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Managing Information

Board of Studies

Prof. H. N. Verma Prof. M. K. GhadoliyaVice- Chancellor Director, Jaipur National University, Jaipur School of Distance Education and Learning Jaipur National University, JaipurDr. Rajendra Takale Prof. and Head AcademicsSBPIM, Pune

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Subject Expert Panel

Dr. Ramchandra G. Pawar Ashwini PanditDirector, SIBACA, Lonavala Subject Matter ExpertPune

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Content Review Panel

Gaurav Modi Shubhada PawarSubject Matter Expert Subject Matter Expert

___________________________________________________________________________________________Copyright ©

This book contains the course content for Managing Information.

First Edition 2013

Printed byUniversal Training Solutions Private Limited

Address05th Floor, I-Space, Bavdhan, Pune 411021.

All rights reserved. This book or any portion thereof may not, in any form or by any means including electronic or mechanical or photocopying or recording, be reproduced or distributed or transmitted or stored in a retrieval system or be broadcasted or transmitted.

___________________________________________________________________________________________

I

Index

ContentI. ...................................................................... II

List of FiguresII. ........................................................... V

List of TablesIII. ...........................................................VI

AbbreviationsIV. ....................................................... VII

Case StudyV. .............................................................. 137

BibliographyVI. ......................................................... 143

Self Assessment AnswersVII. ................................... 146

Book at a Glance

II

Contents

Chapter I ....................................................................................................................................................... 1Organisational Overview ............................................................................................................................. 1Aim ................................................................................................................................................................ 1Objectives ...................................................................................................................................................... 1Learning outcome .......................................................................................................................................... 11.1 Introduction .............................................................................................................................................. 21.2 Organisation and its Types ....................................................................................................................... 21.3 Organisation Structure ............................................................................................................................. 31.4 Organisation Characteristics .................................................................................................................... 31.5 Organisational Functions ......................................................................................................................... 61.6 Life Cycle of an Organisation .................................................................................................................. 81.7 Vertical and Horizontal Organisational .................................................................................................. 10 1.7.1 Types of Organisation Structures ............................................................................................11Summary ..................................................................................................................................................... 15References ................................................................................................................................................... 15Recommended Reading ............................................................................................................................. 15Self Assessment ........................................................................................................................................... 16

Chapter II ................................................................................................................................................... 18Management Functions and Business Processes ..................................................................................... 18Aim .............................................................................................................................................................. 18Objectives .................................................................................................................................................... 18Learning outcome ........................................................................................................................................ 182.1 Management Functions and Levels ....................................................................................................... 19 2.1.1 Management Functions .......................................................................................................... 19 2.1.2 Levels of Management ........................................................................................................... 202.2 Business Functions and Processes ......................................................................................................... 222.3 Information Systems Requirements ....................................................................................................... 252.4 Requirement Analysis ............................................................................................................................ 262.5 Tools and Methods for Requirement Planning ...................................................................................... 28 2.5.1 Methods for Requirement Analysis ....................................................................................... 28 2.5.2 Tools for Requirement Analysis ............................................................................................. 31 2.5.3 Requirement Analysis Tools .................................................................................................. 33Summary ..................................................................................................................................................... 35References ................................................................................................................................................... 35Recommended Reading ............................................................................................................................. 36Self Assessment ........................................................................................................................................... 37

Chapter III .................................................................................................................................................. 39Management Systems ................................................................................................................................ 39Aim .............................................................................................................................................................. 39Objectives .................................................................................................................................................... 39Learning outcome ........................................................................................................................................ 393.1 Introduction ............................................................................................................................................ 403.2 Management Systems Types .................................................................................................................. 403.3 Management System Requirements ....................................................................................................... 413.4 Levels of Management Activities .......................................................................................................... 43 3.4.1 Transaction Processing Systems (TPS) .................................................................................. 44 3.4.2 Knowledge Work Systems (KWS) ........................................................................................ 47 3.4.3 Office Automation System ..................................................................................................... 47 3.4.4 Management Information Systems ........................................................................................ 48 3.4.5 Decision Support Systems (DSS) .......................................................................................... 48 3.4.6 Executive Support System ..................................................................................................... 50

III

Summary ..................................................................................................................................................... 52References ................................................................................................................................................... 52Recommended Reading ............................................................................................................................. 52Self Assessment ........................................................................................................................................... 53

Chapter IV .................................................................................................................................................. 55Business Values of Information Systems .................................................................................................. 55Aim .............................................................................................................................................................. 55Objectives .................................................................................................................................................... 55Learning outcome ........................................................................................................................................ 554.1 Introduction ............................................................................................................................................ 564.2 Impact of Information Systems .............................................................................................................. 56 4.2.1 Social Global Impact of Information Systems ....................................................................... 574.3 Empirical Studies ................................................................................................................................... 584.4 Cost Value Performance ......................................................................................................................... 60 4.4.1 Traditional Financial Evaluation Procedures ......................................................................... 614.5 Total Cost of Ownership ........................................................................................................................ 634.6 Culture for Information Systems ........................................................................................................... 65 4.6.1 Information System Adoption ................................................................................................ 674.7 Decision Management with Information Systems ................................................................................. 68 4.7.1 Decision Support Systems ..................................................................................................... 68 4.7.2 DSS Architecture ................................................................................................................... 70Summary ..................................................................................................................................................... 71References ................................................................................................................................................... 71Recommended Reading ............................................................................................................................. 72Self Assessment ........................................................................................................................................... 73

Chapter V .................................................................................................................................................... 75Portfolio Management and IT Applications ............................................................................................ 75Aim .............................................................................................................................................................. 75Objectives .................................................................................................................................................... 75Learning outcome ........................................................................................................................................ 755.1 Introduction to Portfolio Management ................................................................................................... 765.2 Design and Implementation of Portfolio Management .......................................................................... 825.3 Portfolio Management Methods ............................................................................................................ 855.4 Portfolio Management Issues and Challenges ....................................................................................... 88Summary ..................................................................................................................................................... 90References ................................................................................................................................................... 90Recommended Reading ............................................................................................................................. 90Self Assessment ........................................................................................................................................... 91

Chapter VI .................................................................................................................................................. 93Enterprise Resource Planning (ERP) Systems ........................................................................................ 93Aim .............................................................................................................................................................. 93Objectives .................................................................................................................................................... 93Learning outcome ........................................................................................................................................ 936.1 Introduction to Enterprise Resource Planning Systems (ERP) .............................................................. 946.2 Brief History of ERP .............................................................................................................................. 956.3 ERP Components ................................................................................................................................... 956.4 Distinctive Ways of Implementing an ERP............................................................................................ 96 6.4.1 Guidelines for ERP Implementation ...................................................................................... 976.5 Conquering Implementation of ERP ...................................................................................................... 976.6 ERP Benefits .......................................................................................................................................... 986.7 Customer Expectations in ERP Packages .............................................................................................. 996.8 Drawbacks of ERP ................................................................................................................................. 99

IV

6.9 ERP System Accomplishments ............................................................................................................ 1006.10 Steps to Avoid Pitfalls ........................................................................................................................ 100Summary ................................................................................................................................................... 102Reference................................................................................................................................................... 102Recommended Reading ........................................................................................................................... 102Self Assessment ......................................................................................................................................... 103

Chapter VII .............................................................................................................................................. 105Intelligence Information Systems ........................................................................................................... 105Aim ............................................................................................................................................................ 105Objectives .................................................................................................................................................. 105Learning outcome ...................................................................................................................................... 1057.1 Introduction to Intelligence Information Systems ............................................................................... 1067.2 Knowledge Management in Organisation............................................................................................ 106 7.2.1 Approach for Successful Implementation of Knowledge .................................................... 1067.3 Creating, Developing and Sharing Knowledge ................................................................................... 107 7.3.1 Drivers of Knowledge Management .................................................................................... 108 7.3.2 Knowledge Representation .................................................................................................. 1087.4 Artificial Intelligence in Business ........................................................................................................ 1097.5 Business Analytics ................................................................................................................................1117.6 Business Intelligence ............................................................................................................................1127.7 Role of Business Intelligence ................................................................................................................1147.8 Business Intelligence Tools ...................................................................................................................1157.9 Business Intelligence Reports ...............................................................................................................116Summary ....................................................................................................................................................118References ..................................................................................................................................................118Recommended Reading ............................................................................................................................119Self Assessment ......................................................................................................................................... 120

Chapter VIII ............................................................................................................................................. 122Social, Ethical and Legal Aspects ........................................................................................................... 122Aim ............................................................................................................................................................ 122Objectives .................................................................................................................................................. 122Learning outcome ...................................................................................................................................... 1228.1 Society in the Information Age ............................................................................................................ 123 8.1.1 Broad Applications of Information Technology .................................................................. 1238.2 Moral Dimensions ................................................................................................................................ 124 8.2.1 Computer Crime .................................................................................................................. 1258.3 Technology Trends and Ethical Issues ................................................................................................. 1268.4 Responsibility, Accountability and Liability ........................................................................................ 1288.5 Information Right and Acts .................................................................................................................. 1298.6 Intellectual Property and Rights ........................................................................................................... 132 8.6.1 Copyrights ............................................................................................................................ 133Summary ................................................................................................................................................... 134References ................................................................................................................................................. 134Recommended Reading ........................................................................................................................... 134Self Assessment ........................................................................................................................................ 135

V

List of Figures

Fig. 1.1 Organisation and environment .......................................................................................................... 5Fig. 1.2 Function oriented organisation structure (vertical organisation) .....................................................11Fig. 1.3 Product oriented organisation structure .......................................................................................... 12Fig. 1.4 Multi locations or geographical based organisation structure ........................................................ 12Fig. 1.5 Process oriented organisation structure .......................................................................................... 13Fig. 2.1 Basic levels of management ........................................................................................................... 20Fig. 2.2 Management roles at various levels ................................................................................................ 22Fig. 2.3 Main activities of functional areas .................................................................................................. 23Fig. 2.4 Cross functional business process .................................................................................................. 24Fig. 2.5 Information processed data ............................................................................................................. 25Fig. 2.6 Information system ......................................................................................................................... 25Fig. 2.7 The five critical requirements definition and management process areas analysis ........................ 32Fig. 3.1 Types of system .............................................................................................................................. 43Fig. 3.2 Payroll system (TPS) - a symbolic representation .......................................................................... 45Fig. 3.3 Data transfer from MIS to TPS ....................................................................................................... 48Fig. 3.4 Decision support system for voyage estimation ............................................................................. 49Fig. 3.5 Executive support system ............................................................................................................... 50Fig. 3.6 Inter-relationship............................................................................................................................. 51Fig. 4.1 Various information communication devices ................................................................................. 57Fig. 4.2 Convergence of various communications devices .......................................................................... 57Fig. 4.3 Four layers for the evaluation of adaptive systems ........................................................................ 59Fig. 4.4 The influence of culture on behaviours .......................................................................................... 66Fig. 4.5 Information flow and adoption ....................................................................................................... 67Fig. 5.1 Calculation of expected commercial value of project .................................................................... 86Fig. 5.2 Bubble diagram ............................................................................................................................... 87Fig. 5.3 Pie chart for spending break-up ...................................................................................................... 88Fig. 6.1 ERP life cycle ................................................................................................................................. 94Fig. 6.2 The ERP learning community framework ...................................................................................... 95Fig. 7.1 Knowledge model ......................................................................................................................... 107

VI

List of Tables

Table 1.1 Common and unique characteristics of organisation ..................................................................... 5Table 1.2 Suggested actions for sustained good health of the organisation ................................................... 9Table 2.1 Functional area and business processes ....................................................................................... 24Table 3.1 Features of the six types of information systems ......................................................................... 44Table 3.2 Types of transaction processing systems ...................................................................................... 46Table 4.1 Costs and benefits of information system implementation .......................................................... 62Table 6.1 internet crimes and abuses ......................................................................................................... 126Table 6.2 Information system achievements and issues ............................................................................ 127

VII

Abbreviations

AI - ArtificialIntelligenceANN - ArtificialNeuralNetworkB2B - Business-to-BusinessB2C - Business-to-ConsumerBI - Business IntelligenceBMS - Business Management SystemsBPM - Business Performance ManagementBWA - BusinessWorkflowAnalysisCAD - Computer Aided DesignCEO - ChiefExecutiveOfficerCFO - ChiefFinancialOfficerCI - Computational IntelligenceCIO - ChiefInformationOfficerCMS - Course Management SystemsCOO - ChiefOperationalOfficerCRM - Customer Relationship ManagementCRW - Clear Requirements WorkbenchDBMS - Database Management SystemDCF - Discounted Cash FlowDGMS - Dialog Generation and Management SystemDM - Data MiningDSS - Decision-Support SystemsEA - Evolutionary AlgorithmECV - Expected Commercial ValueEDM - Electronic Document Management EIS - Executive Information SystemsERP - Enterprise Resource PlanningESS - Executive Support SystemsETL - Extract, Transform, and LoadFASMI - Fast Analysis of Shared Multidimensional InformationFDW - Financial Data WarehouseGIS - Geographic Information SystemsGOFAI - GoodOldFashionedArtificialIntelligenceGRASP - Graphical Robotics Applications Simulation PackageIDSS - Decision Support SystemsIGOs - International Intergovernmental OrganisationsIPR - Intellectual Property and RightsIROG - Informal Review of GradesIRR - Internal Rate of ReturnIT - Information TechnologyJRD - Joint Requirements DevelopmentKDD - Knowledge-Discovery in DatabasesKM - Knowledge ManagementKPIs - Key Performance IndicatorsKWS - Knowledge Work SystemsLLC - The Limited Liability CompanyLLP - The Limited Liability PartnershipLP - The Limited PartnershipMBMS - Model-Base Management SystemMIS - Management Information SystemsMRP - Material Requirement Planning

VIII

MSP - Managed Service ProviderNGOs - Non-Governmental OrganisationsNN - Neural NetworkNPV - Net Present ValueOAS - OfficeAutomationSystemsOLAP - Online Analytical ProcessingPDM - Product Data ManagementPIO - PublicInformationOfficersPM - Portfolio ManagementPoS - Point-of-SalePPC - Production, Planning and ControlRFID - RadioFrequencyIdentificationRM - Requirement ManagementSOA - Service-Oriented ArchitecturesSRS - SoftwareRequirementsSpecificationTCO - Total Cost of OwnershipTPS - Transaction Processing SystemsUML - UnifiedModellingLanguage

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Chapter I

Organisational Overview

Aim

The aim of this chapter is to:

definetheterm‘organisation’•

identify different organisational functions•

discuss the organisation structure•

Objectives

The objectives of this chapter are to:

explain the life cycle of an organisation•

analysetheconceptof‘Verticalorganisation’•

highlight the types of organisation structure•

Learning outcome

At the end of this chapter, you will be able to:

classify different types of organisation•

understandtheconceptof‘Horizontalorganisation’•

recognise the key elements required in the formation of organisation structure•


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1.1 IntroductionOrganisations today are totally dependent on information systems in almost every functional area. Information systems have become an inseparable part of the technology used in sectors such as business, manufacturing, communications, education, health care, government and so on. Information and telecommunication technologies (IT) play vital roles in the organisation and management of global businesses. Information systems are contributing in enabling the fundamental shifts in the structure of global markets.

1.2 Organisation and its TypesAnorganisationisdefinedas“astable,formalsocialstructurethatusesresourcesandproducesthemtoproduceoutput. This output could be a physical product or service”.

Leavitt(1962)definedorganisationas“aspecificconfigurationofstructure,people,taskandtechniques”.Structure describes the formof departments, hierarchy and committees. It influences the organisation’s efficiency andeffectiveness.Theword‘People’ refers to the skills, attitudes and social interaction of the members of the organisation. Task refers to the goals of the individual and the organisation. Techniques refer to the methodical approach used to perform tasks. Organisational structure thus refers to the institutional arrangements and mechanisms for mobilising human,physical,financialandinformationresourcesatalllevelsofthesystem.

Organisationisalsodefinedasasystemincorporatingasetofsub-systems. These sub-systems are related group of activities, which are performed to meet the objectives of the organisation.

Thedefinitionoforganisationusuallycontainsfivecommoncharacteristics,theseare:Composed of individuals and groups of individuals•Oriented towards achieving common goals•Differential functions•Intended rational coordination•Continuity through time•

Organisations at a macro level can be divided in three types:Extraction•Manufacturing including construction•Services•

These three types of organisations have different features.

Extraction organisations produce goods by extracting them from the earth. Examples of such organisation are agriculture, mining, oil and gas exploration and producing companies.

The manufacturing organisations produce goods by conversion or by processing of one type of goods chosen as rawmaterialsintoothertypeofgoodsdesignatedasfinishedgoods.Examplesofmanufacturingorganisationare:car manufacturing, fertiliser manufacturing, pharmaceutical and drug manufacturing companies and so on.

The service organisations do not produce any tangible goods but produce services only. Services are intangible items having no shape or colour. Example of service organisations are: banking, insurance, transportation, universities, hospitals,managementconsultancy,legalfirmsandsoon.Thesethreetypesoforganisationsaredifferentintermsof structure, characteristics and functions.

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1.3 Organisation StructureAnorganisationalstructuredefines:

how job tasks are formally divided, grouped and coordinated•what are the organisational components (units), their relationships and hierarchy•whereformalauthorityandpowerarelocatedandprovidesa“home”andidentityforemployees•

Structureisanintegralconstituentoftheorganisation.Itdefinesthearrangementandinterrelationshipofcomponentparts and positions in an organisation. It provides guidelines on:

division of work into activities•linkage between different functions•hierarchy•authority structure•authority relationships•coordination with the environment•

Organisational structure differs within the same organisation depending upon the requirements.

For designing an organisational structure, six key elements are required and these are:Work specialisation:• The term work specialisation or division of labour is used to describe the degree to which tasks in an organisation are subdivided into separate jobs.Departmentalisation:• After the division of jobs through work specialisation, these are grouped together so that common tasks can be coordinated. The basis by which jobs are grouped together is called departmentalisation. Oneofthemostpopularwaysofformingsuchgroupsisbyfunctionslikemarketing,production,andfinanceand so on.Chain of command:• The chain of command is an unbroken line of authority that extends from the top to lowest levelandclarifieswhoreportstowhom.Span of control:• Thenumberofemployeesthatthemanagercanefficientlyhandleandeffectivelydirectdefinesthe span of control. Span of control is important because to a large degree, it determines the number of levels andmanagersanorganisationhas.Allthingsbeingequal,thewiderorlargerthespan,themoreefficient,isthe organisation.Centralisation and decentralisation:• Theterm‘centralisation’referstothedegreetowhichdecision-makingis concentrated to a single point in the organisation. The concept includes only formal authority. If the top management makes all the key decisions, the organisation is termed as centralised. On the other hand, if bulk of the decisions is allowed to be taken at the lower level, the organisation is termed as decentralised.Formalisation:• ‘Formalisation’referstothedegreetowhichjobswithinanorganisationarestandardised.Incase jobs are highly formalised, employees will have less freedom or discretion to carry out the jobs, but the jobs will have explicit methods and procedures to complete them.

1.4 Organisation CharacteristicsNearly all the organisations ranging from multinationals to small ones are based on division of labour, a decision-making structure; and rules and policies which are referred as common organisational characteristics. The degrees of formality with which these aspects of business are approached vary tremendously within the business world, but these characteristics are inherent in any business enterprise that utilises the talents of more than one person.


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Division of labourOrganisations practice division of labour both vertically and horizontally. Vertical division includes three basic levels:

top•middle•bottom•

The main function of top-managers is to draw strategic plans which may include long-term and short-term goals and also to monitor the current business with the help of middle-level managers. Middle-level managers convert the strategic plan set by top level managers into action plan and monitor day-to-day activities of lower level managers. Lowerlevelmanagersactaspertheactionplansdefinedbythemiddlelevelmanagersandperformthespecificactivities as assigned to them.

Organisationsalsodividelabourhorizontallybydefiningtaskgroups,ordepartments,andassigningworkerswithapplicable skills to those groups. Line units perform the basic functions of the business such as focussing on supply, production and distribution, while staff units support line units with expertise and services and deals mostly with internal operations and controls or public relations efforts.

Decision structureDecision-making structures are used to organise authority. These structures vary from operation to operation in their degreeofcentralisationanddecentralisation.Centraliseddecisionstructuresarereferredtoas“tall”organisationsbecause important decisions usually emanate from a high level and are passed down through several channels until theyreachthelowerendofthehierarchy.Conversely,flatorganisations,whichhavedecentraliseddecision-makingstructures, employ only a few hierarchical levels. Such organisations are typically guided by a management philosophy that is favourably disposed toward some form of employee empowerment and individual autonomy.

Standard operating procedureRules, policies, and procedures serve as templates of managerial guidance in all sectors of organisational production andbehaviour.Theymaydocument themostefficientmeansofaccomplishinga taskorprovidestandards forrewarding workers. Formalised rules provide managers with more time to spend on other issues and opportunities, andhelptoensurethatanorganisation’svarioussubsystemsareworkinginconcert.

Organisations can be categorised into two types, depending on the degree of formalisation of rules within their structures, and these are:

formal •informal•

In formal organisations, management has determined that a comparatively impersonal relationship between individuals and the company for which they work is considered as the best environment for achieving organisational goals.Subordinateshavelessinfluenceovertheprocessinwhichtheyparticipate,withtheirdutiesmoreclearlydefined.

Informal organisationsarelesslikelytoadoptoradheretoasignificantcodeofwrittenrulesorpolicies.Instead,individualsaremorelikelytoadoptpatternsofbehaviourthatareinfluencedbyanumberofsocialandpersonalfactors. Changes in the organisation are less often the result of authoritative dictate and more often an outcome of collectiveagreementbymembers.Informalorganisationstendtobemoreflexibleandmorereactivetooutsideinfluences.Butaccordingtosomecritics,sucharrangementsmayalsodiminishtheabilityoftopmanagerstoeffectrapid change.

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Common characteristics Unique characteristics

Formal structurePrincipal of division of labour Standard operating proceduresDecision making processUse of resources (Men, machine, material and so on)Output

Organisational typeEnvironment, goals and powerSize of organisationLocations involvedFunctions and business processesTechnology

Table 1.1 Common and unique characteristics of organisation

Organisations dwell in environment from which they draw resources and to which they provide goods or services. The effect of these environmental factors which may include stockholders, labour unions, government agencies, competitors,financialinstitutions,suppliersandcustomersasshowninfig.1.1.Thesefactorskeepchangingandtosurvive and sustain the organisations have to cope and adjust to these factors and information system play a vital role. Depending upon the type of organisation and industry, each organisation has its own environment to take care of.

OU TPU T S Supplie

Competitors

Govern ment A gencies

Cu stomers

Labour Unions

Stockholder s

The Community

PR OCESSESINPUTS

Monitor & F eedback

MANAGEMENT CONTROL

F inancInstitutio

Fig. 1.1 Organisation and environment

Environmentalinfluencesthataffecttheorganisationscanbecategorisedinto:Specific:• Thespecificenvironmentreferstothenetworkofsuppliers,distributors,governmentagencies,andcompetitors with which a business enterprise interacts.General:• Thegeneralenvironmentencompassesfourinfluencesthatemanatefromthegeographicareainwhichthe organisation operates. These are:Cultural values:• They shape views about ethics and determine the relative importance of various issues.Economic conditions:• These include economic upswings, recessions, regional unemployment, and many other regionalfactorsthataffectacompany’sabilitytogrowandprosper.Economicinfluencesmayalsopartiallydictateanorganisation’sroleintheeconomy.Legal or political environment:• This effectively helps to allocate power within a society and to enforce laws. The legal and political systems in which an organisation operates can play a key role in determining the long-termstabilityandsecurityoftheorganisation’sfuture.Thesesystemsareresponsibleforcreatingaproductiveenvironment for the business community, as well for ensuring that through the regulations pertaining to operation and taxation the needs of the larger community are addressed.


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Quality of education:• It is an important factor in high technology and other industries that require an educated workforce.Businesseswillbebetterabletofillsuchpositionsiftheyoperateingeographicregionsthatfeaturea strong education system.

1.5 Organisational FunctionsThe organisational function of an organisation is business, i.e., to produce goods and generate services. There are some organisations which have the goal to bring about certain effects in its surrounding world, for example, authorities, police, political parties, interest groups, trade unions, and so on. Then there are organisations whose goal is to change individuals, for example, schools, universities, hospitals, prisons, and so on. These types of organisations are also knownasnon-profit-organisationsandbusinessisnotthefunctionoftheseorganisations.Wemaynoticethatforauthorities, prison and police the function is

Some important organisational functions:Business organisation is an area of law that covers the broad array of rules governing the formation and •operation of different kinds of entities by which individuals can organise to do business. The term is also used to describe the entities themselves. In common law countries today, the most commonly addressed forms of business organisation are:

The sole proprietorship: This is, however, a single-person operation, and therefore not truly any kind of �“organisation”Thepartnership,sometimescalleda“generalpartnership” �The limited partnership (LP) �The limited liability partnership (LLP) �The corporation �The limited liability company (LLC) �

Other types of business organisations, such as cooperatives, credit unions and publicly owned enterprises, can be establishedwithpurposesthatequivalent,supersede,orevenreplacetheprofitmaximisationmandateofbusinesscorporations. There are large numbers of organisations in each of these forms of business.

Bureaucracy• refers to the way that the administrative execution and enforcement of legal rules is socially organised.Thisofficeorganisationischaracterisedbystandardisedprocedure,formaldivisionofresponsibility,hierarchy, and impersonal relationships. Examples of everyday bureaucracies include governments, armed forces, corporations, hospitals, courts, ministries and schools.Charity• is the function of the charitable trust, which is organised to serve private or public charitable purposes. Charities may take the form of charitable trusts, companies or unincorporated associations. Because of the benefitsprovidedbycharitabletrusts,theyaresubjecttocertainbenefitsundertrustlaw.Forexample,transfersof property to a charitable trust are usually exempted from the rule against perpetuities, which would otherwise operate to void a transfer made after a certain period. International cooperation or control• is the function for the organisation of international scope or character. There are two main types of international organisations:

International intergovernmental organisations (IGOs) whose members are sovereign states or other �intergovernmental organisations (like, the European Union), andNon-governmental organisations (NGOs), which are private organisations. �

Few examples of IGOs and NGOs are:United Nations, its specialised agencies and associated organisations•INTERPOL•International hydrographic organisation•World trade organisation•Universal postal union•

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Mutual cooperation• is a function for the cooperative organisation or society based on the principle of mutuality. A mutual organisation or society is often simply referred to as a mutual.

A mutual exists with the purpose of raising funds (or money), from its membership or customers (collectively called its members), which can then be used to provide common services to all members of the organisation or society. A mutualisthereforeownedby,andrunforthebenefitofitsmembers,ithasnoexternalshareholderstopayintheformofdividends,andassuchdoesnotusuallyseektomaximiseandmakelargeprofitsorcapitalgains.Mutualsexistforthememberstobenefitfromtheservicestheyprovide.

Varioustypesoffinancialinstitutionsaroundtheworldaremutuals,andexamplesinclude:Building societies•Credit unions•Friendly societies•(Mutual) Insurance or Assurance companies•Savings and loan associations•Mutual savings bank•Mutual bank•

Modernmutualfinancialinstitutionsusuallyofferservicesthatareverysimilartothoseofabank,exceptamutualmay pay higher interest rates on savings and deposit accounts, charge lower interest rates on mortgages and loans, have fewer or lower fees and charges on the services or products it offers, and the members who save and borrow with the mutual ultimately own the business.

Social, cultural, legal, and environmental advocacy functions• are the goals of the Non-Governmental Organisations (NGOs). these organisations are not part of a government and are not founded by states and are typicallyindependentofgovernments.Althoughthedefinitioncanincludefor-profitcorporations,thetermisgenerally restricted to social, cultural, legal, and environmental advocacy groups having goals that are primarily non-commercial.NGOsareusuallynon-profitorganisationsthatgainatleastaportionoftheirfundingfromprivate sources.Collaborative networks function• is the basis of a virtual organisation. A virtual organisation is any type of organisation that does not have a central geographical location and exists solely through telecommunication tools.A virtual organisation comprises a set of (legally) independent organisations that share resources and skills toachieveitsmissionorgoal,butitisnotlimitedtoanallianceofprofitenterprises.Theinteractionamongmembers of the virtual organisation is mainly done through computer networks and is considered as a manifestationofcollaborativenetworks.Inbusinessavirtualorganisationisafirmthatoutsourcesthemajorityof its functions.Pacifistfunctions• arethepacifistprinciplesofstandingagainstwarandaggressionthatarepromotedbythepacifistorganisation.Someorganisationsareconcernedonlywiththeremovalofnuclearweaponsfromwaralthough they may call for suspension of hostilities as well. Amongst other organisations are those which deal withotherconcernsbutwhichhaveastrongpacificelement.Theexamplesofpacifistorganisationsare:

Religious Society of friends (Quakers) �Mennonites �Christian peacemaker teams �Christian anarchism �Fellowship of reconciliation �


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Nuclearpacifistorganisation:Pugwash•CND•

Organisationswhichcitepacifismasanaimare:Green peace•

Collective function is promoted by a group of people who share or are motivated by at least one common issue or interest,orworktogetheronaspecificproject(s)toachieveacommonobjective.Collectivesarealsocharacterisedbyattempts to share and exercise political and social power and to make decisions on a consensus-driven and egalitarian basis.Collectivesdifferfromcooperativesinawaythattheyarenotnecessarilyfocuseduponaneconomicbenefitor saving.

Acommuneorintentionalcommunity,whichmayalsobeknownasa“collectivehousehold”,isagroupofpeoplewho live together in some kind of dwelling or residence, or in some other arrangement, for example, sharing land. Collectivehouseholdsmaybeorganisedforaspecificpurpose,forexample,relatingtobusiness,parenting,orsomeother shared interest.

Types of collectives are:Art collectives•Activist collectives•Environment collectives•Health collectives•Law collectives•Music collectives•Newspaper collectives•Research collectives•

1.6 Life Cycle of an OrganisationOrganisations go through different phases of growth and to sustain the growth lays the need to understand the organisational life cycle. When the present phase of the organisation is known then only measures can be taken to makeimprovements.Thelifecycleofanorganisationhavefivedistinctstagesasdescribedbelow,andeachofthesephases present different management and leadership challenges that are to be dealt with.

The start-up phase1. This phase begin from the time when an entrepreneur conceives the idea of a particular business and giving shape to the business, a management group is formed and a business plan is written. Resources are deployed and the organisation is established, start-up ends when business is declared open.The growth phase2. The organisation moves from start-up phase to growth phase, as the organisation cannot remain stagnant for a long time because stagnancy for a long time leads to natural death for the organisation. In the growth phase, one expects to see revenues climb, new services and products developed, more employees hired and so on. Growth phase has been divided into sub-phases of growth that is:

Childhood �Adolescence �Adulthood �Maturity �

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Few actions, which need to be taken at each phase for better health of the organisation, are shown in the following table.

Stage Characteristics Action to take

Start-up phase An organisation is created and establishes its presence.

Help develop the leadership skills •of others within the organisationDevelop preliminary systems for •the organisation

Growth phase - childhood

An organisation begins to learn new skills and to build a solid, supportive organisational infrastructure.

Invite and accept to nurture the organisational potential by more experienced leaders, organisations, and founders

Growth phase – adolescence

An organisation expands the scope of its actions and learning as it goes.

Experiment •Takeonmoredifficultchallenges•Take responsibility for action or •inaction Learn from and be mentored by •those with more experience

Growth phase – adulthood

An organisation assumes a greater level of responsibility.

Take the lead on an issue even •withoutsignificantcreditTake appropriate risks even if •defeat is possible Nurture and mentor organisations in •their childhood and adolescence

Growth phase – maturity An organisation uses its legacy to strengthen the movement overall.

Turn over responsibility to others •Share wisdom and experiences •Set an example for personal and •organisational renewal

Renewal An organisation resists the urge to stay comfortable.

Develop a new strategic focus or •new organisational leadership

Table 1.2 Suggested actions for sustained good health of the organisation

The decline phase3. After growth the organisations moves to decline phase if not checked in time by management. Various reasons for the organisation to get into decline phase are:

Conflictinginterestsbetweenvariousgroupsordepartments,leadingtodecisionswhicharenotinthebest �interest of the organisation.Poor team work. �No strategic views or strategic views not being followed. �Confusing roles and responsibilities. �Repeated mistakes, no lesson learned from mistakes for correcting mistakes. �Firefightingatdifficulttimesratherthanlongtermcorrectiveandpreventiveactions. �Mistrust among various groups. �


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Executive and employees driven by greed rather than inspiring vision. �No respect for resources (time, money, men or machine). �

The symptoms of decline can be detected at earlier stage and can be handled easily. Some of the more obvious signs being:

declining sales relative to competitors•disappearingprofitmargins,•debt loads which continue to grow year after year•

The renewal phase4. Decline will not continue in case when the, external experts focus on the importance of organisational development as a way of preventing decline or reducing its affects.

One of the ways used for renewal is training which induces new knowledge and skills. One can also put in place arigorousprogramtochangeandtransformorganisation’sculture.

FailureMaximumcasesoforganisationfailureoccurduetofactorswithintheexecutive’scontrol.Evenfirmsclosetobankruptcycanovercometremendousadversitytonursethemselvesbacktofinancialhealth.Insomecases,failuremeans being acquired and merged into a larger organisation. In other cases, it occurs when an organisation elects or is forced into bankruptcy.

1.7 Vertical and Horizontal OrganisationalThe structure of an organisation is the manner in which various sub-units are arranged and inter-related. The organisation structure provides guidelines on hierarchy, line of authority and relationships, linkage between different functions and coordination with environment. Structure in an organisation has three important components:

Complexity• refers to the degree to which activities within the organisation are differentiated. This differentiation has three dimensions:

Horizontal � differentiation refers to the degree of differentiation between units based on the orientation of members, the nature of tasks they perform and their education and training,Vertical � differentiation is characterised by the number of hierarchical levels in the organisation, andSpatial � differentiationisthedegreetowhichthelocationoftheorganisation’soffices,facilitiesandpersonnelare geographically distributed.

Formalisation • refers to the extent to which jobs within the organisation are specialised. The degree of formalisation can vary widely between and within organisations;Centralisation• refers to the degree to which decision-making is concentrated at one point in the organisation.

The grouping of employees or departmentalisation in various types of organisation structures can be based on:function or speciality•product line•customer or market segment•geographical area•workflowprocess•combination of the above•

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1.7.1 Types of Organisation StructuresThe different types of organisation structures are:

Function oriented (vertical) organisation structureThe basic foundation of such organisations started from 20th century when there was lot of emphasis on specialisation during this industrial revolution era.

The key underlying principals for these structures are:Specialisation of labour•Business processes were decomposed into narrower and narrower tasks•Efforts were focused on improving the performance of those individual tasks•Organisationalunits(functionaldepartments)alsoreflectedthisnarrowspecialisation•

General Manager

Production Manager Maintenance Manager Material Manager Finance Manager HR Manager

Executive

Jr. Executive

Jr. Executive

Jr. Executive

Jr. Executive

Jr. Executive

Executive Executive Executive Executive

Fig. 1.2 Function oriented organisation structure (vertical organisation)

The shortcomings of vertical type of structure are:Internal focus on functional goals rather than outward-looking concentration on winning customers and delivering •value.Loss of important information as transactions travel up and down the multiple levels and across the functional •departments.Fragmentation of performance objectives brought about by a multitude of distinct and fragmented goals.•Added expense involved in coordinating the overly fragmented work and departments.•Stiflingofcreativityandinitiativeofworkersatlowerlevels.•Slow responsiveness to changes in the external environment and to customer issues.•Loss of sight of the totality of the business processes.•

Function oriented structure is task based.

Product oriented organisationIndustrialisation and competition were brought in the concept of product oriented organisations, which were comparativelybetter inmany respects.A typicalproductorientedorganisationstructure is shown in thefigurebelow.


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Accounting

Pr oduction

Marketing Marketing

Production

Accounting

CD Cabinets Disk Boxes

HR F inance

General Manager

Fig. 1.3 Product oriented organisation structure

Growth of the organisation in vast areas makes the management to operate the product organisation from multi locations. This brought forward the concept of multi-locational or geographical based organisations. Structure for thistypeoforganisationisshowninthefigurebelow.

Asia

South America

Europe Accounting

Marketing

Production

Marketing

Production

Accounting

Western Division Southeast Di vision International

HR Finance

General Mana er

g

Fig. 1.4 Multi locations or geographical based organisation structure

Process oriented (horizontal) organisation structuresProcess is different from the task in the following ways:

Ataskisadefinedunitofwork,usuallyperformedbyonepersonorsmallgroup.•A process is a related group of tasks that together create an outcome of value to a customer.•Only when all the tasks are performed together as a holistic process the value is created.•When rewards are based on task performance, the total process performance will usually be sub-optimal.•

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A process oriented organisation is based on core processes. The core processes comprise of:End-to-endwork,informationandmaterialflows.•Extends across a business (and even beyond the business boundaries) and drives the achievement of fundamental •performanceobjectivestoanorganisation’sstrategy.Usually not more than 4 to 10 in a typical organisation, this also depends on the business strategy of the •organisation.

The major core business processes in an organisation are:Order acquisition process• transformsasalespotentialintoafirmorderinhand.Orderfulfilmentprocess• transformsanorderintodeliveredgoods,asatisfiedcustomer,andthepaidbill.Product development process• transforms a customer need and/or an advanced concept into a manufacturability designthatsatisfiesthevalueproposition.New business development process• transforms technological and conceptual advancements into new businesses.Customer support process• transforms customer concerns and needs into value-adding solutions.

Major processes are divided into sub-processes, which are then described in terms of basic tasks or activities. Common characteristics of horizontally structured organisations are:

Core processes group employees according to the sets and scope of multiple skills needed to meet performance •objectives.Teams constitute the fundamental units of the organisation and are largely self-supervised.•Process owners are responsible for leading and managing the entire core processes.•The primary focus is external rather than internal, emphasising the delivery.•

Aprocessbasedorganisationstructureisshowninthefigurebelow.

Customer Teams Product Teams New Product Teams

Customer Acquisition and MaintenanceNew Product Development Process Order Fu ent Process

General M anager

Fig. 1.5 Process oriented organisation structure

Merits of a process based organisation structure are:Eliminates the numerous handoffs that occur in functionally organised companies.•Facilitates a tight alignment with what the customer wants.•Highlycompatiblewiththe“leanparadigm”.•


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Fewerlevelsofhierarchyreduced“overhead”effort.•Facilitatesagility,rapidre-configuration,asexternalenvironmentchanges.•Performance measures and incentives/rewards can be tied more directly to tangible, measurable work •progress.Enhances morale•

Process-complete departments can have shorter cycle times for the jobs only if their managers have taken steps to reduce the cycle time by cultivating a collective sense of responsibility. Means for fostering collective responsibility are:

Structure jobs with overlapping responsibilities.•Arrangeworkareassothatpeoplecanseeeachother’swork.•Base incentives or rewards on group performance.•Design procedures so that employees with different jobs are better able to collaborate.•

Restructuring by process can lead to faster cycle times, greater customer satisfaction, and lower costs, but only if the organisation has a collaborative culture. But if companies are not willing to change their culture, they may be better off leaving functional departments intact.

Process oriented organisations are superior to functional organisations in many situations; however, one size does notfitall inorganisational focus.Therearestillmanysituations inwhich theclassicalverticalorganisation issuperior.

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SummaryAnorganisationisdefinedas“astable,formalsocialstructurethatusesresourcesandproducesthemtoproduce•output. This output could be a physical product or service”.Organisationstructuredefinesthedivisionofjobs,organisationcomponentsthererelationshipandhierarchy•and the location of formal authority and power.The key elements in designing the organisational structure are: work specialisation, departmentalisation, chain •of command, span of control, centralisation and decentralisation, and formalisation.The major characteristics of an organisation includes; division of labour, decision structure, and standard •operating procedure.Some important organisational functions of an organisation are: business, charity, bureaucracy, international •cooperation,collaborativenetworksfunction,pacifistfunctionsandsoon.Organisations go through different phases of growth and to sustain the growth lays the need to understand the •organisationallifecycle.Thelifecycleofanorganisationhavefivedistinctstagesnamely,start-up,growth:thisis sometimes divided into an early growth phase (fast growth) and maturity phase (slow growth or no growth), decline, renewal, and failure.The structure of an organisation is the manner in which various sub-units are arranged and inter-related. The •organisation structure provides guidelines on hierarchy, line of authority and relationships, linkage between different functions and coordination with environment. Structure of an organisation has three main components namely, complexity, formalisation and centralisation.•The organisation structures are mainly of three types, function oriented and process oriented.•

Referencesmikesails1, 2011. • Project Life Cycle, Phase & Process Groups [Video Online] Available at: <http://www.youtube.com/watch?v=iVSXB7mMfpw&feature=results_video&playnext=1&list=PLE4220C04ACF860F1> [Accessed 30 November 2011].sparksthisbaby34, 2010. • Organizational Structure [Video Online] Available at: <http://www.youtube.com/watch?v=ZYOAOjZRZ7E> [Accessed 30 November 2011].slideshare.net, 2009. • Organization Structure & Details [Online] Available at: <http://www.slideshare.net/ashutosh_bangalore/organization-1833261> [Accessed 30 November 2011].learnmanagement2.com. • Organisational Functions [Online] Available at: <http://www.learnmanagement2.com/ORGANISATIONAL%20FUNCTIONS.htm> [Accessed 30 November 2011].Kimberly, J., 1980. • Organizational Life Cycle (Jossey Bass Social and Behavioural Science Series). Jossey-Bass Inc Pub.Simon, J. and Donovan, J., 2001. • The Five Life Stages of Non-profit Organizations: Where You Are, Where You’re Going, and What to Expect When You Get There. Fieldstone Alliance.

Recommended ReadingAdizes, I., 1990. • Corporate Lifecycles: How and Why Corporations Grow and Die and What to Do About It. The Adizes Institute.Burton, R., 2006. • Organizational Design: A Step-by-Step Approach. Cambridge University Press.Miles, R. and Snow, C., 2003. • Organizational Strategy, Structure, and Process (Stanford Business Classics). Stanford Business Books.


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Self Assessment____________ refers to the way that the administrative execution and enforcement of legal rules is socially 1. organised.

Collaborative functionsa. Bureaucracyb. Charityc. International controld.

___________ refers to the degree to which jobs within the organisation are standardised.2. Formalisationa. Centralisationb. Decentralisationc. Departmentalisationd.

Which of the following statements is false?3. Growth of the organisation in vast areas makes the management to operate the product organisation from a. multi locations. Industrialisation and competition brought in the concept of product oriented organisations.b. The structure of an organisation is the manner in which various sub-units are arranged and inter-related. c. Maximumcasesoforganisationfailureoccurduetofactorswithintheemployee’scontrol.d.

Which of the following statements is true?4. Organisations dwell in environment from which they draw resources and to which they provide goods or a. services.Informalorganisationsarelesslikelytoadoptoradheretoasignificantcodeofwrittenrulesorpolicies.b. Decision-making structures are used to organise competition. c. Thenumberofemployeesthatthemanagercanefficientlyhandleandeffectivelydirectdefinesthespand. of control.

Match the following.5.

Organisational 1. structure

It refers to the degree to which decision-making is concentrated at one A. point in the organisation.

Bureaucracy2. It refers to the institutional arrangements and mechanisms for mobilising B. human,physical,financialandinformationresourcesatalllevelsofthesystem.

Chain of command3. It refers to the way that the administrative execution and enforcement of C. legal rules is socially organised.

Centralisation4. It is an unbroken line of authority that extends from the top to lowest level D. andclarifieswhoreportstowhom

1-B, 2-D, 3-C, 4-Aa. 1-B, 2-C, 3-A, 4-Cb. 1-B, 2-C, 3-D, 4-Ac. 1-A, 2-C, 3-D, 4-Bd.

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Which of the following is referred to the degree to which activities within the organisation are differentiated?6. Formalisationa. Complexityb. Decentralisationc. Structured.

A _________organisation is any type of organisation that does not have a central geographical location and 7. exists solely through telecommunication tools.

virtuala. socialb. mutualc. verticald.

Whichofthefollowingdefinesthearrangementandinterrelationshipofcomponentpartsandpositionsinan8. organisation?

Organisation structurea. Organisation functionb. Organisation typesc. Organisation controld.

______________ differentiation refers to the degree of differentiation between units based on the orientation 9. of members, the nature of tasks they perform and their education and training.

Formal a. Verticalb. Spatialc. Horizontald.

___________ are also characterised by attempts to share and exercise political and social power and to make 10. decisions on a consensus-driven and egalitarian basis.

Cooperativesa. Collectivesb. Mutualsc. Collaboratived.


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Chapter II

Management Functions and Business Processes

Aim


discuss the key management functions•

explain requirement analysis•

classify the levels of management•

Objectives


explain business functions and processes•

identify the methods of requirement analysis•

comprehend information systems requirements •

Learning outcome


recognise tools for requirement analysis•

explicatetheterm‘prototype’•

definetheconceptof‘informationsystem’•

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2.1 Management Functions and LevelsForsuccessfulandefficientoperationofanorganisationappropriatemanagementisrequired.

Management: Theterm“Management”canbeusedtodescribetheslateofmanagersofanorganisation.AGoverningBody is a term used to describe a group formed to manage an organisation, such as a sports league. Management is knownas“businessadministration”.

Incaseoffor-profitwork,theprimaryfunctionofmanagementistosatisfyarangeofstakeholders.Thisinvolvesmakingprofit for the shareholders, creatingvaluedproducts at a reasonablecost for customers, andprovidingrewardingemploymentopportunitiesforemployees.Innon-profitworkit isalsoimportanttokeepthefaithofdonors. According to most of the management models, shareholders vote for the board of directors, and the board then hires senior management.

Public, private and voluntary sectors place different demands on managers, but all must retain the faith of those who select them, of those people who fund the organisation, and of those who work for the organisation. If they fail to convince employees that they are better off staying than leaving, the organisation will be forced into a downward spiralofhiring,training,firing,andrecruiting.Managementalsohasaresponsibilitytoinnovateandimprovethefunctioning of the organisation.

2.1.1 Management FunctionsThefivebasicmanagementfunctions,whichamanagerhastoperformasperclassicalmodelofmanagement,aredescribed below.

PlanningPlanning is a process of forecasting the future. It requires rigorous analysis of input, output and costs. It involves the development of business vision, mission and objectives and how it will be accomplished. While planning, one has to view the organisation such as its mission, goals, and techniques as such what things they want to accomplish at the end.

To facilitate the planning process in an organisation following things are done:goals are set•objectivesaredefined•policies, rules and procedures are laid down•programs are worked out•budgets,strategies,andschedulesarefinalised•

OrganisingOrganising it the process of identifying the entire job, dividing the job into convenient subjects or tasks, and allocating sub-jobs to persons or group of persons and then delegating authority to each so that, the job is carried out as planned.

CoordinatingCoordination is the process of placing the right person or group of persons at the right job. This function involves activitieslikedefiningtherequirementswithregardtothepeopleforthejobtobedone,selectingsuitablepersons,training and developing them so that they can perform the desired job.


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DirectingDirectingistheabilitytomotivatetheemployee’stoachievethegoal’softhecompanyinthemosteffectiveandoptimalway.Itgivestheabilitytoconvertplansinperformance.HenriFayolhasidentifiedthefunctionofdirectingwith command. According to modern management experts directing includes:

Communication•Motivation•Leadership•

ControllingControllingisthelastprocessofcreatingperformancestandardsbasedontheorganisation’sobjectives,measuringand reporting actual performance and comparing the two. Actual performance is compared with previously set goals. Ifthereareanysignificantdeviations,managementmusttakethecorrectivestepstobringthethingsontrack.Thus,controlling is the process that involves:

fixingstandardsformeasuringworkperformance•measurement of actual performance•comparingactualwithstandardsandfindingoutdeviations,ifany•taking corrective actions•

2.1.2 Levels of ManagementIn an organisation, managers are responsible for the work performance of other organisational members under their span of control. They have formal authority to use organisational resources and to make decisions. In organisations, there are three levels of management:

top-level•middle-level•first-leveloroperationallevel•

Fig. 2.1 shows these three basic organisational levels. These three main levels of managers form a hierarchy, in which they are ranked in order of importance. In most of the organisations, the number of managers at each level issuchthatthehierarchyresemblesapyramid,withmanymorefirst-levelmanagers,fewermiddlemanagers,andthe fewest managers at the top level. These management levels differ in various aspects such as: their possible job titles and their primary responsibilities and the paths taken to hold these positions.

Top Management

Middle - Management

Operational Management

Fig. 2.1 Basic levels of management

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Top-level managersTop-level managers or top managers are also known as senior management or executives. These individuals are at thetoponeortwolevelsinanorganisation,andholdtitlessuchas:ChiefExecutiveOfficer(CEO),ChiefFinancialOfficer (CFO),ChiefOperationalOfficer (COO),Chief InformationOfficer (CIO),Chairperson of theBoard,President, Vice president, Corporate head and so on.

The decisions made by top-level managers affect the entire organisation. Top managers are not involved in the day-to-dayactivitiesofthefirm;rather,theysetgoalsfortheorganisationanddirectthecompanytoachievethem.Topmanagers are ultimately responsible for the performance of the organisation.

Middle-level managersMiddle-levelmanagersormiddlemanagersworkalevelbelowthetopmanagers.Middlemanagers’jobtitlesincludegeneral manager, plant manager, regional manager, and divisional manager.

Middle-level managers are responsible for carrying out the goals set by top management. They do so by setting goalsfortheirdepartmentsandotherbusinessunits.Middlemanagerscanmotivateandassistfirst-linemanagerstoachieve business objectives. Middle managers may also communicate upward, by offering suggestions and feedback to top managers. Because middle managers are more involved in the day-to-day workings of a company, they may providevaluableinformationtotopmanagerstohelpimprovetheorganisation’sbottomline.

Jobs in middle management vary widely in terms of responsibility and salary. Depending on the size of the company and the number ofmiddle-levelmanagers in thefirm,middlemanagersmay supervise only a small groupofemployees, or they may manage very large groups, such as an entire business location. Middle managers may be employeeswhowerepromotedfromfirst-levelmanagerpositionswithintheorganisation,ortheymayhavebeenhiredfromoutsidethefirm.

First-level or operational level managersFirst-levelmanagersarealsocalledfirst-linemanagersorsupervisors.Thesemanagershavejobtitlessuchas:officemanager, shift supervisor, department manager, foreperson, crew leader, and store manager.

First-line managers are responsible for the daily management of line workers, i.e., the employees who actually producetheproductoroffertheservice.Therearefirst-linemanagersineveryworkunitoftheorganisation.Thoughthefirst-levelmanagersdonotsetgoalsfortheorganisation,theyhaveaverystronginfluenceonthecompany.These are the managers that most employees interact with on a daily basis.

Knowledge workersMost of the organisations today also have another level for knowledge workers. Primarily, the knowledge workers are above the operational managers in the organisations. These workers deal more with research and development jobs and also with analysing data for knowledge extraction.

The interaction amongst the three levels of the management can be seen as: The top management, which is also known as strategic level, establishes the policies, plans and objectives of the company as well as general budget framework of the company under which the various departments will operate. These factors are passed down to middle management,wheretheyaretranslatedintospecificrevenue,costandprofitgoals.Thesearereviewed,analysedandmodifiedinaccordancewiththeoverallplanandpolicies,untilagreementisreached.Middlemanagementthenissuesthespecificschedulesandmeasurementyardstickstotheoperatingmanagement.Theoperationallevelhasthejobofproducing,andsellingofthegoodsandservicesrequiredtomeettherevenueandprofitgoals,whichinturnwillenablethecompanytoreachitsoverallplansandobjectives.Thisinteractionisshowninthefigurebelow.


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Knowledge Worker L evel

Operational Management

… Goods…………….Services…………………

Schedules …………………..

Middle Management

Revenue…….. C osts….

Policies…. Plans…… Objectives……

Top Management

Fig. 2.2 Management roles at various levels

2.2 Business Functions and ProcessesBusiness functionsarebusinessactivitieswhicharegroupedaround functionssuchasproduction,financeandpersonnel, and so on, resulting in department or an area of the business organisation. Each of these functional areas is interdependent and is part of the organisational system. A typical set of functions in a manufacturing organisation includes:

Sales and marketing•Manufacturing and production•Finance and accounts•Human resource•Materials management•

Information technology now is an integral part of all business functions. Some of the main activities for each functionalareahavebeenshowninthefig.2.3.

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Materials M anagement Material Planning Procurement Bill of Material Cost estimate Warehousing

Human Resource Employee Recruitment Selection Development Transfer Evaluation Welfare Retirement

Fi nance & Accounts Fi nancial Planning Budgeting Cost accounting Payroll Accounts Receivable A ccounts Payable Assets Accounting

Sales & Marketing Sales Orders Forecasting Sales Analysis BillingDistribution Area Sales control Stock Availability Pricing Product Promotion

Production Production Planning & Control Maintenance Quality Control R & D

Functional Systems

Fig. 2.3 Main activities of functional areas

Business processesAbusinessprocessisdefinedasanyfunctionwithinanorganisationthatenablestheorganisationtosuccessfullydeliveritsproductsandservices.Itcanalsobedefinedasauniquemannerinwhichworkisorganised,coordinated,and focused to produce a valuable product or service.

On the one hand, business processes are concreteworkflowsofmaterial, information, andknowledge-sets ofactivities. On the other hand, business processes represent unique ways in which organisations coordinate work, information, and knowledge, and the ways in which management chooses to coordinate work. Table 2.1 describes typical business processes for each of the functional areas.


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Serial no. Functional area Typical business process

1 Sales or marketingIdentifying customers•Familiarising customers with the product•Selling the product•

2 Manufacturing or productionAssembling the product•Quality checking•Making bills of materials.•

3 Finance or accountsPaying creditors•Managing cash•Creatingfinancialstatements•

4 Human resourceHiring employees•Working out compensation plan•Employee performance evaluation.•

5 Others such as materialsIssuing tender enquiries•Awarding purchase orders•Carrying out inventory control•

Table 2.1 Functional area and business processes

Although each of the major business functions has its own set of business processes, many other business processes are cross-functional, transcending the boundaries between sales, marketing, manufacturing, and research and development. These cross-functional processes cut across the traditional organisational structure, grouping employees fromdifferentfunctionalspecialtiestocompleteapieceofwork.Forexample,theorderfulfilmentprocessatmanycompanies requires cooperation among the sales, the accounting function, and the manufacturing function as shown inthefigurebelow.

Generate Order

Submit Order

Check credit

Ship product

Assemble product

Approve credit

Create invoice

Fig. 2.4 Cross functional business process

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Organisational structure varies with the changing industry but for most of them perform similar business processes.

2.3 Information Systems RequirementsWith the rapid development of information technology, world is moving from industrial age to knowledge age. The new challenge to the management which surrounds us requires profound change in the way we consider the organisations, the way we develop our businesses, the way we manage, and the structures within.

Productivityandefficiencyofbusinesstoreducecostofproductsandservicesandtousetechnologytocontinuallyinnovateisnotnewexcept that thecompetitionhasbecomemuchfiercethaneverbefore.Globalisationof themarketplace and means of accessing the same, through national and global information superhighways have given a new dimension to the concept of information. Information and knowledge are critical to manage change, which is the salient feature of the information age.

InformationInformation is a necessary and vital input for the management on which decision making is based. The characteristics of the information are:

Timeliness:• It should reach the recipient in time and up-to-date. For effective decision making information must reach the decision maker at the right time so that he or she can take the desired action. The delayed information at times can even lead to loss of purpose itself or in substantial loss.Reliability:• Any information can be reliable only if it is factual, accurate and complete.Usefulness:• Relevance and adequacy of the information for the need for which it is required makes it useful to purpose.Explicit:• Quality information is said to be explicit if it does not require further analysis by the recipient for decision-making.

Informationcanbedefinedasprocesseddataasshowninthefigurebelow.

Information Processing Data

Fig. 2.5 Information processed data

SystemSystemisdefinedas“acollectionofelementsintegratedtoachieveacommondefinablegoal”.Forexample,abusiness organisation can be considered as a system, in which the departments, sections and units and so on, are joined together for a common goal. An information system can be a set of collection of elements starting from collectionofdata,itsprocessingandpresentationforachievingadefinedorsetgoal.

InformationProcessing Data

Fig. 2.6 Information system

In business, information systems support business processes and operations, decision-making, and competitive strategies.


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Information systemInformation system is a set of processes that helps in collecting the data, storing the data, processing the data and disseminating information to support decision making process of key managers.

2.4 Requirement AnalysisRequirements analysis, in software engineering, is used to describe all the tasks that go into the instigation, scoping anddefininganeworalteredcomputersystem.Requirementsanalysisisanimportantpartofthesoftwareengineeringprocess; whereby business analysts or software developers identify the needs or requirements of a client; having identifiedtheserequirementstheyaretheninapositiontodesignasolution.Requirements analysis is also known under other names, such as:

requirements engineering•requirements gathering•requirements capture•operational concept documenting•systems analysis•requirementsspecification•

The challengeItisachallengetosuccessfullycompletea“requirementsanalysis”task.Itisadifficulttaskbecauseitisnoteasyto identify all the stakeholders, give them all an appropriate form of input, and document all their input in a clear and concise format. The requirements engineer is expected to determine whether or not the new system is:

feasible•schedulable•affordable•legal•ethical•

Thegeneraldifficultiesinvolvedwithrequirementsanalysisare:The right people with adequate experience, technical expertise, and language skills may not be available to lead •the requirements engineering activities.Theinitialideasaboutwhatisneededareoftenincomplete,wildlyoptimistic,andfirmlyentrenchedinthe•minds of the people leading the acquisition process.Thedifficultyofusingthecomplextoolsanddiversemethodsassociatedwithrequirementsgatheringmay•negatethehopedforbenefitsofacompleteanddetailedapproach.

Stakeholder issuesA number of ways users can inhibit requirements gathering are:

Usersdon’tunderstandwhattheywant.•Userswon’tcommittoasetofwrittenrequirements.•Usersinsistonnewrequirementsafterthecostandschedulehavebeenfixed.•Communication with users is slow.•Users often do not participate in reviews or are incapable of doing so.•Users are technically unsophisticated.•Usersdon’tunderstandthesoftwaredevelopmentprocess.•

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This commonly leads to the situation where user requirements keep changing even when the software development has been started. Because new requirements may sometimes mean changing the technology as well, the importance offinalisinguserrequirementsbeforethecommencementofdevelopmentshouldbemadeverycleartothebusinessusers. Knowing their objectives and expectations regarding the solution beforehand and documenting agreed requirements is fundamental to the success of a project.

Developer issuesThe common problems caused by software developers are:

Software developers and end users often have different vocabularies. Consequently, they can believe they are •inperfectagreementuntil thefinishedproduct issupplied.Thedutytobridgethisgapisoftenassignedtobusiness analysts, who analyse and document the business processes of business units affected by the proposed business solution, and business systems analysts, who analyse and document the proposed business solution from a systems perspective.Softwaredevelopersoftentrytomaketherequirementsfitinanexistingsystemormodel,ratherthandevelop•asystemspecifictotheneedsoftheclient.Analysis is often carried out by programmers, rather than business analysts. It is often the case that programmers •lack the people skills and the domain knowledge to understand a business process properly.Software developers have pre-conceived notions about the problem.•

SolutionsOne of the solutions to the problems of requirement analysis are to recognise that requirements analysis is a specialist fieldbestcarriedoutbyexperts,andthebusinessorsystemanalystsaretheonewhocouldbridgethegapbetweenthebusinessandITworld.Theproblemwiththisapproachisthat,ithasoftenbeendifficulttofindstaffswhopossess equally good people and technical skills. In addition, the techniques used to analyse requirements have not provensufficientlyeffectiveinallsituations.

Techniques introduced in the1990s likeprototyping,unifiedmodelling language (UML),Usecases,andagilesoftware development are often put forward as a promising solution to this issue.

Recently,attemptshavebeenmadetoaddressthesedifficultieswiththeestablishmentoftheInternationalInstituteof Business Analysis, whose main goals are the creation of a common body of knowledge for business analysis, andtouseitasbasisforcertificationofbusinessanalysisprofessionals.Also,anewclassofapplicationsimulationorapplicationdefinitiontoolshaveenteredthemarket.ThesetoolsaredesignedtobridgethecommunicationgapbetweenbusinessusersandtheITorganisation,andalsoallowtheapplicationstobe‘testmarketed’beforeanycode is produced.

The best of these tools offer:Electronicwhiteboardstosketchapplicationflowsandtestalternatives.•Ability to capture business logic and data needs.•Abilitytogeneratehighfidelityprototypesthatcloselyimitatethefinalapplication.•Interactivity•Capability to add contextual requirements and other comments.•Ability for remote and distributed users to run and interact with the simulation.•


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2.5 Tools and Methods for Requirement PlanningRequirementsanalysisisalongandadifficultprocesswhichrequirestherequirementsspecialistsdotheirworkbytalkingtopeople,documentingtheirfindings,analysingthecollectedinformationtodiscoverinconsistenciesandoversights, and then talking to people again. This process can go on for anywhere from a week to a year or more, and may continue throughout the life cycle of a system.

New systems change the environment and relationships between people, so it is important to identify all the stakeholders, take into account all their needs and ensure they understand the implications of the new systems. Most of the time this objective is not met because of the following reasons:

There is not enough communication up front and important needs are overlooked when the system is •implemented.There is not enough ongoing communication during system development and the users are disappointed by the •newsystem’scharacteristics.

Tokeepallthesediscussionswellorganisedandefficient,theevolvingrequirementsmustbedocumented.Analystscan employ several techniques to get the requirements from the customer. Traditional techniques used by analyst include things such as holding interviews, or holding focus groups and creating requirements lists. Modern techniques include prototyping, and use cases. Where necessary, the analyst will employ a combination of these methods to establish the exact requirements of the stakeholders, so that a system that meets the business needs is produced.

2.5.1 Methods for Requirement AnalysisMethods for requirement analysis consist of the following:

Stakeholder interviewsStakeholderinterviewsarenecessaryinrequirementspecification.Inalargesystemthenumberofindividualstobe interviewed is large which increases the time and cost. This often leads to pressure to shorten the analysis phase despite the impact incomplete requirements can have on a project. Stakeholder interviews also often reveal major shortcomings with regard to how existing business processes works and identify how to improve this in the future. This has a positive impact for the business; it will also lead to previously unforeseen increases in time and cost.

Requirement workshopsTo overcome the issues, where systems are complex the usual method is to conduct requirement workshops. The analyst brings the main stakeholders in the system together in order to analyse the system and develop the solution. These workshops are termed as Joint Requirements Development (JRD) sessions, where requirements are jointly identifiedanddefinedbystakeholders.

Such workshops are ideally carried out in a controlled environment, so that the stakeholders are not distracted. A facilitatorcanbeusedtokeeptheprocessfocusedandthesesessionswilloftenbenefitfromadedicatedscribeto document the discussion. Facilitators may make use of a projector and diagramming software or may use props as simple as paper and markers. Often multiple workshops are required to bring the process to a successful conclusion.

Requirementsworkshopsareconsideredtobeaveryusefultechniquewhichcansavesignificanttime.Though,itcanbeadifficulttasktobringalltherequiredstakeholderstogetheratonetime.Otherdrawbackincludethatsomestakeholders do not contribute forcefully enough in workshops and their requirements will not receive the appropriate attention, inevitably producing a limited solution. Additionally, while requirement workshops are an excellent techniqueformodellingtheexistingsystem,theyarenotsousefulfordefiningthenatureofthesolution.

Contract-style requirement listsOne way of documenting requirements has been contract style requirement lists. In a complex system such requirements lists can run to hundreds of pages. Such lists are very much out of favour in modern analysis; as they have proved spectacularly unsuccessful at achieving their aims; but they are still in use to this day.

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Strengths:Provides a checklist of requirements.•Provides a contract between the project sponsor(s) and developers.•For a large system it can provide a high level description.•

Weaknesses:Such lists can run to hundreds of pages. It is virtually impossible to read such documents as a whole and have •a coherent understanding of the system.Such requirements lists abstract all the requirements and so there is little context as:•

Thisabstractionmakesitimpossibletoseehowtherequirementsfittogether. �Thisabstractionmakesitdifficulttoidentifywhicharethemostimportantrequirements. �This abstraction means that the more people who read such requirements the more different visions of the �system we get.This abstractionmeans that it’s extremely difficult to be sure that we have themajority of the �requirements.

These lists create a false sense of mutual understanding between the stakeholders and developers.•These contract style lists give the stakeholders a false sense of security that the developers must achieve •certain things. However, due to the nature of these lists, they inevitably miss out crucial requirements which areidentifiedlaterintheprocess.Developersusethesediscoveredrequirementstorenegotiatethetermsandconditions in their favour.These requirements lists are no help in system design, since they do not lend themselves to application.•

PrototypesPrototyping became a solution to the requirement analysis problem in the mid-1980s. Prototypes are mock ups of thescreensofanapplicationwhichallowuserstovisualisetheapplicationthatisn’tyetconstructed.Prototypeshelpusers get an idea of what the system will look like, and make it easier for users to make design decisions without waitingforthesystemtobebuilt.Whentheywerefirstintroducedtheinitialresultswereconsideredamazing.Majorimprovements in communication between users and developers were often seen with the introduction of prototypes. Early views of the output led to fewer changes later and hence reduced overall costs considerably.

Over the next decade, it was seen that inspite of being a useful technique, it did not solve the requirements problem:

Managersonce they see theprototypehaveahard timeunderstanding that thefinisheddesignwillnotbe•produced for some time.Designers often feel compelled to use the patched together prototype code in the real system, because they are •afraidto‘wastetime’startingagain.Prototypesprincipallyhelpwithdesigndecisionsanduserinterfacedesign.However,theycan’ttelluswhat•the original requirements were.Designers and end users may focus too much on user interface design and too little on producing a system that •serves the business process.

Prototypescanbeflatdiagramsreferredtoas‘wireframes’orworkingapplicationsusingsynthesisedfunctionality.Wireframes are made in a variety of graphic design documents, and often remove all colour from the software design (i.e.,useagreyscalecolourpalette)ininstanceswherethefinalsoftwareisexpectedtohavegraphicdesignappliedtoit.Thishelpstopreventconfusionoverthefinalvisuallookandfeeloftheapplication.


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Use casesA use case is a technique for capturing the potential requirements of a new system or software change. Each use case provides one or more scenarios that convey how the system should interact with the end user or another system to achieveaspecificbusinessgoal.Usecasesavoidtechnicaljargon,preferringthelanguageoftheenduserordomainexpert. Use cases are often co-authored by software developers and end users.

Use cases are deceptively simple tools for describing the behaviour of the software. A use case contains a textual description of all the ways that the intended users could work with the software through its interface. Use cases do not describe any internal workings of the software, nor do they explain how that software will be implemented. They simply show the steps that the user follows to use the software to do his or her work. All of the ways that the users interact with the software can be described in this manner.

During the 1990s use cases have rapidly become the most common practice for capturing functional requirements. This is especially the case within the object-oriented community where they originated, but their applicability is not restricted to object-oriented systems, because use cases are not object oriented in nature.

Each use case focuses on describing how to achieve a single business goal or task. From a traditional software engineering perspective a use case describes just one feature of the system. For most software projects this means that multiple, perhaps dozens, of use cases are needed to fully specify the new system. The degree of formality of a particularsoftwareprojectandthestageoftheprojectwillinfluencethelevelofdetailrequiredineachusecase.

Ausecasedefinestheinteractionsbetweenexternalactorsandthesystemunderconsiderationtoaccomplishabusiness goal. Actors are parties outside the system that interact with the system; an actor can be a class of users, roles users can play, or other systems.

Usecasestreatthesystemasa“blackbox”,andtheinteractionswithsystem,includingsystemresponses,areasperceivedfromoutsidethesystem.Thisisdeliberatepolicy,becauseitsimplifiesthedescriptionofrequirements,and avoids the trap of making assumptions about how this functionality will be accomplished.

A use case should:describe a business task to serve a business goal•be at the appropriate level of detail•be short enough to implement by one software developer in single release•

Use cases are very good at establishing the functional requirements; however they are not suited to capturing non-functional requirements.

SoftwarerequirementsspecificationAsoftwarerequirementsspecification(SRS)isacompletedescriptionofthebehaviourofthesystemtobedeveloped.It includes a set of use cases that describe all of the interactions that the users will have with the software. In addition to use cases, the SRS contains functional requirements and non-functional requirements.

Functional requirementsdefinetheinternalworkingsofthesoftwarei.e.,thecalculations,technicaldetails,datamanipulationandprocessing,andotherspecificfunctionalitythatshowshowtheusecasesaretobesatisfied.

Non-functional requirements impose constraints on the design or implementation such as performance requirements, quality standards, or design constraints.

StakeholderidentificationIn1990'smajoremphasiswaslaidontheidentificationofstakeholders.Intheearlydayssystemswerebuiltfortheprojects sponsor(s), who were usually management types and many of these systems were designed by managers withlittleornocontributionsfromtheendusersasaresultthesesystemsfailedbadly.Therefore,sincethe1990’s

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the search for stakeholders is taking on a more whole system approach. The stakeholders do not just exist in the organisation but there are other stakeholders as well which includes:

Those organisations that integrate horizontally with the organisation.•Anybackofficesystemsororganisations.•Higher management.•

Successfulidentificationofthestakeholdersensuresthatanalysiswilltakeintoaccounttherightelements.

2.5.2 Tools for Requirement AnalysisWith the use of proper tools for requirement analysis helps in avoiding rework, which typically accounts for 40% ofadevelopmentorganisation’stotalspendtime,andmoneythatorganisationscannotaffordintoday’shighlycompetitive business landscape.

ItisimportantforITorganisationstodeliversoftwarerequirementsdefinitionandmanagementsolutionatlesscostbygettingrequirementsrightthefirsttimeandensuringbusinessITalignmentthroughoutthesoftwarelifecycle.And the approach taken by the IT organisations should be such that it takes into account the process maturity and leveragesindustrybestpracticestoevaluatecurrentperformanceandidentifyspecificareasforimprovement.Thetoolshouldprovideascalable,integratedsoftwarerequirementsdefinitionandmanagementsolutionthatenablesIT organisations to:

Define:• Produce accurate and complete requirements by eliciting, specifying, analysing, and validating requirements early, reducing costly rework later in the development lifecycle.Manage:• Delivertherightproductthefirsttime,everytimebytrackingprogress,communicatingchangesandfocusing resources.Verify:• Ensure quality by tracing requirements though implementation to testing.

The tool should meet the following five critical process areas in software requirements definition and management:

Elicitation•Analysis•Specification•Validation•Management•

ElicitationTo eliminate rework, steps need be taken to help organisations mature their existing requirements elicitation process by:

Selecting appropriate stakeholders.•Identifying appropriate elicitation techniques.•Training team members, including business partners, business analysts, systems analysts, architects and others, •to use the preferred techniques with the appropriate stakeholders.Customising templates for elicitation.•Capture user scenarios in a simple visual form that users readily understand.•


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Close Full Screen

Full Screen Storage | Measure/Audit | Linking /Trace | Reporting/Doc | Security

anagement

Review | | Baseline

VALIDATION

Detail Requirements | Business Model Scenarios

| Use C ase Model | Prototype

SPECIFICATION

Technique | Stakeholders | System Boundaries |

Glossary

ELICITATION

Prioritization | Verify | Risk |

Estimation

ANALYSIS

Strategic & Operational Demand

IT Management & Services

MANAGEMENT

Fig.2.7Thefivecriticalrequirementsdefinitionandmanagementprocessareasanalysis

AnalysisTo ensure that the most important business requirements are delivered, steps need be taken so that organisations mature their existing analysis process by:

Implementing an effective approach for evaluating and prioritising requirements.•Enhancing the skills of analysts for analysing and clarifying requirements.•Enabling a robust, requirements-based estimation and planning process.•

IT organisations deliver increased value to business stakeholders based on greater alignment between business and IT, while business stakeholders deliver more value to their customers because the priorities are aligned with IT. The organisation also gains better estimation and thus, improved predictability of system deliveries.

SpecificationToimproveaccuracyandrelevancy,organisationsmaymaturetheirexistingrequirementsspecificationprocessby:

Definingaconsistenthierarchyofrequirementtypesattributesandtraces,soallstakeholderscaneasilyfind,•filterandsortonthemostrelevantdata.Developing standard templates for each requirement scenario to ensure completeness.•Identifyingvariousspecificationtechniques(forexample,usecasemodels,businessprocessmodels,prototypes,•andtraditionalrequirementsspecifications)andtheirappropriateusesothatrequirementsarecapturedinameaningful, easy-to-understand way.Configuringatoolsinfrastructuretosupportcustomtemplatesandintegrations.•Training development teams in the appropriate use of the tools.•

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Providing automated trace ability across the various requirements types.•Training team members to leverage traces throughout the lifecycle to achieve overall project control.•Leveragingselectedtechnologytodetailrequirementswithattributes,traceability,screenshots,images,office•documents and more to make requirements clear and understandable to drive development most effectively.

ValidationTo improve accuracy and completeness, organisations may mature their existing requirements validation process by:

Definingandimplementingaverificationprocesswithclearqualitymetricstoreducedefects.•Automatingvalidationandverificationprocessesthroughthestoryboardexecutiontodriveprocessadoption•and enforcement and improve consistency and quality.Definingandimplementingaprocessforvalidatingrequirementswithstakeholdersthatensuresrequirements•signoff.

ManagementTo maximise responsiveness and control, organisations may mature their existing requirements management process by:

Establishing processes for managing changes to existing requirements, including a standard process for requesting •changes to enable better control of scope and commitment, improved impact analysis and more reliable project planning.Definingproceduresforevaluationandacceptanceamongstakeholders.•

With the use of the appropriate tool, organisations are expected to improve their ability to handle ongoing changes, maximising business impact, while minimising schedule and scope impact, gain greater ability to manage the ever-increasing requests from business teams in a collaborative, factual way, and increase business stakeholder satisfaction because development is more responsive, delivering the right software on time and within budget.

2.5.3 Requirement Analysis ToolsQuite a few number of requirement analysis tools are available for commercial use. Given below is the list of few of these tools which also indicates the suppliers of these tools as well as the salient features:

Accept 360°• from Accept Software Corporation is a requirements management tool that also supports product planning.Thistoolhelpsuserstodefineandtrackfeaturedependencieswithtreediagrams,andtorelatetheseto the market, project plans, implementation considerations and competitor analyses.Active Focus• from Xapware supports the software application life cycle.Agility • from Agile Edge is a tracking database for user requirements, issues, tasks and bug tracking, permitting tracing between these items. There is a simple user interface displaying a table of items with status, symbols and text.AnalystPro • from Goda Software supports requirements editing and trace ability, change control, diagrams including use cases, and other features of full requirement management (RM) tools at a low price per seat.Kris • of Goda Software is an affordable, scalable and collaborative tool for requirements tracking, trace ability analysis and document management. It is easily deployable and customisable to the project needs.Caliber-RM• from Borland is a well-known requirements management tool. It is intended for large and complex systems, and provides a database of requirements with trace ability. This tool view requirements as part of the software quality management process, which it considers and also includes testing and defect tracking. Caliber is Internet-based, and it handles document references, user responsibility, trace ability, status and priority.Chip Carey• of Starbase (former owners of Caliber) it brings all departments together within the software development lifecycle and puts them all on the same page i.e., it provides a mechanism for communication and collaboration and effectively provides a synergy.


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C.A.R.E.• from Sophist Group is a Lotus Notes-based tool which provides a database-like view of requirements. The tool provides a wide range of features and produces both textual and graphical outputs.Cradle• from 3SL Cradle is a multi-user, multi-project, distributed and web-enabled requirements management and systems engineering environment. It is intended for all sizes of requirements and systems development projects. Cradle can link to corporate product data management (PDM) or electronic document management (EDM)systems.Itoffersconfigurationmanagement,edithistoriesandversioncontrol.Itautomatesdocumentproduction and can manage the generated documents. Through its web interface, it can integrate disparate stakeholder groups by creating customisable read-write portals to all project data.Mark Walker• of 3SL Cradle can deliver unlimited requirements and systems modelling scalability to the desktop through web and non-web methods that allow capture and parsing of requirements and their traceability. Clear Requirements Workbench• (CRW) from LiveSpecs Software helps specify, verify, and manage detailed requirements.CRWsupportsfourdetailedspecificationtechniques(glossaries,actioncontracts,testprocedures,andpreciseusecases)forthecleardescriptionofdefinitions,behaviour,andusage.

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SummaryThefivebasicmanagementfunctions,whichamanagerhastoperformasperclassicalmodelofmanagement,•are: planning, organising, coordinating, directing, and controllingPlanning is a process of forecasting the future. It requires rigorous analysis of input, output and costs.•Organising is the process of identifying the entire job, dividing the job into convenient subjects or tasks, and •allocating sub-jobs to persons or group of persons and then delegating authority to each so that, the job is carried out as planned.Coordination is the process of placing the right person or group of persons at the right job. •Directingistheabilitytomotivatetheemployee’stoachievethegoal’softhecompanyinthemosteffective•and optimal way. Controllingisthelastprocessofcreatingperformancestandardsbasedontheorganisation’sobjectives,measuring•and reporting actual performance and comparing the two.Inorganisations,therearethreelevelsofmanagement:top-level,middle-level,andfirst-leveloroperational•level Abusinessprocessisdefinedasanyfunctionwithinanorganisationthatenablestheorganisationtosuccessfully•deliver its products and services. Information is a necessary and vital input for the management on which decision making is based. The •characteristics of the information are: timeliness, reliability, usefulness, and explicit.Systemisdefinedas“acollectionofelementsintegratedtoachieveacommondefinablegoal”.•Information system is a set of processes that helps in collecting the data, storing the data, processing the data •and disseminating information to support decision making process of key managers.Requirements analysis, in software engineering, is used to describe all the tasks that go into the instigation, •scopinganddefininganeworalteredcomputersystem.Methods of requirement analysis are: stakeholder interviews, requirement workshops, contract-style requirement •lists, prototypes, use cases, SRS, functional requirements, Non-functional requirements, and Stakeholder identificationAsoftwarerequirementsspecification(SRS)isacompletedescriptionofthebehaviourofthesystemtobe•developed. Arequirement analysis tool shouldmeet the followingfivecriticalprocess areas in software requirements•definitionandmanagement:elicitation,analysis,specification,validation,andmanagement.

ReferencesTalksAboutManagement, 2010. • Functions of Management [Video Online] Available at: < http://www.youtube.com/watch?v=7FCJjvFwG9Y> [Accessed 30 November 2011].MajoodeBinAfif,2011.• presentation four functions of management 2011 [Video Online] Available at: <http://www.youtube.com/watch?v=TVD7BVsdd5c> [Accessed 30 November 2011].Durham, C., 1992. • Communication for management and business: A function of principles,methods, strategies, process and practice. Kendall/Hunt.Magal, S. and Word, J., 2009. • Essentials of Business Processes and Information Systems. Wiley.Wright, D., 2007. • What is an information system requirement [Online] Available at: <http://it.toolbox.com/blogs/view-of-ba/integrating-information-system-requirements-15618> [Accessed 30 November 2011].Bowman, D., 2009. • Information Systems Analysis [Online] Available at: <> [Accessed 30 November 2011].


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Recommended ReadingStair, R. and Reynolds, G., 2009. • Principles of Information Systems, 9th ed., Course Technology.Grady, J., 2006. • System Requirements Analysis. Academic Press.Hay, D., 2011. • Requirements Analysis: From Business Views to Architecture. Prentice Hall.

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Self AssessmentA ________________ is a complete description of the behaviour of the system to be developed.1.

softwarerequirementsspecificationa. functional requirementb. non-functional requirementc. prototyped.

Which of the following statement is false?2. Planning is a process of forecasting the future. a. Coordination is the process of placing the right person or group of persons at the right job. b. The decisions made by low-level managers affect the entire organisation. c. Jobs in middle management vary widely in terms of responsibility and salary.d.

A___________definestheinteractionsbetweenexternalactorsandthesystemunderconsiderationtoaccomplish3. a business goal.

prototypea. use caseb. functional requirementc. requirementd.

Which of the following statement is true?4. Stakeholderinterviewsarenotnecessaryinrequirementspecification.a. Analysts can employ several techniques to get the requirements from the customer. b. Use cases are deceptively complex tools for describing the behaviour of the software. c. Minor improvements in communication between users and developers were often seen with the introduction d. of prototypes.


System1. ItdefinestheinteractionsbetweenexternalactorsA. and the system under consideration to accomplish a business goal.

Use case2. ItisdefinedasanyfunctionwithinanorganisationB. that enables the organisation to successfully deliver its products and services.

Business process3. These are mock ups of the screens of an application C. which allow users to visualise the application that isn’tyetconstructed.

Prototypes4. Isdefinedas“acollectionofelementsintegratedD. toachieveacommondefinablegoal”.

1-A, 2-D, 3-B, 4-Ca. 1-B, 2-A, 3-D, 4-Cb. 1-D, 2-A, 3-B, 4-Cc. 1-C, 2-A, 3-B, 4-Dd.


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Which of the following deals more with research and development jobs and also with analysing data for 6. knowledge extraction?

Operations managera. Knowledge workersb. Middle-level managersc. Line managersd.

___________istheabilitytomotivatetheemployee’stoachievethegoal’softhecompanyinthemosteffective7. and optimal way.

Planninga. Controllingb. Directingc. Organisingd.

_____________ in software engineering is used to describe all the tasks that go into the instigation, scoping 8. anddefininganeworalteredcomputersystem.

Requirements analysisa. Requirementsspecificationb. Requirements capturec. Systems analysisd.

What does UML stand for?9. UnifiedModernLanguagea. UnifiedModellingLevelb. UnifiedModellingLanguagec. User Modelling Languaged.

________ is internet-based and it handles document references, user responsibility, trace ability, status and 10. priority.

Mark Walker a. Caliberb. Chip Carey c. Cradled.

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Chapter III

Management Systems

Aim


introduce the concept of management systems•

categorise the levels of management activities•

discuss management system requirements•

Objectives


discuss the transaction processing systems•

explain management system requirements•

analyse the concept of decision support system•

Learning outcome


understand management information system•

comprehendtheconceptof‘executivesupportsystem’•

recognise the characteristics of transaction processing systems•


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3.1 IntroductionA manager has to carry out various roles within an organisation, to name a few:

Role of functional expert, carry out decisions, plan and co-ordinate for which he or she has to perform. •Role of a communicator and control all the activities under his or her responsibility. •

Depending upon his or her level in the hierarchy a manager has to carry out strategic, managerial or operational responsibilities.

3.2 Management Systems TypesManagement systems are used by an organisation to provide the framework of processes and procedures to ensure thatanorganisationcanfulfilalltasksrequiredtoachieveitsobjectives.Itisaformal,observablewayinwhichanorganisation administers its operations. For instance, an environmental management system enables organisations to improve their environmental performance through a process of continuous improvement. A more complete system would include accountability and a schedule of activities to be completed, as well as auditing tools to implement corrective actions in addition to scheduled activities, creating an upward spiral of continuous improvement.

Because of the diverse interests, specialities, and levels in an organisation, there are different management systems types. No single system can provide all the information an organisation needs. More and more of these management systems are being covered under computerisation; some of the management systems that have been computerised in various organisations are given below:

Administrative management system•Human resources management system•Accounting management system•Customer relationship management system•Knowledge management system•Logistics management system•Marketing management system•Operations management system•Project management system•Process management system•Personal management system•Product management system•Quality management system•Resource management system•Risk management system•Supply chain management system•Time management system•

Someofthesemanagementsystemsoperateonlyataspecificmanagementlevel,whereas,someoperateacrossmanagement levels.

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3.3 Management System RequirementsEfficientandeffectiveoperationofabusinessrequiresamanagementsystem,whichcansupportbusinessprocessesand operations, decision-making, and competitive strategies.

Themanagersatdifferentlevelsofthehierarchyfilldifferentmanagerialrolesandsomeoftherolesare:

The functional support roleBusiness processes and operations support function which are the most basic task of the functional role performed by managers. They involve collecting, recording, storing, and basic processing of data. Information systems support business processes and operations by:

Recording and storing accounting records including sales data, purchase data, investment data, and payroll •data.Processing such records intofinancial statements such as income statements, balance sheets, ledgers, and•management reports, and so on.Recording and storing inventory data, work in process data, equipment repair and maintenance data, supply •chain data, and other production or operations records.Processing these operations records into production schedules, production controllers, inventory systems, and •production monitoring systems.Recording and storing these human resource records as personnel data, salary data, and employment •histories.Processing these human resources records into employee expense reports, and performance based reports.•Recordingandstoringmarketdata,customerprofiles,andcustomerpurchasehistories,marketingresearchdata,•advertising data, and other marketing records.Processing these marketing records into advertising elasticity reports, marketing plans, and sales activity •reports.Recording and storing business intelligence data, competitor analysis data, industry data, corporate objectives, •and other strategic management records.Processing these strategic management records into industry trends reports, market share reports, mission •statements, and portfolio models.

Information systems use all of the above to implement, control, and monitor plans, strategies, tactics, new products, new business models or new business ventures.

The decision roleDecisionalrolesrequiremanagers toplanstrategiesandutiliseresources.Therearefourspecificroles thataredecisional performed by a manager, namely:

The • entrepreneur role requires the manager to assign resources to develop innovative goods and services, or to expand a business. Most of these roles will be held by top-level managers, although middle managers may be given some power to make such decisions. The • disturbance handler corrects unanticipated problems faced by the organisation from the internal or externalenvironment.Managersatalllevelsmaytakethisrole.Forexample,first-linemanagersmaycorrectaproblemhaltingtheassemblylineoramiddlelevelmanagermayattempttoaddresstheaftermathofafirein the store. The third decisional role is that of • resource allocator, which involves determining the resources allocation to the work units. Top managers are likely to make large, overall budget decisions, while middle managers may makemore specific allocations. In someorganisations, supervisorymanagers are responsible todetermineallocation of salary raises to employees.


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The fourth role is of a • negotiator which deals in work with others, such as suppliers, distributors, or labour unions, to reach agreements regarding products and services. First-level managers may negotiate with employees on issues of salary increases or overtime hours, or they may work with other supervisory managers when needed resources must be shared. Middle managers also negotiate with other managers and are likely to work to secure preferred prices from suppliers and distributors. Top managers negotiate on larger issues, such as labour contracts, or even on mergers and acquisitions of other companies.

The interpersonal roleInterpersonalrolesrequiremanagers todirectandsuperviseemployeesandtheorganisation.Thefigureheadistypically a top of middle manager. This manager may communicate future organisational goals or ethical guidelines to employees at company meetings. A leader acts as an example for other employees to follow, gives commands and directions to subordinates, makes decisions, and mobilises employee support. Managers must be leaders at all levels of the organisation; often lower-level managers look to top management for leadership.

In the role of liaison, a manager must coordinate the work of others in different work units, establish alliances between others, and work to share resources. This role is particularly critical for middle managers, who must often compete with other managers for important resources, yet must maintain successful working relationships with them for long time periods.

The communication roleInformationsystemscansupportacompany’scompetitivepositioning.Thethreelevelsofanalysisare:

The supports for help in piloting the chain of internal value. They are the most recent and the most pragmatic •systems within the reach of the manager. They are the solutions to reductions of costs and management of performance.They are typically named “BusinessWorkflowAnalysis” (BWA)or “BusinessManagementSystems (BMS)”. They ensure control over piloting the set functions of a company. All successful companies have few business functions that give them edge over their competitors. These are •calledcorecompetencies.Ifacompany’scorecompetencygivesitalong-termadvantageinthemarketplace,itis referred to as a sustainable competitive advantage. For a core competency to become a sustainable competitive advantage itmustbedifficult tomimic,unique, sustainable, superior to thecompetition,andapplicable tomultiple situations.

For instance, for a small or medium business MSP or a Managed Service Provider is a good alternative, it is a cost effective solution compared to paying for IT staff or local technicians. Other company characteristics that could constitute a sustainable competitive advantage include:

superior product quality•extensive distribution contracts•accumulated brand equity and positive company reputation•low cost production techniques•patents and copyrights•government protected monopoly•superior employees and management team•

The list of potential sustainable competitive advantage characteristics is very long. According to the experts in today’schangingandcompetitiveworld,noadvantagecanbesustainedinthelongrun.Theyarguethattheonlytruly sustainable competitive advantage is to build an organisation that is so alert and so agile that it will always be abletofindanadvantage,nomatterwhatchangesoccur.

Information systems often support and occasionally constitute these competitive advantages. The rapid change has •made access to timely and current information critical in a competitive environment. Information systems, like business environmental scanning systems, support almost all sustainable competitive advantages. Occasionally, the information system itself is the competitive advantage. For example, Wal-Mart, they have used an extranet to integrate their whole supply chain. This use of information systems gave Sam Walton a competitive advantage for two decades.

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The performance monitoring roleManaging information is not just statistics and data analysis, they are also to be used as an MBO (Management by objectives) tool. They help:

to establish relevant and measurable objectives.•to monitor results and performances (reach ratios).•to send alerts, in some cases daily, to managers at each level of the organisation, on all deviations between •results and pre-established objectives and budgets.

3.4 Levels of Management ActivitiesDifferent levels of management require different information systems to support the types of decisions of the organisational hierarchy. While operational managers mostly make structured decisions, senior managers deal with unstructured decisions; middle managers are often faced with semi-structured decisions.

TransactionProcessingSystem (TPS)

Strategic Level Systems

Long term Long term Long term Profit Sales trend operating budget planning plannForecasting plan forecasting

Personal ing

Management Level Systems

Sales Inventory Annual Capital Management control budgeting investment an Analysis Region-wise Production Cost Pricing/profitability Sales analysis scheduling analysis analysis an

Relocation alysis

Contract cost alysis

Knowledge-Level Systems

Engineering Graphics Workstations workstations

Word Document Processing Imaging

Managerial workstations

Electronic Calendar

Operational Level systems

Machine Control Securities Payro Trading Order tracking Plants scheduling Acco PayaOrder processing Material Cash Acco Movement control management Receiva

ll Compensations

unts Training & ble development unts Employees

ble record keeping

Executive Support System (ESS)

ManagementInformationSystems (MIS)

Decision SupportSystem (DSS)

KnowledgeWork Systems (KWS) office Automation Systems (OAS)

Sales & Marketing Manufacturing Finance Accounts

Fig. 3.1 Types of system

Foreachfunctionalareaintheorganisation,fourlevelsoforganisationalhierarchycanbeidentified:Operational level•Knowledge level•Management level •Strategic level•


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Eachoftheselevelsisservedbydifferenttypesofinformationsystemsasshownaboveinfig.3.1.Organisationshavetransactionprocessingsystems(TPS)attheoperationallevel;knowledgeworksystems(KWS)andofficeautomation systems (OAS) at the knowledge level; management information systems (MIS) and decision-support systems (DSS) at the management level; and executive support systems (ESS) at the strategic level. Each of the majorfunctionalareasofsalesandmarketing,manufacturing,finance,accounting,andhumanresources,inturnisserved by specialised systems at each level.

Features of these six types of information systems are given in the table below. It should be noted that each of the different kinds of systems might have components that are used by organisational levels and groups other than their main constituencies; for example; a middle manager may need to extract data from a TPS.

Type of system Information inputs Processing Information

outputs Users

ESS Aggregate data; external, internal

Graphics; simulations; interactive

Projections; responses to queries

Senior managers

DSS

Low-volume data or massive databases optimised for data analysis; analytic models and data analysis tools

Interactive; simulations analysis;

Special reports; decision analyses; responses to queries

Professionals; staff managers

MISSummary transaction data; high- volume data; simple models

Routine reports; simple models; low-level analysis

Summary and exception reports

Middle managers

KWS Designspecifications;knowledge-base

Modelling; simulations

Models; graphics

Professionals; technical staff

Officesystems Documents; schedules

Document management; scheduling; communication

Documents; schedules; mail

Clerical workers

TPS Transactions; events Sorting; listing; merging; updating

Detailed reports; lists; summaries

Operations personnel; supervisors

Table 3.1 Features of the six types of information systems

3.4.1 Transaction Processing Systems (TPS)TPS record daily routine transactions such as sales orders from customers, or bank deposits and withdrawals. They are vital for the organisation, as they gather all the input necessary for other types of systems; for example, TPS providethebasicinputtothecompany’sdatabase.AfailureintheTPSoftenmeansdisasterfortheorganisation.For instance, when the reservation system at Air India fails, all operations stop, no transactions can be carried out until the system starts again.

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Employees Data (Various departments) To General Ledger Payroll

Syste

Human Resources

m

Data Elements in Payroll Master file Employee:Number Name AddressDepartment AgeMarital Status

To Income Tax Authorities

To Employees Accounts

Fig. 3.2 Payroll system (TPS) - a symbolic representation

Attheoperationallevel,tasks,resources,andgoalsarepredefinedandhighlystructured.Thedecisiontograntcredittoacustomer,forinstance,ismadebyalower-levelsupervisoraccordingtopredefinedcriteria.Allthatmustbedetermined is whether the customer meets the criteria.

PayrollprocessingisatypicalTPSbyHRorfinanceandaccountsdepartmentandisrequiredbyalmostallfirms.Apayrollsystemkeepstrackofthemoneypaidtoemployees.Themasterfileiscomposedofseveralpiecesofinformation (such as a name, address, or employee number) called data elements. Data are keyed into the system, updatingthedataelements.Theelementsonthemasterfilearecombinedindifferentwaystocreatereportsofinterest to management and tax or provident fund authorities and to send pay checks to employees. These TPS can generate other report combinations of existing data elements.


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TypicalTPSapplicationsareforfivefunctionsthatareforsales,marketing,manufacturingorproduction,financeor accounting, human resources are shown in the table below.

Marketing system

Manufacturing or production system

Finance or accounting

system

Human resource system Other types

Major functions of systems

Sales Management Scheduling Budgeting Personnel

records Course records

Sales Promotion Purchasing Billing Perks Admissions

Market research Shipping/receiving General ledger Pay scales Grade records

New products Operations Cost accounting Labour relations alumni

Pricing Engineering Training

Major applications

system

Sales order information system

Machine control system

Accounts receivable or payable

Leave record system

Registration system

Sales communication system

Quality control system

Machine control system Payroll Curriculum

control

Market research system

Purchase order system

Quality control system Training Classes time

table

Warehousing Machine control system

Career path details

Faculty occupancy

ThecommonapplicationsofTPS:TherearefivefunctionalcategoriesofTPS:sales,manufacturing,finance,human resources, and other types of systems specific to a particular industry.Within each of thesemajorfunctions are sub-functions. For each of these sub-functions (for example, sales management) there is a major application system

Table 3.2 Types of transaction processing systems

ManagersneedTPStomonitorthestatusofinternaloperationsandthefirm’srelationswiththeexternalenvironment.TPS are also major producers of information for the other types of systems. Failure of a TPS will lead to the failure of IS of an organisation.

Features of transaction processing systems (TPS) are:Rapid response• : Fast performance with a rapid response time is critical. Businesses cannot afford to have customers waiting for a TPS to respond, the turnaround time from the input of the transaction to the production for the output must be a few seconds or even less.Reliability:• Many organisations rely heavily on their TPS; a breakdown will disrupt operations or even stop the business. For a TPS to be effective its failure rate must be very low. If a TPS does fail, then quick and accurate recovery must be possible. This makes well–designed backup and recovery procedures essential.Inflexibility:• A TPS wants every transaction to be processed in the same way regardless of the user, the customer orthetimeofday.IfaTPSwereflexible,therewouldbetoomanyopportunitiesfornon-standardoperations,for example, a commercial airline needs to consistently accept airline reservations from a range of travel agents, accepting different transactions data from different travel agents would be a problem.Controlled processing:• TheprocessinginaTPSmustsupportanorganisation’soperations.Forexample,ifan organisation allocates roles and responsibilities to particular employees, then the TPS should enforce and maintain this requirement.

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ACID test• properties: Atomicity: � transaction’schangestothestateareatomic:eitherallhappenornonehappen.Thesechangesinclude database changes, messages, and actions on transducers.Consistency: � A transaction is a correct transformation of the state. The actions taken as a group do not violate any of the integrity constraints associated with the state. This requires that the transaction be a correct program.Isolation: � Even though transactions execute concurrently, it appears to each transaction that others executed either before it or after it but not both.Durability: � Once a transaction completes successfully, its changes to the state survive failures.

3.4.2 Knowledge Work Systems (KWS)Knowledge work systems (KWS) support highly skilled knowledge workers in the creation and integration of new knowledge into the company. Computer Aided Design (CAD) systems used by product designers not only allow themtoeasilymakemodificationswithouthaving to redraw theentireobject,butalsoenable themto test theproduct without having to build physical prototypes. Three dimensional graphical simulation systems like GRASP (Graphical Robotics Applications Simulation Package) are used by British Aerospace and Rolls Royce for evaluating and programming industrial robots. Architects use CAD software to create, modify, evaluate and test their designs; such systems can generate photorealistic pictures, simulating the lighting in rooms at different times of the day, perform calculations, for instance on the amount of paint required. Surgeons use sophisticated CAD systems to design operations.

Financial institutions use knowledge work systems to support trading and portfolio management with powerful high-endPCs.Theseallowmanagerstogetinstantaneousanalysedresultsonhugeamountsoffinancialdataandprovide access to external databases.

Knowledgeworksystems(KWS)andofficesystemsservetheinformationneedsattheknowledgeleveloftheorganisation.Knowledgeworksystemsaidknowledgeworkers,whereasofficeautomationsystemsprimarilyaiddata workers.

In general, knowledge workers are people who hold formal university degrees and who are often members of a recognised profession, such as engineers, doctors, lawyers, and scientists. Their jobs consist primarily of creating new informationandknowledge.Knowledgeworksystems(KWS),suchasscientificorengineeringdesignworkstations,promote the creation of new knowledge and ensure that new knowledge and technical expertise are properly integrated into the business. Data workers typically have less formal, advanced educational degrees and tend to process rather thancreateinformation.Theyconsistprimarilyofsecretaries,accountants,filingclerks,ormanagerswhosejobsareprincipallytouse,manipulate,ordisseminateinformation.Officesystemsareinformationtechnologyapplicationsdesignedtoincreasedataworkers’productivitybysupportingthecoordinatingandcommunicatingactivitiesofthetypicaloffice.Officesystemscoordinatediverseinformationworkers,geographicunits,andfunctionalareas:Thesystemscommunicatewithcustomers,suppliers,andotherorganisationsoutsidethefirmandserveasaclearinghouseforinformationandknowledgeflows.

3.4.3OfficeAutomationSystemOfficeSystemsorOfficeAutomationSystems (OAS) support general officework for handling andmanagingdocuments and facilitating communication. Text and image processing systems evolved from word processors to desktop publishing, enabling the creation of professional documents with graphics and special layout features. Spreadsheets, presentation packages like PowerPoint, personal database systems and note-taking systems (for example,appointmentbook,notepad,cardfile)arepartofOAS.

In addition OAS includes communication systems for transmitting messages and documents (e-mail) and teleconferencing capabilities.


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3.4.4 Management Information SystemsManagement Information Systems (MIS) generate information for monitoring performance and maintaining coordination between the activities, for example, between purchasing and accounts payable.

MIS extract process and summarise data from the TPS and provide periodic (weekly, monthly, quarterly) reports to managers.

MISarebecomingmoreflexiblewiththetimebyprovidingaccesstoinformationwheneverneededratherthanjustthepre-specifiedreportsonaperiodicbasis.Userscanoftengeneratemorecustomisedreportsbyselectingsubsetsof data, using different sorting options and different display choices.

Managementinformationsystemscanbedefinedas“astudyofinformationsystemsinbusinessandmanagement”.The termmanagement information systems (MIS) also designates a specific category of information systemsserving management-level functions. Management information systems (MIS) serve the management level of the organisation,providingmanagerswithreportsand,insomecases,withon-lineaccesstotheorganisation’scurrentperformance and historical records. MIS primarily serve the functions of planning, controlling, and decision making at the management level. Generally, they depend on underlying transaction processing systems for their data.

MISsummariseandprovidereportonthecompany’sbasicoperations.ThebasictransactiondatafromTPSarecompressedandareusuallypresentedinlongreportsthatareproducedonaregularschedule.Thefigurebelowshows how a typical MIS transforms transaction-level data from inventory, production, and accounting into MIS filesthatareusedtoprovidemanagerswithreports.

MS Files

Sales Data

Per unit Cost data

Product Charge data

OrderProcessingSystem

Material

stem

ResourcesPlanningSy

GeneralLedger System

ManagementReportsMIS

To Managers

Fig. 3.3 Data transfer from MIS to TPS

Thediagramaboveillustrateshowmanagementinformationsystemsobtaintheirdatafromtheorganisation’sTPS.Inthis system, three TPS supply summarise transaction data at the end of the time period to the MIS reporting system. Managers obtain the organisational data through the MIS, which provides them with the appropriate reports.

3.4.5 Decision Support Systems (DSS)Decision-support systems (DSS) also serve the management level of the organisation. DSS help managers make decisionsthatareunique,rapidlychanging,andnoteasilyspecifiedinadvance.Theyaddressproblemswheretheprocedureforarrivingatasolutionmaynotbefullypredefinedinadvance.AlthoughDSSuseinternalinformationfrom TPS and MIS, they often bring in information from external sources, such as current stock prices or product prices of competitors.

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On the aspect of design, DSS have more analytical power than other system. They are built explicitly with a variety of models to analyse data, or they condense large amounts of data into a form where they can be analysed by decision makers. DSS are designed so that users can work with them directly; these systems explicitly include user-friendly software. DSS are interactive; the user can change assumptions, ask new questions, and include new data.

As mentioned above, there are theoretical possibilities of building such systems in any knowledge domain. For example,theclinicaldecisionsupportsystemformedicaldiagnosis.Otherexamplesincludeabankloanofficerverifyingthecreditofaloanapplicantoranengineeringfirmthathasbidsonseveralprojectsandwantstoknowif they can be competitive with their costs.

A DSS can be designed to help make decisions on the stock market, or deciding which area or segment to market a product toward.

A very useful, small, but powerful DSS is the voyage-estimating system of a company that exists primarily to carry bulkcargoesofcoal,oil,ores,andfinishedproductsforanothercompanywithwhichithasalongtermcontract.Thefirmownssomevessels,chartersothers,andbidsforshippingcontractsintheopenmarkettocarrygeneralcargo.Avoyage-estimatingsystemcalculatesfinancialandtechnicalvoyagedetails.Financialcalculationsincludeship or time costs (fuel, labour, and capital), freight rates for various types of cargo, and port expenses. Technical details include a myriad of factors such as ship cargo capacity, speed, port distances, fuel and water consumption, and loading patterns (location of cargo for different ports). The system can also provide answers to questions such as:

Given a customer delivery schedule and an offered freight rate, which vessel should be assigned at what rate •tomaximiseprofits?What is the optimum speed atwhich a particular vessel can optimise its profit and stillmeet its delivery•schedule? What is the optimal loading pattern for a ship bound for Mumbai from London? •

Fig. 3.4 illustrates the DSS built for a shipping company. The system operates on a powerful desktop personal computer, providing a system of menus that makes it easy for users to enter data or obtain information.

PC

Graphics

AnalyticalModel database

Ship file (e.g., speed capacity)

Port distance restrictions file

External data

• Tata Sons

Ship charter hire history cost file

Port expense file

Reports

Fig. 3.4 Decision support system for voyage estimation


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3.4.6 Executive Support SystemExecutive support system (ESS) is used by senior managers to make decisions. ESS serves the strategic level of the organisation. They address non-routine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution. ESS creates a generalised computing and communications environmentratherthanjustprovidinganyfixedapplicationorspecificcapability.ESSisdesignedtoincorporatedata about external events such as new tax laws or competitors, but they also draw summarised information from internalMISandDSS.Theyfilter,compress,andtrackcriticaldata,emphasisingthereductionoftimeandeffortrequired to obtain information useful to executives. ESS employs the most advanced graphics software and can delivergraphsanddatafrommanysourcesimmediatelytoaseniorexecutive’sofficeortoaboardroom.

Unliketheothertypesofinformationsystems,ESSisnotdesignedprimarilytosolvespecificproblems.Instead,ESS provides a generalised computing and telecommunications capacity that can be applied to a changing array of problems. Whereas many DSS are designed to be highly analytical, ESS tends to make less use of analytical models.

Internal data

• TPS/MISdata

• Financial data

• Office system

External data

• Tata Sons• Internet

News Feeds

• FICCI

ESSWorkstation

• Menus • Graphics • Communications • Local Processing

• Menus • Graphics • Communications • Local Processin

• Menus • Graphics • Communications• Local Processingg

Fig. 3.5 Executive support system

ESS provides solution for the following questions:In what business should we be? •What are the competitors doing? •What new acquisitions would protect us from cyclical business swings? •Which units should we sell to raise cash for acquisitions? •

Fig. 3.5 illustrates a model of an ESS. It consists of workstations with menus, interactive graphics, and communications capabilities that can access historical and competitive data from internal corporate systems and external databases such as Dow Jones News, Retrieval or the Gallup Poll. Since, ESS are designed for the use of senior managers who often have little, if any, direct contact or experience with computer-based information systems, they incorporate easy-to-use graphic interfaces.

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Relationship of systems to one anotherDifferent organisation use different types of management information systems depending upon their need. Most of theorganisationsmakeuseofofficeautomationsystemsandhaveaportfolioofinformationsystemapplicationsbased on TPS and MIS (marketing systems, manufacturing systems, human resource systems). Some organisations have hybrid information systems that contain some of the characteristics of different types of systems.

Thefieldofinformationsystemsismovingsoquicklythatthefeaturesofoneparticulartypeofsystemareintegratedto other types (for example, MIS having many of the features of ESS). System characteristics evolve and new types ofsystemsemerge.Yettheclassificationofinformationsystemsintothesedifferenttypesisusefulbecauseeachtype of system has certain features that are relevant in particular situations.

Fig. 3.6 illustrates how the systems serving different levels in the organisation are related to one another. TPS are typically a major source of data for other systems, whereas ESS is primarily a recipient of data from lower-level systems. The other types of systems may exchange data with each other as well. Data may also be exchanged among systems serving different functional areas. For example, an order captured by a sales system may be transmitted to amanufacturingsystemasatransactionforproducingordeliveringtheproductspecifiedintheorder.

Itisdefinitelyadvantageoustohavesomemeasureofintegrationamongthesesystemssothatinformationcanfloweasilybetweendifferentpartsoftheorganisation.Butintegrationcostsmoney,andintegratingmanydifferentsystems is extremely time consuming and complex. Each organisation must weigh its needs for integrating systems againstthedifficultiesofmountingalarge-scalesystemsintegrationeffort.

Executivesupport

systems (ESS)

Management Information

systems(MIS)

DecisionSupportsystems(DSS)

Knowledgesystems (KWS

& office systems)

Transactionprocessing

system (TPS)

Fig. 3.6 Inter-relationship


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SummaryManagement systems are used by an organisation to provide the framework of processes and procedures to •ensurethatanorganisationcanfulfilalltasksrequiredtoachieveitsobjectives.Themanagersatdifferentlevelsofthehierarchyfilldifferentmanagerialrolesandsomeoftherolesare:functional•support role, decision role, interpersonal role, communication role, and performance monitoring roleDifferent levels of management require different information systems to support the types of decisions of the •organisational hierarchy. Foreachfunctionalareaintheorganisation,fourlevelsoforganisationalhierarchycanbeidentified:operational•level, knowledge level, management level, and strategic level.Transaction processing systems record daily routine transactions such as sales orders from customers, or bank •deposits and withdrawals. They are vital for the organisation, as they gather all the input necessary for other types of systems.Featuresoftransactionprocessingsystemsare:rapidresponse,reliability,inflexibility,controlledprocessing,•and acid test.Knowledge work systems (KWS) support highly skilled knowledge workers in the creation and integration of •new knowledge into the companyOfficeAutomationSystems(OAS)supportgeneralofficeworkforhandlingandmanagingdocumentsand•facilitating communication. Management Information Systems (MIS) generate information for monitoring performance and maintaining •coordination between the activities, for example, between purchasing and accounts payable.Decision support systems help managers make decisions that are unique, rapidly changing, and not easily •specifiedinadvance.Executive support system (ESS) is used by senior managers to make decisions. They address non-routine decisions •requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution.

ReferencesLaudon, K. and Laudon, J., 2009• . Management Information Systems, 11th ed., Prentice Hall.Bernstein, P. and Newcomer, E., 2009. • Principles of Transaction Processing, 2nd ed., Morgan KaufmannTigmaminds, 2010. • Decision Support Systems - An Introduction [Video Online] Available at: < http://www.youtube.com/watch?v=la7MdnrlLZc > [Accessed 1 December 2011].dfgalletta, 2009. • Management Information Systems [Video Online] Available at: <http://www.youtube.com/watch?v=uTgSjnaL8Y8> [Accessed 1 December 2011].MicroStrategy, 2011. • Decision Support System [Online] Available at: <http://www.microstrategy.com/decision-support-system/> [Accessed 1 December 2011].Power, D., 2011. • A Brief History of Decision Support Systems [Online] Available at: <http://dssresources.com/history/dsshistory.html> [Accessed 1 December 2011].

Recommended ReadingLaudon, K. and Traver, C., 2011. • Management Information Systems, 12th ed., Prentice Hall.Gray, J. and Reuter, A., 1992. • Transaction Processing: Concepts and Techniques. Morgan Kaufmann.Marakas, G., 2002. • Decision Support Systems, 2nd ed., Prentice Hall.

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Self AssessmentWhich of the following Transaction Processing Systems is used by human resource department?1.

Billinga. Budgetingb. Payroll processingc. Purchasingd.

Which of the following statements is false?2. Business processes and operations support function are the most basic task of the functional role performed a. by managers. Decisional roles require managers to plan strategies and utilise resources. b. Interpersonal roles require managers to direct and supervise employees and the organisation. c. Informationsystemscannotsupportacompany’scompetitivepositioning.d.

Which of the following generates information for monitoring performance and maintaining coordination between 3. the activities?

Management Information Systems (MIS)a. Transaction Processing Systems (TPS)b. Knowledge work systems (KWS)c. OfficeAutomationSystems(OAS)d.

Which of the following information system is used in strategic management level?4. DSSa. KWSb. ESSc. TPSd.

Which of the following statements is true?5. All successful companies have many business functions that give them edge over their competitors.a. Attheoperationallevel,tasks,resources,andgoalsarepredefinedandhighlyunstructured.b. Theprocessinginatransactionprocessingsystemsmustsupportanorganisation’soperations.c. Managementinformationsystemssummariseandprovidereportonthecompany’scomplexoperations.d.

Knowledgeworksystemsaidknowledgeworkers,whereasofficeautomationsystemsprimarilyaid________6. workers.

dataa. operationb. topc. strategicd.

___________ are information technology applications designed to increase dataworkers’ productivity by7. supportingthecoordinatingandcommunicatingactivitiesofthetypicaloffice.

Officesystemsa. Computer Aided Design b. Graphical Robotics Applications Simulation Packagec. Management information systemsd.


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Which of the following system is used for evaluating and programming industrial robots?8. KWSa. GRASPb. TPSc. CADd.

TPS are typically a major source of data for other systems, whereas ESS is primarily a ___________of data 9. from lower-level systems.

processora. recipientb. evaluationc. programmingd.

Themasterfileinaninformationsystemiscomposedofseveralpiecesofinformationsuchasaname,address,10. or employee number called ____________.

data elementsa. system datab. primary datac. key datad.

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Chapter IV

Business Values of Information Systems

Aim


discuss the social global impact of information systems•

explain the use of empirical studies in software engineering•

definetheconceptofcostvalueperformance•

Objectives


enlist the advantages and opportunities from empirical evaluation•

analysetraditionalfinancialevaluationprocedures•

explain the concept of total cost of ownership•

Learning outcome


explicate the culture for information systems•

comprehend the process of information system adoption•

describe the functions of decision management with information systems•


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4.1 IntroductionTheuseoftheinformationsystemsisincreasingbutevaluatingtheactualbenefitsofusinginformationsystemsremains problematic. Due to cost and time factors involved in designing and implementing information systems, itisessentialtoworkoutcostbenefitanalysisandtotalcostofowningthesystem.Theculturalconsiderationsare the other important factor in information systems implementation along with the decision making, decision managementanddecisionsupportsystemswhichconstituteoneoftheareaswhichhavebeeninfluencedbytheinformation systems.

4.2 Impact of Information SystemsInformation systems have a major effect on businesses and organisations. Information is an organisational resource and is a very important production source in information-based industries and services, for example, banking.

The role of business information systems has changed and expanded over the last four decades. By the 1970s “ManagementInformationsystemanddecisionsupportsystems”wereintroduced.Theywereinteractiveandallowedtheusertochoosebetweennumerousoptionsandconfigurations.Theuserswerenotonlyallowedtocustomiseoutputs;theyalsocouldconfiguretheprogramstotheirspecificneeds.Theuseofinformationsystemsatthistimewas quite costly.

The main development in the 1980s was the introduction of decentralised computing. Instead of having one large mainframe computer for the entire enterprise, numerous PCs were spread around the organisation. This meant that instead of submitting a job to the computer department for batch processing and waiting for the experts to perform the procedure, each user had their own computer that could be customise for their own purposes.

With the computers coming in loads of reports were generated which produced mountains of paper, most of it of no valuesotostreamlinethisprocess“executiveinformationsystems”wereintroducedin1980sgivingtheexecutiveexactly what she or he wanted, and only what was required.

The1980salsosaw thefirstcommercialapplicationofartificial intelligence techniques in the formof“expertsystems”. These programs could give advice within a very limited subject area.

The 1990s saw the introduction of the Communicators, i.e., e-mail, document management; networks; Microsoft, Cisco and strategic information system. These systems used information technology to enable the concepts of business strategy.

The role of business information systems had now expanded to include strategic support. The latest step was the commercialisation of the Internet, and the growth of intranets and extranets at the turn of the century.

All of the above indicated the growth of e-commerce in the coming years. E-commerce, or the use of the internet and the web to conduct business, is typically categorised into business-to-consumer (B2C), business-to-business (B2B),andintra-organisationale-business.Businesses,governments,andnon-profitorganisationsareincreasinglyinvesting in information technology (IT) infrastructures to be able to conduct digitally enabled transactions.

Inthetwentyfirstcenturyscenario,anotheraspecthavingdeepimpactisconvergenceandIntegrationofDevices– Partners (personal digital assistants, software agents, SMS, Microsoft SOAP, mobile appliances (Fig. 4.1 and 4.2).

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SMS HDML WAP PDA Web Interactive TV

Individual Application Engine

Fig. 4.1 Various information communication devices

Application Engine

Application Engine

Application Engine

Application Engine

Application Engine

Application Engine

SMSHDML WAP PDA Web Interactive TV

II nntteerr aaccttiivvee MM iiddddlleewwaarr ee

Fig. 4.2 Convergence of various communications devices

4.2.1 Social Global Impact of Information SystemsInformation technology has brought in a lot of changes in our lives which would not have been possible in its absence. In the 1990s the entire planet is organised around telecommunicated networks of computers at the heart of information systems and communication processes. The entire realm of human activity depends on the power of information, in a sequence of technological innovation that accelerates its pace by month. Genetic engineering, benefitingfromthiswealthofinformationprocessingcapacity,isprogressingbyleapsandbounds,andisenablingus, for thefirst time, tounveil the secretsof livingmatter and tomanipulate life,withextraordinarypotentialconsequences. Software development is making possible user-friendly computing, so that millions of children, when provided with adequate education, can progress in their knowledge, and in their ability to create wealth and enjoy it wisely, much faster than any previous generation. Internet today is used by about 100 million people, and doubling this number every year, is a channel of universal communication where interests and values of all sorts coexist, in a creative cacophony.

Technology though does not solve social problems. But the availability and use of information and communication technologies are a pre-requisite for economic and social development in our world. Econometric studies show the close statistical relationship between diffusion of information technology, productivity and competitiveness forcountries,regions,industriesandfirms.Theyalsoshowthatanadequatelevelofeducationingeneralandoftechnical education in particular, is essential for the design and productive use of new technologies.


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The crucial role of information and communication technologies in stimulating development is has its pros and cons. On the one hand, it allows countries to leapfrog stages of economic growth by being able to modernise their production systems and increase their competitiveness faster than in the past. On the other hand, for those economies that are unable to adapt to the new technological system, their retardation becomes cumulative. Furthermore, the ability to move into the information age depends on the capacity of the whole society to be educated, and to be able to assimilate and process complex information.

Fromthedetailsabove,itcanbefiguredthatinformationandcommunicationtechnologyistheessentialtoolforeconomic development and material well-being in our age; it conditions power, knowledge and creativity; it is, for the time being, unevenly distributed within countries and between countries; and it requires, for the full realisation ofitsdevelopmentalvalue,aninter-relatedsystemofflexibleorganisationsandinformation-orientedinstitutions.Ina nutshell, cultural and educational development conditions technological development, which conditions economic development, which in turn conditions social development, and this stimulates cultural and educational development once more.

Today’stechnologyexecutivesmustmanageriskandensurethattheirITinitiativesandinvestmentsdeliverthefollowing:

The high availability and performance required meeting the needs of the global business environment, ensuring •that transactions are processed with utmost reliability and security.Collaboration between disparate and geographically dispersed development teams around the globe.•The foresight and capability to support emerging technology initiatives such as service-oriented architectures •(SOA).

4.3 Empirical StudiesWith the growing recognition of empirical studies in software engineering they are also entering a new level of maturity by beginning to address the human aspects of software development. This added focus has added a new layer of complexity to an already challenging area of research. In many other disciplines, qualitative research methods have been developed and are commonly used to handle the complexity of issues involving human behaviour.

Theempiricalevaluationsareacommonresearchmethodinsomeareasof informationsystemslike,ArtificialIntelligence (AI). Given below are the advantages, opportunities and the drawbacks presented by empirical studies:

Advantages: Why are evaluations needed?Empiricalmethodsareputtouseonregularbasisinsomeareasofinformationsystemsandartificialintelligence,forexample, planning and search algorithms are benchmarked in standard domains, and machine learning algorithms are usually tested with real data sets. Whereas in some applied areas such as user modelling, the use of empirical studies are rare. Many of them include a simple evaluation study with small sample sizes and often without any statistical methods.

Empiricalresearchbecomesnecessary,foranestimationoftheeffectiveness,efficiencyandtheusabilityofasystemthat applies IS or AI techniques in real world scenarios. Especially user modelling techniques which are based on human-computerinteractionrequireempiricalevaluations.Though,verification,formalcorrectness,andtestsareimportant methods for software engineering; however, the empirical evaluation is seen as an important complement thatcanimproveinformationsystemsandartificialintelligencetechniquesconsiderably.Theempiricalapproachisan important way to both, legitimise the efforts spent, and to give evidence to the usefulness of an approach.

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Opportunities: What we may learn from empirical evaluations?Empirical methods for information systems and artificial intelligence should answer three basic research questions:

Howwillachangeintheagent’sstructureaffectitsbehaviourgivenataskandanenvironment?•Howwillachangeinanagent’staskaffectitsbehaviourinaparticularenvironment?•Howwillachangeinanagent’senvironmentaffectitsbasicbehaviouronaparticulartask?•

These questions can be answered by a combination of four kinds of empirical studies: Exploratory studies that yield causal hypotheses.•Assessment studies that establish baselines, ranges, and benchmarks.•Manipulationexperimentstotesthypothesesaboutcausalinfluences.•Finally observation experiments (or quasi-experiments) that disclose effects of factors on measured variables •without random assignment of treatments.

Thesegeneralandgoaldefiningquestionshavetobespecifiedintermsofeachinformationsystemsandartificialintelligence (IS or AI) area. As an illustrative example, we outline the opportunities of empirical evaluations for adaptive systems and user modelling. Similar results can be obtained for other IS or AI systems.

The evaluation of adaptive systems can be seen as a layered process where each evaluation layer is a prerequisite for the subsequent layers. Three approaches have been proposed that basically just differ in layer granularity. Thus, we will outline four layers of evaluation of adaptive systems here.

UU sseerr

4

Interface

3

Properties

1

User modelInput Data

2

S ystem

Fig. 4.3 Four layers for the evaluation of adaptive systems

Fig.4.3 shows the four layers: during interaction the adaptive system observes the user and registers certain events or behaviour cues, these are:

Based on these input data abstract user properties are inferred1. Finally the system decides what and how to adapt2. Presents the adapted interface to the user3. Each layer has to be evaluated to guarantee adaptation success4.


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Limitations: Where empirical evaluations fail?Empirical research offers many opportunities; still, there are at least two kinds of limitations:

Errors and pitfalls that are directly related to the layered evaluation approach•Inherent limitations of empirical research in general•

4.4 Cost Value PerformanceInformation systems can pay off for a company in various ways, such as:

Investment in information system can support a core competency. Big companies invariably have one or two •core competencies. Core competencies could be anything from new product development to customer service. AnITinvestmentinacompany’scorecompetencycancreateasignificantbarriertoentryforothercompanies,defendingtheorganisation’sprimaryturfandprotectingitsmarketsandprofits.It can build supply chain networks. Firms that are a part of an integrated supply chain system have established •relationships of trust with suppliers. This means faster delivery times, problem-free delivery and an assured supply. The inability of new entrants to get onto a supply chain or inventory management system can be a major barrier to entry.It can enhance distribution channel management. As with supplier networks, investment in distribution channel •management systems can ensure quicker delivery times, problem free delivery, and preferential treatments. When the distribution channel management system is exclusive, it can mean some control over access to retailers, and a barrier to entry.Such an IT investment can help build brand equity. A huge brand name is a formidable barrier to enter and •sustaining it can be facilitated by investment in marketing information systems and customer relationship management system.Informationsystemsmeanbetterproductionprocesses.Automatedsystemsarethemostcostefficientwayto•organise large-scale production. These can produce economies of scale in promotion, purchasing, and production; economies of scope in distribution and promotion; reduced overhead allocation per unit; and shorter break-even timesmoreeasily.Thisabsolutecostadvantagecanmeangreaterprofitsandrevenue.ITinvestmentcanboostproductionprocesses.Informationsystemsallowcompanyflexibilityinitsoutputlevel•it is argued that economies of scale are a barrier to entry, aside from the absolute cost advantages they provide. This is because, a company producing at a point on the long-run average cost curve where economies of scale exist has the potential to obtain cost savings in the future, and this potential is a barrier to entry.Implementing IT experience can leverage learning curve advantages. As a company gains experience using IT •systems,itbecomesfamiliarwithasetofbestpracticesthataremoreorlessknowntootherfirmsintheindustry.Firmsoutsidetheindustryaregenerallynotfamiliarwiththeindustry-specificaspectsofusingthesesystems.IT investment can impact mass customisation production processes. IT controlled production technology can •facilitatecollaborative,adaptive,transparent,orcosmeticcustomisation.Thisflexibilitycanincreasemarginsand increase customer satisfaction.Leverage IT investment in computer-aided design. CAD systems facilitate the speedy development and •introduction of new products. This can create proprietary product differences. Product differentiation can be a barrier to entry. Proprietary product differences can be used to create incompatibilities between competing products.Theseincompatibilitiesincreaseconsumers’switchingcosts.Highcustomerswitchingcostsisaveryvaluable barrier to entry.AlloftheabovemeansexpandedE-commerce.Companywebsitescanbepersonalisedtoeachcustomer’s•interests, expectations, and commercial needs. They can also be used to create a sense of community. Both of these tend to increase customer loyalty. Customer loyalty is an important barrier to entry.Informationsystemsleveragestability.Technologicallysophisticatedfirmswithmultipleelectronicpointsof•contact with customers, suppliers, and others enjoy greater stability. This immense appearance of stability can beabarriertoentry,especiallyinfinancialservices.

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AfactthatITinvestmenttakesasignificantamountofmoneymakesitabarriertoentry.Thesuccessfulinformationsystem implementation is a challenge, as it has to meet a number of critical business goals: deliver increasingly complex mission-critical business applications quickly and securely, and ensure that core business operations are strongly supported. Availability is critical as poorly performing applications have an immediate business impact, cutting revenue and alienating customers. These challenges must be met within the constraints of tight IT budgets and scarce internal corporate resources, while the external environment breeds new technology developments that determine how the enterprise derives competitive advantage.

4.4.1 Traditional Financial Evaluation ProceduresForanycapitalinvestment,almostallorganisationscarryoutfinancialevaluationtoascertainthefinancialviabilityof the project.

Capitalplanning,alsoknownas“capitalbudgeting”, isanaccountingprocessusedtodetermineafirm’slong-term investments such as new machinery, replacement machinery, new plants, new products, new information systemandresearchanddevelopmentprojects.Aspartofthisprocessafinancialanalystdeterminestheeconomicvalue of business projects and allocates capital to that venture which presents the maximum calculated return on investment.

Allcapitalbudgetingmethodsrelyonmeasuresofcashflowsintoandoutofthecompany.Theinvestment cost isanimmediatecashoutflowcausedbythepurchaseofthecapitalitem.Insubsequentyears,theinvestmentmaycauseadditionaloutflowsthatwillbebalancedbythecashinflowsresultingfromtheinvestments.Cashinflowsmay come from increased sales, higher realisation due to better quality of the product or better market share or reducedcostoftheproducts.Thedifferencebetweenthecashoutflowsandcashinflowsisusedforcalculatingthefinancialworthoftheproject.

Oncethecashflowsareknownthereareseveralalternativemethodsavailableforcomparingdifferentprojectsanddeciding on the investment. Financial models assume that all relevant alternatives have been examined, that all costs andbenefitsareknown,andthatthesecostsandbenefitscanbeexpressedintermsofmoney.Someofthecommoncostsandbenefitsarelistedinthetable4.1below.

Costs Benefits(Intangible)

Hardware Improved operations

Software Better asset utilisation

Infrastructure (Networking, telecommunica-tions) Better resource control

Services Better organisational planning

Manpower Higherorganisationalflexibility

Improved quality of information

Benefits(Tangible) More Timely information

Lower operational costs Better Employee training

Increased productivity Better employee morale

Reduced manpower Better corporate image


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Lower computer expenses Improved decision making

Lower vendor services cost Higher employee cooperation

Lower clerical overheads Better customer satisfaction

Reduced facility maintenance cost Better environmental compliance

Higher sales volume Better legal compliance

Table4.1Costsandbenefitsofinformationsystemimplementation

Popular methods for determining the relative and absolute value of business projects include: Net Present Value (NPV) •Internal Rate of Return (IRR)•Discounted Cash Flow (DCF)•Payback Period•

Net present value (NPV) is a standard method for capital budgeting used for the planning of long-term investments. Using the NPV method a potential investment project should be undertaken if the:

Presentvalueofallcashinflows-thepresentvalueofallcashoutflows>0

Akeyinputintothisprocessistheinterestrateor“discountrate”whichisusedtodiscountfuturecashflowstotheirpresentvalues.Ifthediscountrateisequaltotheshareholder’srequiredrateofreturn,anyNPV>0meansthattherequiredreturnhasbeenexceeded,andtheshareholderswillexpectanadditionalprofitthathasapresentvalueequaltotheNPV.Thus,ifthegoalofthecorporationistomaximiseshareholders’wealth,managersshouldundertake all projects that have an NPV > 0, or if two projects are mutually exclusive, they should choose the one with the highest positive NPV.

Internal rate of return (IRR)Theinternalrateofreturn(IRR)isdefinedasthediscountratethatgivesanetpresentvalue(NPV)ofzero.TheNPViscalculatedfromanannualisedcashflowbydiscountingallfutureamountstothepresent.

Discountedcashflow(DCF)AdiscountedcashfloworDCFisthevalueofacashflowadjustedforthetimevalueofmoneyandisaformofpresentvalueanalysis.Thenominalvaluesoftwocashflows(positiveornegative)indifferenttimeperiodscannot be directly compared because of the preference of most people for consumption sooner rather than later. Thepresumptionbehindthisprinciple’sthatarupeeinourhandtodayisworthmorethanarupeewemayreceiveat some point in the future. Similarly, a rupee we have to spend three years from now costs us less than a dollar we have to spend today. This is due to opportunity cost and risk over time.

Opportunitycostissignificantbecauseanyfinancialdecisionmustbemeasuredagainstadefaultlow-riskinvestmentalternativeor the inflationrate.Riskbecomesasignificantfactorwhenthefinancialdecisionbeingconsideredinvolvessomestatisticallysignificantprobabilityofloss.WhenriskisincludedinDCFanalysis,itisgenerallydone so according to the premise that investments should compensate the investor in proportion to the magnitude of the risk taken by investing. A large risk should have a high probability of producing a large return or it is not justifiable.

By combining assessments of both opportunity cost and risk, a discount rate is calculated for the analysis of the presentvalueofanticipatedfuturecashflows.

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Discountedcashflowanalysisiswidelyusedininvestmentfinance,realestatedevelopment,andcorporatefinancialmanagement.

Pay back periodPay back period is the time required to pay back the initial investment of the project. The payback period method is a popular method because of its simplicity and power as an initial screening method. It is more suited for high risk projectsinwhichtheusefullifeoftheprojectisdifficulttoassess.

Theweaknessofthismethodliesinitsnotconsideringthetimevalueofmoney,theamountofcashflowsafterthepayback period.

LimitationsoftraditionalfinancialevaluationproceduresAssessmentofbenefitsincaseoftheinformationsystemsimplementationismoredifficultandvariationinactualandexpectedbenefitsmaybelargerbecauseofthefollowingfactors:

Information systems implementation is closely related to organisational culture and therefore may vary from •organisation to organisation.IS implementation inmost of the cases presents a first time case situation,where no previous data is•available.IS implementation in many cases undergoes change during implementation so initial estimates may be quite •different.Valuation of intangible factors may be subjective or may not be possible at all.•Time over-runs and cost over-runs may be there.•It does take into account the risk factors.•It does not take into account the strategic considerations.•

Other methods of evaluationTheconventionalfinancialbudgetingsystemsdonottakeintoconsiderationthestrategicaspect,whiletheothermethodsnamely real options pricing models, scoring models and portfolio analysis involve strategic considerations.

4.5 Total Cost of OwnershipThetotalcostofownership(TCO)ofaninformationsystemisdefinedasthetotalcostofacquiring,implementing,andkeepingthatsystemrunning.It’sanaccountingmethodologythatisprovingtobecrucialinmakingsoundITdecisions.Cost factors, which should go into the computation of the TCO of any system, can be grouped into:

direct costs•indirect costs•

Direct costs pertain to the acquisition expenses or the cost of buying the system, and cover all of the following activities:

Researching • possible products to buy, which is essentially a labour cost but may also include materials cost, such as purchase of third-party research reports or consultant fees.Designing • the system and all the necessary components to ensure that they work well together. Sourcing• the products, this means getting the best possible deal from all possible vendors through solicited bids or market research. Purchasing• the product(s), which includes the selling price of the hardware, software, and other materials as negotiated with the chosen suppliers. This also includes all applicable taxes and the costs of the systems at the end-user side.


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Delivering• the system, which includes any shipping or transportation charges that might be incurred to get the productintoitsfinalinstallationlocation.Installing• the system this involves costs in utilities and other environmental cost along with the labour costs. Developing • or customising the application(s) to be used.Training• users on the new system.Deploying• the system, including transitioning existing business processes and complete integration with other existing computing resources and applications. This will include the costs to promote the use of the new system among end users.

Indirect costs address the issues of maintaining availability of the system to end users and keeping the system running, which includes the following:

Operations management• , including every aspect of maintaining normal operations, such as activation and shutdown, job control, output management, and backup and recovery.Systems management• , such as problem management, changes management, performance management, and other areas.Maintenance of hardware and software components• , including preventive maintenance, corrective maintenance, and general housekeeping.Ongoing license fees• , especially for software and applications.Upgrade costs• over time that may be required.User support• , including ongoing training, help desk facilities, and problem-resolution costs. It includes the costs to get assistance from third-parties, such as maintenance agreements and other service subscriptions.Environmental factors• affectingthesystem’sexternalrequirementsforproperoperation,suchasairconditioning,powersupply,housing,andfloorspace.Other factors• thatdon’tfallintoanyoftheabovecategories,dependingonthetypeofsystemdeployedandthe prevailing circumstances.

Alltheabovecostfactorsarequiteobvious,butquantifyingeachcostisdifficult,becauseonlyfeworganisationshaveanaccountingpracticethat’smatureenoughtoidentifyandbreakdownallthesetypesofexpensesinsufficientdetail.

The underlying reason for high TCOWhenacompany’ssystemshavehighTCO,itssystemsweremostlikelydeployedwithonlythefollowingobjectivesin mind:

Functionality:• The capability of a computer to perform the tasks and run the applications required by the user.Performance:• The capability of a computer to respond to user input as quickly as possible this is often referred to as system response time.Capacity:• The capability to handle growth in concurrent users, amount of data processed number of transactions completed, or other metrics.

After the systems are deployed, issues that are not directly related to these criteria crop up-issues that prove every bit as important to users over the long term. These post-deployment requirements include:

Availability:• The system or application is there when the user needs it.Ease of use:• No complicated procedures to learn or to remember.Assistance:• If the user has a problem, help is easily accessible.Security:• Theuser’sworkisprotectedfromlossorunauthorisedaccess.

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InallcaseswheretheTCOofasystemisunnecessarilyhigh,it’sbecausethesystemorapplicationwasdesignedwithout taking into consideration the post-deployment user requirements above, particularly availability, security, and assistance.

AvailabilityasthemostsignificantcontributortoTCOIn the information systems user requirement responsible for the greatest hidden costs is availability. Availability also requires ongoing management and maintenance throughout the entire life of every system.

A system is considered available when users can work with it without experiencing outages. Availability is measured fromtheuser’spointofview.Itdealsnotonlywiththepreventionofrealsystemoutages,butwithuser-perceivedoutages as well. These perceived outages are anything that prevents the user from working with the system productively, such as prolonged response times, lack of assistance, or lack of available workstations. As long as the userdoesn’tperceiveorfeeltheoutage,thesystemisconsidered“available.”

A user will consider a system unavailable if one of these conditions occurs:The system is not accessible:• Iftheusercan’taccesstheresourcessheorheneedstorunanapplication,thesystem is considered unavailable. The system is equally unavailable if all workstations or software licenses are in use, or if the network connection to necessary data is down, or if the system has a virus infection.The system is running too slowly:• The system may be operational, but if the response time is long the user will give up waiting and consider the system as unavailable.The system is intermittently having problems:• The user will choose not to use a system if he or she suspects that work may be lost due to intermittent system failures.

4.6 Culture for Information SystemsIn case of information systems we can start with an understanding of culture as the totality of shared meanings and interpretations of a given group. This repository of shared understandings and interpretations of the world is represented by symbols whose meanings and interpretations, members of the same culture share. The exchange of meanings and the agreement on appropriate interpretations of symbols is linked closely to communication. Communication is an integral part of culture without which no culture could exist, which, in turn, underlines the social nature of culture.

An important aspect of culture is that it has a normative function. This means that cultures contain an idea of how things should be and how its members are expected to behave. There are different ways in which the normative character of cultures is transmitted. One of these ways is ethics or morality. This refers to the norms that are accepted inagivencultureandthejustificationofsuchnorms.Italsocanbetranslatedintermsofvaluesthatareimplicitinallcultures.Therefore,onecansaythatcultureisa“valueconcept”.Allofthisshouldrenderitclearthatculturesare linked deeply to questions of identity.

Culture, thus one can claim, is a universal ingredient of human existence. Humans are symbol-using beings who live in a largely self-constructed environment, require continued cooperation to survive, and cannot live without culture. Thus, culture is a necessary ingredient of all communities and societies. At the same time, cultures also canbeproblematic.Thefactthattheydeterminetheirmembers’viewsofrealityandmoralitymeansthattheyareclose to and easily used by ideology. A culture can justify and help appear normal the things and actions that appear repulsiveandimmoraltoothercultures.Thisleadsustothedifficultquestionwhetherthereareuniversalaspectsof all cultures that would allow cross-cultural dialogue aimed at addressing such contradictions.

Traditionally the information systems (IS) designers have followed simple concepts of organisational functioning based overwhelmingly on ideas of management control. Data from operational activity is processed for use as informationformanagementtouseinplanning,decision-makingandsupervision.Whilethisviewpointfitssomeorganisations it is not appropriate to all.


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Culture and information systemInside working organisations, as in all areas of human activity, the behaviour of people is affected by the values and attitudes that they hold. The collective patterns of behaviour are important parts of the culture of the work-group or nation, which form an environment against which values and attitudes are in turn developed. This cycle is shown inthefigurebelow.

Attitude

Values Behaviour

Culture

Fig.4.4Theinfluenceofcultureonbehaviours

Data becomes information only when a person interprets it, and this interpretation of necessity takes place against thebackdropoftheindividual’sculture.Indecision-making,informationisaprerequisiteandthedecision-makingprocess is deeply affected by culture. Thus the meaning of information and effectiveness of an information system can vary substantially in different cultures. National cultures have long been associated with differences in the organisingandoperatingofbusinessesand,morerecently,culturesspecifictoorganisationshavebeengivendueimportance.

It is today an established realisation that the nature and role of information is central to the organisations, and, the culture has a critical impact on the selection, analysis and design of information systems.

National cultureWe have already seen the impact of national values upon corporate culture. A clear link from Japanese national culture to the corporate cultures of major organisations and then to the outstanding success of Japanese business has been an established fact. The interest of some of the top leaders of Indian industry was the possibility of transferring or creating Japanese corporate values in Indian industry in order to generate similar successes. It was found that someIndianorganisationsalreadyhadculturessimilartotheJapaneseorganisationsandthiswassignificantintheir success.

Dimensionsofpowerdistanceanduncertaintyavoidancemaybeofgreatsignificancetotheinformationsystems(IS) designer, especially when the values are extreme. Such extreme values can lead to systematic rejection of information that conforms to recognisable types. Other extreme values may lead to over-reliance on information to the detriment of the organisation. By being aware of the environment the IS designer may be able to foresee some of the dangers and these become acute for a designer who is not a national of the country where development is takingplace.Thedangerscanbesummarisedbrieflyas:

If uncertainty avoidance is strong then an MIS is needed to try to reduce the uncertainty.•If uncertainty avoidance is weak, fatalism leads to doubt about MIS and resistance from users.•If power distance is large then the boss disagrees with the MIS and the boss is right.•If power distance is small, authoritative approaches will be risky.•

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Organisational or corporate cultureOrganisational values are the one that greatly affects many of the organisational aspects that enhance performance andincreaseproductivityanddefineanorganisation’sculture.Organisationalorcorporateculturecanbedefinedas“thepatternofsharedvaluesandbeliefsthathelpindividualsunderstandorganisationalfunctioningandthusprovidethem with the norms for behaviour in the organisation”. Culture can also provide a key to understand issues and in understanding organisational climate as. Cultures can be determined by the values, assumptions and interpretations of organisation members.

These factors can be organised by a common set of dimensions on both, psychological and organisational levels to derive a model of culture types to describe organisations. Corporate culture is an important in predicting the organisational capabilities and outcomes such as customer orientation and new product development. It has been arguedthatthesuccessofanorganisation’sstrategydepends,toasignificantextent,onthecultureoftheorganisation.Consideringcultureinthelightofastrategicmanagementparadigm,ithasbeenarguedthat,foranorganisation’sculturetoprovidesustainedcompetitiveadvantages,itmustaddvalue.Itmustbeuniqueanddifficulttoimitateby competitors.

Other MIS

Step 5

Step 1

E-CRM Business etc.

Use of

Intranet/ Extranet

Internal

ion

Existing System +

MIS/IS ce

Existing System

Center of Activities

Step 2 Step 3

Step 4

Fig.4.5Informationflowandadoption

4.6.1 Information System AdoptionTheprocessofhowanorganisationadoptsaninformationsystemandthenumerousfactorsthatinfluencetheadoptionprocessisshowninthefigureabove.Awholerangeofeconomic,social,politicalandtechnologicalfactorsthatinfluencedecision-makingandperformancesurroundsanorganisation.Otherfactorsintheexternalenvironmentconstitutetheorganisation’scustomers,distributors,suppliersandthecompetition.Theseforcesconstitutetheexternalmacro-environment as well as microenvironment forces. They need to be scanned to determine opportunities and threats for the business.

The internal environment of the organisation could be made up of tangible factors such as the physical plant and equipmentandtheintangiblefactorssuchastheskillsoftheemployeeswithintheorganisation.Informationflowand adoption can be seen with the steps below:Step 1: The current information technology system of an organisation constitutes the centre of information systems influences.

Step 2: Suchinfluencescouldbemadeupofoldlegacysystems,integratedsystems,semi-integratedsystemsorstand-alone information systems. Depending on the organisational size, the market nature and type of products being producedandtheperceivedbenefitsofIS,certainportalsareabletopenetratetheorganisationtovaryingdegreestoinfluenceadoption.


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Step 3: Penetration and adoption are typically facilitated by top management, cultural orientation of the organisation, management information systems or the information technology itself. Once these factors have successfully penetrated theorganisationtoinfluencetheadoptionofIS,internaldiffusionoccurs.

Step 4: The diffusion is considerably affected by the cultural orientation of the organisation to create strong or weak relationships of the factors that lead to the penetration, adoption and diffusion. Based on the corporate culture with respect to IS adoption, the organisation may utilise IS for internal consumption (Intranet), external consumption (Extranet), a network of computer networks for global application (Internet) database management, enterprise resource planning and many other IS applications.

Step 5: In the highest order application of IS, e-Business takes place with inter-organisational connectivity.

This can be done with its exchange partners, such as its customers, which include order taking, order process, order payment, dispatch, order tracking and after-sales customer support. Others include suppliers for procurement processes and overall supply chain management.

4.7 Decision Management with Information SystemsDecision-making is the cognitive process of selecting a course of action from the multiple alternatives present. Eachdecision-makingprocessproducesafinalchoice.Itcanbeanactionoranopinion.Theprocessbeginswhenwe need to do something but we do not know what. Decision-making is a reasoning process, which can be rational or irrational, and can be based on explicit assumptions or tacit assumptions. Common examples include shopping, deciding what to eat, and deciding whom or what to vote for in an election or referendum.

Decision-makingissaidtobeapsychologicalconstruct.Thismeansthatalthoughwecannever“see”adecision,wecan infer from observable behaviour that a decision has been made. It is a construction that attributes commitment to action.

Structured rational decision-making is an important part of all science-based professions, where specialists apply their knowledge in a given area to making informed decisions.

Information fuels the new economy and plays an essential role in developing and maintaining a sustainable competitive advantage. The demands on a business today includes: increased global competition, lower barriers to entry,lowerprofitmarginsandthesearecreatinganever-increasingneedforaccesstodata.Theabilitytogettheright information to the right people at the right time are therefore has become the need of the hour. Organisations that are the most successful at collecting, evaluating and applying information are consistently the leaders in their respectiveindustries.Theabilitytoactfasterandmoreeffectivelythanthecompetitioncanbethedefiningadvantageintoday’smarketplaceandthemeansforsuccessfullymanagingcustomerrelationshipsinthelongrun.

Due to the large number of considerations involved in many decisions, decision support systems have been developed to assist decision makers in considering the implications of various courses of action. They can help reduce the risk of human errors. The systems, which try to realise some human decision-making functions, are called Intelligent Decision Support Systems (IDSS).

4.7.1 Decision Support SystemsDecision support systems are a class of computerised information systems or knowledge based systems that support decision-making activities. The concept of a decision support system (DSS) is very broad. A DSS can take many different forms and the term can be used in many different ways.

Ontheonehand,aDSSisbroadlydefinedas“acomputer-basedsystemthataidstheprocessofdecisionmaking.”Inamorepreciseway,ithasbeendefinedas“aninteractive,flexible,andadaptablecomputer-basedinformationsystem,especially developed for supporting the solution of a non-structured management problem for improved decision making.Itutilisesdata,providesaneasy-to-useinterface,andallowsforthedecisionmaker’sowninsights.”DSScanalsobedefinedinthefollowingways:

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DSS couple the intellectual resources of individuals with the capabilities of the computer to improve the quality •ofdecisions(“DSSarecomputer-basedsupportformanagementdecisionmakerswhoaredealingwithsemi-structured problems”).DSS are “interactive computer-based systems that help decisionmakers utilise data andmodels to solve•unstructured problems.”The term decision support system remains a useful and inclusive term for many types of information systems •that support decision making.

ClassificationofdecisionsupportsystemsAttheuser-levelDSScanbeclassifiedinto:

passive DSS•active DSS•cooperative DSS•

A passive DSS is a system that aids the process of decision-making, but that cannot bring out explicit decisions, suggestions or solutions.

An active DSS can bring out such decision suggestions or solutions.

A cooperative DSSallowsthedecisionmaker(oritsadvisor)tomodify,complete,orrefinethedecisionsuggestionsprovided by the system, before sending them back to the system for validation. The system again improves, completes, andrefinesthesuggestionsofthedecisionmakerandsendsthembacktohimorherforvalidation.Thewholeprocess then starts again, until a consolidated solution is generated.

Attheconceptuallevel,theclassificationofDSSisdoneonthefollowingbasis:communication-driven DSS•data-driven DSS•document-driven DSS•knowledge-driven DSS•model-driven DSS•

A communication-driven DSS supports more than one person working on a shared task; examples include integrated toolslikeMicrosoft’sNetMeetingorGroove.

A data-driven DSS or data-oriented DSS emphasises access to and manipulation of a time series of internal company data and, sometimes, external data.

A document-driven DSS manages, retrieves and manipulates unstructured information in a variety of electronic formats.

A knowledge-driven DSS provides specialised problem solving expertise stored as facts, rules, procedures, or in similar structures.

A model-driven DSSemphasisesaccesstoandmanipulationofastatistical,financial,optimisation,orsimulationmodel. Model-driven DSS use data and parameters provided by DSS users to aid decision makers in analysing a situation, but they are not necessarily data intensive. Dicodess is an example of an open source, model-driven DSS generator.


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At the system level, differentiation of DSS can be done on the two parameters:enterprise-wide DSS •desktop DSS•

Enterprise-wide DSS are linked to large data warehouses and serve many managers in a company.

Desktop,single-userDSSaresmallsystemsthatresideonanindividualmanager’sPC.

4.7.2 DSS ArchitectureThree fundamental components of DSS can be categorised as:

database management system (DBMS)•model-base management system (MBMS)•dialog generation and management system (DGMS)•

DBMS is a software system that uses a standard method of cataloguing, retrieving, and running queries on data. TheDBMSmanagesincomingdata,organisesit,andprovideswaysforthedatatobemodifiedorextractedbyusers or other programs.

MBMS handles representations of events, facts, or situations (using various kinds of models, two examples being optimisation models and goal-seeking models);

DGMS component links the user to the system. It is also known as user interface management component which allows a user to interact with the system.

The support given by DSS can be separated into three distinct interrelated categories: Personal Support•Group Support •Organisational Support•

ThebuildupofaDSSisclassifiedintoafewcharacteristics.Inputs:• this is used so the DSS can have factors, numbers, and characteristics to analyse. User knowledge and expertise:• This allows the system to decide how much it is relied on, and exactly what inputs must be analysed with or without the user. Outputs or Feedback: • This is used so the user of the system can analyse the decisions that may be made and then potentiallyMake a decision:• ThisdecisionmakingisdonebytheDSS’,however,itisultimatelymadebytheuserinorderto decide on which criteria it should use.

ApplicationsThere are theoretical possibilities of building such systems in any knowledge domain.

One of the examples is clinical decision support system for medical diagnosis. Other examples include a bank loan officerverifyingthecreditofaloanapplicantoranengineeringfirmthathasbidsonseveralprojectsandwantstoknow if they can be competitive with their costs.

DSScanbeusedinanyfieldwhereorganisationisnecessary.Additionally,aDSScanbedesignedtohelpmakedecisions on the stock market, or deciding which area or segment to market a product toward. DSS has endless possibilities that can be used anywhere and anytime, for its decision making needs.

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SummaryInformation is an organisational resource and it is a very important production source in information-based •industries and services, for example, banking.The crucial role of information and communication technologies in stimulating development is has its pros and •cons. Theempiricalevaluationsareacommonresearchmethodinsomeareasofinformationsystemslike,Artificial•Intelligence (AI). Empiricalresearchbecomesnecessary,foranestimationoftheeffectiveness,efficiency,andtheusabilityofa•system that applies IS or AI techniques in real world scenarios. The limitations of empirical research are: errors and pitfalls that are directly related to the layered evaluation •approach, and inherent limitations of empirical research in general.Capital planning is an accounting process used to determine afirm’s long-term investments such as new•machinery, replacement machinery, new plants, new products, new information system and research and development projects. Theinvestmentcostisanimmediatecashoutflowcausedbythepurchaseofthecapitalitem.•Net present value (NPV) is a standard method for capital budgeting used for the planning of long-term •investments. Theinternalrateofreturn(IRR)isdefinedasthediscountratethatgivesanetpresentvalue(NPV)ofzero.•AdiscountedcashfloworDCFisthevalueofacashflowadjustedforthetimevalueofmoneyandisaform•of present value analysis. Pay back period is the time required to pay back the initial investment of the project. •Thetotalcostofownership(TCO)ofaninformationsystemisdefinedasthetotalcostofacquiring,implementing,•and keeping that system running. Cost factors, which should go into the computation of the TCO of any system, can be grouped into: direct costs, •and indirect costsDecision-making is the cognitive process of selecting a course of action from the multiple alternatives •present. Decision support systems are a class of computerised information systems or knowledge based systems that •support decision-making activities. Attheuser-levelDSScanbeclassifiedinto:passiveDSS,activeDSS,andcooperativeDSS•Three fundamental components of DSS can be categorised as: database management system (DBMS), model-•base management system (MBMS), and dialog generation and management system (DGMS).

ReferencesUSparkFoundryTV, 2010. • Total Cost of Ownership [Video Online] Available at: < http://www.youtube.com/watch?v=U7-ns_KjnMY> [Accesses 1 December 2011].Bocii, P. and Hickie, S., 2009. • Business Information Systems: Technology, Development and Management, 4th ed., Financial Times Management.Peterson, P., 2002. • Capital Budgeting. Wiley.expressorsoftware, 2009. • Top 10: total cost of ownership [Video Online] Available at: <http://www.youtube.com/watch?v=K10pWgPvTQA> [Accesses 1 December 2011].Pietersz, G, 2011. • TCO (total cost of ownership) [Online] Available at: <http://moneyterms.co.uk/tco/> [Accesses 1 December 2011].Reh, F, 2011. • Total Cost of Ownership (TCO) [Online] Available at: <http://management.about.com/od/money/a/TCO.htm> [Accesses 1 December 2011].


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Recommended ReadingHuber, M. and Piercy, C., 2006• . Information Systems: Creating Business Value. Wiley.Seitz, N. and Ellison, M., • Capital Budgeting and Long-Term Financing Decisions. 4th ed., South-Western College Pub.Rainer, R. and Ceqielski, C., 2010. • Introduction to Information Systems: Supporting and Transforming Business, 4th ed., Wiley.

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Self AssessmentThe evaluation of ________systems can be seen as a layered process where each evaluation layer is a prerequisite 1. for the subsequent layers.

implementationa. adaptiveb. informationc. supportd.

_________ is a software system that uses a standard method of cataloguing, retrieving, and running queries 2. on data.

DBMSa. MBMSb. DGMSc. HBMSd.

Which of the following statements is false?3. Information systems have a major effect on businesses and organisations. a. The role of business information systems had now expanded to include strategic support. b. DSS has limited possibilities that can be used anywhere and anytime, for its decision making needs.c. Information fuels the new economy and plays an essential role in developing and maintaining a sustainable d. competitive advantage.

________ costs address the issues of maintaining availability of the system to end users and keeping the system 4. running.

Indirecta. Directb. Supportingc. Strategicd.

Which of the following statements is true?5. Investment in information system does not support a core competency. a. Allcapitalbudgetingmethodsrelyonmeasuresofinventoryflowsintoandoutofthecompany.b. Riskbecomesasignificantfactorwhenthemarketingdecisionbeingconsideredinvolvessomestatisticallyc. significantprobabilityofloss.Pay back period is the time required to pay back the initial investment of the project.d.


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Total Cost of 1. Ownership (TCO)

It is a software system that uses a standard method of A. cataloguing, retrieving, and running queries on data.

Discounted Cash Flow 2. (DCF)

Itisdefinedasthetotalcostofacquiring,implementing,B. and keeping that system running. It’s an accountingmethodology that is proving to be crucial in making sound IT decisions.

Internal Rate of Return 3. (IRR)

ItisthevalueofacashflowadjustedforthetimevalueofC. money and is a form of present value analysis.

Database Management 4. System (DBMS)

ItisdefinedasthediscountratethatgivesanetpresentD. value (NPV) of zero.

1-C, 2-B, 3-D, 4-Aa. 1-D, 2-C, 3-B, 4-Ab. 1-B, 2-C, 3-D, 4-Ac. 1-A, 2-C, 3-D, 4-Bd.

A__________ is a system that aids the process of decision-making, but that cannot bring out explicit decisions, 7. suggestions or solutions.

passive DSSa. active DSSb. cooperative DSSc. communication driven DSSd.

Decision-making is the __________process of selecting a course of action from the multiple alternatives 8. present.

passivea. cognitiveb. criticalc. flexibled.

The___________isanimmediatecashoutflowcausedbythepurchaseofthecapitalitem.9. investment costa. indirect costb. direct costc. passive costd.

Decision support systems are a class of ____________information systems or knowledge based systems that 10. support decision-making activities.

commercialiseda. computerisedb. capitalisedc. strategicd.

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Chapter V

Portfolio Management and IT Applications

Aim


discuss the concept of portfolio management•

explain various methods for creating and balancing portfolios•

identifythebenefitsofportfoliomanagement•

Objectives


explain the designing and implementation of portfolio management•

highlight the pitfalls while managing the portfolio •

analyse the methods of portfolio management•

Learning outcome


recognise the issues and challenges in portfolio management•

enlist the basic steps for the implementation of portfolio management•

explicate the steps for creating and managing IT investment portfolios•


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5.1 Introduction to Portfolio ManagementPortfolio management is a process which facilitates the determination of the right investments mix, i.e., deploying limited resources to maximise business performance, which is a key management challenge. Most capital investment activities take the form of projects that need to be managed as part of a portfolio. Project portfolio management entails balancing resources, business needs, business risks and changing parameters, while at the same time maximising the return on investment.

Portfoliomanagementwasoriginallycoinedinthefinancialandinvestmentcommunity,andthetermwasusedforthe process of managing the assets of a mutual fund; including choosing and monitoring appropriate investments and allocating funds accordingly.

Theadoptionoftheterminologyintootherindustriessuchasrealestateresultedinamodificationofthetermtoreflectindustryspecificpurposes.Similarly,withinthetechnologysector,thetermappliestoasetofprojectsorprogramsgroupedcollectivelyandmonitored.Portfoliomanagementcanbedefinedastheexpressionofthealignmentofthecorporate and IT strategic plans, viewing the portfolio as a suite of complementary investments that collectively provide the best possible allocation of resources to meet the business needs of the corporation.

Portfolio Management (PM) applications integrate all project-related information within a single, web-based enterprise solution. Organisations use PM solutions to better align and manage their projects, people, and partners so that they can achieve greater return on their portfolio of investments.

Portfolio management is a discipline used to ensure that a correct mix of investment activity is initiated, grouped, funded and managed. Technology assets are categorised as an investment portfolio allowing for:

Investment bundling•Prioritisation•Evaluation•Decision insight and support•Balance between timing, current needs, and future requirements•

Considering the complexities, the problem of managing the technology portfolio is broken into set of smaller problems to facilitate analysis. Among the issues to be considered while discussing the technology portfolio are:

Technology or business alignment•Investment balance•Resource management•Negotiation between competing projects or goals•Risk mitigation and management•Technology performance and reporting•

Portfolio management objectives allow the organisation to be focused, fast, and agile. Achieving these high level objectives necessitates a variety of inter-related steps, and these are:

Grouping:• Synergies between technology spending plans with business strategy.Investment focus:• Viewing expenditures (human, asset, capital) as investments. This also includes a process to track performance.Governance:• Process for making IT investment decisions.Cost control:• Understanding the main drivers of IT costs for restraint purposes.Efficiency:• Useoffinancialresourcesefficiently,leveragingwhereverpossible.

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Various methods are used to create and balance the portfolio, ranging from highly strategic to tactical:Financial portfolio analysis:• Balance and risk mitigation is achieved by spreading investments over a number of different initiatives. Projects are balanced across a number of categories that can include strategic or business objectives,complianceorrequiredmaintenanceandresearchanddevelopment.Dependingontheorganisation’sobjectives, this allows steering committees to incur the least risk and take advantage of market dynamics.Top down and bottom up:• Companies use one of the two either top-down thinking that looks at growth, or howdualprojectsorbusinessunitobjectivesprovidebenefitsinbottom-upplanning.Bothexercisesarepopularwith immature project organisations. However, if conducted separately in a vacuum, it provides a restricted view of the inter-relationships of projects to the organisation. A combined top down or bottom-up approach is the desired solution for such a venture.

AvarietyofportfoliomanagementbenefitsarepossiblefortheorganisationsuccessfullyexecutingaPMinitiative.Thekeybenefitamongtheseistheexpressionofvalueinbusinessterms.Otherkeybenefitsinclude:

Insight into schedule or budget variance•Return on investment calculations•Increased resource utilisation and reduced headcount•Extrapolatingfinancialbenefitsofaproject•Project interventions and results•Discontinued projects or corrective measures as necessary•

Portfolio management for technology organisations will offer IT management and a sense of symmetry with business objectives. A point to note is that as long as IT continues to plan at the individual initiative level, the tactical and reactive nature of most IT organisations would remain. Effective portfolio planning and management bridges the gaptowardsflexibilityandriskmitigation.

TherearefiveprimaryvalueadditionpropositionsthatcanbeachievedwiththeimplementationofaPMsolutionare:

Align business strategy and execution:• Integrate executive guidance (portfolio andfinancial plans), linesponsorship and project-level execution.Planandexecuteeffectivelyandefficiently:• Standardiseworkflowsandautomatebusinessprocessessothatwe can do the right work faster;Leverage resources • (people, partners, money and assets): Manage resources across the enterprise and around the world so that we could use the right resources.Make global teams more productive:• Share and reuse information, work products and templates so that we do the work right.Improve visibility and control:• Gain organisational transparency so that we can identify and solve problems early.

The market for portfolio management solutions is full of competitive offerings. It is important that PM software evaluation should be based on evaluation criteria of value versus just features and functions.

Portfolio management requirements that must be available in the offered or selected PM solution that can be judged based on recognising the importance of achieving value and measurable return on investment and variety of features and functions, which must be present in the PM solution.

Portfolio management requirements can be broadly categorised into four functional areas:Budgetandfinancialmanagement•Business planning and portfolio management•Project and resource management•Collaboration and knowledge management•


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ThebudgetandfinancialmanagementfunctionalityofaPMsolutionshouldintegratewithexistingfinancialandenterprise resource planning (ERP) applications to provide the organisation with real-time project-based budget and financialmanagementcapabilities.Easyaccesstoaccurateproject-basedfinancialinformationismandatorysothatthe organisation can make better and faster business decisions and invest money for maximum return.

Benefitsthatshouldbeenabledbytheapplicationincludetheabilityto:align spend with projects of greatest return•utilise project-based budgets to make better decisions•manageprojectbudgetsagainstfinancialobjectives•make project budgets transparent to sponsor organisations•

Functionalityrequiredwhiledeliveringtheabovevalueandbenefitsinclude:project and resource-driven budget and approval process•budget by project, initiative and organisation•budget billable and non-billable projects•budget revenue and expense•configurebudgetrules•definemulti-yearandrollingbudgets•comprehensive rate management:•

defineflexibleratesforbudget �establish multiple rate hierarchies �use the same or different rates for actual �

Integration:•Integrate with third-party general ledger systems, including providing and sponsoring cost centre �transactions.Perform prior period adjustments �Align budget management with project management �

Chargeback:•Budget project chargeback to sponsoring organisations �Incurred vs. budgeted cost chargeback �

OLAP reports:•General ledger cost analysis �Actual vs. total budget �Project detail cost analysis �

Additionalfinancialmanagementfunctionality:•Inclusion of capital expenditures in non-labour expenses �Incremental project funding �Major expenditure requests �Real-time data vs. historical data views �View-based (resource, cost centre, or organisation) breakdown of labour components salary, fringe, and �so on

As an example, budgeting is a relatively mature process within the majority of organisations. However, the corporate requirement to ensure alignment with changing business and economic condition necessitates a continuous re-budgeting in order to remain competitive. As a result, thousands of hours of time, effort and paper are required to keep budget data current and aligned.

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Inthe‘bottom-up’and‘top-down’budgetingmethod,aneasywaytounderstandtheprocesscanbeprovided.Top-down budget amounts are provided by the sponsoring organisation, and subsequently, the budget layers are built up project-by-project, program-by-program. It is vital to note that budgeting is conducted at the work level, not the cost-centre level, thereby ensuring accuracy.

Anothercriticalfeaturefacingthefinancialseverityisfunding.Thisbeliefprovidesthebenefitofreleasingthetotalmoney associated with a project. Thus, a project with a large budget may only receive a portion of the allocated fundingintheinitialstages,withthebalancereleaseduponcompletionofdefinedmilestones.Thisallowsprojectsponsors to effectively govern the distribution of funds and re-allocate funds midstream if necessary. Funds can be allocated in stages and even from other projects.

The business planning and portfolio management aspects of a PM application should enable the organisation to define,evaluate,andmonitortheirportfolioofprojectsformaximumreturnoninvestment.Organisationsshouldbeabletousethisfunctionalitytoestablishthedefinition,scope,risksandexpectedreturnfortheirportfolioofprojects. In addition, they should be able to model new and existing projects to determine the optimum portfolio mix that maximises their investment return.

Onceportfoliosaredefinedandprioritisedagainstcorporateobjectives,organisationsshouldbeabletomonitorproject portfolios through customisable views.

Benefitsthatshouldbeenabledbytheapplicationincludetheabilityto:select the most important projects•establishtherightdefinitionsofprojectsuccess•monitor project performance against objectives•re-align projects when market conditions change•cancel low priority and failing projects quickly•

Functionalityrequireddeliveringtheabovevalueandbenefitsinclude:“Whatif”scenariomodellingorsensitivityanalysis:•

compare portfolio plans against current operating plans �analyse the impact of new projects on the portfolio �drag and drop schedules �create multiple versions of project portfolio to compare against supply �

User-definedviews:•by project (past, in progress, or planned) �by resources (staff, skills or budget) �by schedule (past, current, or projected) �

Multiple criteria based views:•Actual vs. planned �Actual vs. budget �Actual vs. schedule �

OLAP reporting:•Project work by project type �Planned vs. actual work �Project work by project priority �Track initiative status �View initiative projects at a glance �View initiatives in Gantt charts �


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Simulating projects: The project and resource management component of a PM application should provide a •single record of all project-related activity so that project stakeholders at all levels are equipped with relevant and actionable information to make better and faster decisions throughout the project management lifecycle. It should enable an organisation to build project plan with speed and precision while utilising fewer and lower cost resources.

Benefitsthatshouldbeenabledbytheapplicationincludetheabilityto:manage project plans to objectives•communicate and monitor work for better results•identify and resolve problems early•manage dependences across projects•assign the right people to the right projects•fully utilise FTEs and reduce contractor costs•leverage resource talent across the global enterprise•take advantage of resources in lower cost geographies•

Functionalityrequireddeliveringtheabovevalueandbenefitsinclude:Initiative management:•

Set up unlimited hierarchical relationships initiatives, programs and projects �Monitorinitiativehomepagesandconfigurabledashboards �Defineinitiativechartersandgoals �Track initiative risks and issues �Run initiative reports �Track initiative status �View initiative projects at a glance �View initiatives in Gantt charts �

Project management:•Establish customisable project home pages �Defineprojectchartersandgoals �Defineprojectteammembersandstakeholders �Plan, assign and monitor tasks, deliverables, and milestones �Plan and monitor dependencies within and across projects �Defineprojectimpactsanddrivers �

Risk and issue management:•Defineandmonitorrisksandissues �Assign issue and risk actions �Status issues and risks �Identify common risk and issues across projects �

Resource management:•Definehierarchicalskillsprofilesforresources �Request and allocate resources �Allocateresourcesbasedonweightedproficiencies �

Time and expense:•Record time and expenses for project tasks �Route time and expense approvals �

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Lock approved timesheet data �Capture and report non-billable time and expenses �Establishuser-definedbillablehourmaximums �Report on missing timesheets �Configurealertsfortimesheetsthatareoverdueorawait �Definetimesheetperiods �Billable vs. non-billable time tracking �

Microsoft project and project server integration:•Synchronised project, task and resource management �Integrated OLAP reporting �Sharedconfigurationandsecurityadministration �Configurablefieldmapping �

Collaboration and knowledge management capabilities that span the processes of portfolio, budget, project, resource, and external relationship management must be available in the portfolio management software selected. A web-based user interface is necessary to enable organisations to seamlessly collaborate and share project-related information across internal and external project teams.

Benefitsthatshouldbeenabledbytheapplicationincludetheabilityto:establish a single source for all project-related information•empower project teams with relevant and actionable information•collaborate seamlessly across geographies and business partners•

Functionalityrequireddeliveringtheabovevalueandbenefitsinclude:Customised home pages:•

Organisational, initiative, project, and individual views �

Knowledge sharing across the extended enterprise:•Document management including check-in and check-out and version history �Templates of standard documents, plans, and budgets �Forums for threaded discussions �User-configurableviews �Email documents �

Role-based user support:•IT,R&D,financialandlineofbusinessexecutives �Project managers �Global project team members �Customers �Partners �Contractors and service providers �

Comprehensive reporting:•OLAP reports �Standard reports �Crystal reports �Adhoc reports �PowerPoint charts �


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Security administration:•Password composition and frequency restrictions �Exportable login audit log �

The role of services is critical in the successful implementation of a PM solution. Issues including integration with ERP applications, backend databases, as well as the skill and expertise required to deliver the above, are crucial aspectsofaPMvendor’sstrength.

Eachstepintheimplementationprocessmustbedesignedtodeliverincrementalbenefits,eventhosebeforethesales commitment; this allows the enterprise to achieve more value in a short period.

The software must provide tools to enable services team to develop and provide detailed work plans, monitoring progress via weekly status reports, maintaining logs of issues and risks, and ensuring oversight of bug and enhancement requests.

Another key ingredient in any successful software implementation is end user acceptance and usage. So it can beconcluded from theabove that transitionmanagement is theprocessofdeliberately influencing thehuman,organisationalandworkflowaspectsassociatedwithachangeorintroductionoftechnologytoachievethedesiredresults.

Enterprisesshouldlooktorealisethefollowingbenefitsfromatransitionmanagementeffort:Broadened ownership of implementation success across organisations by creating goal alignment through early, •end-user involvement.Minimised organisational barriers to success by identifying and mitigating organisational issues that will either •lengthen the implementation or jeopardise its success.Improved organisational knowledge and skills for the new environment, as well as increased organisational •effectiveness during implementation.Acceleratedattainmentofprojectedbenefitsbyfocusingonpost-implementationissueslikeuseracceptance,•productivity, and human performance support.Pass on ownership feeling to the end-user at the early stage of the project.•

5.2 Design and Implementation of Portfolio ManagementThebenefitsexpectedfromtheimplementationoftheportfoliomanagementare:

Maximise value of IT investments while minimising the risk.•Improve communication and alignment between information system group and business leaders.•Encourage business leaders to think in terms of a team and to take responsibility for projects.•Allowplannerstoscheduleresourcesmoreefficiently.•Reduce the number of redundant projects.•

There’snosinglerightwaytodoITportfoliomanagement.Vendors,consultingcompaniesandacademicsoffermany models, and often companies develop their own methodologies. Listed below are the key steps in creating and managing the IT investment portfolio based on the experience gained from several companies.

Step 1: Assemble - project inventoryPortfolio management begins with gathering a detailed inventory of all the projects in the company, ideally in a singledatabase,includingname,length,estimatedcost,businessobjective,andROIandbusinessbenefits.ThereareMNC’swhomaintainaglobaldatabaseofallitsITprojectsusingsoftwarefromestablishedITvendors.

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In addition to project plan information, all company users—which may be in thousands from various regions and countries—will have to add weekly updates on how much time they spend working on projects. This is used to gather information on resources.

Creating a project portfolio inventory can be painstaking but is well worth the effort. For many companies, it may betheirfirstholisticviewoftheentireITportfolioandanyredundancies.Agoodinventoryisthefoundationfordeveloping the projects that best meet strategic objectives.

Step 2: Evaluate - identify projects that match strategic objectivesA logical starting point creates a product strategy which consists of markets, customers, products, strategy approach, competitive emphasis, and so on.

The next step involves establishing a portfolio process. The heads of business units, in conjunction with the senior IT leaders in each of those units, compile a list of projects during the annual planning cycle and support them with goodbusinesscasesthatshowestimatedcosts,ROI,businessbenefitandriskassessment.

Next, a senior-level IT steering committee made up of business unit heads, IT leaders and perhaps other senior executives meets to review the project proposals; a good governance structure is central to make this work.

Oneofthecorecriterionforwhichprojectsgetfundedishowcloselyaprojectmeetsacompany’sstrategicobjectivesfor the upcoming year. For this purpose an executive leadership team, which may include the CEO, may create strategic initiatives, such as CRM or organisational excellence. The IT governance council, made up of business leaders and senior IT leaders, then may evaluate projects based on how well they map against those initiatives. It is worthwhile to assess risk from a technology point of view, a change-management point of view, the number of people that a project will impact and whether it will involve huge reengineering.

A project portfolio review board may further evaluate the project opportunity assessment for every proposal.

A good evaluation process can help companies detect overlapping project proposals up front, cut off projects with poor business cases earlier, and strengthen alignment between IS and business executives.

Step 3: Prioritise: score and categorise projectsAfter evaluating projects, most companies will still have more than they can actually fund. Portfolio management helpsinprioritisationprocessthatwillallowtofundtheprojectsthatmostcloselyalignwiththecompany’sstrategicobjectives.

Next, the projects are required to be placed into portfolios—multiple portfolios may be a good idea in many companies because they allow alike projects to be pooled together.

In case of the large technology portfolio, its management team—made up of project sponsors, function managers and product portfolio managers—may examine projects and come up with a list for the portfolio team to score.

They then prioritised them using a model that has four key tenets:Identify four to seven strategies:1. For example, limiting technology risk and increasing the reliability of the infrastructure.Decide on one criterion per strategy:2. For example, the team decided the criterion for limiting technology risk wouldbewhetherthetechnologyhadbeenimplementedinacomparableorganisationandthebenefitscouldbe translated to the company easily.Weigh the criteria:3. Allocate the weight to each criterion.Keep the scoring scale simple:4. Manycompaniesuseascaleofonetofive.Forthetechnologyriskstrategy,fivemightmeanthatithasbeenusedinacomparableorganisationandthebenefitscouldbetransferredeasily;threecouldmeanit’shardtodobecauseitwouldrequirechangingprocesses;onemightmeantheyhaven’tseen it work anywhere else.


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There is no one method to categorise IT investment portfolio. Some companies recommend a portfolio divided into three investment categories:

running (keeping the lights on)•growing (supporting organic growth) •transformingthebusiness(findingnewwaysofdoingbusinessusingtechnology)•

Thesecategoriescanbecross-tabulatedwithfourtofivevalue-focusedcategories,suchashowthoseinvestmentssupport revenue growth, reduce costs or grow market share.

In another model, based on their the previous experience, companies view their IT portfolios on multiple levels and at different stages, by visualising their investments in aggregate and placing them in four categories, with the per cent of IT expenditures apportioned across each. For example they may have 5 per cent [of the projects] in strategic areas, 15 per cent to 20 per cent in the informational category, and the remaining percentage split between the infrastructure and transaction modules.

The payoffs that come from a thorough evaluation and prioritisation process is the primary reason portfolio management is so effective and they are:

Firstly communication between IS and business leaders improves, and portfolio management gives business •leaders a valuable, newfound skill, i.e., the ability to understand how IT initiatives impact their companies.Secondly, business leaders think of the team and not of an individual. Portfolio management throws that practice •outthecornerofficewindow;decisionsaremadebasedonthebestinterestsofthecompany.Thirdly, portfolio management gives business leaders responsibility for IT projects. For example a project for •marketing,it’sthemarketingexecutivewhohastoselltheprojecttotherestoftheteam.Inthechangedscenario,nowthebusinesspeopleproposetheprojectsandtakeresponsibilityforriskprofiling,ongoingoperationalcostsand timeliness of delivery.Finally, the direction of where money is moving is known, which is especially important to CEOs and CFOs •who are increasingly demanding that technology investments deliver value and support strategic objectives.

Step 4: Review: actively manage the portfolioA top-notch evaluation and prioritisation process also becomes ineffective if the portfolio is not actively managed following approval of the project list. It involves monitoring of the projects at frequent intervals, the project managementofficeisrequiredtogetfinancialandworkprogressperspectiveupdatedfromprojectleaders.Thisinformation is required to go into a database, from where the project inventory and its status is circulated to all concerned.

The pitfalls while managing the portfolio and ways to overcome them are as under:Democracy is not easy:• Taking power away from business leaders accustomed to calling the shots will not always go smoothly.Group decision:• Businessleaderswhodidn’thavedecisionsscrutinisedpreviouslynowarehavingdecisionsdecided by group consensus, people realise it does work and that group of people can make better decisions than one or two making unilateral decisions.There’s no single software that does everything:• There are really good budget packages, resource management packages and fairly good portfolio management packages, but no package that ties it all together.Getting good information isn’t easy:• For example, the transparency of the cost structure. There has to be good information around all technology costs and investments.In addition, • database must be updated regularly,sothattherecontinuousflowofstatusofeachprojecttotheconcerned persons to enable them to react quickly to market changes.It’sstilldifficulttomakedecisionsonwhethertoundertakeorcanceltheprojects,asanorganisationalways•tries to make that work.

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It’s an additional time constraint on busy executives: • Good portfolio management means good IT governance which requires regular IT governance committee meetings. This means that the already occupied executive need to put in extra efforts.

5.3 Portfolio Management MethodsThe basic steps for portfolio implementation are:

Collect or identify all ongoing and proposed projects.1. Out of the list, identify or evaluate projects which meet strategic requirement of the company.2. Prioritise as per the score and categorise these projects.3. Review the projects for adoption plan and monitor their implementation.4.

Each of the above steps can be carried out by different methods. In fact portfolio management vendors, not only present their own variant of methods in their packages, but these packages have some minor variations in sequence of these steps also.

Step 1: Collect information on all projects (on-going and planned)The goal of this step is to collect all relevant information on the projects like, status of the project, resources used and required for completion of the project, project schedule and the risk factor involved. Methods used for this are:

Central repository• based present day systems which collect data in formats generated (based on initial key information or data entered) by the system and stored in the data base.Conventional procedures• of project management, wherein data is entered for each project and stored in a common database.

Step 2: Evaluate for strategic complianceThisstepbeginswithcreatingaproductstrategy.Somecompaniesdefinethesestrategiesintermsofkeyperformanceindicators(KPIs).Oncestrategyisdefinedtheneachidentifiedprojectisevaluatedagainststrategytodetermineifthose opportunities are in line with the corporate strategic direction. This evaluation is done in two ways, namely:

Tactical evaluation•Financial evaluation•

Tactical evaluationTop-down, strategic buckets:• Beginatthetopwiththebusiness’sstrategyandfromthat,theproductinnovationstrategy for the business – its goals, and where and how to focus the new project efforts. Next, make splits in resources:‘giventhestrategy,whereshouldwespendourmoney?’Thesesplitscanbebyprojecttypes,productlines, markets or industry sectors, and so on. Thus, we establish strategic buckets or envelopes of resources. Then, within each bucket or envelope, list all the projects – active, on-hold and new – and rank these until we run out of resources in that bucket. The result is multiple portfolios, one portfolio per bucket. Another result is thatourspendingatyear-endwilltrulyreflectthestrategicprioritiesofourbusiness.Top-down, product roadmap:• Once again, begin at the top, namely with the business and product innovation strategyBut here the question is: ‘given thatwehave selected several areas of strategic focus –markets,technologiesorproducttypes–whatmajorinitiativeswemustundertakeinordertobesuccessfulhere?’.Theend result is a mapping of these major initiatives along a timeline – the project roadmap. The selected projects are 100% strategically driven.Bottom-up:• Make sure that the good projects are accepted and unsuitable ones are rejected. The portfolio thus created will be a strong one. Also, it is better to ensure strategic alignment, by using a scoring model at the project reviews, and including a number of strategic questions in this model.


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Financial evaluationFinancialevaluationfurtherdefinestheprojectandanalysethedetailssurroundingitsutility.Theutilityofaprojectcapturestheusefulnessoftheproject,itsvalue,andistypicallydefinedbycosts,benefits,andassociatedrisks.Establish criteria and develop a model to support decision making; make sure accurate data is available to make decisions. Establish a process to analyse the project information; uniformly apply the methodology across the organisation. The different methods for valuation are:

Net Present Value• (NPV): In this method, for each project NPV is determined which is divided by the key or constraining resource. Expected Commercial Value• (ECV): The expected commercial value method uses decision-tree analysis, breaking the project into decision stages for example development and commercialisation as shown in the figurebelow,definingthevariouspossibleoutcomesoftheprojectalongwithprobabilitiesofeachoccurring.The resulting ECV is then divided by the constraining resource, and projects are rank-ordered according to this index in order to maximise the portfolio index. The method also approximates real options theory, and thus is appropriate for handling higher risk projects.

Commercial Success Technical

success PC PV

Commercialisation Cost (CC)

PT

Commercial Failure

Development Cost (DC)

ECV

Technical Failure

ECV=[(PV*PC-CC)*PT-DC] PC=Probability of Commercial

Success (given technical success)

DC=Development Costs remaining in the project

CC=Commercialisation (Launch) Costs

PV=Present value of project’s future earnings (discounted to today)

PT=Probability of Technical Success ECV=Expected Commercial values of the project

The project is broken into stages

in decis ion-tree format. Outcomes, consequences and

probabilities are shown in the

To calculate the ECV, follow the

link from PV on the right to ECV on the left .

Fig. 5.1 Calculation of expected commercial value of project

Step 3: Prioritising and balancingThe third major area of portfolio management is the development and selection of the project portfolio. Several things are to be considered: establish a process that will help optimise the portfolio not just the individual projects. Establish portfolio decision meetings to make decisions.

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Seek balance in the portfolio: Here, the goal is to achieve a desired balance of projects in terms of a number of parameters; for example, long term projects versus short ones; or high risk versus lower risk projects; and across various markets, technologies, product categories, and project types. Pictures portray balance much better than numbers and lists, and so the techniques used here are largely graphical in nature. These include:

Scoring model:• Decision-makers rate projects on a number of questions that distinguish superior projects, typicallyon1-5or0-10scales.Adduptheseratingstoyieldaquantifiedprojectusefulnessscore,whichmustclear a minimum hurdle. Projects are then rank-ordered according to this score until resources run out.Bubble diagrams:• Displaytheprojectsonatwo-dimensionalgridasbubblesasshowninthefigurebelow.The axes vary but the most popular chart is the risk-reward bubble diagram, where NPV is plotted versus probability of technical success. Then seek an appropriate balance in numbers of projects. The bubble diagram provides a graphical view of the project portfolio risk-reward balance. The horizontal axis is net present value; the vertical axis is probability of success. The size of the bubble is proportional to the total revenue generated over the lifetime sales of the product (for working out cost impact, the size of the bubble is made proportional to the cost of the project).

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f Suc

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P roject A

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Portfolio Bubble Chart

Fig. 5.2 Bubble diagram

Pie charts: • Figure below shows spending breakdowns as slices of pies in a pie chart. Popular pie charts include a breakdown by project types, by market or segment, and by product line or product category.


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Portfolio Pie ChartB y project type

New product40%

Maintenance25%

Enhancement35%

Fig. 5.3 Pie chart for spending break-up

Step 4: ‘WHAT IF’ analysis and project adoptionAfter prioritising the list of projects the organisation needs to determine where the cut-off is based on the business plan, and the planned level of investment of the resources available. This subset of the high priority projects then needstobefurtheranalysedandchecked.Thefirststepis tocheckthat theprioritisedlist reflects theplannedbreakdown of projects based on the strategic allocation of the business plan.

5.4 Portfolio Management Issues and ChallengesIn implementation of a portfolio management application, there are many successes as well as the lessons to be learnt. Issues and challenges which need to be understood are:

Portfolio management system acceptance: • Since true success of portfolio management system lies in active involvement of all concerned, it is important that the system’s benefit are recognised and appreciated bythem. Real time readiness: • In the past, a project manager had control over when information about the project was shared and available for all members of the project team and for executives. The project manager could masks blemishes and possible lapses by controlling when information was shared. Now with a portfolio management system,thedaytheissuebecomespastdueitcanbeflaggedinreports.Theprojectmanagermightnowhaveto do daily management of the issues.Conformitytooverrideflexibility:• Oneofthebenefitsofaportfoliomanagementsystemistheabilitytotrackinformation consistently across projects. Latest maturity models call for consistency across the organisation. AportfoliomanagerenforcesconformityandanindividualPMwillloosesomeoftheflexibilitytheyhaveintracking and reporting project status. System to be for the users:• As we take project management from desktop applications and non-integrated artefacts, we have risen to the level of application management. With application management, comes the entire cycleofenhancementrequests,workflowrequests,andevenfieldnames.Requirement of an application administrator:• First thing to do when implementing a portfolio management system is to appoint an application administrator and an application change control process. We need to budget aperson’stimeintothecareandfeedingofthisapplication.Anapplicationadministratorneedsastrongskillsetbalanced between knowledge of project management principles and methodologies, knowledge of the business, and technical knowledge of data bases, SQL, report writing, and trouble shooting. A system administrator focuses on making sure the operating system and the hardware work, the application administrator makes sure the application meets the business need. The organisation may head for failure if it is thought that a system administratorcanprovidethebusinessneedsfulfilledbyanapplicationadministrator.

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Making it business management application requires sincere efforts by all:• A basic premise of a portfolio applicationisthatexecutivelevelsofinformationcanflashfrommultipleprojectsatonetime.Excellenceisamindsetandthemiddlemanagermustmaintainvigilancetoinsurecompliance.There’sanentirelyintegratedthread with this thought and that involves cross-organisational compliance so the portfolio management tool transcends a project management application and becomes a business management application. Reports grow exponentially if not reasoned out:• Input is one aspect of an application, output is another and there is an exponential demand for output. The main outcome of a well organised report is that there is always tendencytorequestforanewreportorthesamereportwitha‘slightmodification’.People will blame the system for their own lapses:• People will blame the system to hide their own insecurities and lack of knowledge. No matter what system is created, it will have its own set of idiosyncrasies and there will be some things the application will require that make no sense at all, but the application requires it. Mental block:• Nomatterhowmuchyoutrain,handhold,andevangelise,somepeoplejustwon’tgettheideaofproject rolling up to program, rolling up to portfolio. Portfolio management is a completely different perspective and does require a certain amount of abstract visualising. While work with these people, one is careful and understanding, the odds are that they want to do well, and they have a wealth of knowledge and experience, but they have a mental block.Customisation efforts increase with time:• Everysalesmanwhopushesaportfoliomanagementsystemflauntsitsflexibilityandthecapabilitytocustomisethesystemtomeetthebusinessneed.Mostgiveyouthecapabilitytoaddcustomfieldsandcreateyourownreports,butasstatedearlierthedemandforvariousoutputsneverceases.Intheinfancyofthesystemwewillbeabletoquicklyaddacustomfieldtomeetaneed,butaftermonthsof customisation here and there, the ripple effect can be enormous.


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SummaryPortfolio management is a discipline used to ensure that a correct mix of investment activity is initiated, grouped, •funded and managed. Thekeybenefitofportfoliomanagementistheexpressionofvalueinbusinessterms.•Portfolio management for technology organisations offers IT management and a sense of symmetry with •business objectives. Portfoliomanagementrequirementscanbebroadlycategorisedintofourfunctionalareas:budgetandfinancial•management, business planning and portfolio management, project and resource management, and collaboration and knowledge management.The key steps in creating and managing the IT investment portfolio are: assemble the project inventory, evaluate •and identify projects that match strategic objectives, prioritise: score and categorise projects, and review: actively manage the portfolio.The basic steps for portfolio implementation are: collect or identify all ongoing and proposed projects, out of •the list, identify or evaluate projects which meet strategic requirement of the company, prioritise as per the score and categorise these projects, and review the projects for adoption plan and monitor their implementation.Strategicevaluationofportfolioisdoneintwowaysnamely,tacticalandfinancialevaluation.•Financial evaluation of portfolio is done through two methods net present value and expected commercial •value.Balancing of the portfolio is done by using scoring models, bubble diagrams, and pie charts.•Few important issues and challenges of portfolio management are: portfolio management system acceptance, •realtimereadiness,conformitytooverrideflexibility,requirementofanapplicationadministratorandsoon.

Referencesportfoliomanagement.in, 2011. • Portfolio Management [Online] Available at: <http://www.portfoliomanagement.in/> [Accesses 1 December 2011].ndtvprofit,2010.• The fundamentals of portfolio management [Video Online] Available at: < http://www.youtube.com/watch?v=eEIsB1-IvD4 > [Accesses 1 December 2011].wisegeel.com, 2011. • What Is a Bubble Diagram? [Video Online] Available at: <http://www.wisegeek.com/what-is-a-bubble-diagram.htm> [Accesses 1 December 2011].Marston, R., 2011• . Portfolio Design: A Modern Approach to Asset Allocation. Wiley.itsmprofessor.com, 2011. • The Fundamentals of Portfolio Management [Online]. Available at: <http://www.itsmprofessor.com/2011/06/fundamentals-of-portfolio-management.html> [Accesses 1 December 2011].Anderson and Sweeney, 2008. • Decision Analysis: Utility Analysis and Scoring Models. Thomson.

Recommended ReadingSalo, A. and Keisler, J., 2011. • Portfolio Decision Analysis: Improved Methods for Resource Allocation. Springer.Eisenbeis, R., 1978. • Problems in applying discriminant analysis in credit scoring models. Board of Governors of the Federal Reserve System.Amnec, N. and Sourd, V., • Portfolio Theory and Performance Analysis. Wiley.

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Self AssessmentThe expected commercial value method uses ______________, breaking the project into decision stages.1.

decision-tree analysisa. pie chartsb. scoring modelc. bubble diagramsd.

Which of the following statements is false?2. Portfolio management is a discipline used to ensure that a correct mix of investment activity is initiated, a. grouped, funded and managed. Portfolio management objectives allow the organisation to be focused, fast, and agile. b. Effectiveportfolioplanningandmanagementbridgesthegaptowardsflexibilityandriskmitigation.c. The market for portfolio management solutions is devoid of competitive offerings.d.

Which of the following statements is true?3. A good evaluation process can help companies detect overlapping project proposals commercially.a. The software must provide tools to enable services team to develop and provide detailed resource plans.b. The role of services is critical in the successful implementation of a performance management solution.c. Onceportfoliosaredefinedandprioritisedagainstcorporateobjectives,organisationsshouldbeable tod. monitor project portfolios through customisable views.

Portfolio management for technology organisations offers IT management and a sense of ___________with 4. business objectives.

achievement a. symmetryb. focusc. investmentd.

The project and resource management component of a portfolio management application should provide a 5. _______ record of all project-related activity.

completea. effectiveb. singlec. multipled.

Portfolio management applications integrate all project-related information within a single, web-based 6. __________solution.

projecta. enterpriseb. managementc. investmentd.

Effective portfolio planning and management bridges the gap towards _________ and risk mitigation.7. flexibilitya. enterpriseb. projectc. resourcesd.


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A ___________user interface is necessary to enable organisations to seamlessly collaborate and share project-8. related information across internal and external project teams.

employee-baseda. web-basedb. project-basedc. planning-basedd.

Abasicpremiseof aportfolio application is that executive levelsof___________canflash frommultiple9. projects at one time.

worka. informationb. planningc. performanced.

Whichoneofthefollowingisabenefitofportfoliomanagementsystem?10. Its ability to track information consistently across projectsa. Available for all members of the project teamb. Strategic allocation of the business planc. Conformitytooverrideflexibilityd.

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Chapter VI

Enterprise Resource Planning (ERP) Systems

Aim


introduce to the concept of enterprise resource planning (ERP) systems •

discuss the history of enterprise resource planning •

explain the distinctive ways of implementing an enterprise resource planning•

Objectives


explain the guidelines for enterprise resource planning implementation•

describe the components of enterprise resource planning•

identify customer expectations in ERP packages•

Learning outcome


recognisethebenefitsofenterpriseresourceplanning•

highlight the ERP system accomplishments•

enlist the drawbacks of enterprise resource planning•


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6.1 Introduction to Enterprise Resource Planning Systems (ERP)Information systems further specialised into system software and application software. ERP is a living example of new application software. Achieving and maintaining competitive advantage is the underlying principle for every business around the world. Companies are struggling nowadays, conversely, with the integration of information from diverse contrasting IT systems and are spending approximately 40% of their IT budgets on maintaining such legacy systems. To meet this challenge, companies are investing considerably in enterprise information system which in general known as Enterprise Resource Planning (ERP) applications. It had been sighted that ERP is a key enabler of business process transformation and IT automation. Gaining strategic advantage is often considered as a key reason for implementing ERP.

ERP systems endow with cross-organisation integration through embedded business processes and are by and large composedofnumerousmodulesincludinghumanresources,sales,production,purchaseandfinance.Duringthe1990s ERP systems were the actual standard for replacement of legacy systems in large companies.

Fig. 6.1 gives the elaborate view of the enterprise resource planning system life cycle, the whole process consists of four steps namely:Step 1: Assess - Provide information about cost, size of the package, when to buy, what to buy, what is right, what is wrong whether to go for in-house ERP or invites ERP vendors.

Step 2: Select - Once the assessment is done, next task is to select the module which is an utmost essential, for example, HLL- a FMCG MNC, in India is a marketing oriented company, is in the process to implement the ERP modulethenitcouldbebeneficialforthecompanytoselectthemarketingmodules.

Step 3: Implement - Once the selection process is completed, the implementation starts. It is again a very careful andsensitivestageas implementationisnotaone-dayjobandit takesyears togoforfinal touch.Inactualityimplementation is a joint effort between internal and external team.

Step 4: Support-Theannualmaintenancecontact,inalaymanterm.Itissignificantastwodifferentkindsofmindsets are going to inter-mingle, i.e., vendor side and the customers.

Assess

Implem

ent

Select

Support

1

24

3

Fig. 6.1 ERP life cycle

ERP systems can provide the foundation for a wide range of e-commerce–based processes, including web-based ordering and order tracing, inventory management, and built-to-order goods.

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6.2 Brief History of ERPIn the manufacturing environment of past the creative focus was on the competence to produce the product. This system integrates capacity, design engineering and management, costs, and long range planning of the enterprise into the equation. There are four stages to ERP.

MRP-I:• Material requirement planning, which was nothing but a historical background of ERP, the motive, was only to tap inventory i.e. raw materials planning.MRP-II:• Manufacturing resource planning which looks after production related issues. The concept of MRP IIwastolookaftershopflooranddistributionmanagementactivities.ERP:• Enterpriseresourceplanningroleisverywideandnotconfinedtoonedepartmentinsteadhaveabroaderpurview.ERP-II or MRP-III:• Money resource planning or ERP-II advent can be seen few years after ERP system origination which emphasised more on planning of capital or when surplus money arises.

6.3 ERP ComponentsTheworld’sfinestaccessibleERPsolutionisfullyweb-enabled,seamlesslyintegratedandcanbeimplementedin weeks. And it can computerise the complete operations globally. ERP can provide assistance in accomplishing unimaginableefficiencyofoperations,significantcostsavings,andmaximiseprofits.ERPispackedwithpowerfulfeatures,extremelyeasytoimplementanduse,comprehensiveinitsscope,modularandflexible,fullycustomisable,totally secure, and incredibly robust. ERP will be used by the companies to manage their business in future. With ERP, we can assimilate transactions of any pulse of the entire organisation, all the time.

ERP can be completely web-enabled and from any type of software on any platform, we can deal with the entire business by exception. ERP modules are a most excellent way to integrate all the departments. These modules enables all the employees of an enterprise to operate like CEO, giving them the tools, information, and insights they necessitate detecting problems earlier and taking action faster. To facilitate easy handling of the system, ERP has been divided into the following core subsystems as shown in Fig. 6.2.

Manufacturing Logistics

Marketing sales and

distribution

Accounts payable and receivable

Multi Currency & Forex Business to Business

ERP Human Resources Module

Human Resources

Production Planning and

Control

Learning communities

Inform

ation

Architectural

system

Suppo

rt

Finance

ERP Industry solution Module

Fig. 6.2 The ERP learning community framework


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Finance:• ERPtakescareofcompletefinancialaccountingoftheenterpriseovertheweb.Itmaintainsallthebooks and records that are essential for proper bookkeeping and accounting. ERP helps to manage all kinds of taxes,bankreconciliationandeverythingelsethatisrequiredforefficientandcompletefinancialaccounting.Thus,financialsprovidereal-timevisibilityintofinancialresults,minute-by-minutecontroloverexpenditure,and guidance for better decisions.Human resources:• ERP handles software for personnel-related tasks for corporate managers and individual employees of the organisation. Examples: human resources administration, automatic personnel management processes including recruitment, business travel, and vacation allotments, payroll handles accounting and preparation of cheque related to employee salaries, wages, and bonuses. Thus, human resources offer comprehensive HR solutions, from recruitment to compensation to work-force development.Manufacturing and logistics:• A group of applications for planning production, taking orders, and delivering products to the customer. Examples: production planning performs capacity planning and creates a daily productionscheduleforacompany’smanufacturingplants.Materialsmanagementcontrolspurchasingofrawmaterials needed to build products.Purchasing:• Empower the purchase function just like sales, indents, and orders. ERP covers all aspects of production, including issues quality control, material receipts, purchase invoices and production receipts, multiple bills of material. Thus, purchasing saves the time by simplifying and improving vendor evaluation, performance tracking and quality examination.Production, Planning and Control (PPC):• ERP enables to plan for material requirements based on a production planning process. The system reports inventory requirements based on work orders initiated, stocks committed and existing stocks. Thus, PPC provides all possible reports and analysis, which facilitates in managing and keep good control of inventory.Multi currency and Forex:• ERP supports accounting for multi-currency operations, with exchange rate tables, transactions in any currency, accounting and reporting in all currencies, and accounting for forex gains and losses.Business 2 Business (B2B):• ERP is a virtual portal that can be accessed by customers, distributors, suppliers, and auditors. Anyone with a computer and a modem, and the necessary access permissions, can place orders and monitordeliveries,andviewaccountstatements.Toimproveourserviceefficiencywecanallowourbusinessassociates to manage their own interaction with our enterprise. All reporting can be individual, grouped, or instantly consolidated across the enterprise.Funds management:• ERPenablesustomanagefundsefficiently.Itmaintainsthecompletecustomerdatabaseanddoeskindoftransactiontypewespecifyanditseffectonfundsflow.Marketing, sales and distribution:• ERP helps to optimise all the everyday jobs and activities carried out in sales, delivery and billing. Key elements are: pre-sales support, inquiry processing, quotation processing, sales order processing, delivery processing, and billing and sales information system. This module also includes a Point-of-Sale(PoS),whichcomesunderretailing,canoptimisethesalesfiguresandalsofacilitateinhavingmore delighted customers.

6.4 Distinctive Ways of Implementing an ERPA properly implemented ERP system can convey good results and dramatically enhance the aptitude to diminish costs, run leaner, and endow with good customer service these are distinctive ways of implementing an ERP. Following are the ERP implementation approaches:

Phased implementation approach:• This implementation approach is also known as modular implementation. The system of modular implementation moves to one ERP module at a time. This limits the capacity of implementation usually to one functional department. This approach suits enterprises that do not share many widespread processes across departments or business units. Independent modules of ERP systems are installed in every unit, while integration of ERP modules is taken place at the afterward stage of the project. This has been themostusuallyusedmethodologyofERPimplementation.Eachbusinessunitmayhavetheirown‘instances’of ERP and databases. Modular implementation trims down the risk of installation, customisation and operation of ERP systems by reducing the scope of the implementation. The successful implementation of one module can promote the overall success of ERP projects.

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Big-Bang implementation approach:• This requires simultaneous implementation of numerous modules of an ERP packages. Enterprises outline a grand plan for their ERP implementation. The installation of ERP systems of all modules happens across the entire enterprises at once. The big bang approach has the prospective to condensetheintegrationcostifit’sexecutedmethodicallyandcautiously.ThismethoddominatedearlyERPimplementations; it partially contributed to the higher rate of breakdown in ERP implementation. Process-oriented implementation:• This method of implementation, focus on the support of one or a few critical business processes, which involves a few business units. The initial customisation of the ERP system is limited to functionality closely related to the intended business processes. This approach is utilised by many small to mid-sized companies whose business processes are not too complex.Vanilla implementation approach:• It is an implementation approach that focuses on minimal customisation of the ERP packages.

6.4.1 Guidelines for ERP ImplementationThe guidelines for ERP implementation are as under:

Understand the corporate needs and culture:• An ERP implementation will bring a change in the roles of different departments and responsibility.Complete business process change:• ERP can change the whole outlook of business by fully reengineering it and giving it new shape and direction, which could be unimaginable.Provide strong leadership:• Leaders plays a very vital role in making a destiny of followers, so while selecting a team leader or project leader, this point has to be kept in mind.Choose a balanced team:• Thesystemenvironmentoftoday’sERPsolutionsiscomplex:RDBMS,servers,networking, LAN, WAN, and so on. These will be on-line, as an integral part of the package. So the team should be balanced in order to rectify the error.Selecting a good implementation methodology:• It is advisable for the project leaders to set out clear and measurable objectives at the very beginning and review the progress at intervals, as the implementation progresses.Train every one: • ERPpackageisnotconfinedtospecificpeoplebutabeneficialtowholeorganisationsoasfarastrainingpartisconcerneditwillbegiventoallandnotrestrictedtofewasitisindirectlygoingtobenefitthe organisation alone.Commitment to adapt and change:• An ERP implementation should not be looked upon as a short distance run.It’sanongoingprocess.Ithaswideimplications,andwillimpactthefutureofthecompanyformanyyears to come.

6.5 Conquering Implementation of ERPThe success of ERP implementation greatly depends on the responsibility of top management and active participation oftheHRpeople.ThesuccessofanERPsolutiondependsonhowquickthebenefitscanbereapedfromit.Thisnecessitates rapid implementations, which lead to shortened ROI periods. Traditional approach of implementation is tocarryoutabusinessprocessre-engineeringexerciseanddefinea“TOBE”modelbeforetheERPsystemimplementation. This led to mismatches between the proposed model and the ERP functionality, the consequence of whichwascustomisations,extendedimplementationtimeframes,highercostsandlossofuserconfidence.Thingsto keep in mind for the successful implementation of ERP are:

Implementation strategy and approach:• Organisational readiness and preparedness is what makes the key difference between success and failure. Any ERP implementation brings a transformation in varying quantum; hence,seniormanagement’scommitmenttochangemanagementprocessandpilotingtheERPimplementationbecomes completely necessary. The end-user participation and ownership of implementing the ERP is a notable paradigm shift compared to the conventional software development process. Implementation strategy is context dependent. So what is successful in one company may not yield similar results in another organisation. Therefore, the strategy and approach to implementation is a key enabler for successful implementation. Start up education:• The simplest and most cost effective education method is to set up either a 2-day corporate training in the company or at a convenient local venue.


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Continuous communication:• The success of the ERP initiative, on the softer side, can be accredited to two things, first,inallthecommunicationabouttheproject,anexerciseoftyingcentralmessagesandspecificdepartmentobjectives and needs back to the overall company. Second, a habitual mix of efforts to include everything from conducting workshops, publishing newsletters and holding focus groups to organising lunch time discussions and travelling road shows each designed to suit dissimilar stages across the implementation life cycle.Forming the team:• Selecting the right project leader is as important as selecting the right package. Core team leadership is a full time assignment. Team leaders should know the business well and have cross-functional experience. The team is also as important as its leader. Project planning:• An important task is the preparation of detailed plan that covers the total implementation process. Here various project management techniques like PERT charts can be used. The implementation plan should have clear components and should include the time schedule, ownership and responsibility, resource requirements and critical success factors for each phase. The project planning should also lay emphasis for determining the effort required for carrying out the various activities. It is important to:

definethescopeoftheproject �estimate the step-wise and task-wise man-hours required �preparing a schedule �

6.6ERPBenefitsThe ERP system has an enormous payback and is far better than the conventional packages. Some advantageous features of ERP system are:

Communication with suppliers or customers can be automated•Efficiencyisaidedbyreducedmanualentries•Dependency on human resource eliminated•Integration of all function already established•Readymade solutions for nearly all the problems•Supplier and customer can intermingle on-line at any time•Reach multiple locations through one system•Complete integration of systems across all functions•Pace in transmission of information•

Fewotherelaboratedbenefitsare:Automatic updation to new technology• : ERP systems can automatically update itself according to the new technology.Enhancedflexibility:• ERPismulti-moduleapplicationsoftwareandisveryflexibleandfrequent,forexample,production manager can access ample number of information through his or her lap-top of marketing department by sitting at home.Improved customer satisfaction:• With the help of ERP, customer have an individual login name and password and theyareable to solve theirgrievancesby internet alone specificallynoneed towaste time invisitingpersonally.Information technology: • Reduced support costs and infrastructure costs.Lead-time minimisation:• “timegapbetweenorderingthegoodsanditsdeliveryisknownasleadtime”soifthis could be minimised then there will be reduction in inventory cost burden.Process improvements:• Eliminate redundant transactions andmultiple reconciliations; extra efficient jobrotationprocess;moreefficientstaffandsuccessionplanning.Related initiatives:• Better focus, reduced spending.Strategic direction:• Improved resource allocation,moreflexible organisation, and better future decisionmaking.

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6.7 Customer Expectations in ERP PackagesCustomers have a lot of expectations from the ERP packages. They have to be very cautious and imagine a lot whilefinallylockingtheproduct.Theexpectationstheyhaveregardingtheproductiselaboratedandexplainedone-by-one below:

Financial health of the company:• Implementation of ERP can give an organisation a new shape that emphasise moreonthefinancialstatus,sotheorganisationisawakeaboutwhethertheyaremovingincorrectdirectionor not.Size of the company and its main focus:• ERP’suser’stotalstrengthandsizeplaysaveryvitalrolewhileconsideringallthefactorsasvendor’scorebenefitisnotonlytoemphasiseonimplementationonly,buttobuild long-term relationship.How to acquire skills on the package in short time:• this varies from company to company and also depends on the level of highly skilled technocrats employed by the organisation thus the whole effort is required by user itself.Is implementation of the package easy: • to make the implementation of the package easy cooperation from both the user as well as the vendor is neededIs the package compiled:• It covers all areas of the department namely: production then marketing, purchase, research and development and many more; package has to be very exhaustive.Is the package localised:• If the company whose product we are to use is located in some other country then the packages be purchased and localised according to the requirements.Is the package too old or too new:• This includes many other things and gives answers to a lot of questions like latest trends, present platform, and many more.Number of implementations in the country:• More the number of implementations more is the experience of the ERP vendor, consequently leads to better after sales service and grasp market share.Quality of the consultants hired:• Key role of the consultant is to bridge the gap between the vendor and the user and act as a liaison, other responsibilities of the consultant includes providing training, giving knowledge to both user and vendor about the latest trend and also guide them about the in-house development of ERP or purchasing from outside.Who is supporting the package:• The brand name of the ERP package also matters. If the company is a new playerwhatUSP’stheyhavefollowedsotheusercanbeextractedforthattheyhavetocome-upwithR&Dmodule which no other vendor has.

6.8 Drawbacks of ERPThe drawbacks of the ERP system are as follows:

Confusinganddifficult:• ERP softwares are a gigantic package and consist of numerous modules, so it is very difficulttounderstanditscharacteristics.Customisation is costly:• Customisationiscostly,forinstancewhenreportisneededtoconfigure,onepersonexpectedfromtheERPvendor‘ssidehastocomeandgivesupport.Hencemorethecustomisationgreaterwillbe the service cost charged by the vendor.Customisation is time consuming and in many cases impractical:• ERP is not a one or two day job it is a regularprocessitrequiresyearstocompleteasmanythingshavetobeincorporatedintoit,i.e.,mindset,officeautomation, and so on. There is clause of hidden cost, which always pinches the user.Decline of an individual’s monopoly over information monopoly:• As information can be put into the server and rights and authority can be given to appropriate people who can access it so that production department data cannotbeconfinedtoproductiondepartmentpeople.Itcanbesharedbymarketingdepartmentpeoplewiththehelp of login name and password thus cutting short time and reducing paper work.ERP engenders a host of fears:• It engenders a host of fears on some of them such as job redundancy. There is misconception among the employees that ERP can be a threat as for upcoming employment, as the employment isentirelybasedontheperson’sperformance.


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Geographic restriction:• The ERP packages are readymade packages made by the ERP vendors and can be customised according to the user need, thus sometimes not suits individual persons who are geographically away.Implementation of an ERP project is a long process:• Like customisation implementation is also a long process becausethereisamplenumberofdepartmentsandERPcancomeinfull-flowwhentheentiredepartmentisfully compatible with ERP integration.Platform restriction:• Platform restriction could be another obstacle upto some extent as they are using different operating systems.

Major stumbling blocks take account of the technical issues around providing adequate and protected access to ERP from heterogeneous locations and platforms.

6.9 ERP System AccomplishmentsWhile ERP systems are generally the most expensive institutional information system implemented by most institutions over recent years, they are not the only one. Most of the universities have other information systems for their organisational needs that ERP systems do not address. For example, course management systems (CMS), such as WebCT and blackboard, are usually the next most expensive. Other institutional information systems may include: timetable management software, assignment tracking software, bookshop management software, library cataloguesystemsandvariousinfrastructuresystemssuchasstudentandstaffauthentication.ThefewUSP’sofERP systems are:

Web-based student records:• Provides staff with access to student records data including course lists, student photos, and student enrolment details.Timetable generator:• A web application that allows a student or staff member to generate a personal timetable.Minimum course presence: • The provision of a consistent minimal web site for every course offered by Infocom independently of academic staff and as early as possible.Informal review of grades (IROG):• Web-based processing of student requests for an informal review of a finalgrade.

6.10 Steps to Avoid PitfallsAnERPsystemrequiresalotofinvestment,soit’scriticaltotheenterprisestodoitaccurately.It’simportanttochoose the correct software, steps to avoid pitfalls in choosing the ERP packages are:

Classify the methodology:• Choose on and stick to a lucid, analytical methodology. The methodology should guide through each step in the selection process and diminish the emotional proportion in the selection. The processes include distinctive phases for completing a thorough business-process review such as:

evaluating vendors �managing software demonstrations �supporting the eventual decision-making process �and structure the supporting implementation plan, together with costs �

Plot to business processes:• Don’tstartwithsoftwaredemos.Beginwiththebusinessprocesses,andthenmapout feature or function requirements through a series of business-area reviews, the creation of process maps, an assessmentof“tobe”processchanges,andthedevelopmentofarequirementsmatrixwithsupportingbusinessscenarios.Be conscious of organisational chemistry:• Use instincts when it comes to the organisational chemistry between the enterprises, consultants, and the selected vendor. We want a consulting organisation that we sense relaxed with, one that can extract the input it needs from the in-house team members.Elect to choose a well-built team: • Set up a steering committee with the president or CEO and heads of sales, finance,andoperations,andsanctionthemtomakedecisions.

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Scrutinise potential vendors:• Accomplish a rigorous software-selection process, and situate potential vendors underthemicroscope.Thinkaboutmorethanjustfeaturesandfunctionalityafinancialstability,technologystrategies, long-term support, implementation successes, and corporate culture, are key factors.Appraise business processes:• Be equipped to alter some business processes if you want to minimise or eradicate customisation.Eventhesmallestenterpriseshavetomakeprocesscompromisesintheirfinalsolution.Bargain customisations:• Negotiate all of the customisations before signing a contract. If you have to customise, you want to be acquainted with up front what it will cost and more important discuss about hidden cost and then incorporate that as part of your contract.Modernise infrastructure:• Plan for an infrastructure helps to sustain the new system. Some ERP implementations require the redesign of the network; make sure you identify what you require to do and how much it will cost.Predict elaborately:• Elaborately look after the implementation plan. The goal is to foresee now, to eliminate implementation setbacks in terms of both cost and time. Implementation will always be preferred or rather become mandatory with the vendor team i.e., make convinced that the software vendor has a role in the implementation. The software vendor has the most vested interests in making clear-cut that you are a pleased customer.


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SummaryResource planning system is a key enabler of business process transformation and IT automation. Gaining •strategic advantage is often considered as a key reason for implementing enterprise resource planning. Enterprise resource planning system life cycle, consists of four steps namely: assess, select, implement, and •support.The approaches for resource planning system implementation are: phased implementation approach, big-bang •implementation approach, process oriented implementation, and vanilla implementation approach.Things to be kept in mind for successful implementation are: implementation strategy and approach, start-up •education, continuous communication, forming team, and project planning.Customerexpectationsfromresourceplanningsystempackagesare:financialhealthofthecompany,sizeof•the company and its main focus, how to acquire skills on the package in short time, is implementation of the package easy, is the package compiled, is the package localised, is the package too old or too new, number of implementations in the country, quality of the consultants hired, and who is supporting the package.Thedrawbacksofenterpriseresourceplanningsystemare:confusinganddifficult,customisationiscostly,decline•of an individual monopoly over information monopoly, ERP engenders a host of fears, geographic restriction, implementation of an ERP project is long process, and platform restriction.FewUSP’sofERPsystemare:web-basedstudentrecords,timetablegenerator,minimumcoursepresence,and•informal review of grades.The steps which should be kept in mind to avoid pitfalls in choosing the ERP packages are: classify the •methodology, plot to business processes, be conscious of organisational chemistry, elect to choose well-built team, scrutinise potential vendors, appraise business processes, bargain customisations, modernise infrastructure, and predict elaborately.

ReferenceWager,B. and Monk, E., 2008. • Enterprise Resource Planning, 3rd ed., Course Technology.ThreeRiverSystems, 2011. • Enterprise Resource Planning [Video Online] Available at: <http://www.youtube.com/watch?v=opD04f-mOkk> [Accessed 1 December 2011].gemyabut, 2010. • Enterprise Resource Planning [Video Online] Available at: <http://www.youtube.com/watch?v=jIoOboVJZbA> [Accessed 1 December 2011].Holsapple, C. and Sena, M., 2005. • ERP plans and decision-support benefits. Elsevier.Donovan, R., • Successful ERP Implementation the First Time [Online] Available at: <http://www.inventoryinc.com/pdf/perfor8.pdf> [Accessed 2December 2011].Leon, A., 2008. • ERP Demystified [Online] Available at: <www.leon-leon.com/it/erpdse/downloads/sg02.pdf> [Accessed 2 December 2011].

Recommended ReadingHarwood, S., 2003. • ERP: The Implementation Cycle. Butterworth-Heinemann.Bradford, M., 2010. • Modern ERP: Select, Implement & Use Today’s Advanced Business Systems, 2nd ed., lulu.com.Oon, R., 2010. • Open Source ERP. Pearson Education.

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Self AssessmentPhased ERP implementation approach is also known as ____________________.1.

vanilla implementation a. big-bang implementationb. process-oriented implementationc. modular implementationd.

Which of the following statements is false?2. Theworld’sfinestaccessibleERPsolutionisfullyweb-enabled,seamlesslyintegratedandcanbeimplementeda. in weeks. ERP will be used by the companies to manage their business in future. b. ERP modules are a most excellent way to integrate all the industries.c. ERPhelpstomanageallkindsoftaxes,bankreconciliationandeverythingelsethatisrequiredforefficientd. andcompletefinancialaccounting.

Which of the following ERP implementation approaches focus on minimal customisation of the ERP 3. packages?

Vanilla implementation a. Big-bang implementationb. Process-oriented implementationc. Phased implementationd.

The initial customisation of the ERP system is limited to __________ closely related to the intended business 4. processes.

resourcesa. functionalityb. systemsc. solutionsd.

Which of the following statements is true?5. AnERPsystemrequiressmallinvestment,soit’scriticaltotheenterprisestodoitaccurately.a. ERP softwares are a gigantic package and consist of numerous modules, so it is easy to understand its b. characteristics.ERP systems cannot automatically update itself according to the new technology.c. ERPismulti-moduleapplicationsoftwareandisveryflexibleandfrequent.d.

Which of the following is considered as a key reason for implementing ERP?6. Gaining strategic advantage a. Unimaginableefficiencyofoperationsb. Significantcostsavingsc. Maximiseprofitsd.

The ERP system has an enormous _________and is far better than the conventional packages.7. modulesa. conditionsb. paybackc. operationsd.


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Time gap between ordering the goods and its delivery is known as _____ time.8. leada. successb. investmentc. implementationd.

Which of the following was the concept of MRP II?9. tolookaftershopflooranddistributionmanagementactivitiesa. raw materials planningb. planning of capital c. fully customisabled.

What does IROG stand for?10. Investment review of gradesa. Implementation review of gradesb. Informal review of gradesc. Informal material of gradesd.

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Chapter VII

Intelligence Information Systems

Aim


introduce the concept of intelligence information systems•

discuss business intelligence tools•

explaintheroleofartificialintelligenceinbusiness•

Objectives


identify the drivers of knowledge management•

understand the concept of business analytics•

describe the process of business intelligence•

Learning outcome


state the role of knowledge management in organisation•

highlight the approach for successful implementation of knowledge•

analyse business processes•


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7.1 Introduction to Intelligence Information SystemsThe technologies present in the market are not in themselves the knowledge management solutions. Instead, when brought to market, they are typically embedded in a smaller number of solutions packages, each of which is designed to be adaptable to solve a range of business problems.

Business analytics and business intelligence are concerned with the process of collecting and analysing domain-specificdatastoredindatawarehousestoderivevaluableinsightsaboutcustomersandemergingmarkets,andtoidentify opportunities as well as key drivers to business growth. It is increasingly being seen as the key differentiator that provides a competitive edge to companies across industries. The tools used in business analytics are varied, ranging from simple slice-and-dice tools to statistical methods such as log it regression, discriminant analysis and multivariate analysis, to more sophisticated tools such as neural networks and optimisation.

7.2 Knowledge Management in OrganisationKnowledge management (KM) is the management of knowledge within organisations. Knowledge management is definedas“KnowledgeManagementcaterstothecriticalissuesoforganisationaladaptation,survivalandcompetencein the face of increasingly discontinuous environmental change; essentially, it embodies organisational processes that seek synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings.”

Knowledge management seeks to make the best use of the knowledge that is available to an organisation, creating new knowledge in the process.

Knowledge is different from information and data. Information can be considered as a message. It typically has a sender and a receiver. Information is the sort of stuff that can be saved onto a computer. Data is a type of information that is structured, but has not been interpreted.

Knowledge can be described as information that has a purpose, whereas, information can be placed onto a computer, knowledge exists in the heads of people. Knowledge is information to which intent has been attached.

7.2.1 Approach for Successful Implementation of KnowledgeKnowledgemanagementhasenterprise-widegoal,manycompaniesfindsuccessiftheystartwithaninitiativeinonedepartment and then extend the practices throughout other parts of the organisation. KM practices relating to service andsupportcanbedefinedasknowledge-poweredproblemresolution,i.e.,usingaknowledgebase,knowledgesharing,collaborationandknowledgereusetoefficientlysolvecustomerquestions.

A successful knowledge management initiative within a help desk or call centre can reduce agent training time and speednewemployeerampup.Knowledge-poweredproblemresolutionenablesagentstobecomemoreconfidentand competent sooner than they otherwise would without a KM practice. By having access to a knowledge base, new help desk and customer service agents can get answers to common questions without having to constantly ask othermoreexperiencedagents.Customersandend-usersbenefitfromfasterproblemresolution,andexperiencedagents can focus on solving more challenging problems.

Customersandend-usersalsobenefitwhentheyhavedirectaccesstoaknowledgebasetosolvetheirownissueswithout ever contacting an agent. A growing number of people now prefer self-service to live interaction, at least forcertainproblemtypes.Forsomepeople,self-servicefitsperfectlyintotheirlifestyle.

Knowledge management is an evolving discipline that can be affected by new technologies and best practices, but there are some things that we are supposed to know. There is a systematic approach for successful implementation of knowledge management and if we analyse what we are trying to accomplish, map out a strategy, garner support from the organisation and have a way to measure it, then we are much more likely to be successful. The 11 points given below outline the ways that will serve as a primer to help understand what it takes to have a successful knowledge management initiative.

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Knowledge management is a discipline•One champion is not enough•Culturalchangeisn’tautomatic•Create a change management plan•Stay strategic•Pick a topic, go in-depth, and keep it current•Don’tgethunguponthelimitations•Set expectations or risk extinction•Integrate KM into existing systems•Educate your self-service users•Become a knowledge-enabled organisation•

7.3 Creating, Developing and Sharing KnowledgeKnowledgeflowscomprisethesetofprocesses,eventsandactivitiesthroughwhichdata,information,knowledgeandmeta-knowledgearetransformedfromonestatetoanother.Tosimplifytheanalysisofknowledgeflows,theframeworkdescribedhereisbasedprimarilyontheknowledgemodel.Themodelorganisesknowledgeflowsintofourprimaryactivityareasnamely:knowledgecreation,retention,transferandutilisationasshowninthefigurebelow.

Retention Transfer

Utilisation

Creation

Fig. 7.1 Knowledge model

Knowledge creation: This comprises activities associated with the entry of new knowledge into the system, and includes knowledge development, discovery and capture.

Knowledge retention: This includes all activities that preserve knowledge and allow it to remain in the system once introduced. It also includes those activities that maintain the viability of knowledge within the system.

Knowledge transfer:Thisreferstoactivitiesassociatedwiththeflowofknowledgefromonepartytoanother.Thisincludescommunication,translation,conversion,filteringandrendering.

Knowledge utilisation: This includes the activities and events connected with the application of knowledge to business processes.


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7.3.1 Drivers of Knowledge ManagementThereareanumberof‘drivers’,ormotivationsleadingtoorganisationsundertakingaknowledgemanagementprogram. The most important of the motivations is to gain the competitive advantage that comes with improved or faster learning and new knowledge creation. KM programs may lead to greater innovation, better customer experiences, consistency in best practices and knowledge access across a global organisation, as well as many other benefits.

Considerations driving a knowledge management program might include:Making available increased knowledge content in the development and provision of products and services.•Achieving shorter new product development cycles.•Facilitating and managing organisational innovation.•Leverage the expertise of people across the organisation.•Benefitingfrom‘networkeffects’asthenumberofproductiveconnectionsbetweenemployeesintheorganisation•increases and the quality of information shared increases.Managing the proliferation of data and information in complex business environments and allowing employees •to rapidly access useful and relevant knowledge resources and best practice guidelines.Facilitate organisational learning.•Managing intellectual capital and intellectual assets in the workforce (such as the expertise and know-how •possessedbykeyindividuals)asindividualsretire−inlargernumbersthantheyhaveinalongtime-andnewworkers are hired.

Knowledge management enablersThetraditionaltechnologieswhichwereusedfor‘enabling,orfacilitatingKMpracticesintheorganisation,includingexpert systems, knowledge bases, software help desk tools, document management systems and other IT systems supportingorganisationalknowledgeflows.

The arrival of the internet brought with it further enabling technologies, including E-learning, web conferencing, collaborativesoftware,contentmanagementsystems,corporate‘Yellowpages’directories,emaillists,wikis,blogs,and other technologies. Each enabling technology can expand the level of inquiry available to an employee, while providingaplatformtoachievespecificgoalsoractions.ThepracticeofKMwillcontinue toevolvewith thegrowth of collaboration applications available by IT and through the internet. Since its adoption by the mainstream population and business community, the internet has led to an increase in creative collaboration, learning and research, e-commerce, and instant information.

There are also a variety of organisational enablers for KM programs, including communities of practice, before-after-and during-action reviews, peer assists, information taxonomies, coaching and mentoring, and so on.

7.3.2 Knowledge RepresentationKnowledgerepresentationisacentralprobleminarrangingknowledge.Itisneededforlibraryclassificationandprocessing concepts in an information system.

Artificialintelligencefieldhasalotofproblems.Theproblemconsistsofhowtostoreandmanipulateknowledgeinan information system in a formal way so that it may be used by mechanisms to accomplish a given task. Examples of applications are expert systems, machine translation systems, computer-aided maintenance systems and information retrieval systems (including database front-ends).

Some people think it would be best to represent knowledge in the same way that it is represented in the human mind, which is the only known working intelligence so far, or to represent knowledge in the form of human language. Unfortunately,wedon’tknowhowknowledgeisrepresentedinthehumanmind,orhowtomanipulatehumanlanguages in the same way as the human mind.

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Forthisreason,variousartificiallanguagesandnotationshavebeenproposedforrepresentingknowledge.Theyaretypically based on logic and mathematics, and have easily parsed grammars to ease machine processing.

The recent approach in knowledge representation languages is to use XML as the low-level syntax. This tends to make the output of these knowledge representation languages easy for machines to parse, at the expense of human readability.

First-order predicate calculus is commonly used as a mathematical basis for these systems, to avoid excessive complexity. However, even simple systems based on this simple logic can be used to represent data which is well beyond the processing capability of current computer systems:

Examples of notations:DATR is an example for representing lexical knowledge•RDF is a simple notation for representing relationships between objects•

Examplesofartificiallanguagesintendedforknowledgerepresentationinclude:CycL•Loom•OWL•KM•

7.4ArtificialIntelligenceinBusinessIntelligence is the capability to solve perceptual problems. Perceptual refers to individual, special, random, fuzzy, sensory, and emotional. Solving such problems requires accumulation, induction and inference of experiences to form new knowledge.

Artificialintelligence(AI)isdefinedasintelligenceexhibitedbyanartificialentity.Suchanentityisgenerallycomputer-controlled;thereforeartificialintelligenceinthiscontextispre-programmed.Humansuseintuitionandviewpoints to make judgments and choices instead of using precise rules or procedures. Therefore, we can say that no matter how powerful a computer might be, if it works only upon a given set of rules or programs, it is not regarded as having real intelligence.

Research in AI is concerned with producing machines to automate tasks requiring intelligent behaviour. For example, controlling, planning and scheduling, the ability to answer diagnostic and consumer questions, handwriting, speech, andfacialrecognition.Ithasbecomeascientificdiscipline,focusedonprovidingsolutionstoreallifeproblems.AI systems are now in routine used in economics, medicine, engineering and the military, as well as being built into many common home computer software applications, traditional strategy games like computer chess and other video games.

Schools of thoughtAI is divided roughly into two schools of thought:

Conventional AI •Computational Intelligence (CI)•


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ConventionalAIinvolvesmethodsclassifiedasmachinelearning,characterisedbyformalismandstatisticalanalysis.ThisisalsoknownassymbolicAI,logicalAI,neatAIandgoodoldfashionedartificialintelligence(GOFAI).AImethods include:

Expert systems: Apply reasoning capabilities to reach a conclusion. An expert system can process large amounts •of known information and provide conclusions based on them.Case based reasoning•Bayesian networks•Behaviour based AI: A modular method of building AI systems by hand.•

Computational intelligence involves iterative development or learning. Learning is based on empirical data and is associated with non-symbolic AI, scruffy AI and soft computing. Methods mainly include:

Neural networks:• Systems with very strong pattern recognition capabilities.Fuzzy systems:• Techniques for reasoning under uncertainty, has been widely used in modern industrial and consumer product control systems.Evolutionary computation:• Applies biologically inspired concepts such as populations, mutation and survival ofthefittesttogenerateincreasinglybettersolutionstotheproblem.Thesemethodsmostnotablydivideintoevolutionary algorithms and swarm intelligence.

With hybrid intelligent systems attempts are made to combine these two groups. Expert inference rules can be generated through neural network or production rules from statistical learning such as in ACT-R.

Apromisingnewapproachcalledintelligenceamplificationtriestoachieveartificialintelligenceinanevolutionarydevelopment process as a side-effect of amplifying human intelligence through technology.

History of commercial AI applicationsThefirstcommercialAIbasedsystem,XCON(ExpertSystem),wasdevelopedinlate1970s.Atthattime,practical,commercial applications of AI were rare. In the early 1980s, Fuzzy Logic techniques were implemented on Japanese subway trains and in a production application by a Danish cement manufacturer. Commercial AI products were only returning a few million dollars in revenue at that time.

The expert systems that companies has started to use, and the AI groups in many large companies, were formed in the mid-1980s. Likewise, interest in using Neural Nets in business applications developed. By the end of the 1980s, expert systems were increasingly used in industry, and other AI techniques were being implemented.

In the early 1990s, AI applications such as automatic scheduling software, software to manage information for individuals, automatic mortgage underwriting systems, and automatic investment decision makers were used. In themid-1990s,AIsoftwaretoimprovethepredictionofdailyrevenuesandstaffingrequirementsforabusiness,credit fraud detection systems, and support systems were developed and used. It was not until the late-1990s that the applicationssuchasdataminingtools,e-mailfilters,andwebcrawlersweredevelopedandgenerallyaccepted.

ArtificialintelligencemethodsforbusinessuseGivenbeloware theAImethodsusedinbusinessnamelyexpertsystem,artificialneuralNetwork(ANN),andevolutionary algorithm (EA) and move on to hybrid systems, fuzzy logic and data mining.

Expert system:ExpertSystemisdefinedas“Acomputerprogramwiththeexpertiseembodiedinit,basedoninterviewbyaknowledgeworkeroftheexpertinthatdomain”.Duringthe“knowledgeacquisition”itwillnotonlybethe“knowledge”ofexpertsthatwillbeclonedandbuiltintothesesystems,butalsotheirintuitionandthewaythat they reason, so that the best options can be selected under any given set of circumstances.

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Anexpertsystemcanbedevelopedbyexpertsystemshellsoftwarethathasbeenspecificallydesignedtoenablequickdevelopment, AI languages, such as LISP and Prolog or through the conventional languages, such as FORTRAN, C++, Java, and so on.

Whiletheexpertsystemconceptmaysoundfuturistic,oneofthefirstcommercialexpertsystems,calledMycin,wasalready in business use in 1974. Mycin was designed as a medical diagnosis tool giving information concerning a patient’ssymptomsandtestresults.ItwasobservedbysomeusersthatMycinproducedbetteranalysisthanmedicalstudents or practising doctors, provided its limitations were observed.

Expert systems were developed for a variety of reasons, including: the archiving of rare skills, preserving the knowledgeofretiringpersonnel,andtoaggregatealloftheavailableknowledgeinaspecificdomainfromseveralexperts.Perhapsanexpert’sknowledgeisneededmorefrequentlythantheexpertcanhandle,orinplacesthattheexpert cannot travel to. The expert system can train new employees or eliminate large amounts of the monotonous workhumansdo,therebysavingtheexpert‘timeforsituationsrequiringhisorherexpertise.

ExpertsystemisanAIapplicationthattakesdecisionsbasedonknowledgeandinference,asdefinedbyexpertsinacertaindomainandtosolveproblemsinthatdomain.Theexpertsystemnormallyfallsunderthedefinitionofweak AI, and is one of the AI techniques that have been easiest for companies to embrace. One advantage of an expert system is that it can explain the logic behind a particular decision, why particular questions were asked, or why an alternative was eliminated. That is not the case with other AI methods.

Artificialneuralnetwork(ANN):“Neuralnetwork”indicatesnetworksthatarehardwarebasedand“ArtificialNeuralNetwork”normallyreferstothosewhicharesoftware-based.Inthefollowingparagraphs,“ArtificialNeuralNetwork”issometimesreferredtoas“NeuralNetwork”or“NeuralComputing”.NeuralNetworksareanapproach,whichisinspired by the architecture of the human brain. In the human brain a neural network exists, which is comprised of over 10 billion neurons; each neuron then builds hundreds and even thousands of connections with other neurons.

Neuralcomputingisdefinedas“thestudyofnetworksofadaptablenodeswhich,throughaprocessoflearningfromtask examples, store experimental knowledge and make it available for use.” As a Neural Network (NN) is designed, rather than being programmed, the systems learn to recognise patterns. Learning is achieved through repeated minor modificationstoselectedneuronweights.NNtypicallystartsoutwithrandomisedweightsforalltheirneurons.Thismeansthattheydonot“know”anything,andmustbetrained.OnceaNNhasbeentrainedcorrectly,itshouldbeabletofindthedesiredoutputtoagiveninput;however,itcannotbeguaranteedthataNNwillproducethecorrectoutput pattern. NN learns by either a supervised or an unsupervised learning process:

The supervised learning process: A supervised learning process has a target pattern (desired output). While learning different input patterns, the weight values are changed dynamically until their values are balanced, so that each input will lead to the desired output. There are two supervised learning algorithms: forward, and back-propagation, learning algorithms.

An unsupervised neural network has no target outputs. During the learning process, the neural cells organise themselves in groups, according to input pattern. The incoming data is not only received by a single neural cell, butalsoinfluencesothercellsinitsneighbourhood.Thegoalistogroupneuralcellswithsimilarfunctionsclosetogether. Self-organisation learning algorithms tend to discover patterns and relationships in that data.

7.5 Business AnalyticsAnalytics closely identify with statistical analysis and data mining, but tends to be based on physics modelling involving extensive computation.

Example: A common application of business analytics is portfolio analysis. Let us take a case of a bank or lending agency which has a collection of accounts, some from wealthy people, some from middle class people, and some from poor people. The question is how to evaluate the whole portfolio.


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The bank can make money by lending to wealthy people, but they are few in number. The bank can make more money by also lending to middle class people. The bank can make even more money by lending to poor people.

The bank wants to maximise its income, while minimising its risk, which makes the portfolio hard to understand.

The analytics solution may combine time series analysis, with many other issues in order to make decisions on when to lend money to these different borrower segments, or decisions on the interest rate charged to members of a portfolio segment to cover any losses among members in that segment.

Business analytics solutions available have capabilities for:Executive information systems• (EIS): Executive dashboards with drilldown analysis capabilities that support decision-making at an executive level.Online analytical processing• (OLAP): OLAP tools are mainly used by analysts. They apply relatively simple techniques such as deduction, induction, and pattern recognition to data in order to derive new information and insights.

Standard reports are designed and built centrally and then published for general use. There are three types of standard reports:

Static reports or canned reports: • Fixed-format reports that can be generated on demand.Parameterised reports: • Fixed layout reports that allow users to specify which data are to be included, such as date ranges and geographic regions.Interactive reports:• Thesereportsgiveuserstheflexibilitytomanipulatethestructure,layoutandcontentofa generic report via buttons, drop-down menus and other interactive devices.

Ad-hocreports:generatedbyusersasa“one-off”exercise.Theonlylimitationsarethecapabilitiesofthereportingtool and the available data.

Advanced analytics: Advanced statistical and analytical processing such as correlations, regressions, sensitivity analysis and hypothesis testing.

Empowers everyone: Provide each person with relevant, complete information tailored to their role:Drive more effective actions:• Guide users toward more intelligent actions and customer interactions.Do it in real time:• Use real-time intelligence to drive better business outcomes and operational results every second of every day.

7.6 Business IntelligenceThe term business intelligence (BI) refers to a set of business processes for collecting and analysing business information. This includes the technology used in these processes, and the information obtained from these processes.

BI business processesInformation is gathered by the organisations information in order to assess the business environment, and cover fieldssuchasmarketing,research,industryormarketresearch,andcompetitoranalysis.Competitiveorganisationsaccumulate business intelligence in order to gain sustainable competitive advantage, and may regard such intelligence as a valuable core competence in some instances.

BI-collectors collect their primary information from internal business sources. Such sources help decision-makers understand how well they have performed. Secondary sources of information include customer needs, customer decision-making processes, the competition and competitive pressures, conditions in relevant industries, and general economic, technological, and cultural trends.

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Eachbusinessintelligencesystemhasaspecificgoal,whichderivesfromanorganisationalgoalorfromavisionstatement. Both short-term goals and long term goals exist.

BI technologySome observers regard BI as the process of enhancing data into information and then into knowledge. Persons involved in business intelligence processes may use application software and other technologies to gather, store, analyse, and provide access to data, and present that data in a simple, useful manner. The software aids in business performancemanagement,andaimstohelppeoplemake“better”businessdecisionsbymakingaccurate,current,and relevant information available to them when they need it.

BI software typesPeople working in business intelligence have developed tools that ease the work, especially when the intelligence taskinvolvesgatheringandanalysinglargequantitiesofunstructureddata.Eachvendortypicallydefinesbusinessintelligence his or her own way, and markets tools to do BI the way that they see it.

Business intelligence includes tools in various categories, including the following:AQL - Associative Query Logic•Scorecarding•Business Performance Management and Performance Measurement•Business Planning•Business Process Re-engineering•Competitive Analysis•Customer Relationship Management (CRM) and Marketing•Data mining (DM), Data Farming, and Data warehouses•Decision Support Systems (DSS) and Forecasting•Document warehouses and Document Management•Enterprise Management systems•Executive Information Systems (EIS)•Finance and Budgeting•Human Resources•Knowledge Management•Mapping, Information visualisation, and Dash boarding•Management Information Systems (MIS)•Geographic Information Systems (GIS)•Online Analytical Processing (OLAP) and multidimensional analysis; sometimes simply called Analytics (based •on the so-called hypercube or cube)Statistics and Technical Data Analysis•Supply Chain Management/Demand Chain Management•Systems intelligence•Trend Analysis•User or End-user Query and Reporting•Web Personalisation and Web Mining•Text mining•


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HistoryBefore the start of the Information Age in the late 20th century, businesses sometimes struggled to collect data from non-automated sources. Businesses then lacked the computing resources to properly analyse the data, and often made business decisions primarily on the basis of intuition.

As businesses started automating more and more systems, more and more data became available. Analysis of the data that was gathered and reports on the data sometimes took months to generate. Such reports allowed informed long-term strategic decision-making. However, short-term tactical decision-making continued to rely on intuition.

In modern businesses, increasing standards, automation, and technologies have led to vast amounts of data becoming available. Data warehouse technologies have set up repositories to store this data. Improved extract, transform, load (ETL) and even recently enterprise application integration tools have increased the speedy collecting of data. OLAP reporting technologies have allowed faster generation of new reports which analyse the data. Business intelligence hasnowbecometheartoffilteringthelargeamountsofdata,extractingpertinentinformation,andturningthatinformation into knowledge upon which actions can be taken.

Business intelligence software incorporates the ability to data mine, analyse, and report. Some modern BI software allow users to cross-analyse and perform deep data research rapidly for better analysis of sales or performance on an individual, department, or company level. In modern applications of business intelligence software, managers are able to quickly compile reports from data for forecasting, analysis, and business decision making.

IndicatorsBI frequently uses key performance indicators (KPIs) to assess the present state of business and to prescribe a course of action. More and more organisations have started to make more data available more promptly. In the past, data only became available after a month or two, which did not help managers to adjust activities in time to hit share market targets. Recently, banks have tried to make data available at shorter intervals and have reduced delays.

7.7 Role of Business IntelligenceThe information economy puts a premium on high quality actionable information which is provided by business intelligence (BI) tools like data warehousing, data mining, and OLAP to the business. A close look at the different organisational functions suggests that BI can play a crucial role in almost every function. It can give new and unique insights about customer behaviour; thereby helping the businesses meeting their ever-changing needs and desires. On the supply side, BI can help businesses to identify their best vendors and determine what separates them from not so good vendors. It can give businesses better understanding of inventory and its movement and also help improve production and storefront operations through better category management. Through a host of analyses and reports, BIcanalsoimproveinternalorganisationalsupportfunctionslikefinanceandhumanresourcemanagementofanybusiness.

Business intelligence is applicable to all types of businesses; however, the magnitude of gains may vary. Given below is the description on how BI can improve the key functional areas and thereby the overall productivity of the business:

MarketingSmart businesses in their efforts to meet the competition have reoriented their business around the customer by improving customer relationship management (CRM) which help them realise the importance of building new customers and retaining them. Increased interaction and sophisticated analysis techniques have given businesses unprecedented access to the mind of the customer; and they are using this to develop one-to-one relation with the customer, design marketing and promotion campaigns, optimise sale front layout, and manage e-commerce operations.

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Sales and ordersThe success of a business in the future would depend on how effectively it manages multiple delivery channels like the internet, interactive TV, catalogs, and so on. A single customer is likely to interact with the retailer along multiple channels over a period of time. This calls for an integrated strategy to serve the customer well, which requiressmoothflowofinformationacrosschannels.Toensuresmoothflowofinformationcustomerdataneedsto be collected from different channels in one data warehouse.

Human resourceDatawarehousingcansignificantlyhelpinaligningtheHRstrategytotheoverallbusinessstrategy.Itcanpresentan integrated view of the workforce and help in designing retention schemes, improve productivity, and curtail costs. Some BI applications in HR are:

Human Resource Reports or Analytic•Manpower allocation•HR Portal•Training and succession planning•

Finance and AccountsTheroleoffinancialreportinghasundergoneamajorchangeduringthelastdecade.Itisnolongerrestrictedtojustfinancialstatementsrequiredbythelaw;increasinglyitisbeingusedtohelpinstrategicdecisionmaking.Also,manyorganisationshaveembracedafreeinformationarchitecture,wherebyfinancialinformationisopenlyavailableforinternaluse.Manycompanies,acrossindustries,haveintegratedfinancialdataintheirenterprisewidedatawarehouseorestablishedseparatefinancialdatawarehouse(FDW).FollowingaresomeoftheusesofBIinfinance:

Budgetary Analysis•Fixed Asset Return Analysis•Financial Ratio Analysis•ProfitabilityAnalysis•

7.8 Business Intelligence ToolsBusiness intelligence tools are a type of application software designed to help the business intelligence (BI) business processes. They are general tools that help in the analysis and presentation of data. While some business intelligence tools include ETL functionality, ETL tools are generally not considered business intelligence tools.

Types of business intelligence tools are:OLAP (including HOLAP, ROLAP and MOLAP)•Reporting software (also called pixel perfect reporting software)•Data mining•Business performance management (BPM)•

On Line Analytical Processing (OLAP)OLAP is an approach to quickly provide the answer to analytical queries that are multi-dimensional in nature. It is part of the broader category business intelligence, which also includes ETL (Extract, Transform, and Load), relational reporting and data mining. The typical applications of OLAP are in business reporting for sales, marketing, managementreporting,businessperformancemanagement(BPM),budgetingandforecasting,financialreportingandsimilarareas.ThetermOLAPwascreatedasaslightmodificationofthetraditionaldatabasetermOLTP(OnLine Transaction Processing).

DatabasesconfiguredforOLAPemployamultidimensionaldatamodel,allowingforcomplexanalyticalandad-hocqueries with a rapid execution time. It is suggested that an alternative and perhaps more descriptive term to describe the concept of OLAP is fast analysis of shared multidimensional information (FASMI). They borrow aspects of navigational databases and hierarchical databases that are speedier than their relational kin.


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Reporting softwareReporting software is used to generate human-readable reports from various data sources.

Data miningData mining also known as knowledge-discovery in databases (KDD), is the process of automatically searching large volumes of data for patterns.

DataMining is defined as “The nontrivial extraction of implicit, previously unknown, and potentially usefulinformation from data and the science of extracting useful information from large data sets or databases.” It is usuallyassociatedwithabusinessorotherorganisation’sneedtoidentifytrends.Datamininginvolvestheprocessof analysing data to show patterns or relationships and sorting through large amounts of data and picking out pieces of relative information or patterns that occur.

Business performance managementBusiness performance management (BPM) is a set of processes that help organisations optimise business performance. BPM is seen as the next generation of business intelligence (BI). BPM is focused on business processes such as planningandforecasting.Ithelpsbusinessesdiscoverefficientuseoftheirbusinessunits,financial,human,andmaterial resources.

BPM involves consolidation of data from various sources, querying, and analysis of the data, and putting the results into practice.

BPM enhances processes by creating better feedback loops. Continuous and real-time reviews help to identify and eliminateproblemsbeforetheygrow.BPM’sforecastingabilitieshelpthecompanytakecorrectiveactionintimeto meet earnings projections. BPM is useful in risk analysis and predicting outcomes of merger and acquisition scenarios and coming up with a plan to overcome potential problems.

7.9 Business Intelligence ReportsReporting is a fundamental business requirement as every transaction-based enterprise application, every database, and each process that workers perform on a day-to-day basis needs reporting. Reporting allows the users to access, format, and securely deliver data as meaningful information. The power of business objects reporting provides the user with the information they need, when they need it — inside and outside the organisation. Reporting and analysis have become constant in business, and they must be seen as a core requirement and be held to the same standards as all core technologies.

The reporting and analysis is a grown up market. Companies have a wide variety of technology options, from a plethora ofBIvendorstoplatformandapplicationvendors.Theparticipationbysomanyvendorsreflectstwoissues:

Companies want a single BI reporting and analysis solution:• Every company and government organisation wants a single, standard reporting and analysis solution for the entire organisation as they need to drive down IT support costs and simultaneously increase the likelihood of a single version of critical data.Vendors want to be selected as the BI reporting and analysis standard:• The vendor that offers the most comprehensive BI reporting and analysis solution is in a better position of being selected as the reporting standard.

Requirements of the reporting solution are:Powerful authoring:• Businessobjectsreportingrequireapowerful,flexible,andopenenvironmentforreportcreation.Weneed to connect to anydata, and thenbuild highly-formatted reports using intuitive,flexibledesign tools along with this we require the ability to integrate end-user report viewing, printing, exporting, and creation capabilities into applications using a comprehensive set of software developer kits and powerful report processing services.

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Flexible sharing:• Once a report is created, we need to publish it on the web, portals, printers, email, and applications. In enterprise reporting, business objects need to provide a BI platform for secure, highly scalable information delivery to handle large numbers of end users around the world. For embedded reporting, we need to provideopenapplicationintegrationandflexibledeployment.Ourproductsarerequiredtointegratetightlywithexisting infrastructure to meet even the most demanding enterprise and embedded reporting requirements. Reporting — the way users work:• For end users, reports need to include built-in interactivity, creating a clean andefficientprocesswhereonereportwillsatisfytheneedsofmanydifferentindividuals.Usersneedtonotonly view reports in web portals, but they also need to explore the information by moving easily from static consumption to insightful interactionProven technology:• The vendor needs to adopt proven technology which has evolved over time to become the de facto accepted standard for reporting. It should have compatibility with leading enterprise application software like SAP, IBM, Microsoft, Oracle, Borland, and BEA.

Types of reporting and analysis solutionsThere are three types of solutions available as shown below. Some of the vendors who supply solutions have also been indicated:

Atitscore,reportingtechnologyisrequiredtobedesignedforinformationdistribution.Whetherit’sad-hocor•predefined,thereportingparadigmhavetoaddresstheinformationdelivery,publishinganddistribution.While describing BI technologies, reporting is often taken up with analysis to categorise a technology as •“reportingandanalysis.”Iftheuserknowsaheadoftimewhatdataisneededandconsidersthejobcompleteonce the report has been published, then reporting technology is the right tool for the job. Every information consumer in the organisation, from executives to production workers, will use these reporting systems.However, if the user’s job is tomake decisions, the “delivery”modelmay only be adequate in certain•circumstancesandbesignificantlyinadequateinothers.Themostpopularfeatureinanyreportingsystemisthe“exporttoexcel”buttonsimplybecausethedecisionmaker’sjobwiththedataisnotdonewhentheinformationis delivered - the job has just begun.

TrendsQualityreportsareimportant.Themostsignificantpartofprovidingqualityreportsisthechoiceandarchitectureof the reporting solution.

Another important aspect of reporting is delivery. Users want reports to be personalised, organised, timely, easily accessibleandintheirpreferredformat.Forexample,intoday’sbusinessenvironmentitisdesirabletobeabletoe-mail reports to colleagues, create spreadsheets from report results and access reports securely over the internet.

One feature of reporting is that it is frequently overlooked in its integration with other IT infrastructure elements. For example,somecustomerdepartmentsaresocompletelyfocusedon“solvingthereportingproblem”—evaluatingchecklists of features from various vendors, reading analyst reports on each vendor – which they fail to, coordinate thiseffortwiththebiggercompanywidepictureofhowthatreportingpiecefitsintootherinfrastructure.


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SummaryBusiness analytics and business intelligence are concerned with the process of collecting and analysing domain-•specificdatastoredindatawarehousestoderivevaluableinsightsaboutcustomersandemergingmarkets,andto identify opportunities as well as key drivers to business growth. Knowledgemanagementisdefinedas“KnowledgeManagementcaterstothecriticalissuesoforganisational•adaptation, survival, and competence in the face of increasingly discontinuous environmental change; essentially, it embodies organisational processes that seek synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings.”Knowledgeflowscomprisethesetofprocesses,eventsandactivitiesthroughwhichdata,information,knowledge•andmeta-knowledgearetransformedfromonestatetoanother.Tosimplifytheanalysisofknowledgeflows,the framework described here is based primarily on the knowledge model. Knowledgemodelorganisesknowledgeflowsintofourprimaryactivityareasnamely:knowledgecreation,•retention, transfer and utilisation.Knowledge management programs may lead to greater innovation, better customer experiences, consistency in •bestpracticesandknowledgeaccessacrossaglobalorganisation,aswellasmanyotherbenefits.Knowledgerepresentationisacentralprobleminarrangingknowledge.Itisneededforlibraryclassification•and processing concepts in an information system.Artificialintelligence(AI)isdefinedasintelligenceexhibitedbyanartificialentity.•Artificialintelligenceisdividedroughlyintotwoschoolsofthought:conventionalArtificialintelligence,and•computational IntelligenceConventionalArtificialintelligenceinvolvesmethodsclassifiedasmachinelearning,characterisedbyformalism•and statistical analysis. Computational intelligence involves iterative development or learning. •Intelligenceamplificationtriestoachieveartificialintelligenceinanevolutionarydevelopmentprocessasa•side-effect of amplifying human intelligence through technology.ExpertSystemisdefinedas“Acomputerprogramwiththeexpertiseembodiedinit,basedoninterviewbya•knowledge worker of the expert in that domain”. Neuralcomputingisdefinedas“thestudyofnetworksofadaptablenodeswhich,throughaprocessoflearning•from task examples, store experimental knowledge and make it available for use.” The term business intelligence (BI) refers to a set of business processes for collecting and analysing business •information. Data mining also known as knowledge-discovery in databases (KDD), is the process of automatically searching •large volumes of data for patterns.

ReferencesDalkir, K. and Liebowitz, J., 2011. • Knowledge Management in Theory and Practice, 2nd ed., The MIT Press.Frappaolo, C., 2006. • Knowledge Management, 2nd ed., Capstone.chriscollison, 2010. • What is Knowledge Management? [Online Video] Available at: <http://www.youtube.com/watch?v=nRVx9qhzbgw> [Accessed 2 December 2011].plambe, 2006. • Explaining Knowledge Management #1 [Online Video] Available at: <http://www.youtube.com/watch?v=uz0KXaflY2w>[Accessed2December2011].Newman, B., 2002. • KM Forum Archives -- The Early Days [Online] Available at: <http://www.km-forum.org/what_is.htm> [Accessed 2 December 2011].Macintosh, A., 1999. • Knowledge Management [Online] Available at: <http://129.215.202.23/~alm/kamlnks.html> [Accessed 2 December 2011].

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Recommended ReadingDell, C. and Hubert, C., 2011. • The New Edge in Knowledge: How Knowledge Management Is Changing the Way We Do Business. Wiley.Jones, M., 2008. • Artificial Intelligence: A Systems Approach (Computer Science). ones and Bartlett Publishers, Inc.Atwood, C., 2009. • Knowledge Management Basics (ASTD Training Basics Series). ASTD Press.


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Self AssessmentWhich of the following is the process of automatically searching large volumes of data for patterns?1.

Business analyticsa. Data miningb. Flexible sharingc. Powerful authoringd.

Business intelligence frequently uses _________________ to assess the present state of business and to prescribe 2. a course of action.

key performance indicatorsa. neural computingb. computational intelligencec. expert systemd.

Which of the following statements is false?3. Reporting software is used to generate computer-readable reports from various data sources.a. Businessobjectsreportingrequireapowerful,flexible,andopenenvironmentforreportcreation.b. Business intelligence software incorporates the ability to data mine, analyse, and report. c. Analytics closely identify with statistical analysis and data mining, but tends to be based on physics modelling d. involving extensive computation.

Match the following4.

Neural computing1. A computer program with the expertise embodied in it, based on A. interview by a knowledge worker of the expert in that domain.

Expert system2. The nontrivial extraction of implicit, previously unknown, and B. potentially useful information from data and the science of extracting useful information from large data sets or databases.

Data mining3. It refers to a set of business processes for collecting and analysing C. business information.

Business intelligence4. The study of networks of adaptable nodes which, through a process D. of learning from task examples, store experimental knowledge and make it available for use.

1-A, 2-D, 3-B, 4-Ca. 1-B, 2-A, 3-D, 4-Cb. 1-D, 2-A, 3-B, 4-Cc. 1-C, 2-A, 3-B, 4-Dd.

Which of the following statement is true?5. Datawarehousing can significantly help in aligning themarketing strategy to the overall businessa. strategy. Knowledge warehousing seeks to make the best use of the knowledge that is available to an organisation, b. creating new knowledge in the process.Business analytics software incorporates the ability to data mine, analyse, and report. c. Businessintelligencehasnowbecometheartoffilteringthelargeamountsofdata,extractingpertinentd. information, and turning that information into knowledge upon which actions can be taken.

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________ is an approach to quickly provide the answer to analytical queries that are multi-dimensional in 6. nature.

OLAPa. BPMb. KDDc. GISd.

Which of the following statements is true?7. The information economy puts a premium on low quality actionable information which is provided by a. business intelligence.OLAP reporting technologies have allowed slower generation of new reports which analyse the data. b. Neural Networks are an approach, which is inspired by the architecture of the computer brain. c. Eachbusinessintelligencesystemhasaspecificgoal,whichderivesfromanorganisationalgoalorfromad. vision statement.

__________ involves the process of analysing data to show patterns or relationships and sorting through large 8. amounts of data and picking out pieces of relative information or patterns that occur.

Data mininga. Business intelligence reportingb. Business performance managementc. Knowledge managementd.

Expert system is a ___________ application that takes decisions based on knowledge and inference.9. business intelligencea. artificialintelligenceb. business performancec. business analyticsd.

Apromisingnewapproach called ____________ tries to achieve artificial intelligence in an evolutionary10. development process as a side-effect of amplifying human intelligence through technology.

artificialneuralcomputinga. on line analytical processingb. intelligenceamplificationc. artificialcomputingd.


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Chapter VIII

Social, Ethical and Legal Aspects

Aim


discuss the broad applications of information technology•

explain the concept of computer crime•

describe the emerging issues in information technology•

Objectives


identify the types of computer crime•

explicatetheconceptof‘copyrights’•

analyse the moral dimensions of information•

Learning outcome


recognise the technology trends and ethical issues of information •

understand the information rights and acts•

comprehend the moral dimensions of information systems•

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8.1 Society in the Information AgeThe use of information communication technologies on commercial basis is recognised as an important tool for economic growth worldwide. The utilisation strategies of information technology for development priorities and prospects differ from sector to sector and from country to country.

Development opportunities and the information ageThe advantages of communications networks that help developing countries to participate in global economy are:

reduced transaction costs •ability to overcome impediments to productivity •

Thedevelopingcountriesarestillnotabletodrawsignificantbenefitsfromthevastresourcesandopportunitiesmade possible by information technology despite the acknowledged potential of the information age for economic growth.

Thespecificwaysinwhichtheinformationtechnologycanbeappliedindevelopinggoalsandpromotingidentifiedobjectivesisstillnotclearlydefined.Determiningcriticalelementsofaregulatoryenvironmentconduciveforgrowthand development is a challenging task. Importantly, the pervasive role of intellectual property rights in regulating almostallaspectsofthedigitaleconomyhasbeeninsufficientlyanalysedaspartofabroaddevelopmentagendaforthedigitaleconomy.Theintellectualpropertyrightsconsistsofpatents,copyrightsandtrademarks,theyfillallthe aspects of the development opportunities created by the commercialisation of information technology.

8.1.1 Broad Applications of Information TechnologyInformation technology has been applied to enhance four major categories of activities, namely:

governance•growth •supply or distribution of goods and services•adding value to existing services and the creation of new products and services•

The important issues regarding the use of information technology in developing countries includes how information technologycanbeusedtoovercomeexistingbarriersinmarketssuchashightransactioncosts,inefficienciesinproduction, distribution and supply, while adding value to existing products and services and also creating new ones.

Information technology can be used to tackle infrastructural barriers that have hindered traditional supply and distribution chains in developing countries. This is only possible when most e-commerce transactions have physical infrastructure such as a dependable postal service, electricity, phone lines, and so on, to function effectively. Only fullydigitalproductsaresignificantlyinsulatedfromtheneedforanddependenceontheinfrastructuralcapacity.

Emerging issues in information technologyTheinformationtechnologyandintellectualpropertyinterface:Thedevelopedcountrieshavefailedtofulfilthe•task to maintain balance between the regulation of information technology and the global rules for intellectual property protection. The unmanageable move of creating a global property rights system in data and databases, both of which are the primary constitutive elements of the internet and associated applications, together with the existing multilateral agreements create an unhealthy environment for development. Because of this the developing countries will be bound by international agreements that constrain their efforts to access the building blocks of economic growth which consist of access to content and competitive opportunities to create new markets and new products. This problem is not limited to the developing countries but exists with the developed countries aswell,wherethereareconflictsamongstakeholdersaboutthenatureandextentofrulesdesignedforsocialand economic use of the information.


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Appropriatingthebenefitsoftheinformationage:Appropriatingthebenefitsoftheinformationageisrelatedto•howinvestmentsininformationtechnologyareinfluencedandsupportedbyregulatoryframeworksthatpromoteinnovation, access and use. In addition to capital investments in information technology, developing countries should undertake to invest in the necessary macroeconomic policies that will facilitate an environment where the domestic population is able to adapt to the existence of the internet, and to encourage entrepreneurial uses of the different opportunities that information technology can offer to deal with existing distribution, dissemination and communication problems that bedevil developing country markets.

The important factors that need to be kept in mind while formulating information policies with a development focus are:

The development of third generation internet technologies through satellite suggests that in a short period of time •eventhismajorproblemoftelecommunicationinfrastructurewillnotbeasignificantbarrierforaccesstotheinternet. In such situation, the emphasis would be on developing guidelines concerning how much developing country resources should be invested in adapting to the current internet state of the art given the dynamic rate of innovation in communications technology. Exploiting the potential of the internet to facilitate development objectives requires access to hardware •(computers), software and content. Innovation, competition and deregulation in the telecommunications industry will enhance the opportunities for access to hardware by citizens. Intellectual property agreements have important implications for access to software and digital content. Business method patents can have withdrawal effects on competition in new markets and the opportunities made •possible by information technologies. Most economic analyses of business method patents suggest that such patents have an unfavourable effect on competition and organisational innovation. Developing countries should preserve domestic policy space to make decisions that are consistent with development priorities.Internationalcopyrightagreementshaveasignificantandunavoidableimpactonaccesstocreativeworksin•the digital age. Institutions of higher learning are an important aspect of developing a strong technology base in any society. •The possibility of distance education learning should occupy a central place in development strategies for the information age. This will require implementation of copyright treaties in a way that ensures that proprietary rights are balanced with public policy limitations that permit use and access for educational purposes.

8.2 Moral DimensionsTherearefivemoraldimensionsnamely:

information rights 1. property rights 2. accountability, liability and control 3. system quality4. the quality of life5.

Information rights: The attempts to regulate the collection and use of information about individuals, with respect to privacy and freedom in an information society are:

There should be no personal records system whose existence is secret.•Individuals have right to access, inspect, and review and amendment to systems that contain information about •them.Without prior consent there must be no use of personal information for purposes other than those for which it •was gathered.Managers of systems are responsible and can be held accountable and liable for the damages done by systems •for their reliability and security.Governments have the right to intervene in the information relationships among private parties.•

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Property rights: intellectual property: The existing laws and policies which are there to settle disputes about copyrights, patents, and trade secrets have to be rewritten to apply to the internet.

Accountability, liability, and control: Many of the laws and court decisions are establishing standards in the area ofaccountability,liability,andcontrolwerefirmlyinplacelongbeforecomputerswereinvented.Similareffortis being made by the government by passing the internet laws. Government of India has enacted a comprehensive law in the form of IT Act 2000.

System quality: data quality and system errors: As our reliability on information systems is increasing the data quality issues are gaining importance. These issues affect us as a consumer as well as a user. Some examples of reported data quality are:

An airline inadvertently corrupted its database of reservations while installing new software and for months •planes took off with half load.Amanufacturerattemptedtorecogniseitsfilesbycustomernumberonlytodiscoverthesalesstaffhadbeen•entering a new customer number for each sale because of special incentives for new accounts. A manufacturing company nearly scrapped a $12 million data warehouse project because of inconsistently •definedproductdata.J.P.Morgan, a New York bank, discovered that 40% of the data in its credit risk management was incomplete, •necessitating double check by users.Several studies have established that 5 to 12 % of bar code sales at retail grocery and merchandise chains are •erroneous and that the ratio of overcharges to undercharges runs as high as 5.1 with 4.1 as a norm. The problem tendstobehumanerrorkeepingshelfpricesaccurateandcorporatepolicythatfailstoallocatesufficientresourcestopricechecking,auditinganddevelopmentoferrorfilepolicies.

Quality of life: equity, access, boundaries: One quality of life issue that affects more and more people personally istheabilitytoworkfromhome.Mosttelecommutersusedtohavearegulardayjob9to5,fivedaysaweekinatypicalofficesetting.Iftheydidn’tgettheirworkdonetoday,theywouldwaituntiltheywerebackintheofficetomorrow or Monday. Now because of technology they can work seven days a week, all hours of the day, at home. And sometimes they do. The impact on personal and family life can be considerable.

Many parents like telecommuting because they can stay home with, or at least be nearer, their children. More and more people are leaving the big cities and moving to small towns for the quality of life, yet they can still keep their well-paying jobs. Many small companies are able to expand their customer base because of technology, which in turns helps the employees immensely.

8.2.1 Computer CrimeComputer crime is one area that has been extremely hard for our society and our governments to keep up with. Many laws have to be rewritten and many new laws must be implemented to accommodate the changes. Computer crime and abuse extends to any wrongdoing involving equipment and internet usage, as shown in the table 6.1.

Problem Description

Hacking Hackers exploit weaknesses in web site security to obtain access to proprietary data such as customer information and password.

Jamming Jammers use software routines to tie up the computers hosting a web site so that legitimate visitors cannot access the site.

Malicious software Cyber vandals use data flowing through the internet to transmitcomputer viruses, which can disable computers they infect.


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Sniffing

Sniffingisaformofelectroniceavesdroppingbyplacingapieceof software to intercept information passing from a user to the computer hosting a web site. This information can include credit cardnumbersandotherconfidentialdata.

SpoofingSpoofing is fraudulently misrepresents themselves as otherorganisations, setting up false web sites where they can collect confidentialinformationfromunsuspectingvisitorstothesite.

Table 6.1 internet crimes and abuses

The governments have recognised the danger of allowing unequal access to technology. It has enlisted the help of private individuals and corporations in an effort to install computers and internet access in public schools and libraries across the nation.

Management actions: a corporate code of ethicsThefivemoralstandardswhichshouldbethereinthecodeofanyfirmwithrespecttotheintellectualpropertyare:

The information rights to privacy and freedom•The property rights to individual ideas and efforts•The accountability, liability and control issues involved in using technology•The system quality requirements of businesses and individuals•The quality of life impact of technology•

Companies can no longer ignore the necessity of establishing rules for technology usage. The issue will only continue to grow.

8.3 Technology Trends and Ethical IssuesThe new computer technologies used for gathering, storing, manipulating, and communicating data are revolutionising theuseandspreadofinformationalongwiththistheyarealsocreatingethicalcontroversies.Thespeedandefficiencyof electronic information systems, which include local and global networks, databases, and programs for processing information, force people to confront entirely new rights and responsibilities in their use of information and to reconsider standards of conduct shaped before the advent of computers.

The table 6.2 below lists the achievements due to technological progress of the information system and their impact on the ethical issue.

Achievement due to technological progress of information system Issues

Computing power doubles every 18 months Dependence on computer systems increases

Rapidly declining data storage costs Easy to track a lot about individuals

Data mining advances Analysis of vast quantities of data

Networking advances and the internet Remotely access, copy, share, and transfer personal data

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New data and software standards agreed upon Data can be shared and processes easily

Mobile computing and tracking (radio frequency identification(RFID)producttrackingtags Effect:canbefoundanywhereanduniquelyidentified

Table 6.2 Information system achievements and issues

The importance of ethics in information systemsThe electronic systems are now extended to all levels of government, into the workplace, and into private lives to suchanextentthatevenpeoplewithoutaccesstothesesystemsareaffectedinsignificantways.Newethicalandlegal decisions are necessary to balance the needs and rights of everyone.

EthicsfillthegapaslegaldecisionslagbehindtechnologyAsinothernewtechnologicalarenas,legaldecisionslagbehindtechnicaldevelopments.Ethicsfillthegapaspeoplenegotiate how use of electronic information should proceed.

EthicalissuesspecifictoelectronicinformationsystemsThe broad issues relating to electronic information systems include control of and access to information, privacy and misuse of data, and international considerations. All of these extend to electronic networks, electronic databases, and,morespecifically,togeographicinformationsystems.

Computer crimesComputercrimecanbedefinedasanactofusingacomputertocommitanillegalact.Thebroaddefinitionofcomputer crime can include the following:

Targeting a computer while committing an offence (for example, gaining entry to a computer system in order •to cause damage to the computer or the data it contains).Using a computer to commit an offence (for example, stealing credit card numbers from a company •database).Using computers to support criminal activity (for example, drug dealer using computers to store records of •illegal transactions).

The various types of computer crimes are:Data diddling:• The changing of data going into or out of a computer; for example, a student breaks into his or heruniversity’sgraderecordingsystemandchangesthegradesheorsheearnedinlastsemester’sclasses,thusraising his or her grade point average.Salami slicing:• Aformofdatadiddlingthatoccurswhenapersonshavessmallamountsfromfinancialaccountsand deposits them in a personal account, for example a bank employee deposits a few rupees from each of thousandsofaccountsintoanaccountsetupinafictitiousname.Theamountsaretoosmalltoraiseflags,butover time the thief collects a substantial sum.Phreaking:• Crime committed against telephone company computers with the goal of making free long distance calls,impersonatingdirectoryassistanceorotheroperatorservices,divertingcallstonumbersoftheperpetrator’schoice, or otherwise disrupting telephone service for subscribers.Cloning:• Cellular phone fraud in which scanners are used to steal the electronic serial numbers of cellular phones, which are used for billing purposes and are broadcast as calls are made. With stolen serial numbers, clones can be made to make free calls that are billed to the owner of the original cell phone.Carding:• it refers to the practice of stealing credit card numbers online, to be resold or used to charge merchandise againstvictim’saccount.Dumpster diving:• This approach means, simply of going through dumpsters and garbage cans for company documents, credit card receipts, and other papers containing information that might be useful.


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Spoofing:• A scam used to steal password for legitimate accounts on computers in which the spoofer uses a program thatduplicatesanorganisation’sloginscreen.Whenlegitimateuserslogintothesystem,thecounterfeitscreenrespondswithanerrormessagebutsecretlycapturestheuser’sIDandpassword.Theswindleletsintruderspass as legitimate users, thus allowing them to steal computer time and resources.

8.4 Responsibility, Accountability and LiabilityIn the information systems discipline the issues of professional ethics are being paid an increasing attention. The key elements of ethical choices made by individuals include:

Responsibility:• It refers to an individual accepting the potential costs, duties, and obligations for decisions they make. Accountability: • it refers to the mechanisms in social institutions to determine who is responsible and assessing responsibilities for decisions and actions.Liability: • it refers to the political means to permit individuals to recover damages via due process. Due process insures laws are applied properly and laws are known and understood, with an ability to appeal to higher authorities.

Responsibility by people related to software industry is primarily the protection, or violation of that protection in context of the software programs. Software users or consumers on the other hand may claim that they have the right to use a product for which they have paid, and indeed have the right to expect responsibility by the software vendors that that product will be free of defects (bugs). This imposes a duty of quality on the developers of the software to ensure that the software is indeed bug-free. Consumers expect that a product should be competitively priced, providing value for money.

Professional accountability is an issue that is closely tied to many codes of ethical conduct. As per ethical code of conduct it is expected that members shall accept professional responsibility for their work and for the work of their subordinates and associates under their direction, and shall not terminate any assignment except for good reason and on reasonable notice. Members are expected to be accountable for the quality, timeliness and use of resources in the work for which he or she is responsible. In general, accountability lies at the root of vendor-client relationships, and is therefore relevant to both the professionals.

Accountability is vital not only for the information systems profession, but also for the other professionals as well, if we are to be held in the highest regard by those for whom we develop systems.

Strict liability is generally applied by courts when a person or property is injured or damaged. Thus, purely economic damages are usually not put to strict liability. A second category of liability is known as negligence. Developers can avoid accusations of negligence by ensuring that they take reasonable care in the design, coding and testing of their products. One problem here relates to the thoroughness of testing. If a company has followed industry standards with regard to testing, then it would appear that if bugs still exist, it cannot be accused of including such bugs either deliberately or through carelessness. Whilst this does not prevent the requirement for software to be bug-free, it certainly does imply that industry standards may need to be set at very high levels. A third liability category is known as breach of warranty. A warranty is essentially a promise that the developer makes to the customer with regard to thefunctionalityofthesoftware,andforms“partofthecontractualagreementbetweenthesellerandthebuyer”.

Computersoftwaredevelopersaffirmthattheysellauserthelicencetoinstallanduse(typically)asinglecopyof a software package; they are not selling the ownership of the software. However, at the same time, software developersemploydisclaimerstominimiseasfaraspossibleanyliability(e.g.,forfinancialordatalosses)arisingoutofthecustomer’suseofthesoftware.

Indeed, we note an unfortunate tendency for software producers to deny to the maximum extent possible any responsibility for actions caused by their software. Same time, consumers are held to be liable for any use of the software that lies outside the narrowly-worded terms of the software license agreement. This situation has the effect of eroding the rights of the user, since virtually all the risks of using the software (but few of the rights)

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are transferred to the user. Legally, these disclaimers have been recognised in courts so long as they are explicit and prominently displayed. There is evidence to indicate that the tendency to disclaim liability is growing more serious, noting that many software companies intend to implement measures that would have the effect of further diminishingconsumers’rights.

8.5 Information Right and ActsTherighttoinformationact:“TheGovernmentofIndiaintheyear2005hasenactedtheRight to Information Act” to provide for setting out the practical regime of right to information for citizens to secure access to information under the control of public authorities in order to promote transparency and accountability in the working of any public authority.

Right to information act came into force on 12th October, 2005. Some of the provisions which have come into force with immediate effect are:

Obligations of public authorities•Designationofpublicinformationofficersandassistantpublicinformationofficers•Constitution of central information commission •Constitution of state information commission •Non-applicability of the act to intelligence and security organisations •Power to make rules to carry out the provisions of the Act•

This act extends to the whole of India except the State of Jammu and Kashmir.

Information means any material in any form including records, documents, memos, e-mails, opinions, advice, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, models, data material held in any electronic form and information relating to any private body which can be accessed by a public authority under any other law forthetimebeinginforcebutdoesnotincludefilenoting.

The right to information includes right to:inspect works, documents, and records•takenotes,extractsorcertifiedcopiesofdocumentsorrecords•takecertifiedsamplesofmaterial•obtaininformationintheformofprintouts,diskettes,floppies,tapes,videocassettesorinanyotherelectronic•mode or through printouts

OfficersandtheirobligationsThe obligations of public authority should get published within one hundred and twenty days of the enactment:

The particulars of its organisation, functions and duties.•Thepowersanddutiesofitsofficersandemployees.•The procedure followed in its decision making process, including channels of supervision and accountability.•The norms set by it for the discharge of its functions; the rules, regulations, instructions, manuals and records •used by its employees for discharging its functions.A statement of the categories of the documents held by it or under its control.•The particulars of any arrangement that exists for consultation with, or representation by the members of the •public, in relation to the formulation of policy or implementation thereof.A statement of the boards, councils, committees and other bodies consisting of two or more persons constituted •byit.Additionally,informationastowhetherthemeetingsoftheseareopentothepublic,ortheminutes’ofsuch meetings are accessible to the public.Adirectoryofitsofficersandemployees.•


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Themonthlyremunerationreceivedbyeachofitsofficersandemployees,includingthesystemofcompensation•as provided in its regulations.The budget allocated to each of its agency, indicating the particulars of all plans, proposed expenditures and •reports on disbursements made.Themannerofexecutionofsubsidyprogrammes,includingtheamountsallocatedandthedetailsandbeneficiaries•of such programmes.Particulars of recipients of concessions, permits or authorisations granted by it.•Details of the information available to, or held by it, reduced in an electronic form.•The particulars of facilities available to citizens for obtaining information, including the working hours of a •library or reading room, if maintained for public use.Thenames,designationsandotherparticularsofthePublicInformationOfficers.•

Public authority means any authority or body or institution of self-government established or constituted: by or under the Constitution•by any other law made by Parliament•by any other law made by State Legislature•bynotificationissuedorordermadebytheappropriateGovernmentandincludesany-•

bodyowned,controlledorsubstantiallyfinanced �non-GovernmentorganisationsubstantiallyfinanceddirectlyorindirectlybytheappropriateGovernment �

Publicinformationofficers(PIO)areofficersdesignatedbythepublicauthoritiesinalladministrativeunitsorofficesunderittoprovideinformationtothecitizensrequestingforinformationundertheAct.Anyofficer,whoseassistance has been sought by the PIO for the proper discharge of his or her duties, shall render all assistance and forthepurposeofcontraventionsoftheprovisionsofthisAct,suchotherofficershallbetreatedasaPIO.

Thedutiesofapublicinformationofficer(PIO)are:PIO shall deal with requests from persons seeking information and where the request cannot be made in writing; •render reasonable assistance to the person to reduce the same in writing.If the information requested for is held by or its subject matter is closely connected with the function of another •public authority, the PIO shall transfer, within 5 days, the request to that other public authority and inform the applicant immediately.PIOmayseektheassistanceofanyotherofficerfortheproperdischargeofhisorherduties.•PIO, on receipt of a request, shall as expeditiously as possible, and in any case within 30 days of the receipt of •the request, either provide the information on payment of such fee as may be prescribed or reject the request foranyofthespecifiedreasons.Where the information requested for concerns the life or liberty of a person, the same shall be provided within •forty-eight hours of the receipt of the request.IfthePIOfailstogiveadecisionontherequestwithintheperiodspecified,heorsheshallbedeemedtohave•refused the request.Where a request has been rejected, the PIO shall communicate to the person making the request:•

the reasons for such rejection �the period within which an appeal against such rejection may be preferred �the particulars of the appellate authority �

PIO shall provide information in the form in which it is sought unless it would disproportionately divert •the resources of the public authority or would be detrimental to the safety or preservation of the record in question.If allowing partial access, the PIO shall give a notice to the applicant, informing:•

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That only part of the record requested, after severance of the record containing information which is exempt �from disclosure, is being provided.Thereasonsforthedecision,includinganyfindingsonanymaterialquestionoffact,referringtothematerial �onwhichthosefindingswerebasedThe name and designation of the person giving the decision �The details of the fees calculated by him or her and the amount of fee which the applicant is required to �depositHis or her rights with respect to review of the decision regarding non-disclosure of part of the information, �the amount of fee charged or the form of access provided.

Ifinformationsoughthasbeensuppliedbyathirdpartyoristreatedasconfidentialbythatthirdparty,the•PIO shall give a written notice to the third party within 5 days from the receipt of the request and take its representation into consideration.Third party must be given a chance to make a representation before the PIO within 10 days from the date of •receipt of such notice.

The list of information which is exempted from disclosure is:Information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, •strategic,scientificoreconomicinterestsoftheState,relationwithforeignStateorleadtoincitementofanoffence.Information which has been expressly forbidden to be published by any court of law or tribunal or the disclosure •of which may constitute contempt of court.Information, the disclosure of which would cause a breach of privilege of Parliament or the State Legislature.•Informationincludingcommercialconfidence,tradesecretsorintellectualproperty,thedisclosureofwhich•wouldharmthecompetitivepositionofathirdparty,unlessthecompetentauthorityissatisfiedthatlargerpublicinterest warrants the disclosure of such information.Informationavailabletoapersoninhisorherfiduciaryrelationship,unlessthecompetentauthorityissatisfied•that the larger public interest warrants the disclosure of such information.InformationreceivedinconfidencefromforeignGovernment.•Information, the disclosure of which would endanger the life or physical safety of any person or identify the •sourceofinformationorassistancegiveninconfidenceforlawenforcementorsecuritypurposes.Information which would impede the process of investigation or apprehension or prosecution of offenders.•CabinetpapersincludingrecordsofdeliberationsoftheCouncilofMinisters,Secretariesandotherofficers.•Information which relates to personal information the disclosure of which has no relationship to any public •activity or interest, or which would cause unwarranted invasion of the privacy of the individual.Notwithstanding any of the exemptions listed above, a public authority may allow access to information, if •public interest in disclosure outweighs the harm to the protected interests.

Only that part of the record which does not contain any information which is exempt from disclosure and which can reasonably be severed from any part that contains exempt information, may be provided.

Procedure for requesting informationApplyinwritingorthroughelectronicmeansinEnglishorHindiorintheofficiallanguageofthearea,tothe1. PIO, specifying the particulars of the information sought for.Reasons for seeking information are not required to be given.2. Payfeesasmaybeprescribed(ifnotbelongingtothe“belowpovertyline”category).3.

The time limit for receiving the information:30 days from the date of application.•48 hours for information concerning the life and liberty of a person.•


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5 days shall be added to the above response time, in case the application for information is given to the Assistant •PublicInformationOfficer.If the interests of a third party are involved then time limit will be 40 days (maximum period + time given to •the party to make representation).Failuretoprovideinformationwithinthespecifiedperiodisadeemedrefusal.•

8.6 Intellectual Property and RightsThe copying of software programs, although nominally protected by copyright laws, is certainly widespread. While some may acknowledge that such copying is as good as theft, the activity persists if only because it is so easy, the chance of getting caught is considered negligible. Such copying is not restricted to personal users but the businesses are involved as well, though often unintentionally.

The rational basis for software protection lies in the prima facie right to private property, particularly property thatcanbesaidtobethe‘fruitofone’sendeavours’.Theseviewsarenotacceptedbyallnationswiththesamegravity.ForinstanceinChinesesociety,the“socialisationprocessemphasisesobligationsanddutiesthatpromoteconformity, collective solidarity, and obedience while downplaying assertiveness and creativity”. The similarity betweena“preoccupationwithsocialorder”inChinesesocietyanda“preoccupationwithindividualfreedom”inWesternsocietiesisapointtobenoted.Thesefundamentalculturalandsocialdifferencesraisethedifficultiesinlegislative attempts to provide for universal protection of creativity.

A danger inherent in copyright protection is that when a technology is wholly owned by a single entity (individual, organisation), consumers may be harmed because the opportunity for competition is much diminished. Monopolies can lead to reduced evolution and diffusion of products, as well as overpricing and underproduction. Given these opposing forces, there clearly needs to be a reasonable balance between protection of a product on the one hand, and the right of consumers to avail themselves of the product at reasonable cost on the other.

In many developing countries, the governments are, more concerned that new technology should spread to the entire society as rapidly as possible, enabling the country to move ahead of the older generations of technology and be at parwiththerestoftheworld.Thetechnologyshouldinsomewaybestronglyprotected,withprofitsgoingoverseas,in such contexts, much of the argument about intellectual property and rights (IPR) lies in the principles between rights and duties. Software producers claim that they have the right to protect the fruit of their endeavours - the software programs. Furthermore, they have the right to be compensated for the resources that they have expended in the development of that product. This right is translated into a right to charge consumers what they deem a fair price forthesoftwareproducts-apricethatcoversthevariousdevelopmentalcosts,aswellasgeneratingprofitsthatcanbe used for future product research and development. To protect their right to the protect fruit of their endeavours; they claim that consumers have a duty both to pay the price and to respect the intellectual property contained within the product - by not stealing it.

There are a number of laws and agreements throughout the world to protect intellectual property rights. The right to copy or duplicate materials can be granted only by the owners of the information. This is known as copyright. Many documents on the internet contain a statement that asserts that the document is copyrighted and gives permission fordistributingthedocumentinanelectronicform,provideditisn’tsoldormadepartofsomecommercialventure.Most of the copyright conventions or statutes include a provision so that individuals may make copies of portions of a document for short-term use. If information is obtainable on the internet, and there is no charge to access the information, it can often be shared in an electronic form.

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8.6.1 CopyrightsChallengesfacedbyelectronicinformationsystemsincludes:Thefluidityofinformationonthenetworkshascausedconfusionastohowcopyrightsandintellectualpropertyrightsapplytoelectronicfiles.Asthenetworksgrowlargerandattractabroaderrangeofpeople,someclarificationofhowelectronicfilescanbeusedisbecomingnecessary.Theeasewithwhichelectronicfilescanbedistributedandthenatureofsomeelectronicinformationcreateproblemswithin existing copyright law. Similar problems have arisen with photocopy machines, VCRs, and tape recorders. To add to these problems are the different copyright laws being followed in the different countries, as a result of which the information made available globally through a network may not have the same protection in other places.

The basic existing copyright principles should keep most network users on ethical grounds. Some of these principles are:

Copyrights protect original works of authorship, including literary, musical, dramatic, graphic, audiovisual, and •architectural works, and sound recordings.The law forbids unauthorised reproduction, distribution, performance, or display of works with copyrights. The •general intent of the law is to protect the commercial value of a work.Having a copy of a work with a copyright does not mean that the holder also has the right to distribute, reproduce, •perform, or display it.Copyrights apply to both published and unpublished work. Under the international Berne Convention on •copyrights, which the U.S. signed in 1989, a copyright comes into effect from the moment a work is created andisfixedinsomeformoftangibleexpression.A copyright notice is not required for copyright protection. The only way a copyright can be invalidated is by •explicit announcement by the author that copyright protections are waived.Copyrights do not apply to titles, short phrases, names, slogans, mere listing of ingredients, or works consisting •entirely of unoriginal information (such as standard calendars).Copyrights do not extend to ideas, procedures, methods, systems, concepts, principles, discoveries, or devices; •these must be patented for protection.Remember, complete international copyright protection does not exist. Works are subject to the laws of individual •nations, although most nations have signed international agreements on copyrights.


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SummaryThe use of information communication technologies on commercial basis is recognised as an important tool •for economic growth worldwide. Information technology has been applied to enhance four major categories of activities namely: governance, •growth , supply or distribution of goods and services, and adding value to existing services and the creation of new products and servicesTherearefivemoraldimensionsofinformationsystemsnamely:informationrights,propertyrights,accountability,•liability and control , system quality, and the quality of lifeOne of the major drawbacks of the information systems is computer crimes. Some of the common computer •crimes are: data diddling, salami slicing, phreaking, cloning and so on.The new computer technologies used for gathering, storing, manipulating, and communicating data are •revolutionising the use and spread of information.In the information systems the key elements of ethical choices includes: responsibility, accountability, and •liability.Right to information act is provided for setting out the practical regime of right to information for citizens •to secure access to information under the control of public authorities in order to promote transparency and accountability in the working of any public authority. Publicinformationofficers(PIO)areofficersdesignatedbythepublicauthoritiesinalladministrativeunitsor•officesunderittoprovideinformationtothecitizensrequestingforinformationundertheAct.The right to copy or duplicate materials can be granted only by the owners of the information it is known as •copyright.

ReferencesIcove, D. and Seger, K., 1995. • Computer Crime: A Crimefighter’s Handbook (Computer Security).O’ReillyMedia.Easttom, C. and Taylor, J., 2010. • Computer Crime, Investigation, and the Law. Course Technology PTR.toolroom, 2008. • Intellectual Property Law | Patents & Trademarks [Video Online] Available at: <http://www.youtube.com/watch?v=9Yp_Xj6YshM> [Accesses 2 December 2011].CopyrightSolverCCS, 2011. • What is a Copyright? [Video Online] Available at: <http://www.youtube.com/watch?v=iNKz00eqzVI> [Accesses 2 December 2011].righttoinformation.com, • Right to Information Act [online] Available at: <http://www.righttoinformation.org/> [Accesses 2 December 2011].Standler, R., 2002. • Computer Crime [Online] Available at: <http://www.rbs2.com/ccrime.htm> [Accesses 2 December 2011].

Recommended ReadingStephen Fishman J. D., 2011. • The Copyright Handbook: What Every Writer Needs to Know, 11th ed., NOLO.McJohn, S., 2008. • Intellectual Property: Examples & Explanations, 3rd ed., Wolters Kluwer Law & Business.Poltorak, A. and Lerner, P., • Essentials of Intellectual Property: Law, Economics, and Strategy (Essentials Series), 2nd ed., Wiley.

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Self Assessment ________ exploit weaknesses in web site security to obtain access to proprietary data such as customer 1. information and password.

Jammersa. Sniffersb. Hackersc. Sniffersd.

____________ is generally applied by courts when a person or property is injured or damaged.2. Strict liabilitya. Negligenceb. Cloningc. Public liabilityd.

Which of the following statements is false?3. Determining critical elements of a regulatory environment conducive for growth and development is a a. efficienttask.Information technology can be used to tackle infrastructural barriers that have hindered traditional supply b. and distribution chains in under developed countries. Business method patents can have withdrawal effects on competition in new markets and the opportunities c. made possible by information technologies. Developing countries should preserve domestic policy space to make decisions that are inconsistent with d. development priorities.

Which of the following statements is true?4. Internationalcopyrightagreementshaveasignificantandunavoidableimpactonaccesstocreativeworksa. in the digital age. A copyright notice is required for copyright protection. b. Copyrights apply only to published work. c. The right to copy or duplicate materials can be granted only by the owners and the readers of the d. information.

A _____________is essentially a promise that the developer makes to the customer with regard to the functionality 5. of the software

right to informationa. warrantyb. copyrightc. liabilityd.


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Match the following6.

Salami slicing1. It refers to the practice of stealing credit card numbers online, A. to be resold or used to charge merchandise against victim’saccount.

Dumpster diving2. A form of data diddling that occurs when a person shaves small B. amountsfromfinancialaccountsanddepositstheminapersonalaccount

Carding3. A scam used to steal password for legitimate accounts on C. computers in which the spoofer uses a program that duplicates an organisation’sloginscreen.

Spoofing4. This approach means, simply of going through dumpsters and D. garbage cans for company documents, credit card receipts, and other papers containing information that might be useful.

1-C, 2-A, 3-D, 4-Ca. 1-A, 2-D, 3-B, 4-Cb. 1-A, 2-B, 3-C, 4-Dc. 1-B, 2-D, 3-A, 4-Cd.

Which of the following fraudulently misrepresents themselves as other organisations, setting up false web sites 7. wheretheycancollectconfidentialinformationfromunsuspectingvisitorstothesite?

Spoofinga. Hackingb. Jammingc. Sniffingd.

____________ refers to the mechanisms in social institutions to determine who is responsible and assessing 8. responsibilities for decisions and actions.

Accountabilitya. Responsibilityb. Liabilityc. Cardingd.

A danger inherent in copyright protection is that when a technology is wholly owned by a single entity, consumers 9. may be harmed because the opportunity for _____________is much diminished.

accountabilitya. competitionb. responsibilityc. developmentd.

__________ can lead to reduced evolution and diffusion of products, as well as overpricing and 10. underproduction.

Innovationa. Informationb. Governancec. Monopoliesd.

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Case Study I

Knowledge Management at Titian Industries

The Bangalore K-Community, the monthly gathering of knowledge management professionals and practitioners in Bangalore,washeldattheofficesofTitanIndustriesonWednesdayDecember22,2010.

CSRamesh,VicePresidentIT&KnowledgeManagementofTitanIndustries,tracedthecompany’sgrowthandlaunch of its KM initiative. Titan Industries operates in the watch, jewellery and eyewear sectors, as well as precision engineering for aerospace and automobile.

Titan was launched in 1984, Tanishq jewellery in 1996, and the eyewear division in 2007. With a turnover of Rs 6,000crore,Titan is thefifth largestbrandedwatchmanufacturer in theworld. Itswatchbrands includeTitan,Sonata, Fastrack and Xylys. The combination of multi-brand stores, large format stores, precision engineering and fiercecompetitioncallsforrapidlearningacrosstheworkforce.

The Titan network has over 600 stores in India, and is the largest jewellery retailer in India (via Tanishq, Gold-Plus, Zoya stores). Tanishq gives employment to hundreds of artisans through karigar parks.

KM at Titan was conceived of as a Tata group initiative in 2005, with formal launch of the portal and related tools in 2006. The ERP SAP portal and process designs were devised in such a way that KM was not forced on people, but became a natural part of their work, Ramesh explained.

Titan’sKMvisionistoinstitutionaliseknowledgesharing;thisisfacilitatedviavehicleslikeportals,CoPs,andtheinternalQuestmagazine.Titan’sKMinitiativeisablendofinformation,collaborationandcommunication.

“KMhasprovenveryusefulforourmanufacturingexperts”saidACChidanand,DivisionalmanagerIT&KMatTitan Industries. All communication is handled via the portal, with minimal email to reduce information overload and facilitate re-use. The portal also targets sales representatives who have a lot of tacit knowledge about their territories and business relationships, and are fairly mobile in terms of location.

The KM journey at Titan covers 100 odd departments, 1,550+ users, and 100+ business processes. Though the watches and jewellery divisions are handled separately, Titan leverages commonalities in process and function across the divisions.

Titan has designed a KM prioritisation matrix for operations and processes by parameters such as specialisation, movement of people and business risk. Other factors for deciding high/low/medium KM priority include geographic spread, and integration with departments already on portal.

The 7 Pacts framework of KM at Titan covers products, process, people, performance, policies, partners and projects. It is applied to assets, customers, technology and strategies at Titan. For each of the 7 pacts, Titan mapped knowledge assets and processes for each department.

KM covers a range of activities at Titan, including environmental initiatives, sharing customer delight tips, and screen defect visualisation. Knowledge assets shared include market research documents, spare part drawings, ISO documentation, and retail manuals and brands standards.

Comments from engineering discussions to shop customers are entered in the KM portal, making them ripe for browsing and analysis. The KM portal is also used for informal knowledge sharing between sales staff (for example, for information on commutes) and this draws them to formal sharing as well. Sharing of knowledge is facilitated via cross-functional teams and virtual project rooms.


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Customer representatives document how they converted potential non-sales into sales; other sales representatives can browse through this and give more advice. Retailers are also given freedom to innovate; for example, free mehndi to get women to come into stores and try new watches. Some of these practices for promoting watch sales can also be used for jewellery. The sales portal is used for heavy rapid knowledge exchanges during festive seasons, for example, on use of elephants and camels as promotional props! KM is also applied to revenue streams like service centres, via documentation of best practices.

“Onanaveragewehad400ideasadaycomingviaourKMportalduringthefestiveseasonacrossthecountry.Some of these ideas could be used in other cities, and some can be used again next year as well” said Chidanand. The idea management initiative has anchors, sponsors and assessors for each set of ideas.

Titan’sInnovationBazaardrewover300entrieslastyear,andmorethan100wereselected.ManagersgavetheirteamstimeofffromdailyoperationalactivitiestoparticipateintheInnovationBazaar.Allfinalists,notjustwinners,wereshowcased on the KM portal during the Innovation Bazaar. Titan retains knowledge about inapplicable innovations, in case they can be revisited later.

Titan also has a function called Innovedge, which is focused not on core R&D but on scouting for existing technologies and apps in the market to see what can be tapped. A good example of Innovedge in the watch section wastheidentificationofUSBwatches.

CoPs at Titan cover activities ranging from retailing, customer service and showroom to maintenance, quality and tool manufacturing. The quality CoP is very popular, and has cross-pollination across a range of domains in interesting and unanticipated ways. KM CoPs are used by technicians as well as receptionists, and are enhanced during regional and functional meet-ups.

As compared to the engineering department, KM at the store level was a slow process to bootstrap, and it took TitanfouryearsforfullKMrolloutatthislevel.“Slowandsteadyisthebestapproach”advisesChidanand.“Wehave to increase our knowledge about local markets. We also acknowledge that some local practices may not apply elsewhere.”

Interestingly, Titan did not institute awards or rewards for KM; the initiative was designed in such a way that knowledgesharingwasanexpectedandhabitualbehaviour,andnotsomethingoutoftheroutine.“Wealsodidnotwant to unnecessarily cause heartburn for those who thought they should have won the award instead” explained Chidanand.

The K-Community gathering had an international visitor this time: Waltraut Ritter, KM consultant and professor based in Hong Kong, and a scholar on IP practices in Europe, China and India. She expressed interest in learning about the KM initiative and contributions to intellectual capital and patents at Titan.

Ramesh stressed that the KM initiative was not focused just on hard metrics the way an ERP implementation would be viewed, but on creating a culture of collaboration and reuse. While there are clear metrics on hand, there are limits as well and Ramesh, joked that people these days do not ask about RoI of telephones in a company! He also, said that sometimes sales people like doctors, do not always write or document well.

However, Titan has developed a comprehensive range of metrics covering KM outcomes: deployment (management), usage (for example, product stories, feedback) and effectiveness (for example, kaizens).

QuarterlyreviewstrackbusinessbenefitsandgainsfromtheKMinitiative.BrandstoriesarecirculatedviatheKMportal,whichisalsousedfortrackingthecompetition.Titan’sartworkandcreativearedocumentedandexplainedvia the portal. Titan has used social media like Facebook for conducting surveys; internal use of Wikis is also on the KM roadmap.

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Key lessons learnt, according to Chidanand, include synergising knowledge initiatives across diverse sectors, for example,watchesandjewels,inthecaseofTitanIndustries.“Seekoutcommonalitiesindifferentdomainsandtryto cross-pollinate where relevant” he advised.

“Ensurethateveryonehassomethinginterestingtoupdate,uploadorlearn.Addresskeybusinessissuesandworkflowrequirementsthroughtheportal,”headded.Eventhe“simplest”kindsofactivitiesareripeforknowledgesharingand improvement; for instance, tips on simple things like effective colour coding of packages and parts are also good practices, observed Chidanand.

K-Community participants from across a wide range of sectors commended Titan on its comprehensive and systematic KM initiative.

(Source: Rao, M., 2010. Case Study: Knowledge Management at Titan Industries [Online] Available at: < http://km.techsparks.com/?p=223 > [Accessed 5 December 2011].)

QuestionsWhat was the motive behind launching the knowledge management initiative by Titian?1. AnswerTitan’sknowledgemanagementvisionwastoinstitutionaliseknowledgesharing;thiswasfacilitatedviavehicleslikeportals,CoPs,andtheinternalQuestmagazine.Titan’sknowledgemanagementinitiativeisablendofinformation, collaboration and communication.

How has knowledge management portal been useful for Titan industries?2. AnswerThe uses for the knowledge management portal are listed below:

The KM portal was used for informal knowledge sharing between sales staff and this draws them to formal •sharing as well. Customer representatives documented how they converted potential non-sales into sales and provided advice •and suggestions to other sales representatives.The sales portal was used for heavy rapid knowledge exchanges during festive seasons.•Titan’sartworkandcreativearedocumentedandexplainedviatheportal.•

What is meant by Innovedge used by Titan industries?3. AnswerTitan has a function called Innovedge, which is focused not on core R&D but on scouting for existing technologies and apps in the market to see what can be tapped. A good example of Innovedge in the watch section was the identificationofUSBwatches.


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Case Study II

Business ProcessesMrs. Fields Cookies: Standardising Routine Decisions

Mrs. Fields Cookies was founded in 1977 as a single cookie store and grew to 600 stores within a decade. The company appealed to customers through warm cookies, friendly service, and reasonable prices. As it grew, the Mrs. Fields Cookies faced the problem of training and motivating relatively inexperienced store managers to use the standardsandproceduresMrs.DebbiFieldsdevelopedwhensheoperatedherfirststoreinCalifornia.Furthermore,as part of its business strategy it needed to make sure store personnel spent more time pleasing customers, and less time doing paperwork.

Mrs. Fields Cookies used information systems as part of its approach to these issues. Years of experimentation and development work created a unique information system that minimises paperwork and permits headquarters to monitor and control day-to-day operations at each store. Each store manager starts the day using a computer program calleda“DayPlanner”whichusesthestore’shistoryforsimilardaystosuggesthowmanybatchesofwhattypeofcookies to bake at what times during the day. At the end of each hour the cash register automatically transmits to the central computer the details of every sale that has occurred. A computer program uses this information to revise earlier projections. If sales are unexpectedly slow, the system might suggest that someone stand outside the store and give away samples. When common problems occur such as cash registers jamming, a program in the system provides guidance by asking typical troubleshooting questions.

While this part of the system makes data collection and repetitive decision making as routine and automatic as possible, another part provides a more human touch. It permits Debbi Fields to send voice or text messages to store managers to discuss problems or pass on news. It also permits store managers to request help from headquarters. They know the computerised part of the system will help with repetitive decisions and paperwork and that even Debbi Fields herself is readily available for issues requiring personal help.

After many years of gradual evolution, the software in the system has been generalised and is being sold under thenamePaperlessManagementtootherbusinessesthatneedtomanagenumerousretailoutlets.Thesystem’s25mix-and-match modules cover diverse areas such as messaging, sales forecasting, time and attendance, executive information, and auditing. Disney Stores uses it to distribute customised personnel and reporting forms, as well as electronicmail.Themajorbenefitsareinclarityandconsistencysinceeveryonereceivessimilarinformationinsimilarformats. Randy Fields, who founded a separate software company to sell this software, explains in a promotional video that in any group of store managers, some will simply be better at tasks such as employee scheduling. Therefore it makes sense for all store managers to use the methods these individuals would use.

Unfortunately,thestrategyofmaintainingconsistencyacrossthestoreswasnotsufficienttomaintainthecompany’srapid growth in the face of a recession in the late 1980s. In March 1993, Mrs. Fields Cookies was forced to exchange 80%ofthecompany’sstockforawrite-offof80%ofits$94milliondebt.DebbiFieldsrelinquishedherpostsasCEOandpresidentandtooka$150,000salarycut.Industryexpertsattributedthecompany’sproblemstoarangeoffactorsincludingcustomers’unwillingnesstopaynearlyadollarforacookie,thelimitedproductline,theexcessivegrowth that was attempted, and the fact that Debbi Fields tried to maintain too much control over the local stores and probably should have started selling franchises earlier.

Despitethecompany’soverexpansionproblems,theMrs.FieldsCookiescaseillustrateshowinformationsystemscanbeintegratedintoacompany’sapproachforperformingandcontrollingitsinternaloperations.Althoughitsproduct is low technology item you can make at home, information systems play a key role in running the stores efficiently.The company’s strategy of using standardisedmethods for repetitive operational decisions allowsemployeestofocusoncustomers.Thisexemplifiesthepointthatdataprocessingrelatedtorepetitivedecisionsoften absorbs energy best applied elsewhere.

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(Source: Prentice-Hall Inc., 1999. Mrs. Fields Cookies: Standardizing Routine Decisions [Online] Available at: <http://www.prenhall.com/divisions/bp/app/alter/student/useful/ch3mrsfields.html>[Accessed5December2011].)

QuestionsExplain why you agree or disagree that using information systems to automate management decisions is 1. appropriate only if managers are not competent to make decisions themselves.Usethiscaseasanexamplewhileexplainingwhyyouagreeordisagreewiththefollowingstatement:“The2. purposeofaninformationsystemshouldbetoprovideinformationthatmaximisesadecisionmaker’sfreedomandflexibility.Explain the features of the software used by Mrs. Debbi Fields.3.


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Case Study III

Maintaining Information System

Whisler Industries: How can we salvage this project?

As a manager of system development since early 1990, Paul Olafson had inherited a project from his predecessor and had not succeeded in turning it around. Whisler had a broad product line of different building materials, including certaintypesofsemi-customtiles,moldings,andflooring.Itsoldbothtodistributorsandretailstores.Theprojectwasan attempt to develop an integrated system that salespeople could use for entering orders, negotiating discounts for multiple products ordered simultaneously, and making delivery commitments. This project was seen as an important way to provide better service to customers and increase sales. The project had encountered many problems:

A key departure• : In 1989, during negotiations about system functionality, the lead analyst accepted a job with a 25 percent salary increase from a competitor.Accommodation to the departure:• The new lead analyst came to an informal agreement about the scope of the project and told his staff to start working on the data structure and program design.Change in scope:• Late in 1990 Whisler acquired one of its competitors and began to work through distributors forthefirsttime.Olafsoninformedtheheadsofinformationsystemsandsalesthatthiswouldmakeitnecessaryto go back to the drawing board because the data structures and basic logic of the system would have to be changed. They responded that delays in this crucial system were unacceptable.Divide and conquer:• Fearing demotion if he made a big fuss, Olafson decided to break the project into two parts.Thefirstpartwouldbethecompletionofasystemthatonlysatisfiedtheneedsofsalestoretailers;thesecond part would expand that system to include additional functions needed for sales to distributors.Another departure:• At this point, one of the two lead programmers quit. Already working 50 hours a week, he thoughtitwasimpracticaltotrytoretrofitonerelativelyuntriedsystemtotwosetsofrequirements.Dissension in the ranks:• This departure led to a near revolt of the programming staff. The programmers insisted onanabsolutefreezeonthespecificationsforthesystemtoavoidcontinualreworktoaccommodateshiftinggoals.Refusal to freeze the spec:• The head of information systems decided it was unacceptable for the group to producesomethingthatwasnotwhattheinternalcustomerwanted,especiallyinafirmpridingitselfoncustomerservice.

At this latest development, Olafson concluded that the current project would surely crash and burn. He decided it was time for a heart to heart talk with his wife and two high school age children. He felt he was in an impossible situation.Hecouldprobablykeephisjobbecausehenowhadthebestunderstandingofhowthecompany’ssystemssupported the sales and order commitment process. But his job was no joy and he was ready to go somewhere else, even at substantially lower pay, before he went crazy in this situation.

(Source: Prentice-Hall Inc., 1999. Whisler Industries: How can we salvage this project? [Online] Available at: <http://www.prenhall.com/divisions/bp/app/alter/student/useful/ch12whisler.html> [Accessed 5 December 2011].)

QuestionsCompare the analysis and development process thus far with the traditional system life cycle.1. What might have been done earlier to prevent the project from getting to where it is now?2. Explain whether you believe the refusal to freeze the spec is a betrayal of the people working in the IS 3. Department.What should Olafson and the head of information systems do?4.

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Recommended ReadingAdizes, I., 1990. • Corporate Lifecycles: How and Why Corporations Grow and Die and What to Do About It. The Adizes Institute.Amnec, N. and Sourd, V., • Portfolio Theory and Performance Analysis. Wiley.Atwood, C., 2009. • Knowledge Management Basics (ASTD Training Basics Series). ASTD Press.Bradford,M.,2010.ModernERP:Select,Implement&UseToday’sAdvancedBusinessSystems,2nded.,•lulu.com.Burton, R., 2006. • Organizational Design: A Step-by-Step Approach. Cambridge University Press.Dell, C. and Hubert, C., 2011. • The New Edge in Knowledge: How Knowledge Management Is Changing the Way We Do Business. Wiley.Eisenbeis, R., 1978. • Problems in applying discriminant analysis in credit scoring models. Board of Governors of the Federal Reserve System.Grady, J., 2006. • System Requirements Analysis. Academic Press.Gray, J. and Reuter, A., 1992. • Transaction Processing: Concepts and Techniques. Morgan Kaufmann.Harwood, S., 2003. ERP: The Implementation Cycle. Butterworth-Heinemann.•Hay, D., 2011. • Requirements Analysis: From Business Views to Architecture. Prentice Hall. Huber, M. and Piercy, C., 2006• . Information Systems: Creating Business Value. Wiley.Jones, M., 2008. • Artificial Intelligence: A Systems Approach (Computer Science). ones and Bartlett Publishers, Inc.Laudon, K. and Traver, C., 2011. • Management Information Systems, 12th ed., Prentice Hall.Marakas, G., 2002. • Decision Support Systems, 2nd ed., Prentice Hall.McJohn, S., 2008. • Intellectual Property: Examples & Explanations, 3rd ed., Wolters Kluwer Law & Business.Miles, R. and Snow, C., 2003. • Organizational Strategy, Structure, and Process (Stanford Business Classics). Stanford Business Books.Oon, R., 2010. Open Source ERP. Pearson Education.•Poltorak, A. and Lerner, P., • Essentials of Intellectual Property: Law, Economics, and Strategy (Essentials Series), 2nd ed., Wiley.Rainer, R. and Ceqielski, C., 2010. Introduction • to Information Systems: Supporting and Transforming Business, 4th ed., Wiley.Salo, A. and Keisler, J., 2011. • Portfolio Decision Analysis: Improved Methods for Resource Allocation. Springer.Seitz, N. and Ellison, M., • Capital Budgeting and Long-Term Financing Decisions. 4th ed., South-Western College Pub.Stair, R. and Reynolds, G., 2009. • Principles of Information Systems, 9th ed., Course Technology.Stephen Fishman J. D., 2011. • The Copyright Handbook: What Every Writer Needs to Know, 11th ed., NOLO.


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Self Assessment Answers

Chapter Ib1. a2. d3. c4. c5. b6. a7. a8. d9. b10.

Chapter IIa1. c2. b3. b4. c5. b6. c7. a8. c9. b10.

Chapter IIIc1. d2. a3. c4. c5. a6. a7. d8. b9. a10.

Chapter IVb1. a2. c3. a4. d5. c6. a7. b8. a9. b10.

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Chapter Va1. d2. d3. b4. c5. b6. a7. b8. b9. a10.

Chapter VId1. c2. a3. b4. d5. a6. c7. a8. a9. c10.

Chapter VIIb1. a2. a3. c4. d5. a6. d7. a8. b9. c10.

Chapter VIIIc1. a2. c3. a4. b5. d6. a7. a8. b9. d10.