3.1 © 2004 by prentice hall relationship between information systems, organizations and business...

3.1 © 2004 by Prentice Hall

RELATIONSHIP RELATIONSHIP BETWEEN BETWEEN

INFORMATION INFORMATION SYSTEMS, SYSTEMS,

ORGANIZATIONS ORGANIZATIONS AND BUSINESS AND BUSINESS

PROCESSESPROCESSES

3.2 © 2004 by Prentice Hall

• What do managers need to know about What do managers need to know about organizations in order to build and use organizations in order to build and use information systems successfully?information systems successfully?

• What impact do information systems have What impact do information systems have on organizations?on organizations?

• How do information systems support the How do information systems support the activities of managers in organizations?activities of managers in organizations?

OBJECTIVES

3.3 © 2004 by Prentice Hall

• Sustainability of competitive Sustainability of competitive advantage.advantage.

• Fitting technology to the Fitting technology to the organizationorganization( or vice-versa)( or vice-versa)

MANAGEMENT CHALLENGES

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ORGANIZATIONS AND INFORMATION SYSTEMS

Figure 3-1

MEDIATING FACTORS:MEDIATING FACTORS: Environment Environment Culture CultureStructure Structure Standard Procedures Standard Procedures Politics Politics Management Management Decisions ChanceDecisions Chance

ORGANIZATIONSORGANIZATIONS INFORMATION INFORMATION TECHNOLOGYTECHNOLOGY

The Two-Way Relationship Between Organizations and Information Technology

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Organization:Organization:

• Stable, formal structureStable, formal structure

• Takes resources from environment and Takes resources from environment and processes them to produce outputsprocesses them to produce outputs

ORGANIZATIONS AND INFORMATION SYSTEMS

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Technical Microeconomic Definition of the Organization

ORGANIZATIONS AND INFORMATION SYSTEMS

Figure 3-2

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Behavioral definition of Organization: Behavioral definition of Organization:

• Collection of rights, privileges, obligations, Collection of rights, privileges, obligations, responsibilitiesresponsibilities

• Delicately balancedDelicately balanced

• Conflict resolutionConflict resolution

ORGANIZATIONS AND INFORMATION SYSTEMS

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COMMON FEATURES OF ORGANIZATIONS

The Behavioral View of Organizations

Figure 3-3

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1. Organizations are bureaucracies that have certain structural features1. Organizations are bureaucracies that have certain structural features

2. Structural Characteristics of Organizations:2. Structural Characteristics of Organizations:

• Clear division of laborClear division of labor

• HierarchyHierarchy

• Explicit rules and proceduresExplicit rules and procedures

• Impartial judgmentsImpartial judgments

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

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Structural Characteristics of Organizations Structural Characteristics of Organizations (cont.):(cont.):

• Technical qualifications for positionsTechnical qualifications for positions

• Maximum organizational efficiencyMaximum organizational efficiency

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

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Standard Operating Procedures:Standard Operating Procedures:

• Precise rules, procedures, and practicesPrecise rules, procedures, and practices

• Enable organizations to cope with all Enable organizations to cope with all expected situationsexpected situations

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

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Organizational Politics:Organizational Politics:

• Divergent viewpoints leads to political Divergent viewpoints leads to political struggle, competition, and conflictstruggle, competition, and conflict

• Hamper organizational changeHamper organizational change

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

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Organizational Culture: A set of Organizational Culture: A set of

fundamental assumptions about:fundamental assumptions about:• What products the organization should What products the organization should

produceproduce

• How and where it should produce themHow and where it should produce them

• For whom they should be producedFor whom they should be produced

ORGANIZATIONS AND INFORMATION SYSTEMS

Common Features of Organizations

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All organizations have different:All organizations have different:

• Structures/Organizational types Structures/Organizational types

• Goals Goals

• ConstituenciesConstituencies

• Leadership Styles, TasksLeadership Styles, Tasks

• Surrounding EnvironmentSurrounding Environment

ORGANIZATIONS & INFORMATION SYSTEMS

Unique Features of Organizations

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• Entrepreneurial:Entrepreneurial: Start up business Start up business

• Machine bureaucracy:Machine bureaucracy: Midsize Midsize manufacturing firmmanufacturing firm

• Divisionalized bureaucracy:Divisionalized bureaucracy: Fortune 500 Fortune 500

• Professional bureaucracy:Professional bureaucracy: Law firms, Law firms, hospitals, school systemshospitals, school systems

• Adhocracy:Adhocracy: Consulting firm Consulting firm

ORGANIZATIONS & INFORMATION SYSTEMS

Organizational Structures

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Figure 3-4

Organization and Its Environment

ORGANIZATIONS & INFORMATION SYSTEMS

3.17 © 2004 by Prentice Hall

• Ultimate goalUltimate goal

• Different groups and constituenciesDifferent groups and constituencies

• Nature of leadershipNature of leadership

• Tasks and technologyTasks and technology

ORGANIZATIONS AND INFORMATION SYSTEMS

Other Differences Among Organizations

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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Information systems department:Information systems department:

• Formal organizational unitFormal organizational unit

• Responsible for information systems in Responsible for information systems in the organizationthe organization

Information Technology Infrastructure and Information Technology Services

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Figure 3-5

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Information Technology Services

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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Includes specialists:Includes specialists:

• Programmers:Programmers: Highly trained, write Highly trained, write softwaresoftware

• Systems analysts:Systems analysts: Translate business Translate business problems into solutions, act as liaisons problems into solutions, act as liaisons between the information systems between the information systems department and rest of the organizationdepartment and rest of the organization

Information Technology Infrastructure and Information Technology Services

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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

Specialists (cont.):Specialists (cont.):• Information system managers: Information system managers: Leaders of Leaders of

various specialistsvarious specialiststeamsteams

• Chief information officer (CIO): Chief information officer (CIO): Senior Senior manager in charge of information systems manager in charge of information systems function in the firmfunction in the firm

• End users:End users: Department representatives Department representatives outside the information system department for outside the information system department for whom applications are developedwhom applications are developed

Information Technology Infrastructure and Information Technology Services

3.22 © 2004 by Prentice Hall

Economic Theories :Economic Theories :

• Information technology is a factor of production, like Information technology is a factor of production, like capital and labor.capital and labor.

Transaction Cost Theory:Transaction Cost Theory:

• Firms can conduct marketplace transactions internally Firms can conduct marketplace transactions internally more cheaply to grow larger.more cheaply to grow larger.

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

ECONOMIC IMPACTS

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Transaction Cost Theory

Figure 3-6

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

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• Agency Cost Theory:Agency Cost Theory: Firm is nexus of Firm is nexus of contracts among self-interested parties contracts among self-interested parties requiring supervision.requiring supervision.

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

ECONOMIC IMPACTS (contd.)

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Agency Cost Theory

Figure 3-7

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

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Behavioral Changes :Behavioral Changes :

• Information technology could change Information technology could change hierarchy of decision makinghierarchy of decision making

• Lower cost of information acquisitionLower cost of information acquisition

• Broadens the distribution of informationBroadens the distribution of information

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

ORGANIZATIONAL AND BEHAVIORAL IMPACTS

3.27 © 2004 by Prentice Hall

Virtual Organization:Virtual Organization:

• Task force networked organizations.Task force networked organizations.

• Uses networks to link people, assets, and Uses networks to link people, assets, and ideas to create and distribute products ideas to create and distribute products and services without being limited to and services without being limited to physical locationsphysical locations

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

Organizational & Behavioral Impact (contd.)

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Increasing the Flexibility of OrganizationIncreasing the Flexibility of Organization

1. Increasing the ability :1. Increasing the ability :– To sense and respond to changes in

marketplace.– To take advantage of new opportunities,

2. Mass customization,2. Mass customization,

3. Micromarketing for niche products3. Micromarketing for niche products

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

How Information Systems Affect Organizations

Organizational & Behavioral Impacts (cotd.)

3.29 © 2004 by Prentice HallFigure 3-8

Implementing Change and Managing Organizational Resistance Made Easier

THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

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2. Affect on Roles of Managers in 2. Affect on Roles of Managers in OrganizationsOrganizations : :

• Interpersonal: Interpersonal: Managers act as Managers act as figureheads and leaders figureheads and leaders

• Informational: Informational: Managers receive and Managers receive and disseminate critical information, nerve disseminate critical information, nerve centerscenters

• Decisional: Decisional: Managers initiate activities, Managers initiate activities, allocate resources, and negotiate allocate resources, and negotiate conflictsconflicts

IMPACT OF INFORMATION TECHNOLOGY ON

MANAGEMENT DECISION MAKING

1. I.T. has reduced information uncertainty.

3.31 © 2004 by Prentice Hall

Process of Decision Making at Various Process of Decision Making at Various Management levels :Management levels :

• Strategic Decision Making:Strategic Decision Making: Determines long-term objectives, Determines long-term objectives, resources, and policiesresources, and policies.

• Management Control: Management Control: Monitors Monitors effective or efficient usage of resources effective or efficient usage of resources and performance of operational unitsand performance of operational units

IMPACT OF INFORMATION TECHNOLOGY ON

MANAGEMENT DECISION MAKINGManagers and Decision Making

3.32 © 2004 by Prentice Hall

• Operational Control: Operational Control: Determines how to Determines how to perform specific tasks set by strategic and perform specific tasks set by strategic and middle-management decision makersmiddle-management decision makers

• Knowledge-level Decision Making: Knowledge-level Decision Making: Evaluates new ideas for products, Evaluates new ideas for products, services, ways to communicate new services, ways to communicate new knowledge, ways to distribute informationknowledge, ways to distribute information

IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT

DECISION MAKING

Managers and Decision Making

Process of Decision Making at Various Management Levels (contd.)

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Decisions are classified as:Decisions are classified as:

• Unstructured:Unstructured: Non routine, decision Non routine, decision maker provides judgment, evaluation, and maker provides judgment, evaluation, and insights into problem definition, no agreed-insights into problem definition, no agreed-upon procedure for decision making.upon procedure for decision making.

• Structured:Structured: Repetitive, routine, handled Repetitive, routine, handled using a definite procedure.using a definite procedure.

IMPACT OF INFORMATION TECHNOLOGY ON

MANAGEMENT DECISION MAKING

Managers and Decision Making

3.34 © 2004 by Prentice Hall

TPS

Organizational Level

OAS MIS

KWS

DSS

ESS

TYPE OFTYPE OFDECISIONDECISION OPERATIONAL KNOWLEDGE MANAGEMENT STRATEGIC

STRUCTURED ACCOUNTS RECEIVABLE

ELECTRONIC PRODUCTIONSCHEDULING COST OVERRUNS

SEMI- BUDGETSTRUCTURED PREPARATION

PROJECTSCHEDULING

FACILITYLOCATION

UNSTRUCTURED PRODUCT DESIGN NEW PRODUCTSNEW MARKETS

Figure 3-9

IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT

DECISION MAKING

Different Kinds of Information Systems

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• Intelligence:Intelligence: Collect information, identify Collect information, identify problem.problem.

• Design:Design: Conceive alternative solution to a Conceive alternative solution to a problemproblem

• Choice:Choice: Select among the alternative Select among the alternative solutions solutions

• Implementation:Implementation: Put decision into effect and Put decision into effect and provide report on the progress of solutionprovide report on the progress of solution

IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT

DECISION MAKING

Stages of Decision Making (all supported by IT)

3.36 © 2004 by Prentice Hall

Figure 3-10

IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT

DECISION MAKING

Decision-Making Process

3.37 © 2004 by Prentice Hall

• Rational Model:Rational Model: Choosing best Choosing best alternative rationally.alternative rationally.

• Organizational ModelOrganizational Model : Group : Group decision.decision.

• Bureaucratic ModelBureaucratic Model : Based on : Based on SOPSOP

• Political ModelPolitical Model : Compromises. : Compromises.

IMPACT OF INFORMATION TECHNOLOGY ON

MANAGEMENT DECISION MAKING

Models of Decision Making

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Factors to consider while planning aFactors to consider while planning anew system:new system:

• Organizational environment Organizational environment

• Organizational structure, hierarchy, Organizational structure, hierarchy, specialization, standard operating specialization, standard operating proceduresprocedures

IMPACT OF INFORMATION TECHNOLOGY ON

MANAGEMENT DECISION MAKINGImplications for the Design and Understanding of

Information Systems

3.39 © 2004 by Prentice Hall

• Culture and politics of the organizationCulture and politics of the organization

• Type of organization and its style of Type of organization and its style of leadership.leadership.

• Groups affected by the system and the Groups affected by the system and the attitudes of workers who will be using the attitudes of workers who will be using the system.system.

• Kinds of tasks, decisions, and business Kinds of tasks, decisions, and business processes, information system is designed processes, information system is designed to assist.to assist.

IMPACT OF INFORMATION TECHNOLOGY ON

MANAGEMENT DECISION MAKING

Factors to Consider while Planning a New Systems (contd.)

3.40 © 2004 by Prentice Hall

System Characteristics to be kept in System Characteristics to be kept in mind while designing new systems:mind while designing new systems:

• Flexibility and multiple options for Flexibility and multiple options for handling data and evaluating informationhandling data and evaluating information

• Capability to support a variety of styles, Capability to support a variety of styles, skills, and knowledge skills, and knowledge

IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT

DECISION MAKING

Implications for the Design and Understanding of Information Systems

3.41 © 2004 by Prentice Hall

System Characteristics to be kept in System Characteristics to be kept in mind while designing new systems:mind while designing new systems:

• Capability to keep track of many Capability to keep track of many alternatives and consequencesalternatives and consequences

• Sensitivity to the organization’s Sensitivity to the organization’s bureaucratic and political bureaucratic and political requirements.requirements.

IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT

DECISION MAKING

Implications for the Design and Understanding of Information Systems

3.42 © 2004 by Prentice Hall

MANAGEMENT CHALLENGES IN COMPLEX RELATIONSHIP BETWEEN I.S. AND ORGANIZATIONAL PERFORMANCE

1. Difficulties in Sustaining Competitive Advantage :-

- Advantage is for a significant period of time,

- Experience and knowledge helps in new investment.

2. Difficulties in Managing System Related Change :

- Change is slowed due to inertia of organizations

- Process of change is complicated and slow.

3.43 © 2004 by Prentice Hall

Solution Guidelines :

1. Perform a Strategic System Analysis :

- Study competitive structure of industry of firm,

- Analyze current business, industry and firm’s value chain

2. Managing Strategic Transitions ( Changes in goals , relationships with customers / suppliers, internal operations and information architecture) :

- Devise new business processes for successful transitions

MANAGEMENT CHALLENGES IN COMPLEX

RELATIONSHIP BETWEEN I.S. AND ORGANIZATIONAL

PERFORMANCE

3.44 © 2004 by Prentice Hall

RELATIONSHIP RELATIONSHIP BETWEEN BETWEEN

INFORMATION INFORMATION SYSTEMS, SYSTEMS,

ORGANIZATIONS ORGANIZATIONS AND BUSINESS AND BUSINESS

PROCESSESPROCESSES