Test Bank for Using MIS, 2nd Edition David M. Kroenke

Test Bank for Using MIS, 2nd Edition David M. Kroenke

Chapter 1 IS in the Life of Business Professionals

Test Bank for Using MIS, 2nd Edition David M. Kroenke

Case Study: $RU Financial Planning ($RU) The Financial Planning industry is highly competitive $RU: • Is a new (start-up) business with 250 clients and growing • Financial products are introduced or changed

Kerrie Dehaviland is the new Office Manager • Her job is to ensure that all financial planners have up-to-date

information when advising clients

– Facts about financial products – Details about business operations – Managing customer interactions with $RU planners – Historical data about customers

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This Could Happen to You Kerrie needs an information system (IS) to manage customer data • She has many questions and evident lack of knowledge about IS – How quickly can it be implemented?

– Who will use the CRM systems?

– What sort of computers will be needed?

• Never thought she would need to manage construction of an

information system

• Her lack of knowledge will slow down development of the system

and put her at a disadvantage when dealing with suppliers

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Study Questions Q1:

Why Management Information Systems (MIS)?

Q2:

What is an information system?

Q3:

What is MIS?

Q4:

How does IS differ from IT?

Q5:

How do successful business professionals use IS?

Q6:

What new opportunities for IS are developing today?

How does the knowledge in this chapter help Kerrie and you?

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Q1: Why Management Information Systems (MIS)?

Because of Moore’s Law the cost of data communications and data storage are essentially zero so Future business professionals need to be able to assess, evaluate and apply emerging information technology to business

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Moore’s Law ‘The number of transistors per square inch on an integrated chip doubles every 18 months’ • The speed of a computer chip increases in proportion to the density

of the transistors (i.e. density doubles, speed doubles)

• Price/performance ratio of computers has fallen dramatically – Computers are smaller – Less expensive

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Moore’s Law (cont’d)

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How Can I Attain Job Security?

Develop ‘a marketable skill and the courage to use it’ Routine skills and textbook knowledge are no longer sufficient RAND Corporation1 suggests marketable skills are: • Ability to adapt to changing technology and shifting demands • Strong non-routine cognitive skills

Robert Reich2 lists the following: • Abstract reasoning • Systems thinking • Collaboration • Ability to experiment 1 Lynn A Kaoly & Constantijn WA Panis 2004, The 21st Century at Work, RAND Corporation, Santa Monica, CA, p. xiv.

2 Robert B Reich 1991, The Work of Nations, Alfred A. Knopf, New York, p. 229.

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Examples of Critical Skills for Non-routine Cognition

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Q2: What is an Information System (IS)?

A group of components that interact to produce information Five fundamental components of computer-based information systems: • Computer hardware • Software • Data • Procedures • People

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Example: Airline Reservation System Computer hardware • Hundreds of computers, routers etc. linked together

Software • Hundreds of different programs to record customers details,

reservations, promotions etc.

Data • About flights, customers, reservations etc.

Procedures • Followed by airline personnel, travel agents, customers

People • Customers, travel agents, airline staff, IT personnel

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Five-Component Framework of an Information System

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Q3: What is MIS? MIS = Management Information Systems MIS is the development and use of information systems that help businesses achieve goals and objectives Key elements of MIS: • Development and use • Information systems • Business goals and objectives

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Development and Use of Information Systems Business professionals need to: • Take an active role in IS to ensure that systems meet their needs • Understand how IT systems are constructed.

• Consider users’ needs during development • Learn how to employ IT systems • Take into account ancillary IT functions – Security – Backup

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Achieving Business Goals and Objectives MIS aids businesses in achieving their goals and objectives • Businesses do not do anything on their own • It is people within the business that perform work

Therefore: MIS empowers users to achieve business objectives • Information systems exist to assist business people • Information systems exist to achieve business goals and objectives

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Business People Must Ask Questions What will the system do for us?

What is its purpose?

What will using it enable us to do?

What goals can we accomplish through its use?

How will it aid us in reaching our objectives?

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Q4: How Does IS Differ from IT? IT includes raw technology such as: • Hardware • Software • Data components

IT alone will not help an organisation achieve goals until it is embedded in an information system (IS) IS = IT + people + procedures IS makes IT useful by grouping the components together so they work as a system • Achieve more than the separate components

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Q5: How Do Successful Business Professionals Use IS? Email, websites and instant messaging do not provide competitive advantage Companies need information systems that support the work of the business professionals Developing the right IS requires input from those with the knowledge of the business not just IT experts • Think creatively about problems, challenges, and opportunities and

find ways to apply IT and IS

• Create innovative applications using emerging (new) technologies • Find ways to gain a competitive advantage with information

systems

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Q6: What New Opportunities for IS are Developing Today?

Data storage and transmission are virtually free, which provides abundant opportunities • YouTube – From just an idea to $1.65 billion in 20 months

Examples of commercial uses of social media • Facebook – www.penn-olson.com/2009/08/02/10-successful-facebook-

business-pages

• Twitter – http://smallbiztrends.com/2009/01/the-ultimate-small-

business-twitter-list.html

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Ethics Guide: Ethics of Misdirected Information Use You overhear a conversation between a real estate agent and the couple competing with you to purchase an apartment.

• Should you listen?

• Should you use the information you hear?

You receive the same information above through an email accidentally sent to your inbox.

• Should you read the email?

• Should you use the information to your advantage?

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Ethics Guide: Ethics of Misdirected Information Use (cont’d) While selling computer software, a customer mistakenly sends you an internal email that contains the maximum amount they can pay.

• Do you share the email with others?

• Do you notify the person who sent it?

• Do you use the information or excuse yourself from the deal?

What is the ethical thing to do? What is the best long-term business thing to do? Explain.

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Ethics Guide: Ethics of Misdirected Information Use (cont’d) A friend inadvertently emails you personal medical data. You read the email and learn embarrassing information about the friend.

• Your friend asks if you read the email. What should you say?

You are a network administrator with unrestricted access to mailing lists. You insert your email address into several lists and receive confidential information. One email shows that your best friend’s department is going to be eliminated and all personnel fired.

• Do you warn him?

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Guide: Password and Password Etiquette Security is essential in information systems Passwords are necessary • Should be a strong password • Protect passwords from others (critical) • Practise proper etiquette – Never ask others for their password – Never write down your password – Do not share it • If others (e.g. IT support) have a legitimate need for your

password

– Take the keyboard and enter it yourself – Ensure they cannot observe what you enter 23

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Creating a Strong Password Rules for strong password: • Use seven or more characters • Do not use your real name or company name • Do not use complete dictionary word • Use a different password from previous passwords used • Use uppercase and lowercase letters, numbers and special symbols

Example: i2LuvMIS(:>)

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How Does the Knowledge in This Chapter Help Kerrie and You? • She wants to use emerging technology to give the financial

planners a competitive advantage

• Work will be guided by five components of an information system • Someone will set up and administer CRM system • She will need procedures and training to enter and maintain

customers’ data

• Financial planners will need procedures for accessing and using the

CRM system

• Need ongoing training • Need to continue to look for the next emerging technology that will

be useful for $RU

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Active Review Q1:

Why Management Information Systems (MIS)?

Q2:

What is an information system?

Q3:

What is MIS?

Q4:

How does IS differ from IT?

Q5:

How do successful business professionals use IS?

Q6:

What new opportunities for IS are developing today?

How does the knowledge in this chapter help Kerrie and you?

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Chapter 2 Business Processes, Information and Information Systems

PowerPoint to accompany:

This Could Happen to You In order for Kerrie to get a budget approved for the CRM system she needs to: • Provide specific details • Provide answers to: – How will this CRM system impact the business processes?

– How will the financial planners use it?

– How will it help gain business?

– How will it help us make money?

Kerrie has the skills and knowledge to answer these questions from her experience with business processes

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Study Questions Q1:

How did this stuff get here?

Q2:

What is a business process?

Q3:

What are the components of a business process?

Q4:

What is information?

Q5:

What is the role of information in business processes?

Q6:

How do information systems support business processes?

How does the knowledge in this chapter help Kerrie and you?

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Q1: How Did This Stuff Get Here?

Even the simplest of business activities is made up of many separate business processes working together as an integrated system Viewed from a macro level a business must: • Obtain payments for its goods and services • Cover costs • Make profit

But decisions at each of the small steps affect the whole

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Q2: What Is a Business Process?

A structured network of activities, resources, facilities, and information that interact to achieve some business function

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Q2: What Is a Business Process? (cont’d) Business systems are integrated processes Examples: • Inventory management processes • Manufacturing processes • Sales and support processes • Accounting systems • HRM

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Portion of Inventory Management Business Process 1 5 3 8

2

Figure 2-1

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6

7

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Inventory Management Business Process Match these descriptions to the previous diagram

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1.

Purchasing (activity) queries Inventory Database (facility) and obtains QuantityOnHand (information)

2.

If reorder needed, Purchasing generates PurchaseOrder (information) to Supplier (resource)

3.

Purchasing (activity) sends copy to Receiving & Stocking (activity)

4.

When ShippedGoods (resource) arrive, Receiving & Stocking puts ItemsReceived into Inventory (facility)

5.

QuantityReceived (information) sent to Inventory Database (facility) and Payment (activity)

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Inventory Management Business Process (cont’d) 6.

Supplier sends Shipping Invoice (information) to Payment (activity)

7.

ShippingInvoice compared to QuantityReceived (information); Payment (facility) generates Supplier Payment (resource )

8.

Counter Sales (activity) interacts with Customer (resource), Inventory (facility), and Inventory Database (facility)

This is just one way, of many, of describing the business process There are several, widely used, documentation standards such as DFDs and UML

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Q3: What Are the Components of a Business Process?

Activities • Transform resources and information of one type into resources

and information of another type

Resources • Items of value, such as customers, suppliers, employees,

distributors etc.

Facilities • Structures used within resources e.g. inventories, databases

Information • Activities generate and use information to know how to transform

inputs to outputs

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Q4: What Is Information?

Information • Knowledge derived from data • Data processed and presented in meaningful context – Processed by summing, ordering, averaging, grouping,

comparing, or other similar operations

• A difference that makes a difference

Data

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Processes

Information

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Characteristics of Good Information Accurate • Correct and complete • Crucial for management • Cross-check information to ensure accuracy

Timely • Produced in time for intended use

Relevant to both • Context • Subject

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Characteristics of Good Information (cont’d) Just barely sufficient • Sufficient for purpose for which generated • Do not need too much or extraneous information

Worth its cost • Relationship between cost and value • Information systems cost money to develop, maintain and use • Must be worth the cost (time and money)

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Q5: What Is the Role of Information in Business Processes?

Business processes generate information by giving context to data • May turn low-level information into high-level information • Useful for management and strategy decisions

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Q6: How Do Information Systems Support Business Processes?

IS supports activities in a business process • Several activities may use one information system • Activity may have own information system • Activity may use several information systems

Systems designers determine relationship of activities to information systems • Relationships are determined during systems development

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What Does It Mean to Automate a Process Activity?

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What Does It Mean to Automate a Process Activity? (cont’d) Automation of processes • Transfers work done by people to computers • Procedures done by people can be converted into software

instructions and followed by computers

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An Information System to Support Counter Sales

Figur e 2-4 18

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An Information System to Support Counter Sales (cont’d) Fully automated (McDonald’s new drive-up window technology) • Cashiers do not require extensive training • Cashiers do not work directly with programs on computer

Computer in cash register communicates with computer connected to the inventory database Programs record sales and make changes

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An Information System to Support Payment

Figure 2-5

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An Information System to Support Payment (cont’d) Payment receives QuantityReceived and ShippingInvoice and produces SupplierPayment Mostly manual • Accounts Payable clerk reads documents and issues payment or

investigates discrepancies

• Processing exceptions complicated – Programming expensive – Probably not effective

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An Information System to Support Purchasing

Figure 2-6 22

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An Information System to Support Purchasing (cont’d) Purchasing clerk’s computer runs program that queries database and identifies stock levels and generates PurchaseOrder Designers decided to balance work between automation and manual activity • Searching database is repetitive – Automated process • Selecting suppliers is complicated – Manual process

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What Is Your Role?

Your mind and your thinking are the most important part of the information system The quality of your thinking is a large part of the quality of the information system You can dramatically improve the quality of your thinking if you are able to use information systems effectively

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Guide: Securing Collaboration Collaboration brings many benefits but exposes companies to risks • Any data transmitted by wireless can be intercepted • Email messages should be regarded as open documents • Data stored in any cloud facility eg Google Docs, can be lost • Microsoft Groove and Microsoft SharePoint software is designed to

support the sharing of data but can be abused

• Companies that enable employees to share data could find that

they are sharing confidential data without thinking about security

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MIS in Use: The Need for Business Processes To understand the need for business processes, the importance of process design, and the role that information systems play in support of such processes A seemingly simple business process can be unexpectedly complex

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Order Approval Process

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Green Guide: PCA People and Greenbizcheck PCA People is a professional recruitment agency in Canberra and ACT Climate change is a key concern Greenbizcheck provides: • Certification of environmental impact • Recommendations on reducing carbon emissions

Using the certification program to identify opportunities to reduce the PCA footprint resulted in: • Reductions in energy and water usage • Successful marketing to eco-savvy customers • Improved PCA staff retention • Tax deduction for the certification process

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How Does the Knowledge in This Chapter Help Kerrie and You? After reading this chapter, Kerrie and you should: • Understand the need for business processes, the importance of

process design, and the role that information systems play in support of these processes

• Be able to create process diagrams to show information needed • Understand the usefulness of a CRM as an activity that captures

information that makes a difference

• Be able to answer the three questions Kerrie’s boss asked her

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Active Review Q1:

How did this stuff get here?

Q2:

What is a business process?

Q3:

What are the components of a business process?

Q4:

What is information?

Q5:

What is the role of information in business processes?

Q6:

How do information systems support business processes?

How does the knowledge in this chapter help Kerrie and you?

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Chapter 3 Organisational Strategy, Information Systems and Competitive Advantage PowerPoint to accompany:

This Could Happen to You Kerrie needs to write a memo to her boss • Explain how the CRM system would provide a competitive

advantage

• A report will be used to justify the development expense

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Study Questions Q1: How does organisational strategy determine information systems structure?

Q2:

What five forces determine industry structure?

Q3: How does analysis of industry structure determine competitive strategy?

Q4: How does competitive strategy determine value chain structure?

Q5: How does competitive strategy determine business processes and the structure of information systems?

Q6:

How do information systems provide competitive advantages?

How does the knowledge in this chapter help Kerrie and you?

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Q1: How Does Organisational Strategy Determine Information Systems Structure?

Information systems exist to help organisations achieve goals and objectives Goals and objectives are determined by competitive strategy Competitive strategy determines structures, features and functions of every information system Organisations examine industry structure to determine a competitive strategy Strategy determines value chains and business processes

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Organisational Strategy Determines Information Systems

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Q2: What Five Forces Determine Industry Structure?

Porter’s five competitive forces: • Bargaining power of customers • Threat of substitutions • Bargaining power of suppliers • Threat of new entrants • Rivalry among existing firms

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Porter’s Five Competitive Forces

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1

4

5 3

Michael Porter 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York.

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Examples of Five Forces

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Q3: How Does Analysis of Industry Structure Determine Competitive Strategy?

Porter identified four competitive strategies: • Cost Leader – Broad cost leadership across industry (most efficient) – Narrow cost leadership focused on particular industry

segment (most efficient)

• Differentiation – Broad differentiation across industry (most effective) – Narrow differentiation focused on particular industry segment

(most effective)

Goals, objectives, culture and activities must be consistent with strategy All information systems must facilitate the organisation’s strategy 9

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Porter’s Four Competitive Strategies

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Q4: How Does Competitive Strategy Determine Value Chain Structure?

A value chain is a network of value-creating activities Consists of: • Primary activities • Support activities • Linkages across value activities

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Porter’s Value Chain Model

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Primary Activities in Value Chain Porter model that is useful to review manufacturing Each primary activity clearly adds value to the product • Think through each activity for a bicycle manufacturer

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Support Activities in the Value Chain Three support activities that contribute indirectly to production, sale, and service • Human resources – Training, recruiting, compensation • Accounting and infrastructure – General management, finance, accounting, legal, government

affairs

• Procurement and Technology – Finding vendors, negotiating prices – R & D, new techniques, methods and procedures

Activities add value and costs that are often intangible and make margins difficult to calculate 14

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Linkages Interactions at each boundary between value activities that are: • Sources of efficiencies • Readily supported by information systems

Example: an integrated manufacturing system • Links sales to operations (production) and inbound logistics • Determines raw material needs • Thus regulates inventory size • Reduces inventory costs

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Q5: How Does Competitive Strategy Determine Business Processes and the Structure of Information Systems?

Business processes implement value chains or portions of value chains Each value chain is supported by one or more business processes An information system may be part of or be used to support a business process Now review the business processes for High-Value Bike Rental

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Rental Process for High-Value Bike Rental

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High-Value Bike Rental Bike rental company uses information systems to maintain customer data in the customer database and bike data in bike inventory database, and transmits charge data to the hotel billing system Reducing costs: Eliminate rental personnel. Bicycles could be placed on racks having locks that customers can open with hotel room keys; the bike would be rented until customer places the bike back on the rack Increase value of the process: The rental agency could decide to rent additional types of equipment or to sell clothing or food and beverages

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Bicycle Rental Competitive Strategies

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Q6: How Do Information Systems Provide Competitive Advantages?

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Business Process Design Porter’s value chain is used to: • Create integrated, cross-departmental business systems • Create new, more efficient processes rather than automating

existing ones

Focus on: • Creating integrated activities across entire value chain • Eliminating redundant processes and creating new, more efficient

ones

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Competitive Advantage via Products Organisations can gain a competitive advantage by: • Creating new products or services • Enhancing existing products or services • Differentiating products or services – By cost – By quality

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Competitive Advantage via Business Processes Organisations can gain a competitive advantage by implementing business systems that: • Lock in customers – By creating high switching costs – How do businesses do this with customers?

• Lock in suppliers – By make it easy to connect to and work with their

organisation

– How does a large retailer do this?

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Competitive Advantage via Business Processes (cont’d) • Create entry barriers – Make it difficult (expensive) for new competitors to enter the

market

– In what industries would there be entry barriers?

• Establish alliances – Establish standards e.g. Blu-Ray – Promote product awareness • Reduce costs – To increase profit margins and profitability

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How Does an Actual Company Use IS to Create Competitive Advantages?

ABC Inc’s Information System Maintains customer account data • IS collects information for ABC (adds value) • IS saves customers time by automatically filling in part of form

(adds value for customer)

Package and information delivery system • IS helps customer to select the delivery address, emails

confirmation and generate shipping labels (adds value for customer)

• What value does shipper get?

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How Does ABC Inc’s Shipping System Create Competitive Advantages?

Information systems can create advantage by: • Enhancing existing products • Differentiating products • Locking in customers • Raising barriers to market entry • Increasing profit margins by decreasing costs and decreasing errors

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Ethics Guide: Yikes! Bikes You are the operations manager for Yikes! Bikes, a manufacturer of high-end mountain bicycles New owners are being deceitful about their plans to turn the company into a low-cost, low-service producer; most employees will lose their jobs You have been told you might be promoted to new general manager if you co-operate • By not telling the employees the truth about ongoing employment,

have the new owners been unethical?

• Should you trust the new owners or leave the company?

• Should you tell employees what is going on?

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Limiting Access to Those Who Have Access A digital divide separates those who have access to the internet from those who do not • Can be provided at public libraries, community centres, retirement

homes

• Enables research and learning about very basic daily living as well

as educational study

• Organisations and government agencies increasingly disseminate

information through the internet because it is efficient

• The ‘have nots’ miss out and fall behind on many criteria – Awareness of entitlements, special offers etc.

• Ensuring there is an alternative source of information for the few

who do not have access is a big problem

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How Does the Knowledge in This Chapter Help Kerrie and You? Knowledge of industry structure gives background and perspective that will enable Kerrie to make a strong case to senior management Understanding the organisation’s competitive strategy enables her to relate that strategy to company projects Kerrie can argue that the CRM system supports the company’s competitive strategy by providing cost-effective dissemination of accurate, latest and best information • Kerrie and the planners at $RU can capture and manage client

information

• They can then provide a higher level of advice and service than

their competitors

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How Does the Knowledge in This Chapter Help Kerrie and You? Kerrie’s memo should include: • A list of competitive advantages the CRM system can create, such

as:

– Help financial planners differentiate their advice from

competitors

– Lock in customers (clients believe $RU provide the most up-

to-date information)

– Raise barriers to market entry for other financial planning

companies

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Active Review Q1: How does organisational strategy determine information systems structure?

Q2:

What five forces determine industry structure?

Q3: How does analysis of industry structure determine competitive strategy?

Q4: How does competitive strategy determine value chain structure?

Q5: How does competitive strategy determine business processes and the structure of information systems?

Q6:

How do information systems provide competitive advantages?

How does the knowledge in this chapter help Kerrie and you?

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Chapter 4 Hardware and Software

PowerPoint to accompany:

This Could Happen to You Kerrie needs an information system to support the management of customers She must calculate costs to get approval so needs to consider five components of information systems: • People: financial planners, office staff and herself • Procedures: for accessing the CRM, changing client details.

• Hardware: ???

• Software: ???

• Data: ???

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This Could Happen to You (cont’d) Kerrie talks to an IT consultant • Specialises in setting up CRM systems

Consultant needs answers to questions about: • Whether the system will run on $RU hardware or an external host • Data structure for the database • Operating system for the server • Requirement to access the system offsite via the internet • How robust the system needs to be across browsers and other

platforms

• Firewall, VPN and other security issues

Kerrie’s lack of knowledge about hardware, software and data management threatened the success of the system 3

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Study Questions Q1: What do business professionals need to know about computer hardware?

Q2:

What’s the difference between a client and a server?

Q3:

What do business professionals need to know about software?

Q4

Why are thin clients preferred to thick clients?

Q5:

Is open-source software a viable alternative?

Q6

How can you use this knowledge?

How does the knowledge in this chapter help Kerrie and you?

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Q1: What Do Business Professionals Need to Know About Computer Hardware?

Basic hardware categories • Input – Keyboard, mouse, document scanners, bar-code scanners, microphones, magnetic ink readers • Processing – CPU (Central Processing Unit) – ‘the brain’ – Main memory and cache memory – Special function cards e.g. video cards • Output – Video displays, printers, audio speakers, overhead projectors, plotters • Storage – Magnetic disks, optical disks, magnetic tapes 45-5

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What Do Business Professionals Need to Know About Computer Hardware? (cont’d)

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What Do Business Professionals Need to Know About Computer Hardware?(cont’d)

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Computer Data Binary digits (bits) • Used to represent data

Sizing Computer Data • Bytes

• Bit is either zero or one

• 8-bit chunk equals 1 byte • Size of main memory and

storage devices

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How Does a Computer Work?

Computer Components

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How Does a Computer Work? (cont’d) CPU (central processing unit) • Transfers program or data from disk to main memory • Moves instruction from main memory via data channel or bus • Has small amount of fast memory called cache – Keeps frequently used instructions – Large cache makes computer fast, but is expensive

Main memory • Contains program instructions • Contains operating system instructions

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How Does a Computer Work? (cont’d) Operating system (OS) • Windows, Linux, MacOS • Program that controls computer’s resources and blocks of data • Provides services to application programs and users

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How Does a Computer Work? (cont’d) Memory Swapping occurs when the main memory is too small to hold all programs and data CPU loads programs from memory in chunks • Places new program into unused memory • If none available, the operating system will remove chunk being

used and replace with requested data

• It slows down the computer processing time

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Why Should a Manager Care How a Computer Works?

Main memory size • Too little means constant memory swapping – Slows processing – Need more memory if processing many programs or large

files

CPU speed • Expressed in hertz (Hz) • Needs more CPU if handling large spreadsheets or database files • Dual processors for PCs • Quad processors for servers

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Why Should a Manager Care How a Computer Works? (cont’d) Cache and main memory are ‘volatile’ • Contents lost when power is cut off

Magnetic and optical disks are ‘non-volatile’ • Saved contents survive after power is turned off

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Q2: What’s the Difference Between a Client and a Server?

Client computers are used for word processing, spreadsheets, database access • Connect to servers for web, email, database

Servers provide service to clients • They are faster, larger, more powerful • Usually have very simple video display, if any • Kerrie will use a server to run her CMS

Server farm • Large collection of coordinated servers • Google has several hundred thousand servers in many data centres

around the world

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Client and Server Computers

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What’s the Difference Between a Client and Server? (cont’d) Grid computing • Network of computers operating as if they are one computer • Companies lease time on grid from IBM and others • Used for intensive arithmetic computing

Cloud computing • Computing networks provided as a service on internet, e.g.

Facebook and others

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Q3: What Do Business Professionals Need to Know About Software?

Two fundamental types: Operating system • Large, complex program that controls computer’s resources • Run only on particular types of hardware • Must conform to instruction set of CPU • Microsoft Windows works only on Intel instruction set CPUs

Application programs • Perform specific user tasks • Written to use particular operating system

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What a Manager Needs to Know About Software

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What Are the Four Major Operating Systems?

Windows • Used by 85% of the world’s desktops • 95% of business users • Different versions for client computers and servers, websites,

email, and so on

Mac OS • Apple Computer Inc. developed for Macintosh computers • Easy-to-use interfaces • Used primarily by graphic artists and art community • Runs on PowerPC processor or a MAC with Intel processor

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What Are the Four Major Operating Systems? (cont’d) Unix • Used primarily in scientific and engineering • More difficult to use than Windows or MAC • Not for business users

Linux • Developed by open-source community • No licence fee to use it • IBM has developed business systems solutions that use Linux

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What Types of Applications Exist and How Do Organisations Obtain Them?

Application Software • Programs that perform a business function • Some are general purpose, e.g. Excel, Word • Some are specific purpose, e.g. QuickBooks, MYOB

Application Software Acquisition • Buy off-the-shelf – May not be a good fit – May need alterations • Custom-developed software – Tailor-made for organisation

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What Types of Application Programs Exist?

Horizontal-market application software • Provides capabilities common across all organisations and

industries

– Off-the-shelf software – Examples: Word, Excel, PowerPoint, Acrobat, Photoshop,

Paint Shop Pro, PageMaker

Vertical-market application software • Serves need of specific community • Usually altered or customised – Can be customised by vendor or qualified consultant – Examples: appointment scheduling, tracking system for

inventory

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What Types of Application Programs Exist? (cont’d) One-of-a-kind application software • Designed for specific need • Example: Australian Tax Office (ATO) to process PAYE tax returns

Hybrid application software • CRM software designed for large customer base, but can be

configured and customised

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How Do Organisations Acquire Application Software?

Off the shelf Off the shelf with alterations Custom-application software • Difficult and risky • May be developed in-house or by outside developer • Last choice if no other option • Result is unique and may confer competitive advantage

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Summary of Software Sources and Types

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What Is the Difference Between a Thin and Thick Client?

Thin client • Does not require installation and administration of client software

such as Microsoft Outlook

• Application requires nothing more than a browser

Thick client • More features and functions on the client computer • Has more code to run on it • More expense and administration

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Q4: Why Are Thin Clients Preferred to Thick Clients?

Client-server applications require processing on both client and server Thin client • Does not require installation and administration of client software,

e.g. online shopping trolley software

• Client operating system is not a complication • Requires nothing more than a browser

Thick client • Requires installation and administration of client software on the

client computer, e.g. Microsoft Outlook

• More features and functions on the client computer • Maintenance and administration of new versions is expensive

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Thin and Thick Clients

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Q5 Is Open-source Software a Viable Alternative Open-source software, e.g. Linux, MySQL • Source code (human readable) is made available, usually without

charge

• Additions and amendments can be made by anyone with the skills • Provided to the community for others to use • Software developers are not paid for their work

Closed-source software, e.g. Microsoft Office • Only machine-readable code is provided • Only the original developer can make changes • Developer depends on licence sales to make money

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Why Do Programmers Work Without Pay? The work may be more intellectually challenging than their paid employment It helps to develop their skills Programmers get kudos from being a recognised contributor to the open-source community They can sell their services to support an open-source product

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Is Open-Source Viable?

Controversial • Free, therefore not professionally developed • Developers are more responsive to reported problems.

Individuals can use software without paying or breaking the law, e.g.

Open Office Companies choose ‘free’ software but still need to pay for support and operational costs

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Q6: How Can You Use This Knowledge?

Role of business professional depends on the policies of the organisation • Large organisations have an IS department that sets standards

for hardware and software

• Medium to small organisations are often less formal – Managers take more active role – Usually standardise to single client operating systems

Managers and employees may have role in specifying horizontal application software Usually no role in specifications of server hardware Work with technical personnel to test and accept software

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Role of Business Professional in Hardware and Software Specifications

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Process for Preparing a Computer Budget

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Green Guide: The End Benefits 2000 tonnes of computer and related equipment collected in four years

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Guide: Keeping up to Speed • Technology continues to change • If you don’t keep up, you might not gain a competitive advantage • Managers need to understand what technology can do • Don’t depend solely on experts

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Guide: Keeping Up to Speed (cont’d) What can a manager do?

• Don’t ignore technology • Take seminars • Read articles, newspapers, ads – The Australian IT supplement • Attend professional events • Get involved as a user representative on technology committees

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How Does the Knowledge in This Chapter Help Kerrie and You? Kerrie is more confident in dealing with her boss and with the consultant Better able to understand the consultant’s questions and her bosses concerns Reduces the work and costs of the consultant Kerrie’s knowledge means she can determine: • That no new client hardware needed • To use thin client on planners’ computers • To prefer thin client on her computer • That CRM software must be installed on $RU server • That $RU as an SME will run Windows • That a consultant will choose and set up CRM software 39

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How Could the Knowledge From This Chapter Help Kerrie and You? (cont’d) • To understand how to sponsor a project like Kerrie’s • To be more confident in talking to and working with IT department

staff

• To better understand computer hardware and software • To better understand client-server networks

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Active Review Q1: What do business professionals need to know about computer hardware?

Q2:

What’s the difference between a client and a server?

Q3:

What do business professionals need to know about software?

Q4

Why are thin clients preferred to thick clients?

Q5:

Is open-source software a viable alternative?

Q6

How can you use this knowledge?

How does the knowledge in this chapter help Kerrie and you?

41

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Chapter 5 Database Processing

PowerPoint to accompany:

This Could Happen to You Kerrie selected ACT! as the application program for her CRM It needs a database management system to store blog entries • According to her consultant ACT! uses MySQL • $RU’s network is standardised on Access – May not be able to run ACT! – Will require revision of labour estimates

Murray, her boss, resists installing MySQL

2

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Study Questions Q1:

What is the purpose of a database?

Q2:

What is a database?

Q3: What are the components of a database application system (DAS)?

Q4:

How do database applications make databases more useful?

Q5:

How are data models used for database development?

Q6:

How are data models transformed into a database design?

Q7:

What is the user’s role in the development of databases?

How does the knowledge in this chapter help Kerrie and you?

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Q1: What Is the Purpose of a Database?

To organise and keep track of things Spreadsheets do that too • Keep lists of single concept, e.g. student test scores in a single

subject

Databases • Keep lists that involve multiple themes/concepts, e.g. student

grades, emails from students, office visits etc.

5-4 4

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Q2: What Is a Database?

A database is a self-describing collection of integrated records Hierarchy of data elements • Bytes/data are grouped into columns/fields • Columns grouped into rows/records • Rows are grouped into tables/files

Collection of tables plus relationships among rows • Also includes ‘metadata’ – Describes the structure of the database

5

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Student Table (also called a file)

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Relationships Among Rows Values in one table may relate to rows/records in other tables.

Key • A column or group of columns that identifies a unique row in table • Each table has a key • Often called the primary key

Foreign keys • Fields, other than the primary key, that are used to connect to a

table where the field IS the primary key Relational databases • Databases using tables, keys, and foreign keys

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Example of Relationships Among Rows

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Metadata Database is self-describing • Contains descriptions of its data, e.g. Field properties in Access

Metadata • Data that describe data • Make databases more useful • Make databases easier to use • Examples of Metadata – Field name – Data type – Field properties – Description 9

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Q3: What Are the Components of a Database Application System (DAS)?

A database by itself is not very useful to business professionals A database application system makes the data from a database more accessible and useful A database application system comprises: • A user who uses the database application • A database application that consists of forms, reports, queries and

other application programs

• A database management system to process the database • A database containing tables, relationships and metadata

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Components of a Database Application System

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Database Management Systems (DBMS) A DBMS is a program used to create, process and administer a database • Usually licensed from vendors • DBMS products include Microsoft Access, Oracle, MySQL, DB2

A DBMS and a database are different • A DBMS is a software program • A database is a collection of tables, relationships and metadata

12

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Creating the Database and its Structures Use a DBMS to create tables, relationships, and other structures in a database

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Processing the Database A major function of a DBMS is to process the data in a database Four processing operations of a DBMS are Read, Insert, Modify, Delete Structured Query Language (SQL) • Is an international standard language for processing a database,

e.g.

– INSERT INTO Student ([Student Number], [Student Name],

HW1, HW2, MidTerm)

– VALUES (1000, ‘Rudd, Kevin’,

14

90, 95, 100)

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Administering the Database DBMS provides tools to administer a database Administrative functions • Security – Used to set up user accounts, passwords, permissions,

processing limits

– Permissions are data access rights for specific users or groups

of users

• Backing up data • Structures to improve performance • Removing data that is not required

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Q4: How Do Database Applications Make Databases More Useful?

Collection of forms, reports, queries, and application programs that process a database Databases can have multiple applications Applications can have multiple users

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Use of Multiple Database Applications

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Forms, Reports and Queries Forms • Used to read, insert, modify, and delete data

Reports • Show data in structured context • May compute values

Queries • Are a means of getting answers from database data

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Example of a Query

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Database Application Programs Simple functions can be effected using forms, reports and queries Database Application Programs • Most realistic business needs require specific logic to be developed

in application programs

• May enable database processing over internet – Serve as intermediary between web server and database – Respond to events such as submit button – Read, insert, modify and delete data from a database

20

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Four Application Programs on a Web Server Computer

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Multi-user Processing Considerations Many users work with the same enterprise database, accessing the same records concurrently Lost-update problem • Occurs when an update to a record made by a transaction in an

application is lost due to an update made by another transaction at the same time

Locking • Used to ensure that a transaction does not interfere with any other

transaction

• Coordinates the activities of users who know nothing about one

another

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Enterprise DBMS and a Personal DBMS? Enterprise DBMS • Processes large organisational and workgroup databases • Supports many users (perhaps thousands) • Examples: DB2, SQL Server, Oracle, DB2

Personal DBMS • Designed for smaller, simpler database applications • Supports fewer than 100 users • Examples: Access, dBase, FoxPro, Paradox, R-Base

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Personal Database System

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Q5: How Are Data Models Used for Database Development?

Database Application Systems require the development of tables, forms, queries, reports, maybe other application programs How to proceed?

• Developers interview users to identify and develop requirements for

applications

• Analyse existing forms, reports, queries, other user activities • Summarise requirements and themes in a data model • Have users review and validate data model • After users approve data model, build database

Description of the Data Model is driven by business professionals

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Database Development Process

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What Are the Components of the Entity-Relationship Data Model?

Data Model • Logical representation of the data to be stored in the database • Entity-Relationship data model is the most common tool

Entities • Something users want to track, e.g. order, customer,

salesperson, item, volunteer, donation

Attributes • Describe characteristics of an entity, e.g. OrderNumber,

CustomerNumber, VolunteerName, PhoneNumber

Identifier • Attribute that uniquely identifies one entity instance from other

instances, e.g. Student_ID_Number

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Student Data Model Entities

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Example of Department, Adviser and Student Entities and Relationships A department may have many advisers An adviser works in one department • 1:N relationship • Called a ‘one-to-many’ relationship

An adviser advises many students • 1:N relationship

A student may have one or more advisers • N:M relationship • Called a ‘many-to-many’ relationship

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Example of Department, Adviser and Student Entities and Relationships

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Example of E-R Diagram with Minimum Cardinalities Each adviser must be in one and only one department A department may have no advisers or many Each student must have one and only one adviser An adviser may have no students or many

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Q6: How Is a Data Model Transformed into a Database Design?

Normalisation • Process of converting natural description of the data in the data

model into well-structured tables for use in a relational database – Sometimes requires creation of additional tables

• Goal is to construct tables that have data about a single theme or

entity

• Purpose is to minimise duplication of data to avoid data integrity

problems

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Data Integrity Problems In the diagram on the next slide, some rows show Dept 100 is ‘Accounting and Finance’ others show Dept 100 is ‘Accounting’. Which one is correct?

A table with data integrity problems will produce incorrect and inconsistent information Occurs if data are duplicated

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Poorly Designed Employee Table

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Single Employee Table Transformed to Two Normalised Tables

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Transforming a Data Model into a Database Design Represent each entity with a table • Entity identifier becomes table key • Entity attributes become table columns

Normalise tables as necessary Represent relationships • Use foreign keys • Add additional tables for N:M relationship

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Student:Adviser Relationship Student:Adviser relationship is N:M and requires three tables • Student – Student details, e.g. name, address • Adviser – Adviser details, e.g. name, department • Student/Adviser allocation – Data about the relationship, e.g. consultation time

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Q7: What Is the Users’ Role in the Development of Databases?

Users are the final judges of: • What data the database should contain • How tables should be related

Users review data model to be sure it accurately reflects their view of the business • Mistakes will make working with the database difficult

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MIS in Use: How Much Is a Database Worth?

In an interview Neil Miyamoto stated: • Our database is our biggest asset: ‘Take away our customer

database... it would take us 8 years to get back...’

Why is it so critical?

• Database contains everything customers do

An example is targeted solicitation • mybarackobama.com

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Ethics Guide: Nobody Said I Shouldn’t Gareth was employed maintaining servers and backing up database • Made copy of database to practise his SQL skills – Queried SQL Server metadata – Discovered tables with order data, customers, salespeople – Uncovered anomalies: one entry clerk gave discounts to a

buyer that no other clerks gave

• Mentioned it to a clerk • Was fired from the company for accessing database

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Ethics Guide: Nobody Said I Shouldn’t (cont’d) Where did Gareth go wrong?

Was it illegal, unethical or acceptable for Gareth to copy the database and take it home?

How should Gareth have handled his discovery of the anomaly by the clerk?

Does Gareth have any legal recourse over being fired?

How can a business protect its databases from unauthorised use?

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Guide: No, Thanks, I’ll Use a Spreadsheet The speaker believes the following: • Databases take time to build • Complicated to operate – May require use of multiple applications • Need IS people to create a database and keep it running • Will share data that you may not want to expose • Spreadsheets are a better option in most cases

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Guide: No, Thanks, I’ll Use a Spreadsheet (cont’d) Do you agree with this point of view about spreadsheets and databases?

Does the concern about sharing data relate to all databases?

What are the problems from using individual spreadsheets in a business?

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How Does the Knowledge in This Chapter Help Kerrie and You? Kerrie now knows what a DBMS is and what roles it can play • ACT! will use MySQL as part of functionality of her application on

the server

• System is isolated from rest of the company databases

She is better able to explain what she wants, and that it is not a threat or exception to the company Access standard She may have avoided hiring a consultant to help her if she had had the knowledge

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Role of DBMS for Kerrie’s CRM

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Active Review Q1:

What is the purpose of a database?

Q2:

What is a database?

Q3: What are the components of a database application system (DAS)?

Q4:

How do database applications make databases more useful?

Q5:

How are data models used for database development?

Q6:

How are data models transformed into a database design?

Q7:

What is the user’s role in the development of databases?

How does the knowledge in this chapter help Kerrie and you?

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Chapter 6 Data Communications

PowerPoint to accompany:

This Could Happen to You Kerrie is asked, ‘Are you going to run the CRM system inside the $RU network?’

She does not know why this is so critical to the development of the CRM system • If it is publicly available on the internet the competition could

access it

• A username and password is another layer of complexity in

development

• The $RU private network is an option via the internet using a VPN

but this requires Murray’s support

What knowledge about data communications does Kerrie need to answer the question?

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Study Questions Q1:

What is a computer network?

Q2:

What are the components of a LAN?

Q3:

What are the alternatives for a WAN?

Q4:

Why do organisations use Virtual Private Networks

Q5:

How does encryption work?

Q6:

What is the purpose of a firewall?

How does the knowledge in this chapter help Kerrie and you?

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Q1: What Is a Computer Network?

Network • Collection of computers • Communicate with one another over transmission line

Three basic types of networks • Local Area Network (LAN) • Wide Area Network (WAN) • Internet

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LAN (Local Area Network) Connected computers that reside in a single geographic location • At a single organisation location • Within a small distance of each other (approx. 0.75km) • Connects between two and several hundred computers • Organisation controls the installation of the communications media

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WAN (Wide Area Network) Connects computers at different geographic locations • Across metropolitan, state, regional, national areas • Uses communication networks from vendors that are licensed by

government

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An Internet Any network of networks Connects LANs, WANs, and other internets There are many public and private internets but usually the term refers to: • What you use when you send an email or access a website • Uses a variety of communication methods and conventions • Seamless flow of data provided by standardised layered protocol

Protocol is a set of rules that two devices must follow in order to communicate

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Q2: What Are the Components of a LAN?

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Q2: What Are the Components of a LAN? (cont’d) Switch/Router • Special purpose computer that receives and transmits messages

Network interface card (NIC) • Hardware that connects each device’s circuitry to the cable

MAC (media access control) address • Each network interface card has a unique identifier

UTP (unshielded twisted pair) cable • Most common connection media • Four pairs of twisted wires to reduce interference

Optical fibre cables • Use light rays to transmit larger amounts of data 9

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Network Interface Card (NIC)

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IEEE 802.3 or Ethernet Protocol World’s most popular protocol for LANs Supports 10/100/1000 Mbps Ethernet Protocol specifies: • Hardware characteristics • How messages are packaged and processed for transmission

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LANs with Wireless Connections Wireless connections are becoming popular • IEEE 802.11g and IEE 802.11n protocols used in the home and

within small offices to connect to LANs

• Bluetooth used over very short distances to replace wires, e.g.

connecting a keyboard

Wireless network interface card (WNIC) • Replaces an NIC to enable wireless connection • Standard in most laptops

Connect to an access point (AP) (modem/router) • Processes messages and communicates with the LAN switch

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Q3: What Are the Alternatives for a WAN? WANs connect computers at separate sites • Outside company site so wholly owned cabling is not an option • Use routers and public communications links between sites • Cable connections made through licensed public

telecommunications companies

Internet service provider (ISP) • A company that provides customers with access to the internet • Provides legitimate internet address • Serves as gateway to internet • Collects money from customers to pay for internet access

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Connecting the Personal Computer to an ISP: Modems Computers are commonly connected to an ISP in one of four ways • Telephone line • DSL line • Cable TV line • Wireless

All require digital data to be converted to an analogue (or wavy) signal using a modem, an abbreviation for modulator/demodulator

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Personal Computer (PC) Internet Access

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DSL Modems Digital subscriber line (DSL) • Operates over standard telephone lines • Data signals do not interfere with voice telephone service • Asymmetric digital subscriber lines (ASDL) – Have different upload and download speeds – Standard used in most homes and small businesses • Symmetrical digital subscriber lines (SDSL) – Have the same upload and download speeds which are often

very fast

– Used by larger businesses

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Cable Modems Provide high-speed data transmission Common in US and parts of Europe • High-capacity optical fibre cable run to a distribution centre in local

area

• Television cables connect at distribution centre and run to

subscriber’s house or business

• Does not interfere with television transmission • Up to 500 user sites connected at each centre – Performance can vary based on number connected • Download speed up to 10 Mbps, upload up to 256 kbps

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WAN Wireless Connection Used by some new communicating devices such as Kindle, iPhone, iPad Variety of WAN protocols are in use, no standardisation yet • LAN connection used if available because download speeds are

faster

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Networks of Leased Lines Dedicated lines leased from telecommunications companies to connected sites Used by large companies with high transmission volumes between a small number of sites Leased-line alternatives • Classified by their use and speed – T1 line (1.544 Mbps), T3 line (44.736 Mbps), OC-768 (40

Gbps)

• Set up as a point-to-point line • Require highly trained specialists to set up and maintain • Monthly connection and maintenance costs expensive • Provide low cost per bit transmitted for high-traffic networks 19

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WAN Using Leased Lines

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Public Switched Data Network Public Switched Data Network (PSDN) • Network of computers and leased lines • Developed and maintained by vendor • Time on the network is leased to organisations

Each organisation or site who wishes to connect to the PSDN must lease a line • The access point into the PSDN is called the point of presence

(POP)

• Saves the organisation setup and maintenance costs (over leased

line)

• Only pay for bandwidth used but cost per bit is higher

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WAN Using PSDN

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PSDN Protocols Frame relay • Process traffic at 56 kbps to 40 Mbps • Simplest and easiest to support • Relatively low cost

Asynchronous transfer mode (ATM) • Can process speeds from 1 to 156 Mbps • Supports voice and data communication

Ethernet • Protocol developed for LANs but also for PSDN • Operates at speeds of 10 to 40 Gbps

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Criteria for Comparing Networking Alternatives

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Q4: Why do Organisations Use Virtual Private Network?

Virtual private network • Uses internet or a private internet to create appearance of private,

secure, point-to-point leased line

• The VPN client to VPN server point-to-point connection is called a

tunnel

• Secure, encrypted communications – VPN client software encrypts data and receiving VPN server

decrypts it

– Users and their keys must be registered with VPN server – Users are authenticated and can then use the network as if

they were physically onsite

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Remote Access Using VPN: Actual Connections

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WAN Using VPN

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Q5: How Does Encryption Work?

Networks are potentially vulnerable to malicious activity including access to valuable company data Encryption • Process of transforming clear text into coded, unintelligible text • Used for secure storage or communication • Algorithms include DES, 3DES, AES

Key • Used to encrypt and decrypt data • Algorithm applies key to produce coded message – Symmetric encryption: same key encrypts and decrypts – Asymmetric encryption: different keys are used

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Q5: How Does Encryption Work? (cont’d) Public key/private key encryption • Used on the internet • Public key used to encrypt messages • Private key used for decrypting messages

HTTPS • Most secure communication uses HTTPS • Essential for internet transfer of credit card numbers – Make sure you check when buying online • Uses Secure Socket Layer (SSL)/ Transport Layer Security (TLS) – Combination of public key/private key and symmetric

encryption

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Q5: How Does Encryption Work? (cont’d)

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Q6: What Is the Purpose of a Firewall?

Firewall • Computer device that prevents unauthorised network access • May be special-purpose computer or program on a general-purpose

computer

• All computers, including home routers should have active firewalls

to protect against hackers

• May be used to control access to specific websites using an access

control list (ACL)

– Encodes rules stating with which IP addresses communication

is allowed or prohibited

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Different Types of Firewalls Organisations may have multiple firewalls • Perimeter – Sits outside organisational network – First contact outsiders make • Internal – Inside network protecting a specific LAN • Packet-filtering – Examines each part of a message (source address,

destination address, and other bytes) before allowing message to pass

– May filter both incoming and outgoing messages – May restrict access to outside websites 32

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MIS In Use: Keeping Up with Wireless WiMax • A standards-based technology for wireless broadband access,

alternative to cable and DSL internet access

Last-mile problem • Getting broadband access from external fast optical fibre lines into

homes and small businesses

WiMax Forum Certified (TM) systems have the capacity of 40 Mbps per channel, for fixed, nomadic, portable, and mobile applications IEEE 802.16-2004 and IEEE 802.16e are wireless standards

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Types of Access to a WiMax Network

Source: Table 1, “Types of Access to a WiMax Network,” from Fixed, Nomadic, Portable, and Mobile Applications for 802.16–2004 and 802.16e WiMax Networks, prepared by Senza Fili Consulting on behalf of the WiMax Forum. © 2005 WiMax Forum, www.wimaxforum.org/technology/downloads (accessed June 2008).

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Guide: Thinking Exponentially Is Not Possible, but…

Nathan Myhrvold from Microsoft claimed that humans: • Cannot think exponentially • Instead think of the fastest linear change and extrapolate from

there

Myhrvold was writing about the growth of magnetic storage • Also applies to growth of computer network phenomena

Ubiquitous and cheap connectivity is growing exponentially • What are the threats and opportunities?

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Guide: Thinking Exponentially Is Not Possible, but… (cont’d) Technology doesn’t drive people to do new things Social progress occurs in small, evolutionary, adaptive steps Technology may enable a capability, but people may not want it • People want to do what they are doing more easily • They want to solve existing problems

Respond by hedging your bets • Position yourself to move as soon as the direction is clear

More potential for error if the actual change is greater than what was imagined

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Green Guide: Corporate Express In 2005 the company realised it had outgrown its data centre on all possible criteria Interim solution bought 18 months to implement new, purpose-built data centre that met corporate social responsibility strategies: • Limit build to what is necessary • Maximise power and cooling efficiency • Optimise air circulation within aisles and cabinets • Incorporate virtualisation of the environment • Simplify the existing infrastructure

Source: Adapted from AIIA 2009, ‘Case Study 11: Corporate Express—Data Centre Optimisation’ from AIIA GreenIT eBook Case Studies— Greening Your Business Through Technology: Leading you towards a sustainable future through GreenIT, Australian Information Industry Association, pp. 45–8.

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Green Guide: Corporate Express What was achieved: • Substantial reduction on data centre space, power and cooling • Substantial reduction in number of servers • Better use of remaining servers and reduction in TCO of servers • Improvement in disaster recovery procedures • Rationalisation of data storage requirements • Huge reductions in CO2 emissions and electricity costs

Source: Adapted from AIIA 2009, ‘Case Study 11: Corporate Express—Data Centre Optimisation’ from AIIA GreenIT eBook Case Studies— Greening Your Business Through Technology: Leading you towards a sustainable future through GreenIT, Australian Information Industry Association, pp. 45–8.

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How Does the Knowledge in This Chapter Help Kerrie and You? Kerrie, office staff and planners use thin client computers • They can access the CRM database: – Using a web browser via the internet – Through a firewall on the office VPN server – To the CRM application running on a DBMS • VPN software enables them to have a secure, private connection

over the internet

• Firewalls stop traffic not addressed to VPN server • Planners already know how to use VPN so do not need new

username and password in order to access the CRM remotely

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Using a Firewall and VPN for Kerrie’s CRM system

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How Does the Knowledge in This Chapter Help Kerrie and You? (cont’d) Murray cannot schedule resources to setup CRM server in time but will not allow an outside person to have unrestricted access to the $RU network Consultant can create server on unprotected test server • Can be copied onto network server after acceptance • Requires some internal IT labour to follow consultant’s instructions • Even then the consultant could include Trojan horse virus or

malware so the compromise is:

– Install only public software from known sources, e.g. CRM and

DBMS commercial software

– Consultant’s code will not reside on production server 41

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Active Review Q1:

What is a computer network?

Q2:

What are the components of a LAN?

Q3:

What are the alternatives for a WAN?

Q4:

Why do organisations use Virtual Private Networks

Q5:

How does encryption work?

Q6:

What is the purpose of a firewall?

How does the knowledge in this chapter help Kerrie and you?

42

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Chapter 7 Business Process Management

PowerPoint to accompany:

This Could Happen to You Murray knows that the business could expand rapidly • Does not want to set up a new business and IT systems only to

change them soon after

• Client data critical for advice from planners • Data must be secure

You obtain an internship at $RU How can Murray successfully incorporate ongoing change into the business?

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This Could Happen to You (cont’d) Client files need to be computerised • Manual handling slows productivity • Problems with updating and annotating client files • Communication problems to clients

Need a system linking planners and office staff to client files for updating A computerised system will improve labour productivity • How can an information system achieve this goal?

3

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Study Questions Q1: Why is business process management important to organisations?

Q2:

How do organisations solve business problems?

Q3:

What role do information systems play in business processes?

Q4: What are the most common functional applications used today?

Q5:

What are the problems with functional information systems?

Q6 : What are the functions and characteristics of customer relationship management (CRM) information systems?

Q7: What are the functions and characteristics of enterprise resource planning (ERP) information systems?

How does the knowledge in this chapter help $RU and you?

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Q1: Why Is Business Process Management Important to Organisations?

Every business needs business processes Processes will change over time whether the business wants them to or not Information systems are often used to support business processes • Often critical, complex and dynamic in structure

To help us we need to examine the industry technology standards for business process management and information systems Use an example of Paddy Pallin, an online trader, to demonstrate the need for managing business processes

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Q1: Why Is Business Process Management Important to Organisations (cont’d)?

Tasks for processing an order at Paddy Pallin

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Business Process Management (BPM) Business Process Management (BPM) • Systematic process of creating, assessing, and altering business

processes

• BPM applies to profit-making, non-profit, and government

organisations

• Involves four stages

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Four Stages of BPM 1. Create model of business process components • Users review and adjust model • ‘As-is-new’ documents current process; it is changed to solve

process problems

2. Create System Components • Uses five elements of IS (hardware, software, data, procedures,

people)

3. Implement business process 4. Create policy and procedures for ongoing assessment of process effectiveness • Adjust and repeat cycles

$RU never designed its processes and had no assessment program in place 8

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BPM Varies with Scope and Size of the Process Functional processes • Activities in a single department or function • BPM easier at this level • Problem is that

may lead to ‘islands of automation’

Cross-Functional processes • Activities among many business departments • Eliminate or reduce isolated systems and data • Example is Customer Relationship Management (CRM)

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BPM Varies with Scope and Size of the Process (cont’d) Inter-organisational processes • Activities that cross organisational boundaries – Business processes that involve activities in another business

or organisation, e.g. supply chain management (SCM), credit card transaction processing

• More difficult than functional and cross-functional systems – Requires negotiation, contracts, litigation to resolve conflicts

between organisations

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Q2: How Do Organisations Solve Business Problems?

Need to document models of business processes • Both as-is models and models incorporating changes

In this section learn the standard notation for creating process documentation using $RU as an example A business process is a network of activities, resources, facilities and data that interact to achieve a function or purpose. (Revision from Chapter 2) • Activity: a task to be performed • Resource: people or equipment that can be assigned to an activity • Facility: a collection of resources (aka repository) • Data: recorded facts and figures (aka business item)

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Business Process Modeling Notation (BPMN Symbols) BPMN is the set of terms and graphical notations for documenting business processes. Developed by the Object Management Group (OMG)

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Top-Level Business Processes for $RU The Production of Statement of Advice (SOA) process has the goal of turning prospective clients into actual clients The Murray resource and Kerrie resource perform labelled activities

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Business Process with Two Swim Lanes

We can convert the diagram into a swimlane layout showing the activities performed by each resource

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Hold Discovery Meeting Activity

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Three Ways of Changing Business Processes The performance of a business process can be increased in one of three ways: • Brute-force approach – Add people, equipment • Change process structure without changing resource allocations • Do both by adding people and/or equipment and changing the

process structure

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Changing a Process by Adding Resources Can add cost to a value chain • Only beneficial if the change generates value greater than its cost • May use computer simulation or financial analysis to assess

changes

At $RU • A specialist has been added to activities • An information system could be used to add resources

7-17 17

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Modified Allocations in the Hold a Discovery Meeting Process

7-18 18

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Changing a Process by Altering Process Structure At $RU • Murray is wasting time by treating the interview and review of

financial information separately

• Missing information could be requested at the interview and a

decision on suitability of $RU for the client made immediately

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Changing a Process by Altering Process Structure (cont’d)

7-20 20

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Changing Resources AND Process Structure More complicated Greater potential for improvement More difficult to implement

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Q3: What Role Do Information Systems Play in Business Processes?

Information systems play an important role in implementing business processes • Implement business process activities • May be manual, automated, or mixed information systems

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IS Alternatives for Implementing the Production of Statement of Advice (SOA) Activity Alternatives for Have a Phone Conversation activity for $RU: Entirely manual • Using word processor to prepare documents detailing the

appointment time and financial information request

Manual and partly automated • Murray collects sufficient data to determine prospect suitability and

records data in a spreadsheet or database application.

• Spreadsheet or database produces a list of interview questions

Entirely automated Have a Phone Conversation system • Clients use internet to input their information and decide if the

prospect would make a good $RU client

• System schedules an interview or send a polite rejection 23

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Information Systems for Facilitating Linkages Among Activities Information systems, particularly with databases, help link activities $RU example • Create database application to track prospect financial information,

location, status

• New activity Process Prospect Database – Updates database from Have a Phone Conversation, Prepare

Letter and Hold a Discovery Meeting activities

– Murray can request prospect financial information and be

notified if not available

The redesign of business processes to take advantage of information systems is increasingly common

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Improved Production of Statement of Advice (SOA)

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Q4: What Are the Most Common Functional Applications Used Today?

Functional processes • Processes that support a single organisational function • Organisational functions – Accounts payable, sales lead-tracking, customer support

business processes

Functional application • A computer program that supports or possibly automates the major

activities in a functional process.

• Usually licensed from a vendor and adapted to fit the organisation

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Q4 What Are the Most Common Functional Applications Used Today? (cont’d)

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Sales and Marketing Applications Sales systems • Obtain sales prospects • Turn prospects into customers • Managing customers

Marketing systems • Product and brand management • Assessing effectiveness of marketing messages, advertising and

promotions

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Operations Applications Manage finished-goods inventory and movement of goods to customer Used primarily by non-manufacturers, distributors, wholesalers, retailers Principal operations applications • Finished-goods inventory management • Order entry • Order management • Customer service

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Manufacturing Applications Facilitate production of goods Inventory applications • Inventory tracking • Inventory management • Just-in-Time (JIT) inventory policy

Manufacturing planning applications • Bill of materials (BOM) is a list of materials and sub-assemblies for

a product

• Materials requirements planning (MRP and MRP II) was a precursor

of Enterprise Resource Planning (ERP)

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Bill of Materials Example

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Manufacturing Applications (cont’d)

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Manufacturing Applications (cont’d) Manufacturing scheduling applications • Master Production Schedule (MPS) – Based on estimates of future sales – Called a push manufacturing process • Schedule manufacture to satisfy actual demand – Based on demand from customers – Called a pull manufacturing process

Manufacturing operations applications • Computer-aided design, computer-aided manufacture, robots etc.

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Customer Service Applications The processes include: • Order tracking • Account tracking • Customer Support • Customer Training

Customers can perform many of these functions for themselves using web-based applications User-generated content and employee blogs provide product-use support

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Human Resources Applications Human resource applications support: • Recruitment • Compensation, pensions, bonuses, etc. in liaison with Payroll • Training and Development • Assessment

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Accounting Applications The most common functional information systems particularly General ledger Accounts payable system • Reconcile payments against purchases, schedule payments

Accounts receivable • Receivables, payments, account ageing and collections

Financial reporting applications • Produce reports to satisfy statutory requirements

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Accounting Applications (cont’d) Cost-accounting applications • Determine the marginal cost and relative profitability of products

Cash management • Provides information to support management of cash flow • Reconciliation of bank records against computer based data

Budgeting applications • Allocate and schedule revenues and expenses

Treasury applications • Management and investment of cash and payment of cash

dividends

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Q5: What Are the Problems with Functional Information Systems?

Data is duplicated because each functional application has its own database Business processes disjointed because supporting applications separated • Difficult for activities to reconcile data and increases chances of

errors

Lack of integrated enterprise information Inefficiency Increased costs due to duplicated data, disjointed systems, limited information and inefficiencies

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Major Problems Created by Isolated Functional Systems

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Q6: What are the Functions and Characteristics of Customer Relationship Management (CRM) Information Systems?

CRM system • Tracks all interactions with customer from prospect through

customer service

• Integrates all primary activities of value chain • Supports four phases of customer life cycle – Marketing: Marketing sends messages to target market – Customer acquisition: Prospects order, become customers

and need to be supported

– Relationship management: Support and resale processes

increase value of existing customers

– Loss/Churn: Win-back processes categorise customers

according to value and attempt to win back high-value customers

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Scope of CRM in Value Chain Activities

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The Customer Life Cycle

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Major Components of CRM Applications

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CRM Centred on Integrated Customer Database Store data in single database Customer-service activities can be linked via database

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Q7: What are the Functions and Characteristics of Enterprise Resource Planning (ERP) Applications?

Integrate primary value chain activities with human resources and accounting Cross-functional, process view of entire organisation Represent ultimate in cross-functional systems • Track customers, process orders, manage inventory, pay

employees, and provide general ledger, payable, receivables, and necessary accounting functions

Outgrowth of manufacturing resource planning (MRP II)

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ERP Applications and the Value Chain

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ERP Characteristics Entire organisation is collection of interrelated activities and crossfunctional processes Formal approach based on documented, tested business models Process blueprint documents each process with diagrams using standard symbols Centralised database Implementation usually involves major business process redesign • Complicated • Slow • Very expensive • High risk

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ERP Characteristics

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Potential Benefits of ERP Efficient business processes • Based on inherent processes that have been chosen as industry

best practice

Inventory reduction • Better planning removes the need for buffer stocks

Lead-time reduction • Reduce lead times in responding to new orders or order changes

Improved customer service • Single point of service regardless of the stage of a customer’s order

Greater, real-time insight into organisation • Company-wide data readily available for business analysis

Higher profitability due to lower costs 49

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How Is an ERP System Implemented?

50

1.

Model current business processes ‘as-is’

2.

Identify relevant ERP blueprint processes

3.

Compare as-is process models with relevant blueprints and note differences

4.

Find ways to eliminate differences

5.

Prepare detailed plan

6.

Train users on new processes, procedures, use of ERP features and functions

7.

Conduct simulation tests of new system

8.

Convert data, procedures, personnel to new system

9.

Follow phased system conversion approach

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ERP Implementation

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Ethics Guide: Dialling for Dollars Assume you are a salesperson It has been a bad quarter so the sales director has authorised a 20% discount on new orders Only stipulation: customers must take delivery prior to end of quarter, so accounting department can book the order for this quarter Your boss says: ‘Start dialling for dollars, and get what you can. Be creative.’

You identify your top customers and offer the discount deal to them

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Ethics Guide: Dialling for Dollars, Scenario 1 With one customer, you say they may take full delivery now and return unsold inventory next quarter • Customer wants this stipulated on purchase order – Accounting will not book full sales amount with stipulation • So, you agree to send an email with stipulation – Accounting books full amount • Significant amount of unsold product probably will be sent back

next quarter for refund

Q: Is it ethical to write agreement to take back product in an email?

Q: What would your boss do if she finds out?

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Ethics Guide: Dialling for Dollars, Scenario 2 With another customer, you don’t offer discount, but agree to post 80% of sale due this quarter with the 20% credit posted next quarter • Accounting books will show full price now but will take off 20% next

quarter

• This will hurt sales next quarter

Q: Is it ethical to offer the discount?

Q: How would it affect the company’s balance sheet?

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Ethics Guide: Dialling for Dollars, Scenario 3 Sell product to fictitious company owned by relative • Accounting books show full sale this quarter • All merchandise returned next quarter for refund

Q: Is this ethical?

Q: Is this legal?

The company’s manufacturing system is scheduling production for next quarter based on this quarter’s sharply increased sales.

Accordingly, it generates a schedule with substantial production increases and schedules workers for production runs.

Q: What impact do your sales activities have on next quarter’s inventories?

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Ethics Guide: Metasecurity Metasecurity is security about security How do you secure the security system?

What is a secure way to store a file of accounts and passwords?

• Use procedures and standards similar to accounting controls – Checks and balances – Reviews of activity logs – Control of critical assets – Encryption and keys • Using white-hat hacking – an employee to check system – Do you trust them?

– What do you do with them when they’ve completed their

check of system?

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Ethics Guide: Metasecurity (cont’d) Secrecy is not the solution Encryption algorithms are published and widely tested for vulnerability Metasecurity is more than hardware and software • It extends to data, procedures and people

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MIS in Use: The Coral Council Planning Office Planning office issues building, septic system, road access permits Serves homeowners and builders Any construction or renovation that involves electrical, gas, plumbing, other utilities, conversion of unoccupied spaces into living or working space

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MIS in Use: The Coral Council Planning Office (cont’d) Problems • Sequential nature of permit process slow and frustrating • Each review takes 3 or 4 weeks • Customers want concurrent reviews • Permit applicants and council personnel do not know status of the

application in the permit process

Solution • Change to a parallel permit-review process

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Sequential Compared with Parallel Review Process Sequential

60

Parallel

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How Does the Knowledge in This Chapter Help $RU and You? $RU needs to review its processes before it expands Needs to create ‘as-is’ process documentation Knowledge will help pinpoint problem areas Could create services that ‘call’ other services, such as a social networking site Could help $RU better understand vendors’ services For you in the future, it may help you be a better consumer of your company’s software applications You may review and produce process diagrams one day

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Active Review Q1: Why is business process management important to organisations?

Q2:

How do organisations solve business problems?

Q3:

What role do information systems play in business processes?

Q4: What are the most common functional applications used today?

Q5:

What are the problems with functional information systems?

Q6 : What are the functions and characteristics of customer relationship management (CRM) information systems?

Q7: What are the functions and characteristics of enterprise resource planning (ERP) information systems?

How does the knowledge in this chapter help $RU and you?

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Chapter 8 Digital Commerce and Web 2.0

PowerPoint to accompany:

This Could Happen to You $RU relies on relationships with financial providers and fund managers to provide quality advice to clients Some of $RU’s business processes and information systems could/should be used by other organisations Is there some way for $RU to use digital technologies, Web 2.0 and social networking applications?

Is there some way of involving financial information or providers and clients in changes to $RU processes?

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Study Questions Q1:

How do companies participate in digital commerce?

Q2:

How does digital commerce improve market efficiency?

Q3: How can information systems enhance supply chain performance?

Q4:

What technology is needed for digital commerce?

Q5:

Why is Web 2.0 so important to business?

Q6:

How can businesses benefit from Web 2.0?

Q7:

How can organisations benefit from social networking?

Q8:

How can organisations benefit from Twitter?

Q9 : What are the benefits and risks of user-generated content (UGC)?

How does the knowledge in this chapter help $RU and you?

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Q1: How Do Companies Participate in Digital Commerce?

Digital commerce is the buying and selling of goods and services over public and private computer networks • Restricted to buying and selling • Does not include information retrieval without a fee

May involve direct buying and selling to customers or broker who sell on behalf of companies

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Digital Commerce Companies Three main types: Business-to-Consumer (B2C) • Sales between a supplier and a retail customer • Involves a web storefront – Customer enters storefront and manages their order

Business-to-Business (B2B) • Sales between companies

Business-to-Government (B2G) • Sales between government agencies and businesses

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Digital Commerce Companies (cont’d) Example of Use of B2B, B2G and B2C

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Digital Commerce Brokers Online auctions • Digital commerce version of a standard auction – eBay is an example

Clearinghouses • Provide goods and services at stated price, arrange for delivery, but

do not own them

– Amazon.com example of clearinghouse • Electronic exchange – Matches buyers and sellers like a stock exchange – Priceline.com is an example

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Q2: How Does Digital Commerce Improve Market Efficiency?

Disintermediation • Elimination of middle layers in supply chain

Improved information on prices and terms • Customer can compare prices on a number of websites

Price Elasticity • Suppliers can determine amount of change in demand against

changes in price

• Price experimentation on customers – Amazon uses it to maximise revenue • Managing prices by direct interaction with customers

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Q3: How Can Information Systems Enhance Supply Chain Performance?

A supply chain is a network of organisations and facilities that: • Transforms raw materials into products delivered to customers • Works with companies and consumers up and down the chain – Customers order from retailers – Retailers order from distributors – Distributors order from manufacturers – Manufacturers get raw materials from suppliers – Transportation companies, warehouses, and inventories are

also involved

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Supply Chain Relationships

Figure CE13-1

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Supply Chain Example: Paddy Pallin

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What Factors Affect Supply Chain Performance?

Facilities • Location, size, and operations methodology (places where products

are fabricated, assembled or stored)

Inventory • All the materials in the supply chain from raw materials to finished

goods

Transportation • Movement of materials in the supply chain

Information • Focus of this section

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Information Affects Supply Chain Performance Influences the way organisations request, respond, and communicate with each other Purpose of the information • Transactional, such as orders and order returns • Informational, such as the sharing of inventory and customer order

data.

Availability • Ways in which organisations share their information and when

Means • Methods by which information is transmitted

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Drivers of Supply Chain Performance

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How Does Supply Chain Profitability Differ from Organisational Profitability?

Supply chain profitability • Difference between sum of revenue generated and sum of costs

incurred

Maximum profit from chain • Cannot be achieved if each organisation maximises its profits in

isolation

• Profitability increases when one or more operate at less than its

own maximum profitability

Why? • When one supplier loses a sale due to out-of-stock item, others in

the supply chain lose revenue

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What is the Bullwhip Effect?

Variability in the size and timing of orders increases at each stage up the supply chain, from customer to supplier A natural dynamic due to multistage nature of supply chain • Unrelated to erratic customer demand • Large fluctuations force distributors, manufacturers and suppliers to

carry larger inventories

• Reduces overall profitability of supply chain

Eliminate bullwhip effect by giving participants access to consumerdemand information • Inter-organisational information systems needed to share data

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The Bullwhip Effect

Figure CE13-4

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Q4: What Technology is Needed for Digital Commerce?

Almost all e-commerce applications use a three-tier architecture • User tier (web browser) • Server tier (web servers, applications) • Database tier (DBMS server)

Hypertext Transfer Protocol (HTTP) • Protocol for communication between the user and server computers • Set of rules for data transfer over the internet

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Three-Tier Architecture

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Three-Tier Architecture (cont’d) Web page • Document code in a markup language (often HTML) and

transmitted using HTTP

Web server • Program that runs on server tier computer, manages HTTP traffic

by sending and receiving web pages

Browser • A computer program on the client computer to process web pages

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Three-Tier Architecture (cont’d) Commerce server • Application program run on server tier • Interacts with web server to: – Retrieve product data from database – Manage shopping cart – Coordinate checkout

Web farm • Multiple web server computers • Used to minimise customer delays

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Watch the Three Tiers in Action!

Go to a web shopfront site and consider diagram below as you shop

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Commerce Server View items requires data about the products to be displayed • Accesses database to get product picture, price, special terms,

product information, related products

• Creates pages according to your selection

At check out • Commerce server processes payment, schedules inventory

processing, arranges shipping

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What is Hypertext Markup Language (HTML)?

Hypertext Markup Language (HTML) • Tag-based markup language like XML • Most common language for defining the structure and layout of web

pages

HTML tags used to define a data element <h2>Price of Item</h2> Hyperlinks are pointers to other web pages using the Uniform Resource Locator (URL) Attributes (<a>) •

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A variable used to provide properties about a tag

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Sample of HTML Document

Figure 8.7a

eXtensible Markup Language (XML) Used to enable two computer programs to exchange data The precise meaning of a tag is defined so that both programs have a consistent use of the content data • Metadata is stored in XML schema separate from the content data • Microsoft Office 2007, 2010 save documents in XML format • XML is the foundation for SOA standards • Companies within a supply chain can share data from disparate

systems including websites – Orders – Inventory data

• Whole industries can share data once XML standards have been

established

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Q5: Why is Web 2.0 Important to Business?

Web 2.0 • Difficult to define • Refers to the new and emerging uses of the internet • It is often interactive, works with virtual communities and is user

centred

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Software as a (Free) Service (SAAS) Run on a server somewhere on the internet • eBay • Google Docs & Spreadsheets, Groups, Earth & Maps

Web 2.0 programs resemble ‘beta’ (test) versions because they never reach a static, fully tested release Often no licence fee SAAS clashes with traditional software vendors • Vendors charge a licence fee and develop new releases

No active marketing, new features released and wait for user to spread word - viral marketing

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Other Characteristics of Web 2.0 Value of the site increases with use Organic user interface • Interfaces change frequently • Mashups combine output from more than one website into a single

user experience

• Example: My Maps where users make custom modifications to

Google maps and publish to share with others

Participation and ownership differences • Web 2.0 is more about participating and sharing than owning

content

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Q6: How Can Businesses Benefit from Web 2.0?

Advertising • Specific to the user interests • AdWords – Vendors pay Google, Yahoo for specific words, phrases – Place on search results list depends on how much vendor paid

for search word

– Vendor pays when someone clicks on their link – Amount can vary day to day, hour to hour • AdSense – Google inserts ads that match web page content – Google pays web page owner for every click on ad

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Q6: How Can Businesses Benefit from Web 2.0? (cont’d) Social Networking • Interaction of people connected by hobbies, friendship, business

association, medical, health or other common trait

• Build online communities • Facebook, MySpace

Mashups • The combination of outputs from two or more websites into a single

user experience

• Using Google Maps a real-estate agent can add the location of a

house for sale

– www.realestate.com.au

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Q7: How Can Organisations Benefit from Social Networking?

Social Networking (SN) • Interaction of people connected by interests, friendships, business

associations or some other common trait that is supported by Web 2.0 technology

N:M communication • Facebook and MySpace • Facilitate communication among people in a social network

Social collaboration • Done for social purpose or topic • Feedback and iteration

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Viral Marketing with SN Traditional business communication is unreliable SN communication is more reliable Viral messaging reaches more people, faster, cheaper and more personally MRV could expand its viral marketing by inducing (viral hook) customers to get their friends to form a relationship with MRV • Finding proper viral hook is critical

Common ways companies form SN relationships with customers are groups and applications

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Comparison of Traditional Marketing with Social Network Marketing Traditional

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Social Network

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Viral Social Marketing Possibility

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How Can Businesses Utilise Social Networking Groups?

A social networking group is an association of SN members related to a particular topic, event, activity or other collective interest • Public – Anyone can find the group by searching and anyone can join it • Invitation – Anyone can find the group by searching, but he or she must be

invited to join

• Private – Group cannot be found by searching, and members must be

invited to join

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Strengthening Relationships Among Customers to Create Viral Marketing Opportunities Invitation or private group • When $RU invite a customer to a financial planning seminar the

person would be invited into a group

• Place photos, videos of prior seminars on group site • Provide documents such as newsletters, advice on common

financial topics etc.

• Start discussion lists among planners and seminar attendees ahead

of the seminars

• Members could post pictures, documents, reflections about the

seminar

• Create pubic version of the group to share with friends • Groups of employees can use SN to build cohesion with their

teammates.

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How Can Businesses Utilise Social Networking Applications?

Social networking application • A computer program that interacts with and processes information

in a social network, e.g.

– Survey Hurricane, a Facebook application created by

Infinistorm (www.infinistorm.com) Users who install this application on their page can survey their friends on topics of interest

– New York Times quiz – Applications for buying and selling items, comparing movies

etc.

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SN Applications Run on Servers When you run an application on a Facebook page, Facebook passes your application request, via a service, to application vendor’s server Application service issues callbacks to Facebook (or other SN vendors) to create friend requests, find your existing friends, generate email, make requests, poke your friends, or take other actions Can collect data about you and your friends for individualised marketing or for data mining

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SN Applications Applications give the application vendor more control over users’ experience than groups do Application can require passwords and user accounts $RU could have different versions of the ‘Let’s Go to a Financial Planning Seminar’ application for: • Prospects • Clients enrolled in upcoming seminars • Attendees of past seminars

Applications can also collect data

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Key to Success: Make the Application Compelling

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SN Application Versus Websites Share many features and functions Why have SN? • Depends on degree to which the application requires a social graph – Does application use or benefit from N:M communication?

– Is there a need for social collaboration?

– Is there a need for feedback and iteration?

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Q8: How Can Organisations Benefit from Twitter?

Users publish 140 character statements Microblog • Website on which users can publish their opinions, restricted to

small amounts of text, like Twitter’s 140 characters

• Enables two-way publishing, worldwide • Enables users with similar interests to find each other

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How Can Businesses Benefit from Microblogging?

Public relations • Direct contact, immediate, low cost contact with customers in mass

with a link to a website

Relationship sales • People look for Tweeters who offer something they value: advice,

links to resources, interesting and thought-provoking opinions

Market research • Product managers search Twitter traffic to learn the ‘buzz’ about a

product

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Q9: What Are the Benefits and Risks of UserGenerated Content (UGC)?

Common types of User-Generated Content • Ratings and surveys • Opinions • Customer stories • Discussion groups • Wikis, Blogs • Video

Maybe sponsored by businesses Reports on products, recent travel plus pictures and videos • CNN iReport • Flickr 45

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Benefits of User-Generated Content (UGC) SN users are three times more likely to trust peers’ opinions over advertiser claims Increases loyalty to company site and brand loyalty Increases brand involvement, interaction, intimacy, influence Discussion groups share advice and assistance Provides useful information for product marketing and development Crowdsourcing • The process by which organisations involve users in design and

marketing of their products – RYZ Wear shoes

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Risks of Using Social Networking and UserGenerated Content Junk and crackpots Inappropriate content Unfavourable reviews Mutinous movements Dependency on SN vendor • Vulnerable to reliability and performance • Vendor may own content • Vendor may remove site

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Green IT Guide: Innovation Science Innovation Science is a software and systems engineering company based in Adelaide • Defence and commercial clients • Objective is reduction of carbon emissions – Constrained to minimise consumption of power • 'Power-down' policy for all end users • Shutdown periods for non-critical servers and network machines • Surge protection boards instead of workstation UPS • Energy efficient lighting

Cost of implementation $865 Saving per year 5.2-5.5 MW 48

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MIS in Use: Fine Woodworking Versus Wooden Boat Wooden Boat

Fine Woodworking

Buying previous issues of a magazine or specific articles enables Wooden Boat to generate revenue every time a customer identifies an issue or article of interest.

Editors of Fine Woodworking offer subscription with unlimited access to previous articles.

Editors can learn directly what topics interest customers.

Disadvantage—a customer might think twice about ordering a back issue since costs could add up pretty quickly.

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Provides a larger initial revenue stream, but does not provide revenue per article or back issue.

Customers may prefer to pay one time per year for access and then obtain any article of interest.

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MIS in Use: Fine Woodworking Versus Wooden Boat (cont’d) Wooden Boat

Fine Woodworking

Wooden Boat’s approach enables people to obtain a specific item, which is more likely to occur with a very specific need.

Fine Woodworking is trying to achieve a broad appeal.

Wooden Boat appears to have a strategy of differentiation within a market niche of wooden boats. It is focusing on people with interests in wood boats.

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Use of a subscription to access any material in its archive is sensible.

Subscribers will be able to browse the archive and to find many different articles of interest (on tools, techniques, projects etc.)

Fine Woodworking appears to have a strategy of differentiation broadly across the industry of woodworking. It is trying to appeal to woodworkers of any type.

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Guide: Blending the Personal and the Professional Employees sharing personal information at work Technology leads to blurring lines between work life and home life Work is portable and always there You need to be more careful about what you say Work networks are not social networks Should managers invite subordinates to be friends in Facebook?

Should managers maintain a professional distance?

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How Does the Knowledge in This Chapter Help $RU? $RU could use Web 2.0 concepts To make use of social networking by connecting clients to each other and financial experts Use AdWords and AdSense to advertise services and the company Add user-generated content for customer-supplied content such as reviews and other services Use Crowdsourcing to allow customers to design future financial products

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How Does the Knowledge in This Chapter Help You? Web 2.0 technology could be important to your career Think about how you might use social networking or UGC in a business A knowledge of these technologies and how to apply them can be used to give you a personal competitive advantage

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Active Review Q1:

How do companies participate in digital commerce?

Q2:

How does digital commerce improve market efficiency?

Q3: How can information systems enhance supply chain performance?

Q4:

What technology is needed for digital commerce?

Q5:

Why is Web 2.0 so important to business?

Q6:

How can businesses benefit from Web 2.0?

Q7:

How can organisations benefit from social networking?

Q8:

How can organisations benefit from Twitter?

Q9: What are the benefits and risks of user-generated content (UGC)?

How does the knowledge in this chapter help $RU and you?

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Chapter 9 Business Intelligence and Information Systems for Decision Making

PowerPoint to accompany:

This Could Happen to You $RU customers are fee sensitive $RU needs to be cost-conscious to keep fees low You want to install a desktop-based knowledge management system for planners Two different options supported by the IT consultants: • A specialist system running in-house using the $RU server • An outsourced solution supplied and run by a funds manager

Murray insists under NO circumstances will $RU ever outsource its IT requirements Why is Murray so adamant on this requirement?

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Study Questions Q1:

Why do organisations need business intelligence?

Q2:

What business intelligence systems are available?

Q3:

What are typical reporting applications?

Q4:

What are typical data-mining applications?

Q5:

What is the purpose of data warehouses and data marts?

Q6:

What are typical knowledge-management applications?

Q7:

How are business intelligence applications delivered?

How does the knowledge in this chapter help $RU and you?

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Q1: Why do Organisations Need Business Intelligence?

Businesses collect massive amounts of data • Millions of emails and messages sent each second • Storage capacity is becoming almost unlimited, so businesses

collect more data at little extra cost

• Need to provide the right information to the right person at the

right time

The data can show patterns and relationships • Those relationships can yield valuable information that can help

businesses make better decisions

• Can help forecast changes or with areas such as customer

relationships management

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How Big is an Exabyte?

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Q2: What Business Intelligence Systems are Available?

Business Intelligence (BI) Tool • Computer program(s) that implement a particular BI technique • Three categories – Reporting tools – Data-mining tools – Knowledge-management tools

Business Intelligence (BI) Application • Use of a BI tool on a particular type of data for a particular purpose

Business Intelligence (BI) System • An information system used to improve decision making • All five IS components to deliver the results of a BI application 6

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Business Intelligence Tools Reporting systems • Integrate data from multiple systems • Sorting, grouping, summing, averaging, comparing data

Data-mining systems • Use sophisticated statistical techniques • Used to discover hidden patterns and relationships • Used to anticipate events or predict future outcomes • Market-basket analysis – Looks for items frequently purchased together

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Business Intelligence Tools (cont’d) Knowledge-management systems • Create value by collecting and sharing human knowledge about

products, products uses, best practices, and other critical knowledge

• Used by employees, managers, customers, suppliers, others who

need access to company knowledge

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Q3: What Are Typical Reporting Applications?

A reporting application uses a reporting tool to compile data from multiple sources into a form that is information for the user Reporting BI systems deliver reports to authorised users at appropriate times using operations: • Sorting • Grouping • Calculating • Filtering • Formatting

Two such applications are • RFM analysis • OLAP 9

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Basic Reporting Operations Raw Sales Data

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Sales Data Grouped and Filtered to Show Repeat Customers

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RFM Analysis RFM program analyses and ranks customers according to their purchase patterns • How recently (R) a customer has ordered • How frequently (F) a customer has ordered • How much money (M) a customer has spent per order

Produces an RFM Score • RFM program first sorts customer records by date of most recent

purchase and scores each customer 1 to 5

• RFM program then re-sorts customers by how frequently they order

and scores each customer 1 to 5

• RFM program finally sorts the customers according to the amount

of money spent and scores each customer 1 to 5

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RFM Analysis (cont’d) • Divides customers into five groups and assigns a score – R score 1 = top 20% in most recent orders – R score 5 = bottom 20% (longest since last order) – F score 1 = top 20% in most frequent orders – F score 5 = bottom 20% least frequent orders – M score 1 = top 20% in most money spent – M score 5 = bottom 20% in amount of money spent

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Interpreting RFM Score Results

Ajax has ordered recently and orders frequently; M score of 3 indicates it does not order most expensive goods • A good and regular customer, sales team should up-sell more

expensive goods

Bloominghams has not ordered recently, but used to order frequently, and orders were of highest monetary value • Sales team should contact this customer immediately 13

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Interpreting RFM Score Results (cont’d)

Caruthers has not ordered for some time, did not order frequently and did not spend much • Sales team should not waste any time on this customer

Davidson is in the middle of all categories • A good regular customer • An option may be to set up on automated contact system or use

the Davidson account as a training exercise

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Online Analytical Processing (OLAP) An OLAP Report shows simple arithmetic operations on data • Sum, average, count etc.

Has a dynamic format • User can change report structure and view online

Contains measures • Data items to be manipulated, e.g. total sales, average cost

Contains dimensions • Characteristics of measures, e.g. purchase date, customer type,

location, sales region

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OLAP Reports An OLAP cube: • Is the presentation of a measure with associated dimensions • Some software displays the measure using three axes

Users can alter format Users can drill down into data • Divide data into more detail

May require substantial computing power

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OLAP Product Family by Store Type

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OLAP Report After ‘Drilling Down’

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OLAP Servers Developed to perform OLAP analysis Server reads data from operational database Performs calculations Stores results in OLAP database Third-party vendors provide software for more extensive graphical displays

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Role of OLAP Server and OLAP Database

Figure CE17-12

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Q4: What Are Typical Data-mining Applications?

Application of statistical techniques to find patterns and relationships among data for purpose of classifying and predicting Convergence of disciplines • Statistics and mathematics • Artificial intelligence • Computer technology • Data management technology

Often used by business professionals who have expertise in datamining techniques

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Converging Disciplines

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Unsupervised Data Mining Analysts do not create a model before running analysis Apply data-mining techniques and observe results Hypotheses created after analysis as explanation for results Common statistical technique used: • Cluster analysis to identify groups with similar characteristics

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Supervised Data Mining Model developed before analysis Statistical techniques used to estimate parameters Regression analysis • Used for making predictions • Measures the impact of a set of (independent) variables on another

(dependent) variable

Neural networks • Used for predicting values and making classifications • Complicated set of nonlinear equations

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Market-Basket Analysis Market-basket analysis is a data-mining technique for determining sales patterns • Uses statistical methods to identify sales patterns in large volumes

of data

• Shows which products customers tend to buy together • Used to estimate probability of customer purchase • Helps identify cross-selling opportunities, e.g. ‘Customers who

bought book X also bought book Y’

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Market-Basket Example

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Market-Basket Terminology Support • Using total sales, it is the probability that two items will be bought

together

– Fins and masks are purchased together 150 times, thus

support for fins and a mask is 150/1,000, or 15%

– Support for fins and weights is 60/1,000, or 6% – Support for fins along with a second pair of fins is 10/1,000,

or 1%

Confidence • Given a particular item, it is the probability that another item will

be purchased

– After buying mask the probability of buying fin is 150/270 or

55.56%

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Market-Basket Terminology (cont’d) Analysis • Base probability of someone buying fins is 28% (280/1000) • But likelihood that a customer will buy fins (after they have bought a

mask) almost doubles from 28% to 55.56%

• Thus sales personnel should try to sell fins to anyone buying a mask

Lift • Ratio of confidence to base probability of buying item • Shows how much base probability increases or decreases when other

products are purchased

– Lift of fins and a mask is confidence of fins given a mask,

divided by the base probability of fins

– Lift of fins and a mask is .5556/.28 = 1.98 28

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Decision Trees Hierarchical arrangement of criteria that predict a classification or value Unsupervised data-mining technique Select attributes most useful for classifying something based on some criteria that creates disparate groups • The more different (or pure) the groups, the better the

classification

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Decision Tree for Student Performance

If Senior = Yes

30

If Junior = Ye s

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Decision Tree Analysis of MIS Class Grades Students’ characteristics • Class (junior or senior), major, employment, age, club affiliations

and other characteristics

Values used to create groups that were as different as possible on grades above or below 50% Results • Best criterion – Class • Next subdivide seniors and juniors into more pure groups – Seniors – Business and non-business majors – Juniors – Restaurant employees and non-restaurant

employees

• Best classifier is whether the junior worked in a restaurant 31

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Create Set of If/Then Decision Rules If student is a junior and works in a restaurant, then predict final grade > 50% If student is a senior and is a non-business major, then predict final grade < 50% If student is a junior and does not work in a restaurant, then predict final grade < 50% If student is a senior and is a business major, then make no prediction

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A Decision Tree for Loan Evaluation Common business application It can be used to: • Classify loan applications by likelihood of default • Evaluate risk in a portfolio • Determine rules to identify loans for bank approval • Identify market segment • Structure a marketing campaign • Predict problems

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A Decision Tree for Loan Evaluation (cont’d) Classifying likelihood of default Examined 3,485 loans 28% of those defaulted Evaluation criteria • Percentage of loan past due less than 50% = .94, no default • Percentage of loan past due greater than 50% = .89, default – Subdivide groups A and B each into three classifications:

CreditScore , MonthsPastDue, and CurrentLTV

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A Decision Tree for a Loan Evaluation (cont’d) Resulting rules • If the loan is more than half paid, then accept the loan • If the loan is less than half paid and if CreditScore is greater than

572.6 and if CurrentLTV is less than .94, then accept the loan

• Otherwise, reject the loan

Decision trees are easy to understand and easy to implement using decision rules

35

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Credit Score Decision Tree

Figure CE14-4

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Q5: What is the Purpose of Data Warehouses and Data Marts?

Operational data, e.g. from transaction processing, is rarely ideal for sophisticated analyses • Missing values and inconsistencies • Data from outside sources can be used to add value • Data format is not designed for data mining • Processing may slow down response for operations

Solution is to extract data into data warehouse or data mart • Production data is extracted, cleaned and prepared for BI

processing

• Prepared data is stored in data-warehouse database using purpose

designed data-warehouse DBMS

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Components of a Data Warehouse

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Data Warehouse Data Sources Internal operations systems External data purchased from outside sources Data from social networking, user-generated content applications Note also metadata, or details concerning the data, is stored in a data warehouse metadata database

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Problems with Operational Data for Data Mining Dirty data is incorrect or incomplete data • Values may be missing • Inconsistent data • Non-integrated data such as a database field is missing • Incorrect data granularity – The degree of summarisation or detail – May be too course or too fine, particularly clickstream data

Curse of Dimensionality is term for ‘too much data’ • Too many attributes makes predicting a meaningless exercise • Too many records (or data points) • Solution is to use statistical sampling 40

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Data Warehouses Versus Data Marts Data Warehouse • Repository of data ready for use by data analysts • Managed by data managers who may not be knowledgeable about

the business functional areas

Data Mart • Collection of data • Extracted from data warehouse to address particular functional

needs

• Smaller than data warehouse • Users are knowledgeable analysts for specific business function

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Data Mart Examples

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Q6: What Are Typical Knowledge-Management Applications?

Knowledge Management (KM) is about capturing and sharing intellectual capital Knowledge Assets • Data through reporting and data mining (already covered) • Documents, in particular, sharing document content • Employees’ knowledge, especially expert systems

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Sharing Document Content Indexing • Content must be easily accessed using relevant keywords • Google® is the world’s best-known indexing engine • Valuable content, protected within an organisation’s firewall still

needs to be indexed so it is available to authorised users

Real Simple Syndication (RSS) • A means of subscribing to content sources like magazines, blogs etc.

• RSS reader feeds content whenever there is a change • SharePoint and other content-management software provide RSS

feeds

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Expert Systems Used to capture human expertise in such a way that non-experts can make equally good decisions Work best when the decisions can be framed in the form ‘If…then’ Expert knowledge is captured by interviewing ‘experts’ and then codifying the rules Even if only 80% of the decisions can be automated in this way, the saving on expert time justifies the expense of creating the system

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Problems of Expert Systems Expensive to develop • Require many hours of expert time to identify the rules

Difficult to maintain • Especially the introduction of new rules

Rarely able to duplicate the ability of an expert to bring together knowledge, skill and experience MYCIN system at Washington University School of Medicine is an expert system that provides a safety net to screen the decisions of doctors • DoseChecker, ParmADE verify dosages and drug interactions • Warnings are sent to pharmacist and doctor

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Q7: How Are Business Intelligence Applications Delivered?

Data from a BI Data source • Data warehouse, operational data etc.

Is processed by a BI tool • RFM, OLAP, Decision tree etc.

To produce BI Application Results That are managed and delivered by BI application server • Users pull results from a website • Or results are pushed to subscriber

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Generic Business Intelligence System

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Management Functions of a BI Server Controls the dissemination of results to users • Metadata about which users are authorised to receive the results • Monitoring of what results are available

Range of sophistication of BI servers • Simple websites from which users request results • Portal servers with a customisable user interface (like iGoogle) – Company portals restrict access to authorised users – Store data to authenticate users – Records of subscriptions and requested alerts • A report server provides only reports

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Delivery Functions of a BI Server BI servers need to deliver results readable by: • Computers • PDAs • Phones • Microsoft Office software • Other software as a service

Alerts are typically email or phone messages Procedure element of the BI systems is highly flexible to deal with the non-structured way in which users interface with the system

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Guide: Counting and Counting and Counting Product managers want to analyse customer clicks on a web page to determine preferences for products Data miners suggest sample scheme but product managers want all data • Would take days to calculate

Sampling is acceptable • Must be done correctly and appropriately • Saves time and money

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MIS in Use: Value of Grocery Store Data Grocery chains collect data on customer purchases by issuing ‘Club’ cards that customers can use for discounts on purchases Customers provide their details to get the card • Grocery chains offer a discount for frequent use • Card allows the chain to correlate a particular customer to that customer’s purchases over time • The chain can collect data on customer identity, items purchased, store location, date and time over long time span • The data are stored in a centralised data warehouse What are the possible uses of the data warehouse and data-mining techniques for a grocery chain?

How can the data provide a competitive advantage?

•

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Ethics Guide: Hiding the Truth?

Social Networking in the Business Arena Case A Suppose a $RU planner places a derogatory comment about a competitor on a site in an effort to attract clients away from the competitor and to them. Once at $RU a client realises it is not true.

Q: Are the planner’s actions unethical? Would $RU have any responsibility to refund the client’s fees?

Case B Assume you own and manage $RU. Q: Would it be unethical for you to encourage your employees to write positive reviews about $RU? Q: What if you instructed your employees to not use their $RU email address?

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Ethics Guide: Hiding the Truth? (cont’d) Case C An employee invites $RU friends to a party at which he promotes $RU services. A guest dies in an car accident on the way to the party. $RU gets sued.

Q: Should $RU be held accountable because they encouraged employees to be creative in bringing in new customers and paid a bonus for each client?

Q: What if $RU managers knew about the presentation parties?

Q: Would it matter if $RU had not encouraged employees to be creative?

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Ethics Guide: Hiding the Truth? (cont’d) Case D $RU has a website for customer reviews.

Despite best efforts, a client has a negative return on an investment as the result of some poor advice. The client writes a negative review.

Q: Would it be ethical to delete the review from the website?

Case E You write a scandalously negative review of a lecturer’s textbook on Amazon.com because you were upset with the grade you got in his/her class.

Q: Are your actions ethical?

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Ethics Guide: Hiding the Truth? (cont’d) Case F Suppose you worked for $RU but you were, undeservedly you think, sacked. You use Facebook to spread rumours to your friends (many of whom are $RU clients) about the quality of $RU’s advice.

Q: Are your actions unethical?

Q: Are your actions illegal?

Q: Do you see any ethical differences between this case and Case D?

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Ethics Guide: Hiding the Truth? (cont’d) Case G Suppose you worked for $RU but were undeservedly sacked. You notice the owner of $RU does not have a Facebook account, so you create one in his name. You post photos of him, some of which are unflattering and revealing. You also post critical, but humorous, comments he made about clients and employees. You invite these clients, employees, and others to join the Facebook site.

Q: Are your actions ethical?

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How Does the Knowledge in This Chapter Help $RU and You? $RU is too small to have a data warehouse or data mart. But it could use knowledge management concepts to: • Develop a plan to organise storage of all data and how

management might use it

• Consider the potential uses for $RU’s data, such as: – Use a reporting system to provide information about how

much repeat business each planner generates

– Identify high-value customers and customer referrals – Analyse office supply usage to guide future equipment

purchases

You could use this knowledge to better understand how businesses can use the vast amount of data they have stored 58

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Active Review Q1:

Why do organisations need business intelligence?

Q2:

What business intelligence systems are available?

Q3:

What are typical reporting applications?

Q4:

What are typical data-mining applications?

Q5:

What is the purpose of data warehouses and data marts?

Q6:

What are typical knowledge-management applications?

Q7:

How are business intelligence applications delivered?

How does the knowledge in this chapter help $RU and you?

59

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Chapter 10 Information Systems Development

PowerPoint to accompany:

This Could Happen to You It is a year after $RU opened Murray, the owner of $RU, wants to establish an ongoing relationship with customers He wants a different website just for established $RU customers He has lots of ideas but doesn’t know how to make it happen or how to start; no one in the business does

2

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Study Questions Q1:

What is systems development?

Q2:

Why is systems development difficult and risky?

Q3:

What are the five phases of the SDLC?

Q4:

How is system definition accomplished?

Q5:

What is the users’ role in the requirements phase?

Q6:

How are the five components designed?

Q7:

How is an information system implemented?

Q8:

What are the tasks for system maintenance?

Q9:

What are some of the problems with the SDLC?

Q10: What are some alternatives to the traditional SDLC? How does the knowledge in this chapter help $RU and you?

3

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Q1: What Is Systems Development?

Also referred to as systems analysis and design Process of creating and maintaining information systems More than developing computer programs • Which generally means just the software and maybe data and

databases

(Information) Systems development involves all five components of Information systems: • Hardware • Software • Data • Procedures • People 4

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Q1: What Is Systems Development? (cont’d) Systems development requires more than programming and technical expertise Systems development requires: • Business knowledge and management skills • Technical skills • Non-technical human relations skills • Interview skills, group dynamics skills • Knowledge of business activities • Skills to develop job descriptions and to train staff

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Systems Development Versus Program Development Information systems are never ‘off-the-shelf’ even though the software component may be Information systems are a whole package designed around the goals of the system Remember that an information system includes the hardware and the procedures to fit the business and the people who use the software

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Q2: Why Is Systems Development Difficult and Risky?

Many projects are not finished, over budget, over time or do not accomplish their goals Some common reasons have been identified

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Major Challenges in Systems Development Difficulty of requirements determination • What features do you want?

• Do you really need them?

• What functions should it have?

• What data do you have?

• What information do you want provided?

• And so on . . .

The solution is to create an environment where difficult questions are asked and answered

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Major Challenges in Systems Development (cont’d) Scheduling and budgeting difficulties • Often these have to be done many times until there is general

agreement

• How long will it take to build the system?

• How long to create data model?

• How long to do testing?

• How long to develop and document procedures?

• On the financial side, how much will it cost and what is the rate of

return?

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Major Challenges in Systems Development (cont’d) Changes in requirements • Systems development aims at moving target • The bigger the system and the longer the project, the more

requirements are likely to change

Changing technology • Even after agreement, the technology might change during

development

Diseconomies of scale • Brooks’ Law – Adding more people to a project can make the project later • Some tasks simply can’t be speeded up – Schedules can be compressed only so far 10

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Major Challenges in Systems Development (cont’d) System development methodologies address the problems • Systems development may be difficult and risky • To solve this problem, development methodologies have emerged • The systems development lifecycle (SDLC) is one of the most

common processes

• Basic tasks are combined into phases of systems development

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Q3: What Are the Five Phases of the System Development LifeCycle (SDLC)?

1. Systems definition • Management’s statement defines new system

. Requirements analysis • Business knowledge used to identify features and functions

3. Component design (hardware, software and networks) • Technical design based on approved user requirements

4. Implementation • Implement, test and install new system

5. System maintenance • Fix errors, add new features, maintain the system 12

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2

Phases in the SDLC

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Q4: How Is System Definition Accomplished?

Team of users and IS professionals assigned to identify the goals and assess feasibility A small business may hire a consultant to work with managers and key employees

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System Definition Define goals of the new system • Defined so as to facilitate competitive strategy

– Supporting business processes, or – Improve decision making • In the case of $RU

– Create quality relationships with quality customers – Use those relationships to generate revenue – How does the new system contribute to this strategy?

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System Definition (cont’d) Define system scope • Defined by customers, users involved, business processes impacted,

physical location, functional area

A clear definition of scope simplifies: • Requirements determination • Development work

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System Definition (cont’d) Assess feasibility •

Cost – Approximated, ‘back-of-the-envelope’ analysis at this early

stage

– Purpose: eliminate infeasible ideas as soon as possible •

Schedule – Difficult to determine but a rough estimate is needed

•

Technical – Is the proposed system able to be built using existing

information technology?

•

Organisational – Does the proposed system fit the customs, culture, charter

and legal requirements of the organisation?

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System Definition (cont’d) Form a project team •

If the project is deemed feasible, a project team is created: – Manager(s): champion and conduit to senior management – Systems analysts: IT professionals with a knowledge of

business and technology; communicate with both technical and user team members

– Programmers and software testers – Users: essential throughout the entire SDLC process but part-

time during some of the stages; their involvement builds commitment to the new system

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Q5: What Is the Users’ Role in the Requirements Phase?

The requirements are specified based on business knowledge provided by users

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Requirements Analysis Determine requirements •

Most important because if the requirements are poorly specified the system will fail

•

Determine and document features and functions

•

Interview users

•

Document requirements – Examine existing system – Review reports, forms, queries, application features – Identify security and control issues

20

•

Consider all five components

•

May involve the creation of a data model for a new database

•

There may be corporate standards for hardware

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Requirements Analysis (cont’d) Approve requirements

21

•

System requirements need to be approved

•

The later requirements are changed the more work (and therefore cost) is involved

•

For this reason, requirements should be approve before a project continues

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Q6: How Are the Five Components Designed?

Each of the five components are designed in this stage Develop and evaluate alternatives •

22

Accurate requirements critical

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Component Design: Five Components of IS Hardware design determined by project team •

Specifications and the source

Software design depends on source •

Off-the-shelf

•

Off-the-shelf with alterations

•

Custom-developed programs

Data model converted to database design Procedure design for users and operations personnel •

Normal, backup, failure recovery procedures

People • 23

Duties and responsibilities for new jobs and revised jobs

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Q7: How Is an Information System Implemented?

Build •

Five components constructed independently then combined

•

Document and review

Test •

Individual components tested

•

System installed and tested

Train •

Users must be trained to use the new system

Convert •

24

The business must stop doing things the old way and start using the new information system

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Implementation: System Testing Test plan •

Sequences of actions that users take when employing system

•

Both normal and incorrect actions should be considered

•

Labour intensive

Product Quality Assurance (PQA) •

IT specialist constructs test plan with advice and assistance of users

Users •

Have final say on whether system is ready for use

Beta testing

25

•

Last stage of testing

•

Future system users try out system on their own

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Implementation: System Conversion Ways of converting business activity from old system to new •

Pilot – Organisation implements entire system on single, limited unit – If systems fails, it only affects limited boundary – Reduces exposure

•

Phased – New system installed in phases – Tested after each phase – Continues until installed at entire organisation – Can’t be used in tightly integrated systems

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Implementation: System Conversion (cont’d) •

Parallel – New system runs in parallel with old system during testing – Expensive and time consuming – Data must be entered twice – Provides easy fallback position

•

Plunge – Direct installation – Install new system and discontinue old – There is no backup position

27

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Design and Implementation for the Five IS Components

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Q8: What Are the Tasks for System Maintenance?

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Q8: What Are the Tasks for System Maintenance? (cont’d) Fixing or adapting system •

Patch – Applied to all copies of a commercial software product – Usually bundled as ‘service packs’

•

Minor enhancements – Adaptation to new requirements done via service packs

•

Major enhancements – Usually result in new version of software product – Start of a new cycle of SDLC

•

Failures – Hardware and database failures must also be fixed

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Q9: What Are Some of the Problems with the SDLC? SDLC waterfall Sequence of non-repeated phases • It rarely works smoothly, causing development team to go back and forth, raising costs and delaying project •

Requirements documentation difficulty Business requirements sometimes change making documented requirements incomplete or obsolete • ‘Analysis paralysis’: projects spend so much time on documentation that it hampers progress •

Scheduling and budgeting difficulties Time and cost estimates for large project are usually way-off • People who make initial estimates know little about how long it will take or cost •

31

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Q10: What Are Some Alternatives to the Traditional SDLC? Monolithic (traditional)

32

•

Standard SDLC built around documented stages

•

Best used when the problem is well defined, non urgent and the environment is cooperative

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Q10: What Are Some Alternatives to the Traditional SDLC? (cont’d) Incremental

33

•

Delivery of stand alone sub-systems

•

Best for large, complex applications where not all requirements are known at the outset or are changeable

•

Appropriate if there is controversy surrounding the project

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Q10: What Are Some Alternatives to the Traditional SDLC? (cont’d) Evolutionary • Phases of this methodology deliver a series of quick fully-functional

prototypes

• Evaluation of the system results in a revised prototype • Suitable when there are time pressures, vague requirements and

contentious politics

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Q10: What Are Some Alternatives to the Traditional SDLC? (cont’d) One technique based on the ideas of incremental and evolutionary methodologies is the Agile or Rapid Application Development (RAD) approach • Team has a different attitude to development • Emphasis on people and cooperation • Working software is more important than documentation • User involvement at the level of true collaboration • Team open to changing requirements rather than resistant

35

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Green Guide: Jetstar and VMware Jetstar is a low-fare airline with 25 domestic and 15 international routes VMware services aim to reduce carbon impact and achieve other environmental goals by optimising hardware use

36

IT Performance Drivers

Business Performance Drivers

Lower IT support costs Speed to market Lower cost to introduce technology and exit Improve service delivery performance Improve security Reduce risk Delivery of business systems

Simplify/commoditise processes and assets Be adaptable-competitive advantage in business Speed, flexibility and scalability Supply toolkit of connectivity and IT supply options Choice in dealing with complexity

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Green Guide: Jetstar and VMware (cont’d) End Benefits • Access to all back-office and business systems from any

international check-in counter

• IT savings around $1M per annum – 120 fewer servers saves over $12,000 and 12.5 tonnes CO2 • Desktop asset life increased from 3 to 10 years • Power consumption at airports reduced by 85% • Other savings: – Management 42% – Maintenance 60% – Remote systems management (100%) 37

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Guide: The Real Estimation Process Estimating is just ‘theory’, the average of many people’s guesses Project managers sum up estimates and take to management Management then negotiates the schedule and budget by reducing time a month or two • Negatively impacts the project

Typically, project starts with optimistic schedules and ends up late Deadlines can become guesses from ‘fantasy land’

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How Does the Knowledge in This Chapter Help $RU and You? Knowledge in this chapter helps Murray organise his thoughts and activities Gives him a professional basis for approaching a development vendor Knowledge of systems definition and requirements phases will help him manage these phases Helps him to take an active role in other phases For you: • Knowledge will prepare you to participate in systems development

projects

• Advance your career • Ensure that new information systems provide good support for the

work you need to do

39

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Active Review Q1:

What is systems development?

Q2:

Why is systems development difficult and risky?

Q3:

What are the five phases of the SDLC?

Q4:

How is system definition accomplished?

Q5:

What is the users’ role in the requirements phase?

Q6:

How are the five components designed?

Q7:

How is an information system implemented?

Q8:

What are the tasks for system maintenance?

Q9:

What are some of the problems with the SDLC?

Q10: What are some alternatives to the traditional SDLC? How does the knowledge in this chapter help $RU and you?

40

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41

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Chapter 11 Information Systems Management

PowerPoint to accompany:

This Could Happen to You $RU does not have an established IT department IT services performed by inexperienced staff on a part-time basis with outside contractors Kerrie wanted restricted access to $RU’s CRM system • Easiest way was to put it on $RU’s server • Exposed $RU to enormous security risk • Kerrie didn’t understand the problems

Kerrie needs to be knowledgeable about the role, responsibilities and concerns of IT personnel With this knowledge she can interact with IT personnel in a professional and effective way

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Study Questions Q1:

Why do you need to know about the IT/IS department?

Q2: What are the functions and organisation of the IT/IS department?

Q3:

How do organisations plan the use of IT/IS?

Q4:

What tasks are necessary for managing IT infrastructure?

Q5: What are the tasks necessary for managing enterprise applications?

Q6:

What are the tasks necessary for managing outsourcing?

Q7:

How do organisations decide how much to spend on IT/IS?

Q8:

What are your IT/IS rights and responsibilities?

How does the knowledge in this chapter help Kerrie and you?

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Q1: Why Do You Need to Know About the IT/IS Department?

Responsibilities and duties of the IT/IS department • To be a more effective consumer • To obtain services, equipment and systems needed

Functions of the IT/IS department • To be a more effective manager especially for strategic planning • To better understand needs of IT/IS department in supporting new

initiatives

Direct management of the IT/IS department • This is particularly relevant for small businesses where there may

be no IS professionals but the functions must still be performed

• A good example is ensuring that backups are made regularly

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Q2: What Are the Functions and Organisation of the IT/IS Department?

Plan the use of IT/IS to accomplish organisational goals and strategy (see Q3) Develop, operate and maintain the organisation’s computing infrastructure (see Q4) Develop, operate and maintain enterprise applications (see Q5) Protect information assets (see Q5) Manage outsourcing relationships (see Q6)

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Typical Senior-Level Reporting Relationships

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Structure of the IT/IS Department Chief Information Officer (CIO) • Principal manager • Reports to CEO, COO or CFO

Technology • Head: Chief Technology Officer (CTO) • Investigates new information systems technologies for possible

application at organisation

Operations • Manages computing infrastructure

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Structure of the IT/IS Department (cont’d) Development • Manages process of creating new information systems • Maintains existing system

Outsourcing relations • Handles affairs with outsourced systems

Data administration • Establishes data standards and data management practices and

policies

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IS-Related Job Positions Systems analyst

Salesperson

Programmer

Small-scale project manager

PQA test engineer

Large-scale project manager

Technical writer

Database administrator

User support representative

CTO

Computer technician

CIO

Network administrator Consultant

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IT/IS Position Requirements Most positions require business knowledge plus technical knowledge Many require university degrees Most require good communication skills Dual majors with IS are an excellent choice • Accounting and information systems • Marketing and information systems • Management and information systems • HRM and information systems

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Q3: How Do Organisations Plan the Use of IT/IS? Ideally strategic planning includes: • Align information systems with organisational strategy • Maintain alignment as the organisation changes • Communicate IT/IS issues to executive group • Develop/enforce IS priorities within the IT/IS department – Avoid development without clear justification • Sponsor the steering committee – Performs important communication function between IS, the

users and management

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Q4: What Tasks are Necessary for Managing IT Infrastructure?

Align infrastructure design with organisational structure • Infrastructure includes hardware, software and database • Needs to reflect the culture and structure of the organisation, e.g.

– Autonomous, decentralised decision making needs to have

flexibility in its information system design

– Centralised, highly controlled operational units must comply

with organisation-wide standards for IS and IT

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Q4: What Tasks are Necessary for Managing IT Infrastructure? (cont’d) Create, operate and maintain IT infrastructure • Create and maintain infrastructure for end-user computing

– Maintain current versions of desktop computing hardware and

software for all employees

• Create, operate and maintain networks • Create, operate and maintain data centres, data warehouses and

data marts

Establish technology and product standards • Maintenance is easier and cheaper if the computers of all employees

conform to one of the established standard operating environments • Individual changes to the configuration should be minimised

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Q4: What Tasks are Necessary for Managing IT Infrastructure? (cont’d) Track problems and monitor resolutions • IT/IS department provides a service to all employees

– Record and prioritise problems – Monitor performance using criteria such as queue length,

average time to resolution etc.

Manage computer infrastructure staff • Choose staff who are suitable for their main task, e.g.

– Help-desk – Network support – System development • Manage, train, promote staff to retain continuity 14

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Q5: What Are the Tasks Necessary for Managing Enterprise Applications?

Develop new applications • IT/IS aligns its priorities with the organisation’s strategy • Then develops plans for new systems • Submits proposals to the steering committee/executive • Initiates the development using SDLC or other methodology

Maintain (legacy) systems • Fix and enhance existing systems that are still operational • Legacy systems have survived beyond their expected use-by date

– Still used, but outdated technology – Core and/or expensive to replace • Requests for maintenance must be recorded and tracked, similar to

infrastructure management system (Help-desk) 15

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Q5: What Are the Tasks Necessary for Managing Enterprise Applications? (cont’d) Integrate enterprise applications • Enterprise Application Integration (EIA) enables disparate information

systems to work together

– Commonly needed after a merger – Often involves an intermediary layer of software and/or

database

Manage development staff • Sustaining-application developers • Product quality assurance (PQA) engineers • Technical writers

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Q5: What Are the Tasks Necessary for Managing Enterprise Applications? (cont’d) Administer data • Define data standards

– Definitions for data items used across the organisation – Product number is a good example • Maintain the data dictionary (see Ch 5)

– Description of each item of data in the database – Includes format, ‘owner’, examples • Define data policies

– Includes policies on data privacy – Organisational-level decision implemented by the data

administrator

• Plan for disaster recovery (see Ch 13) 17

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Q6: What Are the Tasks Necessary for Managing Outsourcing?

Outsourcing is the process of hiring another organisation to perform a service • Usually a service that is not core to the competitive strategy of the

organisation

• The decision to outsource does not remove all problems as the

outsourcing contract must still be negotiated and managed

For more detail see Chapter Extension 12

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Q7: How Do Organisations Decide How Much to Spend on IT/IS? Analyse costs and benefits of system • Estimate dollar costs • Value tangible benefits – Lifetime value of customers lost by not having support system – Anticipated customer support cost savings • Value intangible benefits – Value of email system • Compute costs and tangible benefits to see if project is justified – If not, then consider intangibles – Subjective decision

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Q8: What Are Your IT/IS Rights and Responsibilities?

Users’ rights include: • Resources to perform work proficiently • Reliable network and internet services • Secure computing environment • Participating in requirements meeting for applications • Reliable systems development and maintenance • Prompt attention to problems, concerns, and complaints • Effective training

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Q8: What Are Your IT/IS Rights and Responsibilities? (cont’d) Users’ responsibilities include: • Learning basic computer skills and techniques • Following security and backup procedures • Using computer resources in a manner consistent with employer’s

policies

• Making no unauthorised hardware modifications • Installing only authorised programs • Installing computer patches and fixes • Treating information systems workers professionally

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Is Outsourcing Fool’s Gold?

A negative view of outsourcing computer infrastructure is that you are trading one set of problems for another Outsourcing is effectively changing IT middle management • Outsource vendor hires your first-line IT staff complete with their

existing good/bad characteristics

• No way to ensure that the vendor’s middle managers are any better

You inherit the vendor’s bureaucratic problems: forms, procedures, committees, report, management tools etc.

You become a clone of vendor’s other clients • No competitive advantage from IT/IS

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Is Outsourcing Fool’s Gold? (cont’d) Hard to bring outsourced operations back in-house if the relationship fails • Can’t hire vendor’s employees • Your remaining employees lack critical knowledge

Vendors are not committed to your bottom line Moral: You can’t get away from IS problems by hiring someone else to manage your IS for you

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Ethics Guide: Using the Corporate Computer Suppose you work at a company with the stated policy.

• ‘Computers, email, and the internet are to be used primarily for

official company business. Small amounts of personal email can be exchanged with friends and family, and occasional usage of the internet is permitted, but such usage should be limited and never interfere with your work.’

Resources consumed by sending social emails include: • File size consumes bandwidth • Processing cycles on your company system, receiver’s system,

routers, email server etc.

• Company time to send and reply

Is it ethical if the email file size is small? Sent to many people?

Concerns a request for help?

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How Does the Knowledge in This Chapter Help Kerrie and You? The knowledge in this chapter can be used to: • Understand the need to plan, develop, maintain and protect

information systems

• Understand organisation structure and functions of IT department • Understand various professional IT careers • Become a more informed consumer of IT department services • Manage IT/IS functions in organisations that are too small for an

IT/IS department (like $RU)

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Active Review Q1:

Why do you need to know about the IT/IS department?

Q2: What are the functions and organisation of the IT/IS department?

Q3:

How do organisations plan the use of IT/IS?

Q4:

What tasks are necessary for managing IT infrastructure?

Q5: What are the tasks necessary for managing enterprise applications?

Q6:

What are the tasks necessary for managing outsourcing?

Q7:

How do organisations decide how much to spend on IT/IS?

Q8:

What are your IT/IS rights and responsibilities?

How does the knowledge in this chapter help Kerrie and you?

26

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Chapter 12 Information Security Management

PowerPoint to accompany:

Australian Bank and $RU: Very Different Companies Murray was previously with an Australian bank • Multinational company with billion of dollars in turnover • Thousands of employees in many functional areas • More than 200 people in IT department • Outsourced important functions $RU is a small business • Less than $1million in turnover • Only 10 employees, mainly financial planners and office staff • No IT department, office manager handles computers Both manage information systems differently, particularly the way they • Manage their IT and IS resources • Protect systems with security • Develop information systems 2

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This Could Happen to You An unhappy employee steals $RU’s customer data Offers to sell it to a competitor Customer data includes customer names and email addresses but no credit card data Should $RU notify its customers? What are the risks?

Should $RU notify its lawyer?

Should $RU contact the police? $RU had no IT department and no one thought about IT security

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Study Questions Q1:

What are the sources and types of security threats?

Q2:

What are the elements of a security program?

Q3:

What is senior management’s security role?

Q4:

How can technical safeguards protect against security threats?

Q5:

How can data safeguards protect against security threats?

Q6:

How can human safeguards protect against security threats?

Q7:

How should organisations respond to security incidents?

Q8:

What is the extent of computer crime?

How does the knowledge in this chapter help $RU and you?

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Q1: What Are the Sources and Types of Security Threats?

Unintentional human errors and mistakes • Accidental problems – deletions, copy-overs, operating errors • Poorly written programs • Poorly designed procedures • Physical accidents

Malicious human activity • Intentional destruction by employees • Insider attacks from disgruntled employees • Hackers • Virus and worm writers • Criminals (inside and outside) and terrorists 5

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Q1: What Are the Sources and Types of Security Threats (cont’d) Natural events and disasters • Fires, floods, cyclones, earthquakes, tsunamis, avalanches,

tornados

• Initial losses of capability – Loss of sales and services, purchase and payment data,

software and hardware

• Secondary losses from recovery actions – Cost of replacing and recovering data, reconstructing

facilities, lost customers, law suits/legal costs

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Security Threats

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Unauthorised Data Disclosure Human error • Posting private information in public place • Placing restricted information on searchable websites • Inadvertent disclosure during recovery

Malicious release • Pretexting:

pretending to be someone else via phone call

• Phishing: pretexting using email • Spoofing: disguising as a different IP address or different email

sender

• Sniffing/Drive-by sniffing: searching for unprotected or WEP

wireless networks

• Network Tap: breaking into networks 8

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Incorrect Data Modification Human errors • Incorrect entries and information • Procedural problems

Incorrect data modifications • Systems errors

Hacking • Unauthorised access to a computer system

Faulty recovery actions

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Faulty Service Incorrect systems operations • Incorrect data modification • Incorrectly sending wrong goods to customer or goods to wrong

customer

• Incorrect billing • Programming errors • Errors in hardware, software, program, data installation • Usurpation – Unauthorised program or update replaces legitimate/approved

program

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Denial of Service (DOS) Human error • Inadvertently shut down web server – Gateway router using an intensive application

Malicious denial-of-service attacks • Flood web server with millions of requests for web pages • Computer worms • Natural disasters

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Loss of Infrastructure Accidental • Water line breaks causing damage to hardware

Theft • Disgruntled employee steals hardware

Terrorist • Bombs computer centre

Natural disasters • Floods, cyclones, hurricanes, fire, earthquakes

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Q2: What Are the Elements of a Security Program?

Must be addressed in a systematic way Three components • Senior management involvement – Must establish security policy – Manage risk • Safeguards – Protections against security threats • Incident response – Must plan for prior to security incidents

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Security Safeguards as They Relate to the Five Components Effective security requires balanced attention to all five components

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Q3: What Is Senior Management’s Security Role?

Standards Australia’s AS/NZS ISO/IEC 27001-2006 addresses Information Security Management Systems (ISMS) Senior Management is responsible for an ISMS that: • Supports the organisation’s mission • Is suitable for the industry • Is justified by cost-benefit ratio • Is explicitly defined • Is regularly reviewed • Considers privacy of employees and customers

OECD also has principles that guide the content of a security policy

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What Are the Elements of a Security Policy?

General statement • Goals of the security program • Assets to be protected • The department with primary concern for policy

Issue-specific policy • Each risk that is identified must be addressed explicitly

System-specific policy • Each information system and corporate database must be

considered and safeguards implemented and documented

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Risk Management Risk is the likelihood of an adverse occurrence Decisions on dealing with identified risks are sometimes difficult Management must consider these factors: • Which assets are at risk • To what threats are those assets exposed • What safeguards can be used to protect the assets • Despite safeguards there is usually some residual vulnerability • Consequences are the result of successful threats, usually cost • Likelihood provides a balance to the predicted consequence • Probability of financial loss determines how much should be

invested in security measures

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Q4: How Can Technical Safeguards Protect Against Security Threats?

Involves hardware and software • Identification and authentication – Single sign-on for multiple systems – Wireless access • Encryption – Digital signatures – Digital certificates • Firewalls • Malware protection • Design for secure applications

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Identification and Authentication User names and passwords • Identification: user name • Authentication: password

Smart card • Microchip embedded with identifying data • Authentication by personal identification number (PIN)

Biometric authentication • Fingerprints, facial scans, retina scans

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Identification and Authentication (cont’d) Single sign-on for multiple systems • One sign-on can be used for authentication on multiple networks

and to other servers

• Without passwords being passed over networks • Kerberos is the best-known software • Convenient but also risky if passwords are not protected

Wireless access • Wireless connection to internet does not have the physical security

of Ethernet cabling

• Organisations use VPN technology • Wifi protocol IEEE 802.11 includes protection using WEP or the

more recent WPA and WPA2

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Encryption

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Encryption (cont’d) Digital Signatures

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Encryption (cont’d) Digital Signatures • Do not use email for passwords, credit card numbers or TFNs • Emails and digital documents can be intercepted and changed

during transmission

Digital Certificates • Certificate Authorities (CAs) supply public keys • Secure sessions using SSL/TLS use the CA to verify the public key • Browsers have the public keys for the common CAs in their

program code

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Firewalls Computer devices that prevent unauthorised network access May be special-purpose computer or program on a general-purpose computer Organisations may have multiple firewalls • Perimeter firewalls sit outside organisational network • Internal firewalls are inside network

See also Chapter 6

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Malware Protection Spyware • Installed without user’s knowledge • Reside in background, monitor user actions, keystrokes, computer

activity

• Sometimes used for marketing analysis

Adware • Similar to spyware without malicious intent • Watches user activity, produces pop-up ads, changes window,

modifies search results

• Can slow computer performance

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Malware Protection Bots, BotNets and Bot Herders • Collective noun for virus, worm, Trojan horse, spyware, adware • Or any other program not consciously installed by the user of the

computer

• Malicious and dangerous • Some steal credit card details

A network of bots managed by a ‘bot herder’ is the next generation of malware

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Malware Is a Serious Problem

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Malware Safeguards Install anti-virus and anti-spyware programs Set anti-malware programs to scan frequently • Scan hard drive and email

Update malware definitions regularly Open email attachments only from known sources • 90% of all viruses spread by email attachments

Install updates promptly and only from legitimate sources Browse only reputable internet neighbourhoods • It is possible for some malware to install itself when you do nothing

more than open a web page

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Design for Secure Applications Design for secure applications • Be sure that your company designs and builds systems with

security as a requirement

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Q5: How Can Data Safeguards Protect Against Security Threats?

Data administration • Organisation-wide function – Develop data policies – Enforce data standards

Database administration • Pertains to databases – Ensures procedures exist for orderly multi-user processing – Controls changes to database structure – Protects the database

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Data Safeguards Define data policies • ‘We will not share identifying customer data with any organisation.’

Specify user data rights and responsibilities Rights enforced by user accounts authenticated by passwords Protect sensitive data with encryption • Key escrow: copy of encryption key held by trusted party

Backup and recovery procedures Physical security

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Q6: How Can Human Safeguards Protect Against Security Threats?

Considered under five headings: • Human safeguards for employees • Human safeguards for non-employees • Account administration • Systems procedures • Security monitoring

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Human Safeguards for Employees Position definitions • Define job tasks and responsibility • Separate duties and authorities • Grant ‘least possible privileges’ • Document security sensitivity (risk analysis)

Hiring and screening employees • Extensive interviews and background checks for high-sensitivity

positions

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Human Safeguards for Employees (cont’d) Dissemination and enforcement • Make employees aware of security policies and procedures • General training for new employees • Position-specific training for promoted employees • Enforcement factors – Responsibility – Accountability – Compliance • Management attitude expressed in word and deed

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Human Safeguards for Employees (cont’d) Termination • Establish security policy and procedures • Standard human resources policies for friendly terminations – Remove accounts, passwords on last work day – Recover all keys for encrypted data – Recover all door keys and pass cards, ID badges • Unfriendly terminations – Remove accounts, passwords prior to notifying employee of

termination

– Security officer cleans out person’s desk or watches as person

cleans out desk

– Accompany person off premises 35

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Human Safeguards for Non-employee Personnel Temporary personnel and vendors • Screen personnel • Training and compliance • Contract should include specific security provisions • Provide accounts and passwords with the least privileges

Public users • Harden web site and facility • Take extraordinary measures to reduce system’s vulnerability

Protect partners and public that receive benefits from system from internal company security problems

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Account Administration Account management • Creation of new accounts, modification of existing accounts,

removal of terminated accounts

• Users need to provide early, timely notification of account change

needs

• Users and business manager need to inform IT to remove accounts

Password management • User-signed acknowledgment forms • Change passwords frequently

Help-desk policies • Authentication of users who have lost password • Password should not be emailed 37

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Systems Procedures Procedure types • Normal operations • Backup • Recovery

Each procedure type should be standardised Procedures exist for users and operations personnel • Procedures vary by duties and responsibilities

Systems analysts develop procedures for system recovery • How will company operate while system is unavailable?

• How will company respond in an emergency?

• How will service be resumed?

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Systems Procedures (cont’d)

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Security Monitoring Activity log analyses • Firewall logs • DBMS log-in records • Web server logs

Security testing • In-house and external security professionals

Investigation of incidents • How did the problem occur?

Learn from incidents • Indication of potential vulnerability and needed corrective actions

Review and update security and safeguard policies 40

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Q7: How Should Organisations Respond to Security Incidents?

Disaster • Substantial loss of infrastructure caused by acts of nature, crime, or

terrorism

Best safeguard is to choose appropriate location for infrastructure • Avoid placing where prone to floods, earthquakes, cyclones,

hurricanes, avalanches, car/truck accidents

• Do not place in unobtrusive buildings, basements, backrooms,

physical perimeter

• Fire-resistant buildings

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Disaster-Recovery Backup Sites Backup processing centres in geographically removed site Create backups for critical resources Hot sites • A hot site is run by a utility company that can take over the running

of the systems without forewarning

• Hot sites are very expensive but maintain normal business without

interruption Cold Sites

• A cold site provides computers and office space but customers have

to install software and backups of data before normal business can continue Periodically train and rehearse cutover of operations 42

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Incident-Response Plan Have a plan in place • How should employees respond • Who should they contact • What reports should they make • Which actions are important to prevent further loss

Centralise reporting Specific responses • Speed • Preparation pays • Don’t make problems worse

Practise incident response 43

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Q8: What Is the Extent of Computer Crime?

Hard to gauge as companies do not publicise security failures for fear of bad publicity • Large businesses report more lapses • Likely to have company policies for taking data off-site on laptops

etc.

• Theft of a laptop from a car loses not only the hardware but the

data which may be company confidential

Financial losses from security incidents are almost impossible to estimate

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Types and Incidence of Computer Security Incidents

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MIS in Use: Phishing for Credit Card Accounts Phishing is an operation that spoofs legitimate companies in an attempt to get credit card information, driver’s licences, and other data Usually initiated by email request • Designed to cause you to click • Asks for personal data • May install spyware, malware, adware

If you click on a link in phish web page immediately close browser, restart computer, run anti-malware scan Defences • Know your purchases and deal directly with vendors • Notice the implausibility of an email • Don’t be misled by legitimate-looking graphics, web addresses 46

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Green Guide: DFT and the State Government of Victoria Department of Treasury and Finance (DFT) provides policy advice on economic, financial and resource management Green purchasing program was devised to cover Requests for Tender (RFT) for IT equipment Initial target was desktop and notebook computer purchases Resulted in required criteria in the RFT documents that cover material use, end-of-life considerations, energy conservation and packaging Suppliers are encouraged to review the environmental sustainability of their products

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Guide: Security Assurance, Hah! Office reality is a far cry from ideal security procedures • Passwords unchanged from default • Trivial passwords such as PassWord • Written on yellow sticky on monitor, noticeboard or in drawer

What should the speaker do about these infringements?

How should you deal with an organisational shortcoming that is obvious to you?

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Guide: The Final, Final Word Stay alert to new technology-based opportunities Watch for ‘second-wave’ opportunities Enrol in a database class or systems development class, security class, even if you’re not an Information Systems major Look for novel applications of IS technology in emerging business environment

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How Does the Knowledge in This Chapter Help $RU and You? Use it to understand security threats to $RU • Need to ask suppliers about safeguards $RU can use • Review safeguards on customer data • Limit access to data • Develop procedures for dealing with terminated or recently

resigned employees

You: • Know threats to your computer, software and data • Understand need for security safeguards • Maintain appropriate human safeguards in your department

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Active Review Q1:

What are the sources and types of security threats?

Q2:

What are the elements of a security program?

Q3:

What is senior management’s security role?

Q4:

How can technical safeguards protect against security threats?

Q5:

How can data safeguards protect against security threats?

Q6:

How can human safeguards protect against security threats?

Q7:

How should organisations respond to security incidents?

Q8:

What is the extent of computer crime?

How does the knowledge in this chapter help $RU and you?

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