apple iPhone or Android operating system and increase switching costs. Business-related apps allow users to create and edit documents, connect to corporate systems, schedule and participate in meetings, track shipments, and dictate voice messages.

Businesses benefit most from these new tools and trends by not having to re-invent the wheel. Apps have already been developed by someone else and a business can use them for its own purposes. Mashups let a business combine previously developed Web applications into new ones with new purposes. They don’t have to re-invent the previous applications from scratch—merely use them in the new processes.

5-5 What are the challenges of managing IT infrastructure and management solutions?

Name and describe the management challenges posed by IT infrastructure.

Creating and maintaining a coherent IT infrastructure raises multiple challenges including:

Dealing with platform and infrastructure change: As firms grow, they can quickly outgrow their infrastructure. As firms shrink, they can get stuck with excessive infrastructure purchased in better times. Scalability refers to the ability of a computer, product, or system to expand to serve a larger number of users without breaking down. Businesses that bring mobile computing and cloud computing platforms into the mix need new policies and procedures for managing them.

Management and governance: Involves who will control and manage the firm’s IT infrastructure. Will the IT infrastructure be centrally controlled and managed or divided among departments and divisions? How will infrastructure costs be allocated among business units?

Making wise infrastructure investments: IT infrastructure is a major capital investment for the firm. If too much is spent on infrastructure, it lies idle and constitutes a drag on firm financial performance. If too little is spent, important business services cannot be delivered and the firm’s competitors will outperform the underinvesting firm. The organization needs to determine if it will buy or rent all or portions of its IT infrastructure.

Coordinating infrastructure components: Firms create IT infrastructures by choosing combinations of vendors, people, and technology services and fitting them together so they function as a coherent whole.

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Explain how using a competitive forces model and calculating the TCO of technology assets help firms make infrastructure investments.

The competitive forces model can be used to determine how much to spend on IT infrastructure and where to make strategic infrastructure investments. What is the market demand for the organization’s services? What is the organization’s business strategy? What is the organization’s information technology (IT) strategy, infrastructure, and costs? Has the organization performed an IT assessment? What technology services do competitors offer to their customers, suppliers, and employees? How much do the organization’s competitors spend on IT infrastructure?

The total cost of owning technology resources includes not only the original cost of acquiring and installing hardware and software, but it also includes the ongoing administration costs for hardware and upgrades, maintenance, technical support, training, and even utility and real estate costs for running and housing the technology. The TCO model can be used to analyze these direct and indirect costs to help firms determine the actual cost of specific technology implementations.

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CHAPTER 66-1 What are the problems of managing data resources in a traditional file environment?

List and describe each of the components in the data hierarchy.

Figure 6.1 shows a sample data hierarchy. The data hierarchy includes bits, bytes, fields, records, files, and databases. Data are organized in a hierarchy that starts with the bit, which is represented by either a 0 (off) or a 1 (on). Bits are grouped to form a byte that represents one character, number, or symbol. Bytes are grouped to form a field, such as a name or date, and related fields are grouped to form a record. Related records are collected to form files, and related files are organized into a database.

Define and explain the significance of entities, attributes, and key fields.

Entity is a person, place, thing, or event on which information is obtained.

Attribute is a piece of information describing a particular entity.

Key field is a field in a record that uniquely identifies instances of that unique record so that it can be retrieved, updated, or sorted. For example, a person’s name cannot be a key because there can be another person with the same name, whereas a social security number is unique. Also a product name may not be unique but a product number can be designed to be unique.

List and describe the problems of the traditional file environment.

Problems with the traditional file environment include data redundancy and confusion, program-data dependence, lack of flexibility, poor security, and lack of data sharing and availability. Data redundancy is the presence of duplicate data in multiple data files. In this situation, confusion results because the data can have different meanings in different files. Program-data dependence is the tight relationship between data stored in files and the specific programs required to update and maintain those files. This dependency is very inefficient, resulting in the need to make changes in many programs when a common piece of data, such as the zip code size, changes. Lack of flexibility refers to the fact that it is very difficult to create new reports from data when needed. Ad-hoc reports are impossible to generate; a new report could require several weeks of work by more than one programmer and the creation of intermediate files to combine data from disparate files. Poor security results from the lack of control over data. Data sharing is virtually impossible because it is distributed in so many different files around the organization.

6-2 What are the major capabilities of database management systems (DBMS) and why is a relational DBMS so powerful?

A database is a collection of data organized to service many applications efficiently by storing and managing data so that they appear to be in one location. It also minimizes redundant data. A

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database management system (DBMS) is special software that permits an organization to centralize data, manage them efficiently, and provide access to the stored data by application programs.

A DBMS can reduce the complexity of the information systems environment, reduce data redundancy and inconsistency, eliminate data confusion, create program-data independence, reduce program development and maintenance costs, enhance flexibility, enable the ad hoc retrieval of information, improve access and availability of information, and allow for the centralized management of data, their use, and security.

Name and briefly describe the capabilities of a DBMS.

A DBMS includes capabilities and tools for organizing, managing, and accessing the data in the database. The principal capabilities of a DBMS include data definition language, data dictionary, and data manipulation language.

The data definition language specifies the structure and content of the database.

The data dictionary is an automated or manual file that stores information about the data in the database, including names, definitions, formats, and descriptions of data elements.

The data manipulation language, such as SQL, is a specialized language for accessing and manipulating the data in the database.

Define a relational DBMS and explain how it organizes data.

The relational database is the primary method for organizing and maintaining data in information systems. It organizes data in two-dimensional tables with rows and columns called relations. Each table contains data about an entity and its attributes. Each row represents a record and each column represents an attribute or field. Each table also contains a key field to uniquely identify each record for retrieval or manipulation.

List and describe the three operations of a relational DBMS.

In a relational database, three basic operations are used to develop useful sets of data: select, project, and join.

Select operation creates a subset consisting of all records in the file that meet stated criteria. In other words, select creates a subset of rows that meet certain criteria.

Join operation combines relational tables to provide the user with more information that is available in individual tables.

Project operation creates a subset consisting of columns in a table, permitting the user to create new tables that contain only the information required.

Explain why non-relational databases are useful.

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There are four main reasons for the rise in non-relational databases: cloud computing, unprecedented data volumes, massive workloads for Web services, and the need to store new types of data. These systems use more flexible data models and are designed for managing large data sets across distributed computing networks. They are easy to scale up and down based on computing needs.

They can process structured and unstructured data captured from Web sites, social media, graphics. Traditional relational databases aren’t able to process data from most of those sources. Non-relational databases can also accelerate simple queries against large volumes of structured and unstructured data. There’s no need to predefine a formal database structure or change that definition if new data are added later.

Define and describe normalization and referential integrity and explain how they contribute to a well-designed relational database.

Normalization is the process of creating small stable data structures from complex groups of data when designing a relational database. Normalization streamlines relational database design by removing redundant data such as repeating data groups. A well-designed relational database will be organized around the information needs of the business and will probably be in some normalized form. A database that is not normalized will have problems with insertion, deletion, and modification.

Referential integrity rules ensure that relationships between coupled tables remain consistent. When one table has a foreign key that points to another table, you may not add a record to the table with the foreign key unless there is a corresponding record in the linked table.

Define and describe an entity-relationship diagram and explain its role in database design.

Relational databases organize data into two-dimensional tables (called relations) with columns and rows. Each table contains data on an entity and its attributes. An entity-relationship diagram graphically depicts the relationship between entities (tables) in a relational database. A well-designed relational database will not have many-to-many relationships, and all attributes for a specific entity will only apply to that entity. Entity-relationship diagrams help formulate a data model that will serve the business well. The diagrams also help ensure data are accurate, complete, and easy to retrieve.

6-3 What are the principal tools and technologies for accessing information from databases to improve business performance and decision making?

Define big data and describe the technologies for managing and analyzing it.

Traditional databases rely on neatly organized content into rows and columns. Much of the data collected nowadays by companies don’t fit into that mold.

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Big data describes datasets with volumes so huge they are beyond the ability of typical database management system to capture, store, and analyze. The term doesn’t refer to any specific quantity of data but it’s usually measured in the petabyte and exabyte range. It includes structured and unstructured data captured from Web traffic, e-mail messages, and social media content such as tweets and status messages. It also includes machine-generated data from sensors.

Big data contains more patterns and interesting anomalies than smaller data sets. That creates the potential to determine new insights into customer behavior, weather patterns, financial market activity, and other phenomena.

Hadoop: Open-source software framework that enables distributed parallel processing of huge amounts of data across inexpensive computers. The software breaks huge problems into smaller ones, processes each one on a distributed network of smaller computers, and then combines the results into a smaller data set that is easier to analyze. It uses non-relational database processing and structured, semistructured and unstructured data.

In-memory computing: rather than using disk-based database software platforms, this technology relies primarily on a computer’s main memory for data storage. It eliminates bottlenecks that result from retrieving and reading data in a traditional database and shortens query response times. Advances in contemporary computer hardware technology makes in-memory processing possible.

Analytic platforms: Uses both relational and non-relational technology that’s optimized for analyzing large datasets. They feature preconfigured hardware-software system designed for query processing and analytics.

List and describe the components of a contemporary business intelligence infrastructure.

Business intelligence (BI) infrastructures include an array of tools for obtaining useful information from all the different types of data used by businesses today, including semi-structure and unstructured big data in vast quantities. Data warehouses, data marts, Hadoop, in-memory processing, and analytical platforms are all included in BI infrastructures.

Powerful tools are available to analyze and access information that has been captured and organized in data warehouses and data marts. These tools enable users to analyze the data to see new patterns, relationships, and insights that are useful for guiding decision making. These tools for consolidating, analyzing, and providing access to vast amounts of data to help users make better business decisions are often referred to as business intelligence. Principal tools for business intelligence include software for database query and reporting tools for multidimensional data analysis and data mining.

Describe the capabilities of online analytical processing (OLAP).

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processing (OLAP), that enables users to view the same data in different ways using multiple dimensions. Each aspect of information represents a different dimension.

OLAP represents relationships among data as a multidimensional structure, which can be visualized as cubes of data and cubes within cubes of data, enabling more sophisticated data analysis. OLAP enables users to obtain online answers to ad hoc questions in a fairly rapid amount of time, even when the data are stored in very large databases. Online analytical processing and data mining enable the manipulation and analysis of large volumes of data from many perspectives, for example, sales by item, by department, by store, by region, in order to find patterns in the data. Such patterns are difficult to find with normal database methods, which is why a data warehouse and data mining are usually parts of OLAP.

Define data mining, describing how it differs from OLAP and the types of information it provides.

Data mining provides insights into corporate data that cannot be obtained with OLAP by finding hidden patterns and relationships in large databases and inferring rules from them to predict future behavior. The patterns and rules are used to guide decision making and forecast the effect of those decisions. The types of information obtained from data mining include associations, sequences, classifications, clusters, and forecasts.

Explain how text mining and Web mining differ from conventional data mining.

Conventional data mining focuses on data that have been structured in databases and files. Text mining concentrates on finding patterns and trends in unstructured data contained in text files. The data may be in e-mail, memos, call center transcripts, survey responses, legal cases, patent descriptions, and service reports. Text mining tools extract key elements from large unstructured data sets, discover patterns and relationships, and summarize the information.

Web mining helps businesses understand customer behavior, evaluate the effectiveness of a particular Web site, or quantify the success of a marketing campaign. Web mining looks for patterns in data through:

Web content mining: Extracting knowledge from the content of Web pages.

Web structure mining: Examining data related to the structure of a particular Web site.

Web usage mining: Examining user interaction data recorded by a Web server whenever requests for a Web site’s resources are received.

Describe how users can access information from a company’s internal databases through the Web.

Conventional databases can be linked via middleware to the Web or a Web interface to facilitate user access to an organization’s internal data. Web browser software on a client PC is used to access a corporate Web site over the Internet. The Web browser software requests data from the

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organization’s database, using HTML commands to communicate with the Web server. Because many back-end databases cannot interpret commands written in HTML, the Web server passes these requests for data to special middleware software that then translates HTML commands into SQL so that they can be processed by the DBMS working with the database. The DBMS receives the SQL requests and provides the required data. The middleware transfers information from the organization’s internal database back to the Web server for delivery in the form of a Web page to the user. The software working between the Web server and the DBMS can be an application server, a custom program, or a series of software scripts.

6-4 Why are information policy, data administration, and data quality assurance essential for managing the firm’s data resources?

Describe the roles of information policy and data administration in information management.

An information policy specifies the organization’s rules for sharing, disseminating, acquiring, standardizing, classifying, and inventorying information. Information policy lays out specific procedures and accountabilities, identifying which users and organizational units can share information, where information can be distributed, and who is responsible for updating and maintaining the information.

Data administration is responsible for the specific policies and procedures through which data can be managed as an organizational resource. These responsibilities include developing information policy, planning for data, overseeing logical database design and data dictionary development, and monitoring how information systems specialists and end-user groups use data.

In large corporations, a formal data administration function is responsible for information policy, as well as for data planning, data dictionary development, and monitoring data usage in the firm.

Explain why data quality audits and data cleansing are essential.

Data that are inaccurate, incomplete, or inconsistent create serious operational and financial problems for businesses because they may create inaccuracies in product pricing, customer accounts, and inventory data, and lead to inaccurate decisions about the actions that should be taken by the firm. Firms must take special steps to make sure they have a high level of data quality. These include using enterprise-wide data standards, databases designed to minimize inconsistent and redundant data, data quality audits, and data cleansing software.

A data quality audit is a structured survey of the accuracy and level of completeness of the data in an information system. Data quality audits can be performed by surveying entire data files, surveying samples from data files, or surveying end users for their perceptions of data quality.

Data cleansing consists of activities for detecting and correcting data in a database that are incorrect, incomplete, improperly formatted, or redundant. Data cleansing not only corrects data

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but also enforces consistency among different sets of data that originated in separate information systems.

CHAPTER 77-1 What are the principal components of telecommunications networks and key networking technologies?

Describe the features of a simple network and the network infrastructure for a large company.

A simple network consists of two or more connected computers. Basic network components include computers, network interfaces, a connection medium, network operating system software, and either a hub or a switch. The networking infrastructure for a large company relies on both public and private infrastructures to support the movement of information across diverse technological platforms. It includes the traditional telephone system, mobile cellular communication, wireless local area networks, videoconferencing systems, a corporate Web site, intranets, extranets, and an array of local and wide area networks, including the Internet. This collection of networks evolved from two fundamentally different types of networks: telephone networks and computer networks.

Name and describe the principal technologies and trends that have shaped contemporary telecommunications systems.

Client/server computing, the use of packet switching, and the development of widely used communications standards such as TCP/IP are the three technologies that have shaped contemporary telecommunications systems.

Client/server computing has extended to networking departments, workgroups, factory floors, and other parts of the business that could not be served by a centralized architecture. The Internet is based on client/server computing. Packet switching technology allows nearly full use of almost all available lines and capacity. This was not possible with the traditional dedicated circuit-switching techniques that were used in the past. TCP/IP is a suite of protocols that has become the dominant standard of network communications. Having a set of protocols for connecting diverse hardware and software components has provided a universally agreed upon method for data transmission.

7-2 What are the different types of networks?

Define an analog and a digital signal.

Analog: a continuous waveform that passes through a communications medium and has been used for voice communication. Traditionally used by telephone handsets, computer speakers, or earphones.

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Digital: a discrete, binary waveform, rather than a continuous waveform, represented by strings of two states: one bits and zero bits, which are represented as on–off electrical pulses. Computers use digital signals and require a modem to convert these digital signals into analog signals that are transmitted across telephone lines, cable lines, or wireless media.

Distinguish between a LAN, MAN, and WAN.

LAN (Local Area Network): a telecommunications network that is designed to connect personal computers and other digital devices within a half-mile or 500-meter radius. LANs typically connect a few computers in a small office, all the computers in one building, or all the computers in several buildings in close proximity. LANs require their own dedicated channels.

MAN (Metropolitan Area Network): a network that spans a metropolitan area, usually a city and its major suburbs. Its geographic scope falls between a WAN and a LAN.

WAN (Wide Area Network): spans broad geographical distances—entire regions, states, continents, or the entire globe. The most universal and powerful WAN is the Internet. Computers connect to a WAN through public networks, such as the telephone system or private cable systems, or through leased lines or satellites.

7-3 How do the Internet and Internet technology work and how do they support communication and e-business?

Define the Internet, describe how it works and explain how it provides business value.

The Internet is a vast network of computers that connects millions of people all over the world. The Internet uses the client/server model of computing and the TCP/IP network reference model. Every computer on the Internet is assigned a unique numeric IP address. No one owns the Internet, and it has no formal management organization. However, worldwide Internet policies are established by organizations and government bodies, such as the Internet Architecture Board and the World Wide Web Consortium. The Internet must also conform to the laws of the sovereign nation-states in which it operates, as well as the technical infrastructure that exist within the nation-state.

The Internet enables employees to gain remote access to the company’s internal systems through its Web site. They are able to better service customers and suppliers, improve operational efficiency, increase productivity, lower operational costs, have a broader market base, and reach more individual customers on a global scale by establishing a Web presence. The cost of e-mail and other Internet services tend to be far lower than equivalent voice, postal, or overnight delivery costs, making the Internet a very inexpensive communication medium. It is also a very fast method of communication, with messages arriving anywhere in the world in a matter of seconds or minutes.

Explain how the Domain Name System (DNS) and IP addressing system work.

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The Internet is based on the TCP/IP networking protocol suite. Every computer on the Internet is assigned a unique Internet Protocol (IP) address, which currently is a 32-bit number represented by four strings of numbers ranging from 0 to 255 separated by periods.

A domain name is the English-like name that corresponds to the unique 32-bit numeric IP address for each computer connected to the Internet. The Domain Name System (DNS) converts IP addresses to domain names so that users need to specify only a domain name to access a computer on the Internet instead of typing the numeric IP address. DNS servers maintain a database containing IP addresses mapped to their corresponding domain names.

When a user sends a message to another user on the Internet, the message is first decomposed into packets using the TCP protocol. Each packet contains its destination address. The packets are then sent from the client to the network server and from there on to as many other servers as necessary to arrive at a specific computer with a known address. At the destination address, the packets are reassembled into the original message.

List and describe the principal Internet services.

Table 7.2 lists and describes the major Internet services:

E-mail—person-to-person messaging; document sharing.

Newsgroups—discussion groups on electronic bulletin boards.

Chatting and instant messaging—interactive conversations.

Telnet—logging on to one computer system and doing work on another.

File Transfer Protocol (FTP)—transferring files from computer to computer.

World Wide Web—retrieving, formatting, and displaying information (including text, audio, graphics, and video) using hypertext links.

Define and describe VoIP and virtual private networks and explain how they provide value to businesses.

Voice over Internet Protocol (VoIP) enables Internet technology to be used for telephone voice transmission over the Internet or private networks. VoIP offers the advantage of avoiding tolls charged by local and long-distance telephone networks. VoIP provides businesses an opportunity to reduce costs because they no longer have to maintain separate networks or provide support services and personnel for each different type of network. It gives organizations flexibility because phones can be added or moved to different offices without rewiring or reconfiguring networks.

Virtual private networks are secure, encrypted, private networks that have been configured within a public network to take advantage of the economies of scale and management facilities of large networks, such as the Internet. VPNs are low-cost alternatives to private

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WANs. VPNs give businesses a more efficient network infrastructure for combining voice and data networks.

List and describe alternative ways of locating information on the Web.

Search engines are a facility on the Web that helps you find sites with the information and/or services you want. Examples: Google, Yahoo!, and MSN.

Intelligent agent shopping bots use intelligent agent software for searching the Internet for shopping information. Examples: MySimon and Froogle.

Blogs are informal yet structured Web sites where subscribing individuals can publish stories, opinions, and links to other Web sites of interest.

Rich Site Summary or Really Simple Syndication (RSS) is a simple way for people to have content they want pulled from Web sites and fed automatically to their computers, where it can be stored for later viewing. It’s commonly used with blogs.

Wikis are collaborative Web sites where visitors can add, delete, or modify content on the site, including the work of previous authors.

Web 2.0 provides second-generation interactive Internet-based services that enable people to collaborate, share information, and create new services online. Web 2.0 software applications run on the Web itself instead of the desktop and bring the vision of Web-based computing closer to realization.

Web 3.0 (Semantic Web) reduces the amount of human involvement in searching for and processing Web information. It’s still in its infancy but promises to establish specific meanings for data on the Web, categories for classifying the data, and relationships among classification categories.

Compare Web 2.0 and Web 3.0.

Web 2.0 refers to second-generation interactive Internet-based services that enable people to collaborate, share information, and create new services online. Web 2.0 is distinguished by technologies and services such as cloud computing, software mashups and widgets, blogs, RSS, and wikis. These software applications run on the Web itself instead of the desktop and bring the vision of Web-based computing closer to realization. Web 2.0 tools and services have fueled the creation of social networks and other online communities where people can interact with one another in the manner of their choosing.

Web 3.0 focuses on developing techniques to make searching Web pages more productive and meaningful for ordinary people. Web 3.0 is the promise of a future Web where all digital information and all contacts can be woven together into a single meaningful experience. Sometimes referred to as the semantic Web, Web 3.0 intends to add a layer of meaning atop the existing Web to reduce the amount of human involvement in searching for and processing Web

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information. It also focuses on ways to make the Web more “intelligent,” with machine-facilitated understanding of information promoting a more intuitive and effective user experience. Web 3.0 will use cloud computing, software-as-a-service, ubiquitous connectivity among mobile platforms and Internet access devices, and transformation of the Web into a more seamless and interoperable whole.

7-4 What are the principal technologies and standards for wireless networking, communications, and Internet access?

Define Bluetooth, Wi-Fi, WiMax, and 3G and 4G networks.

Standards for wireless computer networks include Bluetooth (802.15) for small personal area networks (PANs), Wi-Fi (802.11) for local area networks (LANs), and WiMax (802.16) for metropolitan area networks (MANs). Bluetooth can link up to eight devices within a 10-meter area using low-power, radio-based communication and can transmit up to 722 Kbps in the 2.4 GHz band. Wireless phones, keyboards, computers, printers, and PDAs using Bluetooth can communicate with one another and even operate one another without direct user intervention.

Wi-Fi is useful for creating wireless LANs and for providing wireless Internet access. Its access range is limited to anywhere between 300 feet and three miles. Hotspots are public access points individuals use to obtain high speed Internet access.

WiMax has a wireless access range of up to 31 miles and a data transfer rate of up to 75 Mbps, making it suitable for providing broadband Internet access in areas lacking DSL and cable lines. The 802.16 specification also has robust security and quality-of-service features to support voice and video.

3G is a short term for third-generation wireless technology, especially mobile communications. Cellular networks have evolved from slow-speed (1G) analog networks to high-speed, high-bandwidth, digital packet-switched, third-generation (3G) networks with speeds ranging from 144 Kbps to more than 2 Mbps for data transmission.

4G is short term for fourth-generation wireless technology. It is entirely packet switched and capable of 100 Mbps transmission speed (which can reach 1 Gbps under optimal conditions), with premium quality and high security. Voice, data, and high-quality streaming video are available to users anywhere, anytime.

Describe the capabilities of each and for which types of applications each is best suited.

Bluetooth: Access very limited; useful for creating small personal area networks.

Wi-Fi: Access is limited to 30–50 meters; useful for creating small local area networks

WiMax: Access is limited to a range up to 31 miles: useful for creating wide area networks

3G networks: Access is available on major cellular telephone carriers that have configured their networks for 3G services.

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4G networks: Provides premium quality for voice, data, and streaming video from cellular telephone carriers.

Define RFID, explain how it works and describe how it provides value to businesses.

Mobile wireless technology facilitates supply chain management by capturing data on the movement of goods as these events take place and by providing detailed, immediate information as goods move among supply chain partners. Radio frequency identification (RFID) systems provide a microchip that contains data about an item and its location. The tags transmit radio signals over a short distance to special RFID readers. The RFID readers then pass the data over a network to a computer for processing.

RFID gives businesses an opportunity to further automate their supply chain networks. The technology allows more data on an RFID chip than typical barcodes. RFID systems track each pallet, lot, or unit item in a shipment. The technology helps companies improve receiving and storage operations by improving their ability to “see” exactly what stock is stored in warehouses or on retail store shelves.

Define WSNs, explain how they work, and describe the kinds of applications that use them.

Wireless sensor networks (WSNs) are networks of interconnected wireless devices with some processing and radio-transmitting capability that are embedded into the physical environment to provide measurements of many points over large spaces.

Wireless sensor networks are valuable for monitoring environmental changes, traffic patterns, security incidents, or supply chain events. Wireless sensor networks can be placed in the field for years without any maintenance or human intervention. That reduces costs to businesses using them.

CHAPTER 88-1 Why are information systems vulnerable to destruction, error, and abuse?

List and describe the most common threats against contemporary information systems.

The most common threats against contemporary information systems include: technical, organizational, and environmental factors compounded by poor management decisions. Figure 8.1 includes the following:

Technical: Unauthorized access, introducing errors

Communications: Tapping, sniffing, message alternation, theft and fraud, radiation

Corporate servers: Hacking, viruses and worms, theft and fraud, vandalism, denial of service attacks

Corporate systems: Theft of data, copying data, alteration of data, hardware failure, and software failure; power failures, floods, fires, or other natural disasters can also disrupt

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computer systems

Poor management decisions: Poorly designed safeguards that protect valuable data from being lost, destroyed, or falling into the wrong hands

Define malware and distinguish among a virus, a worm, and a Trojan horse.

Malware (for malicious software) is any program or file that is harmful to a computer user. Thus, malware includes computer viruses, worms, Trojan horses, and also spyware programs that gather information about a computer user without permission.

Virus: A program or programming code that replicates itself by being copied or initiating its copying to another program, computer boot sector or document.

Worm: A self-replicating virus that does not alter files but resides in active memory and duplicates itself without human intervention.

Trojan horse: A program in which malicious or harmful code is contained inside apparently harmless programming or data. A Trojan horse is not itself a virus because it does not replicate but is often a way for viruses or other malicious code to be introduced into a computer system.

Define a hacker and explain how hackers create security problems and damage systems.

A hacker is an individual who gains unauthorized access to a computer system by finding weaknesses in security protections used by Web sites and computer systems. Hackers not only threaten the security of computer systems, but they also steal goods and information, as well as damage systems and commit cybervandalism. They may intentionally disrupt, deface, or even destroy a Web site or corporate information system.

Define computer crime. Provide two examples of crime in which computers are targets and two examples in which computers are used as instruments of crime.

The Department of Justice defines computer crime as “any violations of criminal law that involve a knowledge of computer technology for their perpetration, investigation, or prosecution.” Computer crime is defined as the commission of illegal acts through the use of a computer or against a computer system. Table 8.2 provides examples of computer crimes.

Computers as targets of crime:

Breaching the confidentiality of protected computerized data

Accessing a computer system without authority

Knowingly accessing a protected computer to commit fraud

Intentionally accessing a protected computer and causing damage, negligently or deliberately

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Knowingly transmitting a program, program code, or command that intentionally causes damage to a protected computer

Threatening to cause damage to a protected computer

Computers as instruments of crime:

Theft of trade secrets

Unauthorized copying of software or copyrighted intellectual property, such as articles, books, music, and video

Schemes to defraud

Using e-mail for threats or harassment

Internationally attempting to intercept electronic communication

Illegally accessing stored electronic communications, including e-mail and voice mail

Transmitting or processing child pornography using a computer

Define identity theft and phishing and explain why identity theft is such a big problem today.

Identity theft is a crime in which an imposter obtains key pieces of personal information, such as Social Security identification number, driver’s license number, or credit card numbers, to impersonate someone else. The information may be used to obtain credit, merchandise, or services in the name of the victim or to provide the thief with false credentials.

It is a big problem today as the Internet has made it easy for identity thieves to use stolen information because goods can be purchased online without any personal interaction. Credit card files are a major target of Web site hackers. Moreover, e-commerce sites are wonderful sources of customer personal information that criminals can use to establish a new identity and credit for their own purposes.

Phishing involves setting up fake Web sites or sending e-mail messages that look like those of legitimate businesses to ask users for confidential personal data. The e-mail instructs recipients to update or confirm records by providing Social Security numbers, bank and credit card information, and other confidential data either by responding to the e-mail message or by entering the information at a bogus Web site. New phishing techniques such as evil twins and pharming are very hard to detect.

Describe the security and system reliability problems created by employees.

The largest financial threats to business institutions come from employees. Some of the largest disruptions to service, destruction of e-commerce sites, and diversion of customer credit data and personal information have come from insiders. Employees have access to privileged information, and in the presence of sloppy internal security procedures, they are often able to

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roam throughout an organization’s systems without leaving a trace.

Many employees forget their passwords to access computer systems or allow other coworkers to use them, which compromises the system. Malicious intruders seeking system access sometimes trick employees into revealing their passwords by pretending to be legitimate members of the company in need of information (social engineering). Employees can introduce errors by entering faulty data or by not following proper instructions for processing data and using computer equipment. Information specialists can also create software errors as they design and develop new software or maintain existing programs.

Explain how software defects affect system reliability and security.

The software can fail to perform, perform erratically, or give erroneous results because of undetected bugs. A control system that fails to perform can mean medical equipment that fails or telephones that do not carry messages or allow access to the Internet. A business system that fails means customers are under- or overbilled. Or, it could mean that the business orders more inventory than it needs. Or an automobile’s braking system may fail.

Major quality problems are the bugs or defects caused by incorrect design. The other problem is maintenance of old programs caused by organizational changes, system design flaws, and software complexity. Bugs in even mildly complex programs can be impossible to find in testing, making them hidden bombs.

8-2 What is the business value of security and control?

Explain how security and control provide value for businesses.

Security refers to the policies, procedures, and technical measures used to prevent unauthorized access, alteration, theft, or physical damage to information systems.

Controls consist of all the methods, policies, and organizational procedures that ensure the safety of the organization’s assets; the accuracy and reliability of its account records; and operational adherence to management standards.

The business value of security and control:

Firms relying on computer systems for their core business functions can lose sales and productivity.

Information assets, such as confidential employee records, trade secrets, or business plans, lose much of their value if they are revealed to outsiders or if they expose the firm to legal liability.

Describe the relationship between security and control and recent U.S. government regulatory requirements and computer forensics.

Legal actions requiring electronic evidence and computer forensics also require firms to pay

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more attention to security and electronic records management. Computer forensics is the scientific collection, examination, authentication, preservation, and analysis of data held on or retrieved from computer storage media in such a way that the information can be used as evidence in the court of law. It deals with the following problems:

Recovering data from computers while preserving evidential integrity

Securely storing and handling recovered electronic data

Finding significant information in a large volume of electronic data

Presenting the information to a court of law

Recent U.S. government regulatory requirements include:

Health Insurance Portability and Accountability Act (HIPAA)

Gramm-Leach-Bliley Act

Sarbanes-Oxley Act

These laws require companies to practice stringent electronic records management and adhere to strict standards for security, privacy, and control.

8-3 What are the components of an organizational framework for security and control?

Define general controls and describe each type of general control.

General controls govern the design, security, and use of computer programs and the security of data files in general throughout the organization’s information technology infrastructure. They apply to all computerized applications and consist of a combination of hardware, software, and manual procedures that create an overall control environment.

General controls include software controls, physical hardware controls, computer operations controls, data security controls, controls over implementation of system processes, and administrative controls.

Define application controls and describe each type of application control.

Application controls are specific controls unique to each computerized application. They include both automated and manual procedures that ensure that only authorized data are completely and accurately processed by that application.

Application controls can be classified as:

Input controls: Check data for accuracy and completeness when they enter the system. There are specific input controls for input authorization, data conversion, data editing, and error handling.

Processing controls: Establish that data are complete and accurate during updating.

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Output controls: Ensure that the results of computer processing are accurate, complete, and properly distributed.

Describe the function of risk assessment and explain how it is conducted for information systems.

A risk assessment determines the level of risk to the firm if a specific activity or process is not properly controlled. Business managers working with information systems specialists can determine the value of information assets, points of vulnerability, the likely frequency of a problem, and the potential for damage. Controls can be adjusted or added to focus on the areas of greatest risk. An organization does not want to over-control areas where risk is low and under-control areas where risk is high.

Security risk analysis involves determining what you need to protect, what you need to protect it from, and how to protect it. It is the process of examining all of the firm’s risks, and ranking those risks by level of severity. This process involves making cost-effective decisions on what you want to protect. The old security adage says that you should not spend more to protect something than it is actually worth. Two elements of a risk analysis that should be considered are: (1) identifying the assets and (2) identifying the threats. For each asset, the basic goals of security are availability, confidentiality, and integrity. Each threat should be examined with an eye on how the threat could affect these areas. One step in a risk analysis is to identify all the things that need to be protected. Some things are obvious, such as all the various pieces of hardware, but some are overlooked, such as the people who actually use the systems. The essential point is to list all things that could be affected by a security problem.

Define and describe the following: security policy, acceptable use policy, and identity management.

A security policy consists of statements ranking information risks, identifying acceptable security goals, and identifying the mechanisms for achieving these goals. The security policy drives policies determining acceptable use of the firm’s information resources and which members of the company have access to its information assets.

An acceptable use policy (AUP) defines acceptable uses of the firm’s information resources and computing equipment, including desktop and laptop computers, wireless devices, telephones, and the Internet. The policy should clarify company policy regarding privacy, user responsibility, and personal use of company equipment and networks. A good AUP defines unacceptable and acceptable actions for each user and specifies consequences for noncompliance.

Identity management consists of business processes and software tools for identifying valid system users and controlling their access to system resources. It includes policies for identifying and authorizing different categories of system users, specifying what systems or portions of

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systems each user is allowed to access, and the processes and technologies for authenticating users and protecting their identities.

Explain how information systems auditing promotes security and control.

Comprehensive and systematic MIS auditing organizations determine the effectiveness of security and controls for their information systems. An MIS audit identifies all of the controls that govern individual information systems and assesses their effectiveness. Control weaknesses and their probability of occurrence will be noted. The results of the audit can be used as guidelines for strengthening controls, if required.

8-4 What are the most important tools and technologies for safeguarding information resources?

Name and describe three authentication methods.

Authentication refers to the ability to know that a person is who he or she claims to be. Some methods are described below:

What you know: Passwords known only to the authorized users.

What you have:

o Token is a physical device that is designed to provide the identity of a single user.

o Smart card is a device that contains a chip formatted with access permission and other data.

What you are: Biometrics is based on the measurement of a physical or behavioral trait that makes each individual unique.

Describe the roles of firewalls, intrusion detection systems, and antivirus software in promoting security.

A firewall is a combination of hardware and software that controls the flow of incoming and outgoing network traffic. Firewalls prevent unauthorized users from accessing internal networks. They protect internal systems by monitoring packets for the wrong source or destination, or by offering a proxy server with no access to the internal documents and systems, or by restricting the types of messages that get through, for example, e-mail. Further, many authentication controls have been added for Web pages as part of firewalls.

Intrusion detection systems monitor the most vulnerable points or “hot spots” in a network to detect and deter unauthorized intruders. These systems often also monitor events as they happen to look for security attacks in progress. Sometimes they can be programmed to shut down a particularly sensitive part of a network if it receives unauthorized traffic.

Antivirus software is designed to check computer systems and drives for the presence of computer viruses and worms and often eliminates the malicious software, whereas antispyware

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software combats intrusive and harmful spyware programs. Often the software can eliminate the virus from the infected area. To be effective, antivirus software must be continually updated.

Explain how encryption protects information.

Encryption, the coding and scrambling of messages, is a widely used technology for securing electronic transmissions over the Internet and over Wi-Fi networks. Encryption offers protection by keeping messages or packets hidden from the view of unauthorized readers. Encryption is crucial for ensuring the success of electronic commerce between the organization and its customers and between the organization and its vendors.

Describe the role of encryption and digital certificates in a public key infrastructure.

Digital certificates combined with public key encryption provide further protection of electronic transactions by authenticating a user’s identify. Digital certificates are data fields used to establish the identity of the sender and to provide the receiver with the means to encode a reply. They use a trusted third party known as a certificate authority to validate a user’s identity. Both digital signatures and digital certificates play a role in authentication. Authentication refers to the ability of each party to know that the other parties are who they claim to be.

Distinguish between disaster recovery planning and business continuity planning.

Disaster recovery planning devises plans for the restoration of computing and communications services after they have been disrupted by an event such as an earthquake, flood, or terrorist attack. Disaster recovery plans focus primarily on the technical issues involved in keeping systems up and running, such as which files to back up and the maintenance of backup computer systems or disaster recovery services.

Business continuity planning focuses on how the company can restore business operations after a disaster strikes. The business continuity plan identifies critical business processes and determines action plans for handling mission-critical functions if systems go down.

Identify and describe the security problems posed by cloud computing.

Accountability and responsibility for protection of sensitive data reside with the company owning that data even though it’s stored offsite. The company needs to make sure its data are protected at a level that meets corporate requirements. The company should stipulate to the cloud provider how its data are stored and processed in specific jurisdictions according to the privacy rules of those jurisdictions. The company needs to verify with the cloud provider how its corporate data are segregated from data belonging to other companies and ask for proof that encryption mechanisms are sound. The company needs to verify how the cloud provider will respond if a disaster strikes. Will the cloud provider be able to completely restore the company’s data and how long will that take? Will the cloud provider submit to external audits and security certifications?

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Describe measures for improving software quality and reliability.

Using software metrics and rigorous software testing are two measure for improving software quality and reliability.

Software metrics are objective assessments of the system in the form of quantified measurements. Metrics allow an information systems department and end users to jointly measure the performance of a system and identify problems as they occur. Metrics must be carefully designed, formal, objective, and used consistently. Examples of software metrics include:

Number of transactions that can be processed in a specified unit of time

Online response time

Number of known bugs per hundred lines of program code

Early, regular, and thorough testing will contribute significantly to system quality. Testing can prove the correctness of work but also uncover errors that always exist in software. Testing can be accomplished through the use of:

Walkthroughs: A review of a specification or design document by a small group of people.

Coding walkthroughs: Once developers start writing software, these can be used to review program code.

Debugging: When errors are discovered, the source is found and eliminated.

CHAPTER 99-1 How do enterprise systems help businesses achieve operational excellence?

Define an enterprise system and explain how enterprise software works.

Enterprise software consists of a set of interdependent software modules that support basic internal business processes. The software allows data to be used by multiple functions and business processes for precise organizational coordination and control. Organizations implementing this software would have to first select the functions of the system they wish to use and then map their business processes to the predefined business processes in the software. A particular firm would use configuration tables provided by the software to tailor a particular aspect of the system to the way it does business. Table 9.1 describes some of the major business processes supported by enterprise software. These include financial and accounting processes, human resources processes, manufacturing and production processes, and sales and marketing processes.

Describe how enterprise systems provide value for a business.

Enterprise systems provide value both by increasing operational efficiency and by providing

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firmwide information to help managers make better decisions. Large companies with many operating units in different locations have used enterprise systems to enforce standard practices and data so that everyone does buisness the same way. Enterprise systems helps firms respond rapidly to customer requests for information or products. Manufacturing is better informed about producing only what customers have ordered, procuring exactly the right amount of components or raw materials to fill actual orders, staging production, and minimizing the time that components or finished products are in inventory.

Enterprise software includes analytical tools for using data captured by the system to evaluate overall organizational performance. Enterprise system data have common standardized definitions and formats that are accepted by the entire organization. Enterprise systems allow senior management to easily find out at any moment how a particular organizational unit is performing or to determine which products are most or least profitable.

Companies can use enterprise systems to support organizational structures that were not previously possible or to create a more disciplined organizational culture. They can also improve management reporting and decision making. Furthermore, enterprise systems promise to provide firms with a single, unified, and all-encompassing information system technology platform and environment. Lastly, enterprise systems can help create the foundation for a customer-driven organization.

9-2 How do supply chain management systems coordinate planning, production, and logistics with suppliers?

Define a supply chain and identify each of its components.

A supply chain is defined as a network of organizations and business processes for procuring materials, transforming raw materials into intermediate and finished products, and distributing the finished products to customers. It links suppliers, manufacturing plants, distribution centers, retail outlets, and customers to supply goods and services from source through consumption. Supply chain management is the integration of supplier, distributor, and customer logistics requirements into one cohesive process.

Explain how supply chain management systems help reduce the bullwhip effect and how they provide value for a business.

The bullwhip effect occurs when information about the demand for a product gets distorted as it passes from one entity to the next across the supply chain. It can also result from “gaming,” as purchasers present manufacturers or suppliers with a false picture of consumer demand. It can be dealt with by reducing uncertainties about demand and supply when all the players in a supply chain have accurate and up-to-date information.

Define and compare supply chain planning systems and supply chain execution systems.

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Supply chain planning systems enable the firm to generate demand forecasts for a product and to develop sourcing and manufacturing plans for that product. They help companies make better operating decisions such as determining how much of a specific product to manufacture in a given time period; establishing inventory levels for raw materials, intermediate products, and finished goods; determining where to store finished goods; and identifying the transportation mode to use for product delivery. One of the most important functions is demand planning, which determines how much product a business needs to make to satisfy all of its customers’ demands. These functions are referred to as order planning, advanced scheduling, demand planning, distribution planning, and transportation planning.

Supply chain execution systems manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner. They track the physical status of goods, the management of materials, warehouse and transportation operations, and financial information involving all parties. These functions are referred to as order commitments, final production, replenishment, distribution management, and reverse distribution.

Describe the challenges of global supply chains and how Internet technology can help companies manage them better.

Firms use intranets to improve coordination among their internal supply chain processes, and they can use extranets to coordinate supply chain processes shared with their business partners. Using intranets and extranets (both based on Internet technology), all members of the supply chain can instantly communicate with one another, using up-to-date information to adjust purchasing, logistics, manufacturing, packaging, and schedules. A manager can use a Web interface to tap into suppliers’ systems to determine whether inventory and production capabilities match demand for the firm’s products. Business partners can use Web-based supply chain management tools to collaborate online with suppliers and customers. Sales representatives can access suppliers’ production schedules and logistics information to monitor customers’ order status. The Internet has introduced new ways of managing warehousing, shipping, and packaging based on access to supply chain information that can give companies an edge in delivering goods and services at a reasonable cost.

Distinguish between a push-based and pull-based model of supply chain management and explain how contemporary supply chain management systems facilitate a pull-based model.

In a push-based model, production master schedules are based on forecasts or best guesses of demand for products, and products are “pushed” to customers. In a pull-based model, actual customer orders or purchases trigger events in the supply chain.

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make it possible to move from sequential supply chains, where information and materials flow sequentially from company to company, to concurrent supply chains, where information flows in many directions simultaneously among members of a supply chain network. Members of the network immediately adjust to changes in schedules or orders.

9-3 How do customer relationship management systems help firms achieve customer intimacy?

Define customer relationship management and explain why customer relationships are so important today.

Customer relationship management: A business and technology discipline that uses information systems to coordinate all of the business processes surrounding the firm’s interaction with its customers in sales, marketing, and service.

Importance of customer relationships: Globalization of business, the Internet, and electronic commerce have put more power in the hands of customers. Companies realize that their only enduring competitive strength may be their relationships with their customers. Some say that the basis of competition has switched from who sells the most products and services to who “owns” the customer, and that customer relationships represent the firm’s most valuable asset.

Describe how partner relationship management (PRM) and employee relationship management (ERM) are related to customer relationship management (CRM)?

CRM systems capture and integrate customer data from all over the organization, consolidate the data, analyze the data, and then distribute the results to various systems and customer touch points across the enterprise. Companies can use this customer knowledge when they interact with customers to provide them with better service or to sell new products and services. CRM systems integrate and automate many customer-facing processes in sales, marketing, and customer service, providing an enterprise-wide view of customers. These systems track all of the ways in which a company interacts with its customers and analyze these interactions to maximize customer lifetime value for the firm. CRM extends to a firm’s business partners who are responsible for selling to customers.

The more comprehensive CRM packages contain modules for partner relationship management (PRM) and employee relationship management (ERM).

PRM uses many of the same data, tools, and systems as CRM to enhance collaboration between a company and its selling partners. If a company does not sell directly to customers but rather works through distributors or retailers, PRM helps these channels sell to customers directly.

ERM software deals with employee issues that are closely related to CRM, such as setting objectives, employee performance management, performance-based compensation, and

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employee training.

Describe the tools and capabilities of customer relationship management software for sales, marketing, and customer service.

Customer relationship management systems typically provide software and online tools for sales, customer service, and marketing. Refer to Figure 9.8 for a diagram of the business processes that CRM software supports for sales, marketing, and service. Capabilities include the following:

Sales:

Sales force automation modules in CRM systems help sales staff increase their productivity by focusing sales efforts on the most profitable customers, those who are good candidates for sales and services.

Provide sales prospect and contact information, product information, product configuration capabilities, and sales quote generation capabilities.

Enable sales, marketing, and delivery departments to easily share customer and prospect information.

Increase salespeople’s efficiency in reducing the cost per sale as well as the cost of acquiring new customers and retaining old ones.

Capabilities for sales, forecasting, territory management, and team selling.

Supports direct-marketing campaigns by providing capabilities for capturing prospect and customer data, for providing product and service information, for qualifying leads for targeted marketing, and for scheduling and tracking direct-marketing mailings or e-mail.

Customer Service:

Provide information and tools to make call centers, help desks, and customer support staff more efficient.

Includes capabilities for assigning and managing customer service requests.

May also include Web-based self-service capabilities.

Marketing:

Support direct-marketing campaigns by providing capabilities for capturing prospects and customer data, for providing product and service information for qualifying leads for targeted marketing, and for scheduling and tracking direct-marketing mailings or e-mail.

Includes tools for analyzing marketing and customer data. Identifies profitable and unprofitable customers, designs products and services to satisfy specific customer needs and interests, and identifies opportunities for cross-selling, up-selling, and bundling.

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Distinguish between operational and analytical CRM.

Operational CRM includes customer-facing applications such as tools for sales force automation, call center and customer service support, and marketing automation.

Analytical CRM includes applications that analyze customer data generated by operational CRM applications to provide information for improving business performance management. Applications are based on data warehouses that consolidate data from operational CRM systems and customer touch points. The database serves online analytical processing, data mining, and other data analysis techniques. Provides information related to customer lifetime values.

9-4 What are the challenges posed by enterprise applications and how are enterprise applications taking advantage of new technologies?

List and describe the challenges posed by enterprise applications.

Enterprise applications are very difficult to implement successfully. They require extensive organizational change, expensive new software investments, and careful assessment of how these systems will enhance organizational performance. Enterprise applications require both deep-seated technological changes and fundamental changes in business operations. Employees must accept new job functions and responsibilities. They must learn new work activities and understand how data they enter into the system can affect other parts of the company. Enterprise applications introduce switching costs that make it very expensive to switch vendors. Multiple organizations will share information and business processes. Management vision and foresight are required to take a firm- and industry-wide view of problems and to find solutions that realize strategic value from the investment.

Explain how these challenges can be addressed.

Enterprise applications create new interconnections among myriad business processes and data flows inside the firm (and in the case of supply chain management systems, between the firm and its external supply chain partners). Employees require training to prepare for new procedures and roles. Attention to data management is essential. Management must understand the impact that implementing enterprise applications will have on every facet of the business. Executives must not underestimate the time and costs of implementation, not just on the organization but also on customers, suppliers, and business partners.

How are enterprise applications taking advantage of SOA, Web services, open source software, and wireless technology?

Enterprise application vendors are delivering more value by developing systems that are more flexible, Web-enabled, and capable of integration with other systems. Next-generation enterprise applications include open source and on-demand solutions. Small companies choose open source products because there are no software licensing fees even though

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support and customization for open-source products cost extra. Major enterprise application vendors offer portions of their products that work on mobile handheld computing devices. Salesforce.com and Oracle include some Web 2.0 capabilities and services that enable organizations to identify new ideas more rapidly, improve team productivity, and deepen interactions with customers.

Define social CRM and explain how customer relationship managements systems are using social networking.

Social CRM tools enable a business to connect customer conversations and relationship from social networking sites to CRM processes rather than having them in separate “silos.” The tools help organizations identify new ideas more rapidly, improve team productivity, and deepen interactions with customers. When employees interact with customers via social networking sites, they are often able to provide customer service functions much faster and more cheaply than by using telephone conversations or e-mail. Customers have come to expect rapid responses to their questions and complaints and aren’t willing to wait on slower, outdated technologies.

CHAPTER 1010-1 What are the unique features of e-commerce, digital markets, and digital goods?

Name and describe four business trends and three technology trends shaping e-commerce today.

Students can answer this question by including information outlined in Table 10.1, which lists several business and technology trends shaping e-commerce today.

List and describe the eight unique features of e-commerce.

Table 10.2 outlines eight unique features of e-commerce which include:

E-commerce technology is ubiquitous, meaning that it is available just about everywhere a computer can connect to the Internet.

It has global reach, permitting commercial transactions to cross cultural and national boundaries far more conveniently and cost effectively than is true in traditional commerce.

It operates according to universal standards shared by all nations around the world, whereas most traditional commerce technologies differ from one nation to the next.

It provides information richness, enabling an online merchant to deliver to an audience of millions complex and rich marketing messages with text, video, and audio in a way not possible with traditional commerce technologies, such as radio, television, or magazines.

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It is interactive, meaning it allows for two-way communication between merchant and consumer and enables the merchant to engage a consumer in ways similar to a face-to-face experience but on a much more massive, global scale.

It increases information density (the total amount and quality of information available to all market participants).

It permits personalization and customization—merchants can target their marketing messages to specific individuals by adjusting the message to a person’s name, interests, and past purchases.

Social technology enables user content creation and distribution and supports social networks.

Define a digital market and digital goods and describe their distinguishing features.

Digital markets are said to be more “transparent” than traditional markets. Table 10.3 describes distinguishing features of digital markets. The Internet has created a digital marketplace where millions of people are able to exchange massive amounts of information directly, instantly, and for free. Information asymmetry is reduced. Digital markets are very flexible and efficient, with reduced search and transaction costs, lower menu prices, and the ability to change prices dynamically based on market conditions. Digital markets provide many opportunities to sell directly to the consumer, bypassing intermediaries, such as distributors or retail outlets. Other features include delayed gratification, price discrimination, market segmentation, switching costs, and network effects.

Digital goods are goods that can be delivered over a digital network and include music, video, software, newspapers, magazines, and books. Once a digital product has been produced, the cost of delivering that product digitally is extremely low. New business models based on delivering digital goods are challenging bookstores, publishers, music labels, and film studios that depend on delivery of traditional goods.

10-2 What are the principal e-commerce business and revenue models?

Name and describe the principal e-commerce business models.

Table 10.5 identifies seven Internet business models.

E-tailer: Sells physical products directly to consumers or individual businesses.

Transaction broker: Saves users money and time by processing online sale transactions and generates a fee each time.

Market creator: Provides a digital environment where buyers and sellers meet, search for and display products, and establishes prices for those products; it can provide online auctions and reverse auctions.

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Content provider: Creates revenue by providing digital content, such as digital news, music, photos, or video over the Web.

Community provider: Provides an online meeting place where people with similar interests can communicate and find useful information.

Portal: Provides an initial point of entry to the Web along with specialized content and other services.

Service provider: Provides Web 2.0 applications such as photo sharing, video sharing, and user-generated content as services. Provides other services such as online data storage and backup.

Name and describe the e-commerce revenue models.

There are six e-commerce revenue models:

Advertising revenue: Generates revenue by attracting a large audience of visitors who can then be exposed to advertisements. It’s the most widely used revenue model in e-commerce.

Sales revenue: Companies derive revenue by selling goods, information, or services to customers.

Subscription revenue: A Web site offering content or services charges a subscription fee for access to some or all of its offerings on an ongoing basis.

Free/freemium revenue: Basic services or content are free whereas advanced or special features cost extra.

Transaction fee revenue: A company receives a fee for enabling or executing a transaction.

Affiliate revenue: Sites that steer customers to an affiliate business receive a referral fee or percentage of the revenue from any resulting sales.

10-3 How has e-commerce transformed marketing?

Explain how social networking and the “wisdom of crowds” help companies improve their marketing.

Networking sites sell banner, video, and text ads; sell user preference information to marketers; and sell products such as music, videos, and e-books. Corporations set up their own social networking profiles to interact with potential customers and “listen” to what social networkers are saying about their products, and obtain valuable feedback from consumers. At user-generated content sites, high-quality video content is used to display advertising. Online communities are ideal venues to employ viral marketing techniques.

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Creating sites where thousands, even millions, of people can interact offers business firms new ways to market and advertise products and services, and to discover who likes or dislikes their products. In a phenomenon called “the wisdom of crowds” some argue that large numbers of people can make better decisions about a wide range of topics or products than a single person or even a small committee of experts. In marketing, the wisdom of crowds concept suggests that firms should consult with thousands of their customers first as a way of establishing a relationship with them, and second, to better understand how their products and services are used and appreciated. Actively soliciting customer comments builds trust and sends the message to customers that the company cares what they are thinking and that customer advice is valuable.

Define behavioral targeting and explain how it works at individual Web sites and on advertising networks.

Behavioral targeting refers to tracking the click-streams of individuals for the purpose of understanding their interests and intentions, and exposing them to advertisements which are uniquely suited to their behavior. Ultimately, this more precise understanding of the customer leads to more efficient marketing and larger sales and revenues. Behavioral targeting of millions of Web users also leads to the invasion of personal privacy without user consent.

Behavioral targeting takes place at two levels: at individual Web sites and on various advertising networks that track users across thousands of Web sites. Most e-commerce Web sites collect data on visitor browser activity and store it in a database. They have tools to record the site that users visited prior to coming to the Web site, where these users go when they leave that site, the type of operating system they use, browser information, and even some location data. They also record the specific pages visited on the particular site, the time spent on each page of the site, the types of pages visited, and what the visitors purchased. Firms analyze this information about customer interests and behavior to develop precise profiles of existing and potential customers.

Define the social graph and explain how it is used in e-commerce marketing.

A social graph is a depiction of all the people you know and all the people they know. A digital social graph is a mapping of all significant online social relationships. It’s synonymous with the idea of a “social network” used to describe offline relationships. The small world theory believes any person is only six links away from any other person on earth.

The products and services you buy will influence the decisions of your friends, and their decisions will in turn influence you. It’s the “word of mouth is the best advertising” theory in digital format. Marketers’ target audience is not the one isolated individual but millions of connected people all talking to each other and swapping information. Marketers will spend

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more than $3 billion on social network marketing in 2012. That’s twice the amount of money spent in 2010 and about 9 percent of all online marketing.

Table 10.7 has four features of social commerce that include: social sign-on, collaborative shopping, network notification; and social search recommendations.

10-4 How has e-commerce affected business-to-business transactions?

Explain how Internet technology supports business-to-business electronic commerce.

Business-to-business transactions can occur via a company Web site, net marketplace, or private exchange. Web sites make it easy to sell and buy direct and indirect goods over the Internet, compare suppliers, products, and prices, and even find out how others feel about the product. Further, supply chain linkages through intranets and extranets can support JIT, reduce cycle times, and other practices of continuous improvement. Because of the ease and efficiencies brought by the Internet, business-to-business participants can save a significant amount of money and time.

Define and describe Net marketplaces and explain how they differ from private industrial networks (private exchanges).

A Net marketplace is a single digital marketplace based on Internet technology linking many buyers to many sellers. The Net marketplace is an important business model for B2B e-commerce because some Net marketplaces serve vertical markets for specific industries and other Net marketplaces serve horizontal markets, selling goods that are available in many different industries. Also, Net marketplaces can sell either direct goods or indirect goods. Net marketplaces are more transaction-oriented and less relationship-oriented than private industrial networks.

10-5 What is the role of m-commerce in business, and what are the most important m-commerce applications?

List and describe important types of m-commerce services and applications.

The most popular categories of m-commerce services and applications for mobile computing include:

Location-based services: Users are able to locate restaurants, gasoline stations, local entertainment, or call a cab.

Banking and financial services: Users can manage their bank accounts, checking account balances, transfer funds, and pay bills using their cell phones.

Wireless advertising: Cell phones provide another avenue for advertisers to reach potential customers. Cell phone service providers can sell advertising on phones.

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Games and entertainment: Users can download video clips, news clips, weather reports, live TV programs, and short films designed to play on mobile phones.

Personalized services: Services that anticipate what a customer wants based on that person’s location or data profile, such as updated airline flight information or beaming coupons for nearby restaurants.

10-6 What issues must be addressed when building an e-commerce Web site?

List and describe the four types of e-commerce presence.

Figure 10.10 lists the four types of e-commerce presence businesses should consider:

Web sites: traditional, mobile, and/or tablet platforms with search, display, apps, affiliates, sponsorships as possible activities

E-mail: internal lists and/or purchased lists as a platform with newsletters, updates, and sales as possible activities

Social media: Facebook, Twitter, and/or blogs as a platform with conversation, engagement, sharing, and/or advice as possible activities

Offline media: print and or TV and radio as the platform with education, exposure, and/or branding as possible activities

CHAPTER 1111-1 What is the role of knowledge management and knowledge management programs in business?

Define knowledge management and explain its value to businesses.

Knowledge management is the set of processes developed in an organization to create, gather, store, maintain, transfer, apply, and disseminate the firm’s knowledge. Knowledge management promotes organizational learning and incorporates knowledge into its business processes and decision making. As the textbook points out, knowledge management enables the organization to learn from its environment and incorporate this new knowledge into its business processes. Knowledge management helps firms do things more effectively and efficiently, and cannot be easily duplicated by other organizations. This “in-house” knowledge is a very valuable asset and is a major source of profit and competitive advantage.

Describe the important dimensions of knowledge.

Table 11.1 describes the important dimensions of knowledge:

Knowledge is a firm asset: an intangible asset; requires organizational resources; experiences network effects as its value increases as more people share it.

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Knowledge has different forms: can be either tacit or explicit; involves know-how, craft, and skill; involves knowing how to follow procedures; involves knowing why, not simply when, things happen.

Knowledge has a location: it’s a cognitive event involving mental models and maps of individuals; has both a social and an individual basis of knowledge; is “sticky, situated, and contextual”.

Knowledge is situational: it’s conditional; it’s related to context.

Distinguish between data, knowledge, and wisdom and between tacit knowledge and explicit knowledge.

Data by itself has no meaning but is the first step in the creation of knowledge. Knowledge includes concepts, experience, and insight that provide a framework for creating, evaluating, and using information. Wisdom is the collective and individual experience of applying knowledge to the solution of problems. Explicit knowledge is knowledge that has been documented whereas tacit knowledge is the expertise and experience of organizational members that has not been formally documented.

Describe the stages in the knowledge management value chain.

Refer to Figure 11.2 for the knowledge management value chain. These steps include:

Acquire: knowledge discovery, data mining, neural networks, genetic algorithms, knowledge workstations, expert knowledge networks

Store: document management systems, knowledge databases, expert systems

Disseminate: intranet portals, push e-mail reports, search engines, collaboration

Apply: decision support systems, enterprise applications

11-2 What types of systems are used for enterprise-wide knowledge management and how do they provide value for businesses?

Define and describe the various types of enterprise-wide knowledge management systems and explain how they provide value for businesses.

There are three types of knowledge management systems:

Enterprise-wide knowledge management systems are general-purpose, firmwide efforts that collect, store, distribute, and apply digital content and knowledge. These systems include capabilities for searching for information, storing both structured and unstructured data, and locating employee expertise within the firm. They also include supporting technologies such as portals, search engines, collaboration tools, and learning management systems. Structured knowledge systems provide databases and tools for organizing and storing structured documents, whereas semistructured

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knowledge systems provide databases and tools for organizing and storing semistructured knowledge, such as e-mail or rich media.

Knowledge network systems provide an online directory of corporate experts in well-defined knowledge domains and use communication technologies to make it easy for employees to find the appropriate expert in a company. Some knowledge network systems go further by systematizing the solutions developed by experts and then storing the solutions in a knowledge database as a best-practices or frequently asked questions (FAQ) repository. Often these systems include group collaboration tools, portals to simplify information access, search tools, and tools for classifying information based on a taxonomy that is appropriate for the organization.

Intelligent techniques help discover patterns and apply knowledge to discrete decisions and knowledge domains. It uses tools like data mining, neural networks, experts systems, case-based reasoning, fuzzy logic, genetic algorithms, and intelligent agents (bots) to capture individual and collective knowledge and to extend their knowledge base.

Describe the role of the following in facilitating knowledge management: portals, wikis, social bookmarking, and learning management systems.

Portals provide access to external sources of information such as news feeds and research, as well as to internal knowledge resources along with capabilities for e-mail, chat/instant messaging, discussion groups, and videoconferencing.

Wikis provide a central repository for all types of corporate data that can be displayed in a Web browser, including electronic pages of documents, spreadsheets, and electronic slides. They can embed e-mail and instant messages. Even if wikis are changed, the software tracks the changes and provides tools for reverting to earlier versions.

Social bookmarking lets users save bookmarks to Web pages on a public Web site and tag these bookmarks with keywords. The bookmarks can be shared with co-workers, managers, customers, suppliers, and business partners.

Learning management systems provide tools for the management, delivery, tracking, and assessment of various types of employee learning. These systems provide value to the business by reducing the time and cost to acquire and utilize knowledge and by providing knowledge for higher-quality decisions.

11-3 What are the major types of knowledge work systems and how do they provide value for firms?

Define knowledge work systems and describe the generic requirements of knowledge work systems.

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Knowledge work systems (KWS) are specialized systems for engineers, scientists, and other knowledge workers that are designed to promote the creation of knowledge and to ensure that new knowledge and technical expertise are properly integrated into the business. These systems reflect the special needs of knowledge workers. In this day and age, knowledge work is critical to most organizations, and in some organizations knowledge work systems produce strategic advantage or the knowledge that enables their company to keep up with others who are trying for strategic advantages.

KWS must have adequate computing power to handle the specialized tasks and complex calculations, provide easy access to external databases to support research, and present a user-friendly interface. KWS software uses intensive graphics, analysis, document management, and communications capabilities. These capabilities can increase the productivity of highly paid knowledge workers. KWS often run on workstations that are customized for the work they must perform. Computer-aided design (CAD) systems and virtual reality systems, which create interactive simulations that behave like the real world, require graphics and powerful modeling capabilities. KWS for financial professionals provide access to external databases and the ability to analyze massive amounts of financial data very quickly.

Describe how the following systems support knowledge work: CAD, virtual reality, augmented reality, and investment workstations.

CAD systems automate the creation and revision of designs using computers and sophisticated graphics software. Benefits include the production of more sophisticated and functional designs, reducing the time required to produce designs, reducing expensive engineering changes, preparing fewer prototypes, and facilitating the tooling and manufacturing process.

Virtual reality systems have visualization, rendering, and simulation capabilities. This type of system uses interactive graphics software to create computer-generated simulations that are so close to reality that users believe they are participating in a real world. The users actually feel immersed in the computer-generated world. Virtual reality provides educational, scientific, and business benefits.

Augmented reality is related to virtual reality and enhances visualization by providing a live direct or indirect view of a physical real-world environment whose elements are augmented by virtual computer-generated imagery. The user remains grounded in the real physical world, and the virtual images are merged with the real view to create an augmented display.

Investment workstations are computer systems that access and manipulate massive amounts of financial data to manage financial trades and portfolio management. In addition to massive amounts of data, financial data are produced so quickly that

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specialized, very powerful systems are necessary to keep up with the rapid speed of finance and financial changes.

11-4 What are the business benefits of using intelligent techniques for knowledge management?

Define an expert system, describe how it works, and explain its value to business.

Expert systems are an intelligent technique for capturing tacit knowledge in a very specific and limited domain of human expertise. These systems capture the knowledge of skilled employees in the form of a set of rules in a software system that can be used by others in the organization.

Expert systems model human knowledge as a set of rules that collectively are called the knowledge base. The strategy used to search through the collection of rules and formulate conclusions is called the inference engine. The inference engine works by searching through the rules and “firing” those rules that are triggered by facts gathered and entered by the user.

Expert systems help organizations make high-quality decisions with fewer people. They are used in discrete, highly structured, decision-making situations where expertise is expensive or in short supply.

Define case-based reasoning and explain how it differs from an expert system.

Case-based reasoning (CBR) uses descriptions of past experiences of human specialists, representing them as “cases” and storing them in a database for later retrieval when the user encounters a new case with similar parameters. The system searches for stored cases similar to the new one, locates the closest fit, and offers the solution to the old case for use with the new case. If the new case fits the solution, it is added to the case database. If not, the case will be added with a new solution or explanations as to why the solution did not work. CBR differs from expert systems in that it captures the knowledge of the organization rather than a single expert, and the knowledge is captured as cases rather than if-then rules. Also, expert systems work by applying IF-THEN-ELSE rules against a knowledge base whereas CBR represents knowledge as a series of cases. With case-based reasoning, the knowledge base is continuously updated by the users.

Define machine learning and give some examples.

Machine learning is the study of how computer programs can improve their performance without explicit programming. A machine that learns is a machine that, like a human being, can recognize patterns in data and change its behavior based on its recognition of patterns, experience, or prior knowledge.

Two examples are the Google search engine that incorporates current search requests into its algorithms and “remembers” it for the next search. The recommender engine on Amazon

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suggests other items you might be interested in based on patterns in prior consumption, behavior on other Web sites, and the purchases of others who are “similar.”

Define a neural network and describe how it works and how it benefits businesses.

Neural networks are usually physical devices (although they can be simulated with software) that emulate the physiology of animal brains. Neural networks are used for solving complex, poorly understood problems for which large amounts of data have been collected. They find patterns and relationships in massive amounts of data that would be too complicated and difficult for a human being to analyze. Neural networks “learn” patterns from large quantities of data by sifting through data, searching for relationships, building models, and correcting over and over again the model’s own mistakes.

In a neural network, the resistors in the circuits are variable, and can be used to teach the network. When the network makes a mistake, that is, chooses the wrong pathway through the network and arrives at a false conclusion, resistance can be raised on some circuits, forcing other neurons to fire. Used after a false conclusion, intervention teaches the machine the correct response. If this learning process continues for thousands of cycles, the machine learns the correct response. The simple neurons or switches are highly interconnected and operate in parallel so they can all work simultaneously on parts of a problem. Neural networks are very different from expert systems where human expertise has to be modeled with rules and frames. In neural networks, the physical machine emulates a human brain and can be taught from experience.

Define and describe fuzzy logic, genetic algorithms, and intelligent agents. Explain how each works and the kinds of problems for which each is suited.

Fuzzy logic is a rule-based AI technology that tolerates imprecision by creating rules that use approximate or subjective values and incomplete or ambiguous data. Fuzzy logic represents more closely the way people actually think than traditional IF-THEN rules. For example, if we all agree that 120 degrees is hot and –40 degrees is cold, then is 75 degrees hot, warm, comfortable, or cool? The answer is fuzzy at best and cannot be programmed in an IF-THEN manner. Japan’s Sendai subway system uses a fuzzy logic system to control acceleration so it will operate more smoothly.

Genetic algorithms (adaptive computation) are a variety of problem-solving methods that are conceptually based on the method that living organisms use to adapt to their environment (process of evolution.) Genetic algorithms control the generation, variation, adaptation, and selection of possible problem solutions using genetically based processes. As solutions alter and combine, the worst ones are discarded and the better ones survive to go on and produce even better solutions. Genetic algorithms are particularly suited to the areas of optimization, product design, and the monitoring of industrial systems. Organizations can use genetic algorithms to minimize costs and maximize profits and schedule and use resources

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efficiently. Genetic algorithms are ideal when problems are dynamic and complex and involve hundreds of variables or formulas. For example, General Electric used a genetic algorithm to help them design a jet turbine aircraft engine that required the use of about 100 variables and 50 constraint equations.

Intelligent agents are software programs that use a built-in or learned knowledge base to carry out specific, repetitive tasks for an individual user, business process, or software application. By watching the user of a program or system, an intelligent agent may customize the software system to meet the user’s needs, reducing software support costs. Intelligent agents can be used as wizards to help users do or learn how to perform a given task. Intelligent agents can be used to carry out “smart” searches of the database, data warehouse, or the Internet, reducing search costs and avoiding the problems of misdirected searches. Agent-based modeling applications model consumer, stock market, and supply chain behavior.

CHAPTER 1212-1. What are the different types of decisions, and how does the decision-making process work? How do information systems support the activities of managers and management decision making?

List and describe the different levels of decision making and decision-making constituencies in organizations. Explain how their decision-making requirements differ.

Figure 12.1 illustrates the answer to this question. Each of these levels has different information requirements for decision support and responsibility for different types of decisions.

Senior management deals mainly with unstructured decisions.

Middle management deals with semistructured decisions.

Operational management deals with structured decisions.

Distinguish between an unstructured, semistructured, and structured decision.

Decisions are classified as structured, semistructured, and unstructured.

Unstructured decisions are those in which the decision maker must provide judgment, evaluation, and insight to solve the problem. Each of these decisions is novel, important, and nonroutine, and there is no well-understood or agreed-on procedure for making them.

Structured decisions are repetitive and routine, and they involve a definite procedure for handling them so that they do not have to be treated each time as if they were new.

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Semistructured decisions have elements of both unstructured and structured decisions. Only part of the problem has a clear-cut answer provided by an accepted procedure.

List and describe the stages in decision making.

Stages in the decision-making process include:

Intelligence consists of discovering, identifying, and understanding the problems occurring in the organization. Why is there a problem, where, and what effect it is having on the firm?

Design involves identifying and exploring various solutions to the problem.

Choice consists of choosing among solution alternatives.

Implementation involves making the chosen alternative work and continuing to monitor how well the solution is working.

Compare the descriptions of managerial behavior in the classical and behavioral models.

The classical model suggests that managers perform five classical functions. These functions are planning, organizing, coordinating, deciding, and controlling. Although the classical model describes formal managerial functions, it does not provide a description of what managers actually do. The behavioral models suggest that managerial behavior is less systematic, more informal, less reflective, more reactive, less well-organized, and somewhat frivolous. The behavioral models differ from the classical model in that managers perform a great deal of work at an unrelenting pace, managerial activities are fragmented, managers prefer speculation, managers prefer oral forms of communication, and managers give the highest priority to maintaining a diverse and complex web of contacts.

Identify the specific managerial roles that can be supported by information systems.

Table 12.2 compares managerial roles with the support systems. Information systems support the liaison, nerve center, disseminator, spokesperson, and resource allocator roles. Currently, information systems do not support the figurehead, leader, entrepreneur, disturbance handler, and negotiator roles. Information systems are the strongest at the informational role and the weakest at the interpersonal and decisional roles.

12-2. How do business intelligence and business analytics support decision making?

Define and describe business intelligence and business analytics.

Business intelligence: The infrastructure for warehousing, integrating, reporting, and analyzing data from the business environment. It collects, stores, cleans, and makes relevant information available to managers. It includes databases, data warehouses, and data marts.

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Business analytics: Focuses on the tools and techniques for analyzing and understanding data and information. It includes online analytical processing (OLAP), statistics, models, and data mining.

List and describe the elements of a business intelligence environment.

Data from the business environment: Structured and unstructured data from many different sources, including mobile devices and the Internet that are integrated and organized so that they can be analyzed and used by human decision makers.

Business intelligence infrastructure: Powerful database systems that capture relevant data stored in transactional databases or are integrated into an enterprise-data warehouse or interrelated data marts.

Business analytics toolset: Software tools used to analyze data and produce reports, respond to managers’ questions, and use key indicators of performance to track a business’s progress.

Managerial users and methods: Business performance management and balanced scorecard approaches that focus on key performance indicators; industry strategic analyses that focus on changes in the general business environment with special attention to competitors. Managerial oversight ensures that business analytics focus on the right issues for the organization.

Delivery platform—MIS, DSS, ESS: One suite of hardware and software tools in the form of a business intelligence and analytics package that integrate information from MIS, DSS, and ESS and disseminate it to the appropriate manager’s desktop or mobile computing device.

User interface: Business analytics software suites emphasize visual techniques such as dashboards and scorecards that can be viewed on mobile computing devices, desktop computers, or Web portals.

List and describe the analytic functionalities provided by BI systems.

Production reports: Predefined reports based on industry-specific requirements.

Parameterized reports: Users enter several parameters in a pivot table to filter data and isolate impacts of the parameters.

Dashboards/scorecards: Visual tools for presenting performance data as defined by users.

Ad hoc query/search/report creation: Users create their own reports based on queries and searches.

Drill down: The ability to move from a high-level summary to a more detailed view.

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Forecasts, scenarios, models: Include the ability to perform linear forecasting, what-if scenario analysis, and analyze data using standard statistical tools.

Compare two different management strategies for developing BI and BA capabilities.

Single vendor: Provides all the hardware and software necessary to adopt BI and BA capabilities. The risk comes from the vendor having all the pricing power. The reward comes from the organization having fewer integration problems.

Multiple best-of-breed vendors: Adopt the best hardware and software from multiple vendors. The risk comes from potential integration problems among all the components. The reward comes from greater flexibility and independence in choosing vendors.

12-3. How do different decision-making constituencies in an organization use business intelligence? What is the role of information systems in helping people working in a group make decisions more efficiently?

List each of the major decision-making constituencies in an organization and describe the types of decisions each makes.

Operational management: Generally, makes structured decisions based on day-to-day operations in the organization; receives most information from transaction reporting systems and some information from MIS systems.

Middle management: Generally, makes structured decisions and semistructured decisions based on routine products reports from TPS and MIS; use exception reports to determine exceptional conditions upon which they act.

Super users/business analysts: Generally, make semistructured decisions based on information from MIS, DSS, and more sophisticated analytics and models; try to find patterns in data, model alternative business scenarios, or test specific hypotheses.

Executive management: Generally, make unstructured decisions based on information from MIS and DSS but more importantly from ESS; use balanced scorecard methods based on key performance indicators that include data on four dimensions of the firm’s performance: financial, business process, customer, and learning and growth.

Describe how MIS, DSS, or ESS provides decision support for each of these groups.

Management information systems (MIS) provide routine reports and summaries of transaction-level data to middle and operational level managers to provide answers to structured and semistructured decision problems. MIS provide information on the firm’s performance to help managers monitor and control the business. They typically produce fixed, regularly scheduled reports based on data extracted and summarized from the firm’s

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underlying transaction processing systems. The formats for these reports are often specified in advance.

Decision-support systems (DSS) provide analytical models or tools for analyzing large quantities of data and supportive interactive queries for middle managers who face semistructured situations. DSSs emphasize change, flexibility, and rapid responses. With a DSS there is less of an effort to link users to structured information flows and a correspondingly greater emphasis on models, assumptions, ad-hoc queries, and display graphics.

Executive support systems (ESS) help senior managers with unstructured problems that occur at the strategic level of the firm. ESS provide data from both internal and external sources, including data from the Web and provide a generalized computing and communications environment that can be focused and applied to a changing array of problems. ESS provide easy-to-use analytical tools and online displays to help users select and tailor the data as needed.

ESS help senior executives monitor firm performance, spot problems, identify opportunities, and forecast trends. These systems can filter out extraneous details for high-level overviews or drill down to provide senior managers with detailed transaction data if required. Some display a high-level view of firm performance in the form of a digital dashboard. ESS help executives monitor key performance indicators and to measure performance against external environmental changes. ESS expand executives’ span of control because information is readily available and easy to access.

Define and describe the balanced scorecard method and business performance management.

A balanced scorecard focuses on measurable outcomes on four dimensions of a business’s performance: financial, business process, customer, and learning and growth. Each dimension uses key performance indicators (KPIs) to understand how well an organization is performing on any of the dimensions at any time. The framework of a balanced scorecard requires managers to focus on more than just financial performance. They must focus on things they are able to influence at the present time such as customer satisfaction, business process efficiency, or employee training. The KPIs are developed by senior executives and are automatically provided to users through executive support systems.

Business performance management systematically translates a firm’s strategies into operational targets. Once the strategies and targets are identified, KPIs are developed that measure progress toward the targets. The firm’s performance is then measured with information drawn from the firm’s enterprise database systems. BPM uses the same ideas as the balanced scorecard method but with a stronger strategy flavor.

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Define a group decision-support system (GDSS) and explain how it differs from a DSS.

A GDSS is an interactive computer-based system that facilitates the solution of unstructured problems by a set of decision makers working together as a group. GDSS have been developed in response to the growing concern over the quality and effectiveness of meetings. In general, DSS focus on individual decision making, whereas GDSS support decision making by a group.

Explain how a GDSS works and how it provides value for a business.

Hardware, software tools, and people are the three GDSS elements. Hardware includes the conference facility itself (room, tables, chairs) that is laid out to support group collaboration. It also includes electronic hardware such as electronic display boards as well as audiovisual, computer, and networking equipment. Software tools include electronic questionnaires, electronic brainstorming tools, idea organizers, questionnaire tools, tools for voting or setting priorities, stakeholder identification and analysis tools, policy formation tools, and group dictionaries. People include the participants, a trained facilitator, and the staff to support the hardware and software.

GDSS enable more people to attend and participate in a meeting. A GDSS improves the productivity of large group meetings by allowing attendees to contribute simultaneously to the discussion. A GDSS can guarantee anonymity, follow structured methods for organizing and evaluating ideas, preserve the results of meetings, and increase the number of ideas generated and the quality of decisions while producing the desired results in fewer meetings.

CHAPTER 1313-1 How does building new systems produce organizational change?

Describe each of the four kinds of organizational change that can be promoted with information technology.

Figure 13.1 shows four kinds of organizational change and the risks and rewards of each:

Automation: Low risk, low reward. Employees perform tasks more efficiently and effectively.

Rationalization: Medium risk, medium reward. Involves streamlining standard operating procedures, redesigning business processes, work flows, and user interfaces.

Business process redesign: Higher risk, higher reward. Organizations rethink and streamline business processes to improve speed, service, and quality. BPR reorganizes work flows, combining steps to cut waste and eliminate repetitive, paper-intensive tasks. May eliminate jobs also.

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Paradigm shift: Highest risk, highest reward. Transforms how an organization carries out its business or even the nature of the business.

Define business process management and describe the steps required to carry it out.

Business process management: Companies manage incremental process changes that are required simultaneously in many areas. Organizations need to revise and optimize numerous internal business processes and BPM provides the methodologies and tools necessary to be successful. BPM is more about continual improvements to business processes and using processes as building blocks in information systems.

Steps required for effective BPM:

Identify processes for change: A business first needs to understand what business processes need improvement. Improving the wrong processes simply allows a business to continue doing what it shouldn’t do in the first place.

Analyze existing processes: An organization must understand and measure the performance of existing processes as a baseline including inputs, outputs, resources, and the sequence of activities. The process design team identifies redundant steps, paper-intensive tasks, bottlenecks, and other inefficiencies. Otherwise, the effectiveness of the changes can’t be determined.

Design the new process: The process design team tries to improve the process by designing a new one that can be documented and modeled for comparison with the old process. The new process design needs to be justified by showing how much it reduces time and costs or enhances customer service and value.

Implement the new process: Translate the new process into a new set of procedures and work rules. As employees begin using the new process problems are uncovered and addressed and employees may recommend improvements.

Continuous measurements: The new process must be continually measured because it may deteriorate over time as employees fall back on old methods or the business experiences other changes.

13-2 What are the core activities in the systems development process?

Distinguish between systems analysis and systems design. Describe the activities for each.

System analysis: Requires an organization to analyze problems it will try to solve with information systems. It includes defining a problem, identifying its causes, specifying the solution, and identifying information requirements that the system solution must meet. System analysis requires determining if the solution is feasible from a financial, technical, and organizational standpoint.

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System design: Shows how the system will fulfill the objective of the system analysis. It’s the overall plan or model for the system that serves as a blueprint and consists of all the specifications that give the system its form and structure. The specifications outline managerial, organizational, and technological components of the system solution.

Define information requirements and explain why they are difficult to determine correctly.

Information requirements involve identifying who needs what information, where, when, and how. They define the objectives of the new or modified system and contain a detailed description of the functions the new system must perform. Gathering information requirements is perhaps the most difficult task of the systems analyst, and faulty requirements analysis is a leading cause of systems failure and high systems development costs. Some problems require adjustments in management, additional training, or refinement of existing organizational procedures rather than an information system solution.

Explain why the testing stage of systems development is so important. Name and describe the three stages of testing for an information system.

Testing is critical to the success of a system because it is the only way to ascertain whether the system will produce the right results. Three stages of information system testing are:

Unit testing: Refers to separately testing or checking the individual programs.

System testing: The entire system is tested to determine whether program modules are interacting as planned.

Acceptance testing: The system undergoes final certification by end users to ensure it meets established requirements and that it’s ready for installation.

Describe the role of programming, conversion, production, and maintenance in systems development.

Programming: Specifications that were prepared during the design stage are translated into software program code.

Conversion: The process of changing from the old system to the new system.

Production: The operation of the system once it has been installed and conversion is complete. The system will be reviewed during production by both users and technical specialists to determine how well it has met its original objectives and to decide whether any revisions or modifications are needed.

Maintenance: Modifications to hardware, software, documentation, or procedures to a production system to correct errors, meet new requirements, and improve processing efficiency.

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13-3 What are the principal methodologies for modeling and designing systems?

Compare object-oriented and traditional structured approaches for modeling and designing systems.

Structured methods for designing systems separate processes from data in the modeling process. System analysis is separated from system design. Object-oriented development (OOD) combines processes and data into an object that becomes the basic unit of system analysis and design. Data encapsulated in an object is accessed and modified only by the operations or methods associated with that object. Processing logic resides within the objects. Object-oriented development is more iterative and incremental than traditional structured development. The analysis phase of OOD requires system builders to document the functional requirements of a system and specify its most important properties. During the design phases, system builders describe how the objects will behave and how they will interact with one another. Similar objects are grouped together to form a class. Classes are further grouped into hierarchies in which a subclass inherits the attributes and methods from its superclass.

13-4 What are the alternative methods for building information systems?

Define the traditional systems life cycle. Describe each of its steps and its advantages and disadvantages for systems building.

The traditional systems life cycle is a formal methodology for managing the development of systems and is still the principal methodology for large projects. The overall development process is partitioned into distinct stages, each of which consists of activities that must be performed in a certain order. The stages are usually sequential with formal “sign-off” agreements among end users and data processing specialists to validate that each stage has been completed. Users, managers, and data processing staff have specific responsibilities in each stage. The approach is slow, expensive, inflexible, and is not appropriate for many small desktop systems.

The systems life cycle consists of systems analysis, systems design, programming, testing, conversion, and production and maintenance. Systems analysis requires an organization to define a problem that needs solving. Technical specialists identify the problem, gather information requirements, develop alternative solutions, and establish a project management plan. Business users provide information requirements, establish financial or operational constraints, and select the solution. During systems design, technical specialists model and document design specifications and select the hardware and software technologies for the solution. Business users approve the specifications.

Technical specialists translate the design specifications into software during the programming phase. After that, technical specialists develop test plans and conduct unit,

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system, and acceptance tests. Business users provide test data and scenarios and validate test results.

During the conversion phase, technical specialists prepare a conversion plan and supervise conversion. Business users evaluate the new system and decide when the new system can be put into production. During the production and maintenance phase, technical specialists evaluate the technical performance and perform maintenance. Business users use the system and evaluate its functional performance.

The main advantages of using this method for building information systems are:

It is highly structured.

It has a rigorous and formal approach to requirements and specifications and tight controls over the system building process.

It is appropriate for building large transaction processing and management information systems and for building complex technical systems.

Disadvantages are:

It is very costly and time-consuming.

It is inflexible and discourages change even though requirements will change during the project due to the long time this method requires.

It is ill-suited to decision-oriented applications that can be rather unstructured and for which requirements are difficult to define.

Define information system prototyping. Describe its benefits and limitations. List and describe the steps in the prototyping process.

Information system prototyping is an explicitly interactive system design methodology that builds an experimental model of a system as a means of determining information requirements. Prototyping builds an experimental system quickly and inexpensively for demonstration and evaluation so that users can better determine information requirements. A preliminary model of a system or important parts of the system is built rapidly for users to experiment with. The prototype is modified and refined until it conforms precisely to what users want. Information requirements and design are determined dynamically as users interact with and evaluate the prototype.

Prototyping is most valuable when requirements are uncertain and cannot be entirely prespecified or when the appropriate design solution is unclear. Prototyping is especially helpful for designing end-user interfaces (screens and reports) and for determining elusive requirements of decision-support type applications. Prototyping can help reduce implementation costs by capturing requirements more accurately at an earlier point in the implementation process. It is not so useful for very structured, well-understood, or routine

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problems.

It is best suited for smaller applications oriented toward simple data manipulation. Large systems with complex processing may be able to have only limited features prototyped. The prototype may be built so rapidly that design is not well thought out or must be reworked for a production environment. The problem arises when the prototype is adopted as the production version of the system without careful analysis and validation. Prototypes are built so rapidly that documentation and testing are glossed over. The system is so easily changed that documentation may not be kept up-to-date.

The steps in prototyping include identifying the users basic requirements; developing a working prototype of the system outlined in the basic requirements, using the prototype, and revising and enhancing the prototype based on the users reaction. The third and fourth steps are repeated until users are satisfied with the prototype.

Define an application software package. Explain the advantages and disadvantages of developing information systems based on software packages.

Application software packages are common to all business organizations and are built around universal functions with standard processes that don’t change a great deal over time. Examples include payroll, accounts receivable, general ledger, or inventory control.

Software packages provide several advantages:

The vendor has already established most of the design that may easily consume up to 50 percent of development time.

Programs are pretested, reducing testing time and technical problems.

The vendor often installs or assists in the installation of the package.

Periodic enhancement or updates are supplied by the vendor.

Vendors also maintain a permanent support staff well versed in the package, reducing the need for individual organizations to maintain such expertise in-house.

The vendor supplies documentation.

The disadvantages of application software packages are:

There are high conversion costs for systems that are sophisticated and already automated.

They may require extensive customization or reprogramming if they cannot easily meet unique requirements.

A system may not be able to perform many functions well in one package alone.

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Define end-user development and describe its advantages and disadvantages. Name some policies and procedures for managing end-user development.

End-user development refers to the development of information systems by end users with minimal or no assistance from professional systems analysts or programmers. This is accomplished through sophisticated user-friendly software tools and gives end users direct control over their own computing.

Advantages include improved requirements determination, realizing large productivity gains when developing certain types of applications, enabling end users to take a more active role in the systems development process, many can be used for prototyping, and some have new functions such as graphics, modeling, and ad-hoc information retrieval.

Disadvantages include not being suited for large transaction-oriented applications or applications with complex updating requirements, standards for testing and quality assurance may not be applied, and proliferation of uncontrolled data and private information systems.

End-user development is suited to solving some of the backlog problem because the end users can develop applications themselves. It is suited to developing low-transaction systems. End-user development is valuable for creating systems that access data for such purposes as analysis (including the use of graphics in that analysis) and reporting. It can also be used for developing simple data-entry applications.

Policies and procedures to manage end-user development include the following:

The organization must establish sufficient support facilities for end-user computing: information centers or distributed end-user computing centers.

Training and support should be targeted to the specific needs of those being trained.

End-user application development should be incorporated into an organization’s strategic plan.

Management should develop controls over end-user computing in the following areas:

Cost justification of end-user information system projects.

Hardware and software standards for user-developed applications.

Company-wide standards for microcomputers, word processing software, database management systems, graphics software, and query and reporting tools.

Quality assurance reviews that specify whether the end-user systems must be reviewed by information systems and internal audit specialists.

Control for end-user developed applications covering testing, documentation, accuracy, and completeness of input and update, backup, recovery, and supervision.

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Critical applications that supply data to other important systems should be flagged and subjected to more rigorous standards.

Describe the advantages and disadvantages of using outsourcing for building information systems.

Outsourcing is the process of turning over an organization’s computer center operations, telecommunications networks, or applications development to external vendors who provide these services. Outsourcing is seen as a way to control costs or to develop applications rather than try to use in-house staff.

Advantages of outsourcing are:

Outsourcing firms possess skills, resources, and assets that clients don’t.

It may be less costly than hiring, training, and maintaining in-house staff.

The Internet and networking technologies have drastically reduced costs associated with using offshore outsourcing firms.

The main disadvantage is that firms hiring outsourcers tend to underestimate costs of:

Identifying and evaluating vendors.

Transitioning to a new vendor.

Improving internal software development methods to match those of vendors.

Monitoring vendors to make sure they are meeting contract requirements.

Coping with cultural differences.

13-5 What are new approaches for system building in the digital firm era?

Define rapid application development (RAD) and agile development and explain how they can speed up system-building?

RAD is a process for developing systems in a very short time period by using prototyping, fourth-generation tools, and close teamwork among users and systems specialists. RAD allows the creation of working software in a very short time by using objects and by automating much of the code generation.

Agile development rapidly creates working software by breaking a large project into smaller subprojects. Each subproject requires a team to plan the project development, analyze requirements, design, code, test, and document it. The overall risk of producing bad software is minimized and projects can adapt to changes more quickly. Agile development emphasizes face-to-face communications rather than written documents. People collaborate more and make decisions more quickly and effectively using this method of software development.

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Explain how component-based development and Web services help firms build and enhance their information systems.

Component-based development expedites application development by grouping objects into suites of software components that can be combined to create large-scale business applications. Systems are built by assembling and integrating existing software components such as shopping carts, user authentication, search engines and online catalogs.

Web services enable firms to obtain software application components delivered over the Internet for building new systems or integrating existing systems. Web services provide a common set of standards that enable organizations to link their systems regardless of their technology platform through standard plug-and-play architecture. Web services offer significant cost savings and open up new opportunities for collaborating with other companies.

Explain the features of mobile application development and responsive Web design.

Because mobile devices have a much smaller screen size, it’s easier to use fingers and multi-touch gestures rather than a keyboard to maneuver through Web sites and applications. Mobile apps must be optimized for specific tasks but not too many. Saving resources such as bandwidth, screen space, memory, processing, data entry, and user gestures is a top priority.

Web site designers must design the sites specifically for mobile interfaces and create multiple mobile sites to meet the needs of smartphones, tablets, and desktop browsers. Responsive Web design enables Web sites to automatically change layouts according to the visitor’s screen resolution, whether on a desktop, tablet or smartphone. A mix of flexible grids and layouts, flexible images, and media queries that optimize the design for different viewing contexts is necessary. Users across a broad range of devices and browsers will have access to a single source of content, laid out to be easy to read and navigate with a minimum of resizing, panning, and scrolling.

CHAPTER 1414-1 What are the objectives of project management and why is it so essential in developing information systems?

Describe information system problems resulting from poor project management.

When an information system fails to work properly or costs too much to develop, companies may not realize any benefit from their information system investment, and the system may not be able to solve the problems for which it was intended. Good project management is essential for ensuring that systems are delivered on time, on budget, and provide genuine business benefits.

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Define project management. List and describe the project management activities and variables addressed by project management.

Project management refers to the application of knowledge, skills, tools, and techniques to achieve specific targets within specified budget and time constraints. Project management activities include planning the work, assessing the risk, estimating and acquiring resources required to accomplish the work, organizing the work, directing execution, and analyzing the results. Project management must deal with five major variables:

Scope: Defines what work is or is not included in a project.

Time: The amount of time required to complete the project.

Cost: Based on the time to complete a project multiplied by the cost of the human resources required to complete the project.

Quality: An indicator of how well the end result of a project satisfies the objectives specified by management.

Risk: Refers to potential problems that would threaten the success of a project.

14-2 What methods can be used for selecting and evaluating information systems projects and aligning them with the firm’s business goals?

Name and describe the groups responsible for the management of information systems projects.

Large corporations will have a management structure to ensure the most important systems projects receive priority.

Corporate strategic planning group: Responsible for developing the firm’s strategic plan, which may require the development of new systems.

Information systems steering committee: The senior management group with responsibility for systems development and operations. It’s composed of department heads from both end-user and information systems areas. The committee reviews and approves plans for systems in all divisions, seeks to coordinate and integrate systems, and occasionally selects specific information systems projects.

Project management group: Composed of information systems managers and end-user managers, this group is responsible for overseeing specific information systems projects.

Project team: Directly responsible for individual systems projects. It consists of systems analysts, specialists from the relevant end-user business areas, application programmers, and database specialists.

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the plan.

An information systems plan helps executives, managers, and users identify information systems projects that will deliver the most business value. The information systems plan must support the overall business plan. It serves as a road map indicating the following principles:

Purpose of the plan

Strategic business plan rationale

Current systems/situation

New developments to consider

Management strategy

Implementation plan

Budget requirements

The major categories of an information systems plan are further broken down in Table 14.1.

Explain how key performance indicators, portfolio analysis, and scoring models can be used to select information systems projects.

Key performance indicators (KPIs) help an organization clearly understand both its long- and short-term information requirements. KPIs are shaped by the industry, the firm, the manager, and the broader environment. New information systems should focus on providing information that helps the firm meet its goals implied by KPIs.

Portfolio analysis is used to help evaluate alternative system projects. Portfolio analysis inventories all of the firm’s information systems projects and assets, including infrastructure, outsourcing contracts, and licenses. Firms try to improve the return on their information system portfolios by balancing the risk and return from their systems investments. By using portfolio analysis, management can determine the optimal mix of investment risk and reward for their firms, balancing riskier, high-reward projects with safer, lower-reward ones.

Scoring models are useful when many criteria must be considered. It assigns weights to various system features and then calculates the weighted totals. The scoring model requires experts who understand the issues and the technology. Often the most important outcome of a scoring model is not the score but agreement on the criteria used to judge a system. It helps confirm, rationalize, and support decisions, rather than serve as the final arbiter of the system selection process. Table 14.2 can be used to explain how a simple scoring system works.

14-3 How can firms assess the business value of information systems projects?

List and describe the major costs and benefits of information systems.

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Table 14.3 lists all of the major costs and benefits of information systems. It divides the costs among five system components: hardware, software, telecommunications, personnel, and services. Some of the tangible benefits include increased productivity, lower operational costs, and a reduced workforce. Among the intangible benefits are improved organizational planning, more timely information, improved decision making, and increased job satisfaction.

Distinguish between tangible and intangible benefits.

Students can use Table 14.3 to answer this question.

Tangible benefits can be quantified and assigned a monetary value. They include: increased productivity, lower operational costs, reduced workforce, lower computer expenses, lower outside vendor costs, lower clerical and professional costs, reduced rate of growth in expenses, reduced facility costs, and increased sales.

Intangible benefits cannot be immediately quantified but may lead to quantifiable gains in the long run. They include: improved asset utilization, improved resource control, improved organizational planning, increased organizational planning, increased organizational flexibility, more timely information, more information, increased organizational learning, legal requirements attained, enhanced employee goodwill, increased job satisfaction, improved decision making, improved operations, higher client satisfaction, and better corporate image.

Explain how real options pricing models can help managers evaluate information technology investments.

Appropriate strategies, such as real options pricing models (ROPM), can be applied to evaluate and value the information system when the benefits cannot be established in advance. Real options pricing models apply the same techniques for valuing financial options to systems investments and can be useful to help managers think about the potential value of highly uncertain IT investments. ROPM allows managers to systematically take into account the volatility in the value of IT projects over time, the optimal timing of the investment, and the changing cost of implementation as technology prices fall over time. The disadvantages of this model are primarily in estimating all the key variables, especially the expected cash flows from the underlying asset, and changes in the cost of implementation.

14-4 What are the principal risk factors in information systems projects and how can they be managed?

Identify and describe each of the principal risk factors in information systems projects.

Project size: The larger the project (dollars spent, the size of the implementation staff, the time allocated, and the number of organizational units affected), the greater the risk. The larger the project, the higher the failure rate. There are few reliable techniques for estimating

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the time and cost to develop large-scale information systems.

Project structure: Highly structured projects usually have clear and straightforward requirements, therefore outputs and processes are easily defined. Users know exactly what they want and what the system should do; there is almost no possibility of users changing their minds.

Experience with technology: The less experience the project team has with hardware, system software, application software, or database management system, the higher the risk of project failure.

Explain why builders of new information systems need to address implementation and change management.

An information system is a sociotechnical entity, an arrangement of both technical and social elements. Information systems change involves hardware and software, but in addition, it involves changes in jobs, skills, management, and organization. When we design a new information system, we are redesigning the organization, reordering its technical and social elements. Change management addresses these types of changes, or more directly, the effects of the changes on the people whose jobs will change. The system not only changes the technology and the organization, it also changes people, and the project must also address this aspect if it is to succeed.

Explain why eliciting support of management and end users is so essential for successful implementation of information systems projects.

The user-designer communication gap deals with the relationship that exists between end users and information systems specialists. These two groups have different backgrounds, interests, and priorities and has traditionally been a problem for information systems implementation efforts. These differences create user-designer communications gaps as depicted in Table 14.4. Information systems specialists often have a highly technical orientation to problem solving, focusing on technical solutions in which hardware and software efficiency is optimized at the expense of ease of use or organizational effectiveness. End users prefer systems that are oriented toward solving business problems or facilitating organizational tasks.

Explain why there is such a high failure rate for implementations involving enterprise applications, business process reengineering, and mergers and acquisitions.

These projects are very challenging, partly because they usually require extensive organizational change. They also often replace deeply entrenched old technologies and legacy systems. Many are undermined by poor implementation and change management practices. The project must address employee concerns about the change, their fears and anxieties, resistance by key managers, changes in job functions, career paths, and recruitment

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practices.

A major reason for merger and acquisition failures is the difficulty in integrating the information systems of the different companies. Combining the different systems usually requires considerable organizational change and complex system projects to manage the change. Unless the integration of the systems is successful, the expected benefits of the merger or acquisition will not be achieved.

Identify and describe the strategies for controlling project risk.

Strategies you can follow to increase the chances of a successful system include:

New systems that involve challenging and complex technology can be helped by recruiting project leaders with strong technical and administrative experience.

If the firm does not have staff with the required technical skills or expertise, outsourcing or using external consultants are options that may be pursued.

Using formal planning and control tools, such as Program Evaluation and Review Technique (PERT) or Gantt charts improve project management by listing the specific activities that make up a project, their duration, and the sequence and timing of task.

Promote user participation by making user education and training easily available, and by providing better incentives for users who cooperate.

Exercise sensitivity to ergonomic issues.

Solve organizational problems prior to introducing new systems.

Identify the organizational considerations that should be addressed by project planning and implementation.

The term implementation refers to the entire process of organizational change surrounding the introduction of a new information system. Information systems design and the entire implementation process should be managed as planned organizational change using an organizational impact analysis. A very large percentage of information systems fail to deliver benefits or solve the problems for which they were intended because the process or organizational change surrounding system building was not properly addressed. The principal causes of information system failure are (1) insufficient or improper user participation in the systems development process, (2) lack of management support, (3) high levels of complexity and risk, and (4) poor project management.

Explain how project management software tools contribute to successful project management.

You can use special tools to help you manage the implementation of a new information system (internal integration tools). The software features these capabilities:

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Define and order tasks.

Assign resources to tasks.

Establish starting and ending dates to tasks.

Track progress.

Facilitate modifications to tasks and resources.

Automate the creation of Gantt and PERT charts.

Track the way changes in one aspect of a project affect others.

If nothing else, these special tools will help you communicate with everyone on the implementation team and in the organization as a whole.

CHAPTER 1515-1 What major factors are driving the internationalization of business?

List and describe the five major dimensions for developing an international information systems architecture.

According to Figure 15.2, the five major factors are the need to:

Understand the global business environment in which your firm is operating.

Consider a corporate strategy for competing in that environment.

Consider how to structure your organization to pursue the strategy.

Consider management and business processes in implementing the strategy.

Develop an appropriate technology platform.

Describe the five general cultural factors leading toward growth in global business and the four specific business factors. Describe the interconnection among these factors.

According to Table 15.1, the five general cultural factors are:

Global communication and transportation technologies: A global village has been created in which global communications of all kinds are no more difficult and not much more expensive than domestic communications.

Development of global culture: Has created shared values and beliefs around the world.

Emergence of global social norms: References the fact that proper attire, proper consumption, good and bad government, and other norms are more and more shared.

Political stability: The world is living through the longest period of world political stability in the modern age

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Global knowledge base: Educational, scientific, and industrial knowledge and skills are no longer centered in North America, Europe, and Japan, but have spread to Latin American, China, Southern Asia, and Eastern Europe.

The specific business factors are:

Global markets: Patterns of consumption of goods are becoming similar around the world.

Global production and operations: Far-flung production facilities are coordinated at central headquarters thousands of miles away.

Global coordination: Coordination of business factors has expanded beyond production to include all major business functions, such as accounting, marketing, sales, and human resources systems development.

Global workforce: The location of business activities is based on workforce availability.

Global economies of scale: Production is concentrated where it is best accomplished; lower production costs are exploited wherever they emerge.

These factors are interrelated. The spread of global communications has led to the emergence of a global culture and global social norms. This, in turn, has led to the development of global markets. Emerging global technologies make possible the transportation of raw materials and finished products throughout the world, and have given businesses the ability to act globally. Global production and coordination and the ability of businesses to make use of global economies of scale all depend upon the emergence of sophisticated global communications. The existence of global markets has been one of the factors making global production and operations attractive.

List and describe the major challenges to the development of global systems.

According to Table 15.2, the general challenges are:

Cultural particularism—regionalism, nationalism, language differences, different standards for electronic data interchange, e-mail, and telecommunications.

Social expectations—brand-name expectations, work hours: phone networks are not uniformly reliable.

Political laws—transborder data and privacy laws, commercial regulations, different data transfer speeds and shortages of skilled consultants.

Explain why some firms have not planned for the development of international systems.

For some companies, the competition has not been powerful enough yet to drive them toward developing international systems. Other companies lack the global strategy needed for such

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development, or they have inherited a patchwork of international systems built with outdated technologies and standards. Some companies underestimate the time, expense, and logistical difficulties of making goods and information flow freely across different countries. The difficulties involved in planning a system appropriate to the firm’s global strategy, structuring the organization of systems and business units, solving implementation issues, and choosing the right technical platform are simply too much for some companies.

15-2 What are the alternative strategies for developing global businesses?

Describe the four main strategies for global business and organizational structure.

Referencing Table 15.3, there are four main strategies.

Domestic exporter: Heavy centralization of corporate activities in the home country of origin. Production, sales, marketing, finance, and other such functions are set up to optimize resources in the home country. Foreign marketing is totally reliant on the domestic home base.

Multinational: Concentrates financial management and control in a central home base, but decentralizes production, sales, and marketing to suit local market conditions.

Franchiser: Create, design, and finance the product in the home country, but rely on foreign personnel for further production, marketing, and human resources. Often, the product must be produced locally because it is perishable.

Transnational: A stateless, truly globally managed firm. It has no single national headquarters, but instead has many regional headquarters and perhaps a world headquarters. Nearly all of the value-added activities are managed from a global perspective without reference to national borders.

Describe the four different system configurations that can be used to support different global strategies.

According to Figure 15.3 there are four different system configurations:

Centralized: Systems development and operations that occur totally at the domestic home base.

Duplicated: Systems development occurs totally at the home base, but operations are handed over to autonomous units in foreign locations.

Decentralized: Each foreign unit designs its own, totally unique solutions and systems.

Networked: Systems development and operations occur in an integrated and coordinated fashion across all units.

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15-3 What are the challenges posed by global information systems and management solutions for these challenges?

List and describe the major management issues in developing international systems.

The major management issues in developing international systems are listed in Table 15.4. These issues include agreeing on common user requirements, introducing changes in business processes, coordinating applications development, coordinating software releases, and encouraging local users to support global systems.

Identify and describe three principles to follow when organizing the firm for global business.

According to Figure 15.4, a sensible strategy is to reduce agency costs by developing only a few core global systems that are vital for global operations, leaving other systems in the hands of regional and local units. Not all systems should be coordinated on a transnational basis. Core systems are those that support functions that are absolutely critical to the organization. Other systems should be partially coordinated because they share key elements, but they don’t have to be totally common across national boundaries. A final group of systems is peripheral, truly provincial, and needed to suit local requirements only.

Identify and describe three steps of a management strategy for developing and implementing global systems.

Step 1: A company must define its core business processes before it can build an information system that supports them.

1. Define a short list of critical core business processes by conducting a business process analysis. The list should include about ten business processes that are absolutely critical for the firm.

2. Identify centers of excellence for these processes. Some areas of a company, for some lines of business, have a division or unit that stands out in the performance of one or several business functions.

3. Rank-order the business process of the company and decide which processes should be core applications, centrally coordinated, designed, and implemented around the globe, and which should be regional and local. By identifying the critical business processes, the company has gone a long way toward defining a vision of the future that it should be working toward.

Step 2: Identify the core systems to coordinate centrally. Keep the list to an absolute minimum. By dividing off a small group of systems as absolutely critical, the opposition to a transnational strategy is divided. You can appease those who oppose the central worldwide coordination implied by transnational systems by permitting

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peripheral systems development to progress unabated.

Step 3: Choose an incremental, grand design, or evolutionary approach. Both the incremental and grand design approaches are dangerous. The best approach is to evolve transnational applications incrementally from existing applications with a precise and clear vision of the transnational capabilities the organization should have in five years.

Define cooptation and explain how it can be used in building global systems.

Cooptation is defined as bringing the opposition into the process of designing and implementing the solution without giving up control over the direction and nature of the change. The idea is to find a way whereby local units in transnational companies are brought into the process of building transnational core systems by becoming part of the process rather than by being brought in through raw power. One cooptation approach is to permit each country unit to develop one transnational application first in its home territory, and then throughout the world. Another approach is to develop systems based upon existing centers of excellence. The centers of excellence perform the initial identification and specification of the business process, define the information requirements, perform the business and systems analysis, and accomplish all design and testing. This approach uses a phased rollout strategy.

15-4 What are the issues and technical alternatives to be considered when developing international information systems?

Describe the main technical issues facing global systems.

Hardware, global software, and telecommunications are the main technical issues. Hardware issues arise because the firm needs to standardize the computer hardware platform when there is so much variation from operating unit to operating unit and country to country. Finding applications that are user friendly in an international environment and that truly enhance productivity is a critical software challenge. Making data flow seamlessly across networks shaped by disparate national standards is a major telecommunications challenge. Table 15.5 highlights the most prominent problems of international networks.

Identify some technologies that will help firms develop global systems.

The main hardware and telecommunications issues are systems integration and connectivity. The choices for integration are to go either with a proprietary architecture or with an open systems technology. Global networks are extremely difficult to build and operate. Firms can build their own global networks or they can create global networks based on the Internet (intranets or virtual private networks). The main software issue concerns building interfaces to existing systems and selecting applications that can work with multiple cultural, language, and organizational frameworks.

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