Instructor Solution Manual For Essentials of MIS, 14th Edition by Kenneth C. Laudon, Jane P. Laudon

Instructor’s Resource Manual For Essentials of MIS 14 Edition Kenneth C. Laudon, New York University Jane P. Laudon, Azimuth Information Systems Prepared by Robert J. Mills, Utah State University Lindsay Bennion, Utah State University Taylor Petersen, Utah State University

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Instructors of classes using Essentials of MIS, 14, Laudon/Laudon, may reproduce material from the Instructor‘s Resource Manual and Test Bank for classroom use.

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ISBN-10: 0-13-650086-2 ISBN-13: 978-0-13-650086-5

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Chapter 1 Business Information Systems in Your Career

Learning Objectives

1-1 Why are information systems so essential for running and managing a business today?

1-2 What exactly is an information system? How does it work? What are its people, organizational, and technology components?

1-3 How will a four-step method for business problem solving help you solve information system-related problems?

1-4 What information systems skills and knowledge are essential for business careers?

1-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline

1-1

Why are information systems so essential for running and managing a business today?

How Information Systems Are Transforming Business Key Challenges in Management Information Systems Globalization Challenges and Opportunities: A Flattened World Business Drivers of Information Systems

1-2

What exactly is an information system? How does it work? What are its people, organizational, and technology components?

What Is an Information System?

It Isn‘t Simply Technology: The Role of People and Organizations Dimensions of Information Systems

1-3

How will a four-step method for business problem solving help you solve information systemrelated problems?

The Problem-Solving Approach

A Model of the Problem-Solving Process The Role of Critical Thinking in Problem Solving The Connections Between Business Objectives, Problems, and Solutions 1-4

What information systems skills and knowledge are essential for business careers?

How Information Systems Will Affect Business Careers Information Systems and Business Careers: Wrap-Up How This Book Prepares You for the Future

1-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Business model, 09

Information system (IS), 11

Business processes, 14

Information systems literacy, 13

Change management, 20

Information technology (IT), 11

Computer hardware, 15

Information technology (IT) infrastructure, 15

Computer literacy, 13

Input, 12

Computer software, 15

Internet, 15

Critical thinking, 21

Intranets, 15

Culture, 14

Management information systems (MIS), 13

Data, 11

Network, 15

Data management technology, 15

Networking and telecommunications technology, 15

Extranets, 15

Output, 12

Feedback, 12

Processing, 12

Information, 12

World Wide Web, 15

Teaching Suggestions

You are probably meeting in the first class session to introduce yourself, the course, and to meet the students. It is good to get to the classroom early and meet the students as they come in.

Learn a few names as the students enter.

After going over any requirements you may have for the course, try to give an overview of the course, stressing that this is not a technical course. Usually, you can‘t do enough to put nontechnical types at ease.

The opening case, ―PCL Construction: The New Digital Firm,‖ shows students that even some traditional industries such as construction are now embracing technology as a way to reduce costly delays and improve business processes. Students will become familiar with the idea that many kinds of businesses have had to change the way they operate.

PCL employees are now using mobile devices and digital touch-screen kiosks to access digitized, updated blueprints instead of tracking down paper design documents. These digitized plans allow for much faster revisions, allowing employees to identify and resolve problems quicker in order to keep projects on-time and on-budget.

PCL has also implemented its own proprietary project management system for budgeting, costing, forecasting, subcontractor tracking, production, and reporting. Further, PCL has started moving much of its computing work to the cloud using Microsoft Azure. This allows PCL employees to access information from the cloud at any time while saving money by not having to devote as many on-site resources to hosting the hardware and software.

Section 1-1: Why are information systems so essential for running and managing a business today?

This section gives students a feel for the importance of information systems in business today and how they have transformed businesses on the world stage. A good discussion of the six important business objectives outlined in this section allows the instructor and students to discuss why businesses have become so dependent on information systems today and the importance of these systems for the survival of a firm. Stress to students that information systems are not a luxury. In most businesses they are the core to survival. This would be a good time to ask students to discuss how their own schools are using information systems to enhance their product offering.

Table 1-1 (Page 7) is a great way to introduce students to much of the new IT jargon that has developed over the last several years. Most of the technologies will be discussed in future chapters. Ask students how much hands-on experience they‘ve had with some of the new business tools as either an employee or a customer.

Globalization is affecting virtually every country in the world. The most striking evidence of this trend is the increasing presence of cell phones in very small villages of Africa. As technology becomes more pervasive and, in some cases easier to use, globalization will continue its steady march. China, Singapore, and Russia are good examples of how globalization has flattened the world. They have become major exporters to other countries, especially industrialized and advanced countries such as the United States and many European countries. Emerging countries, such as Poland, the Ukraine, and Ireland, are excellent examples of increasing globalization.

Ask students to provide examples of truly digital firms (Cisco Systems and Dell Computers), as opposed to those businesses (local mom-and-pop stores or a local doctor’s office) that still perform many business processes outside of integrated information systems.

Review the six strategic business objectives: operational excellence; new products, services, and business models; customer and supplier intimacy; improved decision making; competitive advantage; and survival. The rest of the text will continually refer back to these six objectives as reasons why firms should incorporate and integrate business processes with information systems.

Section 1-2: What exactly is an information system? How does it work? What are its people, organizational, and technology components?

This section gives students the facts and definitions that underpin information systems and allow students to knowledgeably discuss information systems. Students do not need the knowledge of a technical person, but they do need to understand the role of information technology and how it must support the organization’s business strategy. They must also understand how information technology can be used to help transform a business. Note that the chapter’s definitions and terms help prepare students to discuss information systems as an intricate part of business systems. Encourage students to see that technology is subordinate to the organization and its purposes.

This is also a good place to reinforce the differences between information systems literacy and computer literacy. When asked to describe company information systems, students often depict information systems in terms of technology. It is important to stress that information systems are more than just technology, and that they have management, organization, and technology dimensions. The diagram at the beginning of the chapter can be used to illustrate this point.

Ask students why some companies can achieve much better results using information systems while others cannot. That will help them understand the concept of complementary assets and show that there is much more to building a digital firm than simply buying the latest, greatest hardware and software. It will also help them understand the delicate relationship between technology, management, and organizations’ assets.

Interactive Session: Technology: UPS Competes Globally with Information Technology

Case Study Questions

1. What are the inputs, processing, and outputs of UPS’s package tracking system?

Inputs: The inputs include package information, customer signature, pickup, delivery, time-card data, current location (while en route), and billing and customer clearance documentation.

Processing: The data are transmitted to a central computer and stored for retrieval. Data are also reorganized so that they can be tracked by customer account, date, driver, and other criteria.

Outputs: The outputs include pickup and delivery times, location while en route, and package recipient. The outputs also include various reports, such as all packages for a specific account or a specific driver or route, as well as summary reports for management.

2. What technologies does UPS use? How are these technologies related to UPS’s business strategy?

Technologies include handheld computers (DIADs), barcode scanning systems, wired and wireless communications networks, desktop computers, UPS’s central computer (large mainframe computers), and storage technology for the package delivery data. UPS also uses telecommunication technologies for transmitting data through pagers and cellular phone networks. The company uses in-house software for tracking packages, calculating fees, maintaining customer accounts, and managing logistics, as well as software to access the World Wide Web. UPS has used the same strategy for more than 90 years. Its strategy is to provide the ―best service and lowest rates.‖ One of the most visible aspects of technology is the customer’s ability to track his/her package via the UPS website. However, technology also enables data to seamlessly flow throughout UPS and helps streamline the workflow at UPS. Thus, the technology described in the scenario enables UPS to be more competitive, efficient, and profitable. The result is an information system solution to the business challenge of providing a high level of service with low prices in the face of mounting competition.

3. What strategic business objectives do UPS’s information systems address? 

Operational excellence: UPS has maintained leadership in small-package delivery services despite stiff competition from FedEx and the U.S. Postal Service by investing heavily in advanced information technology.



New products, services, and business models: In June 2009, UPS launched a new web-based Post-Sales Order Management System (OMS) that manages global service orders and inventory for critical parts fulfillment. The system enables high-tech electronics, aerospace, medical equipment, and other companies anywhere in the world that ship critical parts to quickly assess their critical parts inventory, determine the most optimal routing strategy to meet customer needs, place orders online, and track parts from the warehouse to the end user.



Customer and supplier intimacy: Customers can download and print their own labels using special software provided by UPS or by accessing the UPS website. UPS spends more than $1 billion each year to maintain a high level of customer service while keeping costs low and streamlining its overall operations.

UPS also provides tools that enable customers, such Cisco Systems, to embed UPS functions, such as tracking and cost calculations, into their own websites so that they can track shipments without visiting the UPS site.

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Improved decision making: Special software creates the most efficient delivery route for each driver that

considers traffic, weather conditions, and the location of each stop. UPS estimates its delivery trucks save 28 million miles and burn 3 million fewer gallons of fuel each year as a result of using this technology. 

Competitive advantage: UPS is leveraging its decades of expertise managing its own global delivery network to manage logistics and supply chain activities for other companies. Its Supply Chain Solutions division provides a complete bundle of standardized services to subscribing companies at a fraction of what it would cost to build their own systems and infrastructure.

4. What would happen if UPS’s information systems were not available?

Arguably, UPS might not be able to compete effectively without technology. If the technology were not available, then UPS would, as it has through most of its history, attempt to provide that information to its customers, but at higher prices. From the customers’ perspective, these technologies provide value because they help customers complete their tasks more efficiently. Customers view UPS’s technology as valueadded services as opposed to increasing the cost of sending packages.

Section 1-3: “How will a four-step method for business problem solving help you solve information system-related problems?

Too often, information systems are thought to be all about hardware and software. Issues that focus on human behavioral aspects of information systems are overlooked or minimized. That can lead to disaster.

After contrasting the technical and behavioral approaches, you should stress to your students that the sociotechnical approach does not ignore the technical but considers it as a part of the organization.

Section 1-4: What information systems skills and knowledge are essential for business careers?

As an exercise, instructors may wish to have their students surf the internet for job opportunities at Monster.com (www.monster.com) or another employment application site. Divide your class into groups to represent the major functional areas such as finance, accounting, marketing, human resource management, production and operations, information systems, and others. Ask each group to find five jobs being advertised in each of the functional areas. Have them list the required qualifications being requested as they relate to the field of information systems.

Because your students should have access to email, you may want to send them an ―MIS Word of the Day.‖ Check out http://www.whatis.com, http://whatis.techtarget.com, or one of the many other online computer terminology dictionaries to locate words and definitions that supplement the Laudon text.

Students often enjoy the electronic interactions with their instructor, and the words are yet another way to reinforce learning.

Interactive Session: People: Will Automation Steal Our Jobs?

Case Study Questions

1. How does automating jobs pose an ethical dilemma?

Automating jobs pose an ethical dilemma because it illustrates two sets of competing interests.

Companies provide a benefit to the community by providing jobs. However, to be competitive, companies also need to be competitive and automating helps reduce the number of workers needed, especially in manufacturing. According to source from this case, ―for every robot per thousand workers, up to six workers lost their jobs and wages fell as much as .75 percent.‖

Chapter 4 of this text focuses on ethical issues raised by information systems:

Ethics refers to the principles of right and wrong that individuals, acting as free moral agents, use to make choices to guide their behavior. Information systems raise new ethical questions for both individuals and societies because they create opportunities for intense social change and, thus, threaten existing distributions of power, money, rights, and obligations.

1a. Who are the stakeholders? Identify the options that can be taken and the potential consequences of each.

There are several stakeholders involved when discussing the automating of jobs.

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Employees and their families are directly impacted by automation when job losses occur.

These individuals have the option to take other jobs that are more difficult to automate, but many replacement jobs consist of low-paying service sector jobs in hotels, restaurants, and nursing homes.



Shareholders and management are positively impacted where automation helps reduce costs and creates efficiencies. Moving forward, these individuals will identify additional areas where automation can lower costs and improve efficiencies.



Highly educated professionals benefit as they help design, develop, and implement automation. These individuals are part of the high-paying beneficiaries of automation, artificial intelligence, and robotics.



Entire communities are also impacted by automation. In this case, the city of Lakeland in central Florida was ranked as third among metro areas that are most at risk due to automation and artificial intelligence. Unfortunately, communities like Lakeland are potentially impacted like manufacturing cities (i.e., Detroit) that have already been impacted by automation and robotics.

2. If you were the owner of a factory deciding on whether to acquire robots to perform certain tasks, what people, organization, and technology factors would you consider?

Current and future research on which tasks are better preformed with artificial intelligence should be compared to the type of factory I own. The research mentioned in the case examined 964 occupations with each job consisting of 20 to 32 tasks. The results of this research found many jobs and associated tasks that would be better performed by artificial intelligence. However, many jobs remain where humans excel.

The people, organization, and technology factors raise an interesting question in terms of the ethical dilemmas described in question one, and strategy as an organization. If I automate, will other job opportunities arise to help retain displaced employees? What impact will automating have on the community? I would also prioritize tasks that would be best lend themselves to automation. Based on the information provided in this case, the question seems to be focused on the degree I would automate, and not whether to automation is needed.

Section 1-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as a financial client support and sales assistant. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions 1-1 Why are information systems so essential for running and managing a business today?

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

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

1.

2.

3.

4.

5.

6.

Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival

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

Describe the challenges and opportunities of globalization.

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

(Learning Objective 1: Why are information systems so essential for running and managing a business today? AACSB: Application of knowledge)

1-2 What exactly is an information system? How does it work? What are its people, organization, and technology components?

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

  

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

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

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

Define an information system and describe the activities it performs.

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

(Learning Objective 2: What is an information system? How does it work? What are its people, organizational, and technology components? AACSB: Application of knowledge)

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

   

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

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

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

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

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

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

(Learning Objective 2: What is an information system? How does it work? What are its people, organizational and technology components? AACSB: Analytical thinking)

1-3 How will a four-step method for business problem solving help you solve information system-related problems?

List and describe each of the four steps for solving business problems.

   

Problem identification involves understanding what kind of problem is being presented—whether it stems from people, organizational, or technology factors or a combination of these.

Solution design involves designing several alternative solutions to the problem that has been identified.

Solution evaluation and choice entails selecting the best solution, taking into account its cost, available resources, and skills in the business.

Implementation entails purchasing or building hardware and software, testing the software, providing employees with training and documentation, managing change as the system is introduced into the organization, and measuring the outcome.

Give some examples of people, organizational, and technology problems found in businesses.

In answering this question students may draw on examples given in Table 1.2.

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Organization: In order to understand how a specific business firm uses information systems, you need to know something about the structure, history, and culture of the company. Typical organizational problems include:      



People: Information systems require skilled people to build and maintain them, and they need people who can understand how to use the information in a system to achieve business objectives. Typical people problems include:       



Poor/outdated business processes (usually inherited from the past) Unsupportive culture and attitudes Political in-fighting Turbulent business environment/changes in the organization‘s surrounding environment Complexity of task Inadequate resources

Lack of employee training Difficulties of evaluating performance Legal and regulatory compliance Work environment Lack of employee support and participation Ergonomics Poor or indecisive management

Technology: Information technology is one of many tools managers use to cope with change. Elements of technology include: computer hardware, computer software, data management technology, networking and telecommunications technology. Other technology elements include the internet, intranets, extranets, and the World Wide Web. Typical technology problems include:      

Insufficient or aging hardware Outdated software Inadequate database capacity Insufficient telecommunications capacity Incompatibility of old systems with new technology Rapid technological change

Describe the relationship of critical thinking to problem solving.

Critical thinking can be briefly defined as the sustained suspension of judgment with an awareness of multiple perspectives and alternatives. It involves at least four elements:

   

Maintaining doubt and suspending judgment. By doubting all solutions at first and refusing to rush to a judgment, you create the necessary mental conditions to take a fresh, creative look at problems, and you keep open the chance to make a creative contribution.

Being aware of different perspectives. Recognize that business problems have many dimensions and that the same problem can be viewed from different perspectives. You have to decide which major perspectives are useful for viewing a given problem.

Testing alternatives or modeling solutions to problems and letting experience be the guide. Not all contingencies can be known in advance and much can be learned through experience. Therefore, experiment, gather data, and reassess the problem periodically.

Being aware of organizational and personal limitations.

(Learning Objective 3: How will a four-step method for business problem solving help you solve information system-related problems? AACSB: Application of knowledge) Describe the role of information systems in business problem solving.

Problem solving requires critical thinking in which one suspends judgment to consider multiple perspectives and alternatives. There are a number of reasons why business firms invest in information systems and technologies. Six business objectives of information systems include: operational excellence; new products, services, and business models; customer/supplier intimacy; improved decision making; strategic advantage; and survival. When firms cannot achieve these objectives, they become ―challenges‖ or ―problems‖ that receive attention. Managers and employees who are aware of these challenges often turn to information systems as one of the solutions or the entire solution.

(Learning Objective 3: How will a four-step method for business problem solving help you solve information system-related problems? AACSB: Application of knowledge.)

1-4 What information system skills and knowledge are essential for business careers?

Describe the role of information systems in careers in accounting, finance, marketing, management, and operations management and explain how careers in information systems have been affected by new technologies and outsourcing?

Each of the major business fields requires an understanding of information systems.

Accounting: Accountants need to understand future changes in hardware, software, and network security essential for protecting the integrity of accounting systems along with new technologies for reporting in online and wireless business environments.

Finance: Financial people need to understand future IT changes, financial database systems, and online trading systems for managing investments and cash.

Marketing: Marketing personnel require an understanding of marketing database systems and systems for customer relationship management as well as web-based systems for online sales.

Operations management: These individuals need knowledge of changing hardware, software, and database technologies used in production and services management and an in-depth understanding of how enterprise-wide information systems for production management, supplier management, sales force management, and customer relationship management achieve efficient operations.

Careers in information systems: The individuals clearly need to understand the central role databases play in managing information resources of the firm and how new hardware and software technologies can enhance business performance. They also need skills for leading the design and implementation of new management systems, working with other business professionals to ensure systems meet business objectives, and working with software packages providing new system solutions.

List and describe the information system skills and knowledge that are essential for all business careers.

Common information systems skills and knowledge for all business careers include an understanding of how information systems help firms achieve major business objectives; an appreciation of the central role of databases; skills in information analysis and business intelligence; sensitivity to the ethical, social, and legal issues raised by systems; and the ability to work with technology specialists and other business professionals in designing and building systems.

(Learning Objective 4: What information system skills and knowledge are essential for business careers? AACSB: Application of knowledge)

Discussion Questions

1-5 What are the implications of globalization when you have to look for a job? What can you do to prepare yourself for competing in a globalized business environment? How would knowledge of information systems help you compete?

Student answers to this question will vary.

1-6 If you were setting up the website for a Major League Baseball team, what people, organizational, and technology issues might you encounter?

Student answers to this question will vary.

1-7 Identify some of the people, organizational, and technology issues that UPS had to address when creating its successful information systems.

Student answers to this question will vary.

Hands-On MIS Projects This section gives students an opportunity to analyze real world information systems needs and requirements. It provides several exercises you can use to determine if students are grasping the material in the chapter.

Management Decision Problems

1-8 Snyders of Hanover: The financial department uses spreadsheets and manual processes for much of its data gathering and reporting. Assess the impact of this situation on business performance and management decision making.

   

Data entry errors from repetitive entry No information available on-demand Late reporting of critical decision-making information Time consuming

(Learning Objective 2: What is an information system? How does it work? What are its people, organizational, and technology components? AACSB: Analytical thinking)

1-9 Dollar General Corporation: The company wants to keep costs as low as possible, so it does not use an automated method for keeping track of inventory at each store. What decisions have to be made before investing in an information system solution?

  

Determine business problems—mismanagement of inventory, too little or too much inventory, no ability to track inventory.

Lack of information system to manage inventory is actually increasing costs rather than decreasing them.

What is the exact problem the company wants to solve—reduce costs.

(Learning Objective 1: Why are information systems so essential for running and managing a business today? AACSB: Analytical thinking, Application of knowledge)

Improving Decision Making: Using Databases to Analyze Sales Trends:

Software skills: Database querying and reporting Business skills: Sales trend analysis

1-10 This exercise helps students understand how they can use database software to produce valuable information from raw data. The solutions provided here were created using the Query Wizard and Report Wizard capabilities of Microsoft Access. Students can, of course, create more sophisticated reports if they wish, but most information can be obtained from simple query and reporting functions. The main challenge is to get students to ask the right questions about the information.   

Which products should be restocked?

Which stores and sales regions would benefit from a promotional campaign and additional marketing?

Which times of the year should products be offered at full price, and when should discounts be used?

The answers to the questions can be found in the Microsoft Access File named: MIS13ch01_solutionfile.mdb

(Learning Objective 2: What is an information system? How does it work? What are its people, organizational, and technology components?, AACSB: Analytical thinking.)

Improving Decision Making: Using the Internet to Locate Jobs Requiring Information Systems Knowledge

Software skills: Internet-based software

Business skills: Job searching 1-11 In addition to having students research jobs in their chosen career field, it may be quite interesting to have them research jobs in other career fields so they can see that virtually every job and/or career requires information systems skills.

(Learning Objective 4: What information system skills and knowledge are essential for business careers?

AACSB: Written and oral communication, Analytical thinking, Reflective thinking, Application of knowledge) Collaboration and Teamwork Project

1-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: New Technology at UPS Clashes with Outdated Ways of Working

1-13. Identify the problem faced by UPS. Was it a people problem, an organizational problem, or a management problem? Explain your answer.

The major challenge faced by UPS is staying competitive with new rivals such as Amazon.com and appropriately updating investments in information technology. The problem encompasses problems at the people, organizational, and managerial levels:

 Outdated equipment required more employee ‗touch points‘ at the sorting centers. Each additional ‗touch point‘ introduces additional possibility for error, even with well-qualified workers.  At the organization level, errors were adding up to missorted packages which can add a day to deliveries, and degrading customer service.  At the managerial level, managers were working with historical data to make decisions regarding undeliverable packages. With new technology, they now have access to real-time data to help make actual decisions (i.e., staffing) versus estimating.

1-14. Describe the solution to this problem pursued by UPS? Is this a successful solution? Why or why not?

The primary solution being integrated by UPS is the automation of older facilities to reduce the number of human touch points. This investment, including super hubs, can now sort packages 30 percent more efficiently, and with far fewer errors. In another example, an upgraded facility with

750 workers were able to process the same number of packages as an older facility with 1,170 workers. By all accounts, the upgrades have been very successful.

1-15. Diagram the packing sorting process at UPS before and after automation.

Using Business Process Model and Notation (BPMN), the following two diagrams illustrate the packing sorting process before and after automation.

1-16. How did automated package sorting change operations and decision making at UPS?

The automated package sorting improved operations by requiring fewer human touch points and automating most of the process with the exception unloading and loading boxes onto a trailer. In some instances, new automated facilities provided additional jobs.

Based on IT innovations including Bluetooth enhancements providing real-time information to managers, decisions can be made using actual data rather than historical data requiring estimating. This improvement allows for better allocation of resources and increased efficiency with fewer errors.

(Learning Objective 1: How are information systems transforming business and why are they so essential for running and managing a business today? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

1-17 What are the strategic objectives that firms try to achieve by using information systems? For each strategic objective, give an example of how a firm could use information systems to achieve the objective.

View rubrics in MyLab MIS.

1-18 Describe three ways in which information systems are transforming how business is conducted.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 2 Global E-Business and Collaboration

Learning Objectives

2-1 What major features of a business are important for understanding the role of information systems?

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

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

1.

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

2.

3.

2-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

4.

Chapter Outline 2-1

What major features of a business are important for understanding the role of information systems?

Organizing a Business: Basic Business Functions Business Processes Managing a Business and Firm Hierarchies The Business Environment The Role of Information Systems in a Business

2-2

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

Systems for Different Management Groups Systems for Linking the Enterprise E-Business, E-Commerce and E-Government

2-3

Why are systems for collaboration, and social business, and knowledge management so important, and what technologies do they use?

What is Collaboration?

What is Social Business?

Business Benefits of Collaboration and Social Business Building a Collaborative Culture and Business Processes Tools and Technologies for Collaboration and Social Business Systems for Knowledge Management

2-4

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

The Information Systems Department Information Systems Services

2-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Business, 41

Information systems department, 66

Business intelligence, 48

Information systems managers, 66

Business processes, 42

Interorganizational system, 53

Chief data officer (CDO), 67

Knowledge management systems (KMS), 53

Chief information officer (CIO), 66

Knowledge workers, 44

Chief knowledge officer (CKO), 67

Management information systems (MIS), 48

Chief privacy officer (CPO), 66

Middle management, 44

Chief security officer (CSO), 66

Operational management, 44

Collaboration, 56

Portal, 50

Customer relationship management (CRM) systems, 53

Production or service workers, 44

Data workers, 44

Programmers, 66

Decision-support systems (DSS), 48

Senior management, 44

Digital dashboard, 51

Social business, 57

E-government, 55

Structured knowledge, 65

Electronic business (e-business), 55

Supply chain management (SCM) systems, 52

Electronic commerce (e-commerce), 55

Systems analysts, 66

End users, 67

Tacit knowledge, 65

Enterprise applications, 51

Teams, 56

Enterprise content management (ECM) systems, 65

Telepresence, 60

Enterprise systems, 52

Transaction processing systems (TPS), 47

Executive support systems (ESS), 50

Teaching Suggestions

The opening vignette, "Enterprise Social Networking Transforms Sharp Corporation into a More Innovative Connected Organization," provides an outstanding example of how the company embraced social business tools to improve its odds for success, and solidify its commitment to using unique innovative technology to contribute to the culture and welfare of individuals throughout the world. These technologies are the very same ones every business needs to succeed.

Sharp was facing stiff competition from Asian competitors and looked to ways to improve its business processes and organizational communication. Sharp, employees 50,000 people worldwide and the large, centralized firm with a traditional hierarchical culture made it difficult for employees to experiment and innovate on their own. Directives were only flowing downward, and the company’s younger employees were looking for opportunities to share ideas and opinions freely.

Sharp implemented Yammer, Microsoft’s enterprise social networking platform for internal business uses, which enables employees to create groups to collaborate on projects and share and edit documents. It also includes a news feed that allows employees to easily learn what’s happening company wide.

By using Yammer, employees share updates, ask for feedback, and connect volunteers around improvement initiatives. One project resulted in a 60 percent simplification of a key quality process that saved the company thousands of euros and reduced overall end-to-end process time.

Within months of implementation, over 10,000 users within the company were using Yammer. The system has helped improved the flow of information in both directions (i.e., management to rank-in-fileemployees) with some department managers using Yammer to solicit input from employees regarding potential technologies that could be implemented in the organization to improve process and business efficiencies.

Section 2-1: What major features of a business are important for understanding the role of information systems?

Table 2-1 may help students understand that every business, large and small, uses the same basic business processes. Referring back to this table may help as you examine information needs for each functional area. You could have students select a business with which they are familiar and identify some of the business processes involved in each of the basic functional areas.

Another good classroom exercise is to use Figure 2-2 (Page 43) to compare how the order fulfillment process can be accomplished sequentially, as the figure shows, versus simultaneously, as a new information system would allow.

The explanation of firm hierarchies sets the basis for the rest of the text as it explains the various levels of management. Senior management requires a different type of information than do middle management, operational management, knowledge workers, data workers, and production or service workers.

Throughout the text, students will need this information to understand how and why each type of information system is necessary.

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

This section focuses on how information systems serve various management levels in companies. The ultimate goal is for students to realize that one system helps serve other systems and, working together, all the systems serve the entire organization.

Type of System Transaction Processing Systems (TPS) Management Information Systems (MIS) Decision Support Systems (DSS)

Executive Support Systems (ESS)

Information Inputs Transactions; daily events

Information Outputs Detailed reports; lists; summaries

Users Operations personnel; first-line supervisors

Summary transaction data; high-volume data; simple models Optimized for data analysis, analytic models and data analysis tools.

Aggregate data; external, internal

Summary and exception reports

Middle managers

Interactive; simulations; analysis

Professionals, staff managers

Projections; responses to queries

Senior managers

It’s likely that students’ main encounter will be with TPS systems when they first begin their careers.

Stress the importance of accurate data at the TPS level since it serves as the initial source for the other systems.

Typically, DSS and ESS systems will be the least familiar. Students may better understand them if you ask these types of questions: Why do national retail chains open stores in certain locations and not others?

How can a retail chain determine which type of clothing to stock at different geographic locations?

Most importantly, students need to understand that each type of information system supports the different kinds of decisions made at each managerial level.

Enterprise systems: Central to this section is the need to coordinate activities, decisions, and knowledge across the firm’s different levels, functions, and business units. Enterprise systems use a single central data repository in order to supply all users with a consolidated view of employees, customers, suppliers, and vendors. The key to effectively using enterprise systems is to eliminate redundancy and duplication, not just in the information systems but also in business processes.

Supply chain management systems: Students should understand the importance of a business managing its relationships with suppliers through a free-flowing exchange of information. The concept may seem foreign to those students who think a company is a closed entity and shouldn’t share data or information with anyone outside the organization. A review of a typical supply chain may be helpful: sourcing,

producing, and delivering goods and services. It may also be helpful to engage the students in an exercise that lists all the entities involved in producing and delivering goods and services.

Customer relationship management systems: Ask students how many times they’ve quit doing business with a company because of poor customer service. Ask them how many times they’ve had to supply a business with the same information simply because they talked to a different department in the company.

Discuss how important it is for every functional area in a business to have the same consolidated view of its customers to avoid these kinds of problems.

Knowledge management systems: Few, if any, students have probably had any experience with these systems. Point out that businesses are beginning to realize how much expertise and experience is locked away in employees’ heads and that it’s imperative to find a way to capture that information. Moreover, it’s important that businesses find a way to make the expertise and experience available to a wide range of users. On the other hand, students should understand that employees are very reluctant to impart their individual knowledge due to fear or self-preservation.

Intranets and Extranets: As internet-based technologies continue to expand the basic platforms for disseminating information, smaller businesses that cannot afford to implement enterprise applications can turn to intranets and extranets. Your difficulty will be getting students to understand the difference between the two since they operate basically the same way. Intranets are limited to internal users; extranets are available to external users as well as internal users. Both are an inexpensive way to quickly disseminate information and data across functional lines and organizational boundaries.

E-business, e-commerce, and e-government: Have students give examples of their own experiences with of each of these. Students are most often confused between e-business and e-commerce. Stress that ebusiness refers to the use of digital technology and the internet to execute major business processes, while e-commerce is more narrowly centered on the buying and selling of goods and services over the internet.

Interactive Session: Organizations: The City of Mississauga Goes Digital

Case Study Questions

1. Describe the problems the City of Mississauga hoped to address using digital technology.

The City of Mississauga is facing a changing demographic with fewer middle-income individuals and more low-income individuals. As such, management has a vision for all residents to have the advantages that access to digital technology provides.

The city is also working to move to a paperless city as much as possible. Further they are interested in doing a better job of tracking buses and other city vehicles to become more efficient and effective. Finally, management is interested in providing improved traffic flow and safety with improved traffic intersections.

2. What technologies did Mississauga employ for a solution? Describe each of these technologies and the role each played in a solution.

City employees have broken down Mississauga into 23 defined communities with one hub center and 500 mobility kits for residents with future expansions anticipated. This effort will help provide better access to digital technology for all residents regardless of income levels.

To help go paperless and reduce the need for travel, the city is helping to provide infrastructure needed to encourage videoconferencing where residents can participate in meetings remotely.

City employees have updated its vehicles to allow for real-time updates on location and other travel variables. The real-time snowplow information is a unique way to better inform the public and track activities using onboard sensors that indicate when blades are being used. Finally, Mississauga implemented a new high-capacity fiber optic system to improve over 700 traffic intersections.

3. What people, organization, and technology issues did the City of Mississauga have to address in developing a solution?

The City of Mississauga appeared to have very effective individuals working on various technology projects. In some cases, city officials collaborated with other municipalities which required additional coordination and integration efforts. The city also worked with businesses to partner on initiatives to create and support a more versatile workplace.

4. How did the technologies in this case improve operations and decision making at the City of Mississauga?

The technologies in this case have helped transform the City of Mississauga as a destination to attract a younger and motivated workforce. Improved operations and decision making were particularly recognized in tracking city vehicles. The real-time information about bus locations was used for timing maintenance and warranties to reduce downtime. In addition, location data about bus locations and routes is being provided to the public to improve travel schedules. The real-time information provided by the sensors on the snowplows provided management with data to help make better decisions and potentially a safer environment during storms.

(Learning Objective 2: How do systems serve different management groups in a business and how do systems that link the enterprise improve organizational performance? AACSB: Application of knowledge)

Section 2-3: Why are systems for collaboration, social business, and knowledge management so important, and what technologies do they use?

Students have probably used most of these systems without even realizing their business value. Your task is to relate these increasingly common technologies to business processes and needs. Discuss how they can use cell phones, instant messaging, social networking sites, and wikis in a business setting to communicate, collaborate, and share ideas with team members, business partners, customers, and suppliers.

One exercise you can use to reinforce the usefulness of team collaboration is to have small student groups explore social networking sites to see how many postings by businesses they can find. For instance, Twitter has tweets for free Honey Bunches of Oats at Walmart and a tweet for an article about General Electric’s solar technology. Businesses also make use of the popular YouTube.com to post videos of their products. This exercise will help demonstrate how businesses must constantly adapt their marketing strategies to reach customers. You can also generate a discussion about students’ experiences on these kinds of sites in relation to business uses and ask them to relate how effective these new methods of engaging customers are.

Table 2.2 (Page 58) describes important application of social business inside and outside the firm.

Because some of these applications are relatively unknown, you can have teams of students explore one or two of them and then present to the class a list of characteristics, capabilities, advantages, and disadvantages for each one.

Table 2.3 (Page 58) emphasizes the benefits of collaboration and social business while Figure 2.10 (Page 59) highlights the necessity of having the appropriate organization structure and culture, along with the right technology, to successfully use collaboration in an organization. Discuss how the absence of even one of these three can hinder or prevent collaboration. Ask students to draw on their own experiences to compare and contrast firms with a collaborative culture to those without.

Many times, people and businesses decide which collaborative tools to use based on which ones they are most familiar with, rather than which are the most appropriate tool for the task at hand. You can have student teams evaluate one or more collaborative programs for an organization to which they belong like a sports team, sorority/fraternity, workplace, or even their use in your classroom. Have them use the time/space matrix in Figure 2.11 (Page 64) and the information in the section "Checklist for Managers: Evaluating and Selecting Collaboration Software Tools" to help select the best tool.

Enterprise content management (ECM) systems help manage company knowledge including semistructured, semistructured, and unstructured types of information. Year ago, statistics were particularly valuable because companies often didn’t have enough data to make decisions. As such, they used statistics based on samples of the population data. We still use statistics, but today, many companies have too much data, and EMCs help to capture, store, retrieve, distribute, and preserve vast amounts of data.

Interactive Session: Technology: Videoconferencing: Something for Everyone

Case Study Questions

1. Compare the capabilities of the videoconferencing tools described in this case. How do they promote collaboration and innovation?

The Cisco‘s IX5000 immersive telepresence system offers leading-edge telepresence and is much more affordable and easier to use than in the past. It is sleekly sculpted, with high-definition video and theatre-quality sound, creating a high-quality lifelike collaboration experience for 8 to 18 people. Video and other content can move across any of the screens.

Zoom provides a less expensive and easier to use cloud-based option for online video and audio conference, collaboration, chat, screen-sharing, and webinars across various devices. Zoom provides a free basic version for up to 100 participants and for around $20 per month offer services that can accom9odate up to 1,000 participants and 10,000 viewers.

Videoconferencing is becoming a tool of choice to promote collaboration and innovation as they allow individuals to manage business processes and to connect an collaborate with others around the world.

2. How is videoconferencing related to the business models and business strategies of the organizations described in this case?

Nepris uses Zoom to connect teachers with industry experts to help make the instructional experience more immersive with real-world application. Zoom provides a reasonably priced option to allow Nepris to compete in this niche space.

FCTI, which is a leading US ATM network and service provider, also uses Zoom for video conferencing. The goal is to help employees collaborate more effectively than email, text messaging, or phone calls.

3. Describe the specific ways in which videoconferencing technology helped each of the organizations in this case improve their operations and decision making.

Zoom provides both companies with the opportunity to conference via tablets and smartphones.

As such, both companies can participate in meetings and collaborations from remote locations. In the case of Nepris, it allows experts to participate with instructors while accommodating the industry expert‘s busy, and often remote, schedules.

(Learning Objective 3: Why are systems for collaboration, social business, and knowledge management so important, and what technologies do they use? AACSB: Application of knowledge) Section 2-4: What is the role of the information system’s function in a business?

If possible, arrange a session with the school’s information systems department to allow students to see first-hand how such a center works and who is responsible for running the systems. Have the IS staff and students participate in a Question and Answer forum about how typical processes are handled. Many students have a better appreciation of how these complex centers work when they actually see one in operation rather than just reading about it. Stress to students that in all but the smallest of firms these systems are critical to the operational efficiency and sheer survival in a very competitive marketplace.

Most importantly, students should understand that the IS staff is responsible for the well-being of all users in an organization. Users and the IS staff are teammates not polarizing opposites.

Section 2-5: How will MIS help my career? addresses how the chapter‘s elements and information can help in securing a good job as a sales support specialist. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

2-1 What major features of a business are important for understanding the role of information systems?

Define a business and describe the major business functions.

A business is a formal organization whose aim is to produce products or provide services for a profit. That is, to sell products at a price greater than the costs of production. Every business, large or small, has these four major functions: manufacturing and production; sales and marketing; human resources; and finance and accounting.

Define business processes and describe the role they play in organizations.

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

Business processes for the manufacturing and production area include product assembling, quality checking, and producing bills of materials. For the sales and marketing area, business processes include identifying customers, making customers aware of the product, and selling the product. For finance and accounting, business processes include paying creditors, creating financial statements, and managing cash accounts. For human resources, business processes include hiring employees, evaluating employees‘ job performance, and enrolling employees in benefits plans.

Identify and describe the different levels in a business firm and their information needs.

From highest to lowest, the three levels of the organizational hierarchy are senior, middle, and operational management.

 Senior managers need summary information that quickly informs them about the overall performance of the firm, such as gross sales revenues, sales by product group and region, and overall profitability.  Middle managers need more specific information on the results of specific functional areas and departments of the firm, such as sales contacts by the sales force, production statistics for specific factories or product lines, employment levels and costs, and sales revenues for each month or even each day. o Knowledge workers, such as engineers, scientists, or architects, design products or services and create new knowledge for the firm. They may need access to external scientific databases or internal databases with organizational knowledge.  Operational managers need transaction-level information, such as the number of parts in inventory each day or the number of hours logged on Tuesday by each employee. o Production or service workers actually produce the product and deliver the service. Production workers need access to information from production machines. Service workers need access to customer records so they can take orders and answer questions from customers.

Types of information systems include transaction processing at the operational level, decisionsupport systems and management information systems at the middle level, and executive support systems at the senior level.

(Learning Objective 1: What major features of a business are important for understanding the role of information systems? AACSB: Application of knowledge)

Explain why environments are important for understanding a business.

Business environments are constantly changing. New developments in technology, politics, customer preferences, and regulations happen all the time. In general, when businesses fail, it is often because they failed to respond adequately to changes in their environments. A firm must monitor changes in its environment and share information with key entities in that environment in order to stay in business.

External business environmental forces include: technology and science, the economy, international change, and politics.

Internal business environmental forces include: customers, suppliers, stockholders, regulations, and competitors.

(Learning Objective 1: What major features of a business are important for understanding the role of information systems? AACSB: Application of knowledge)

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

Define business intelligence systems.

Business intelligence systems focus on delivering information to support management decision making.

These systems use data and software tools for organizing, analyzing, and providing access to data to help managers and other enterprise users make more informed decisions. Business intelligence addresses the decision-making needs of all levels of management.

Business intelligence systems for middle management help with monitoring, controlling, decision making, and administrative activities in an organization.

Describe the characteristics of transaction processing systems (TPS) and the role they play in a business.

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

 At the operational level, tasks, resources, and goals are predefined and highly structured.  Managers need TPS to monitor the status of internal operations and the firm‘s relationship with its external environment.  TPS are major producers of information for other types of systems.  Transaction processing systems are often so central to a business that TPS failure for a few hours can lead to a firm‘s demise and perhaps that of other firms linked to it.

Describe the characteristics of management information systems (MIS), decision support systems (DSS), and executive support systems (ESS) and explain how each type of system helps managers make decisions.

Middle management needs systems to help with monitoring, controlling, decision making, and administrative activities.  MIS provides middle managers with reports on the organization‘s current performance. This information is used to monitor and control the business and predict future performance.  MIS summarizes and report the company‘s basic operations using data supplied by TPS. The basic transaction data from TPS are compressed and usually presented in reports that are produced on a regular schedule.  MIS serves managers primarily interested in weekly, monthly, and yearly results, although some MIS enable managers to drill down to see daily or hourly data if required.

 MIS generally provides answers to routine questions that have been specified in advance and have a predefined procedure for answering them.  MIS generally are not flexible and have little analytical capability.  Most MIS use simple routines, such as summaries and comparisons, as opposed to sophisticated mathematical models or statistical techniques.

Examples include sales and profit per customer and per region, relocation summary and analysis, inventory control, capital investment analysis, and even a report on students who were here in the fall but did not to return in the spring.

While MIS have an internal orientation, DSS will often use data from external sources, as well as data from TPS and MIS. DSS support ―what-if‖ analyses rather than a long-term structured analysis of MIS. Whereas MIS are generally not flexible and provide little analytical capabilities, DSS are designed for analytical purposes and are flexible.

Decision-support systems (DSS) support non-routine decision making for middle managers.  DSS provide sophisticated analytical models and data analysis tools to support semi-structured and unstructured decision-making activities.  DSS use data from TPS, MIS, and external sources, in condensed form, allowing decision makers to perform ―what-if‖ analysis.  DSS focus on problems that are unique and rapidly changing; procedures for arriving at a solution may not be fully predefined.  DSS are designed so that users can work with them directly; these systems include interactive, user-friendly software.

Executive support systems help senior managers address strategic issues and long-term trends, both in the firm and in the external environment.  ESS address non-routine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution.  ESS provide a generalized computing and communications capacity that can be applied to a changing array of problems.  ESS are designed to incorporate data about external events, such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS.  ESS are designed for ease-of-use and rely heavily on graphical presentations of data.

(Learning Objective 2: How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance? AACSB: Application of knowledge) Explain how enterprise applications improve organizational performance.

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

applications allow an organization to efficiently exchange information among its functional areas, business units, suppliers, and customers.

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

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

This changes the workflow of an organization:  Information flows seamlessly throughout an organization, improving coordination, efficiency, and decision making.  Gives companies the flexibility to respond rapidly to customer requests while producing and stocking only that inventory necessary to fulfill existing orders.  Increases customer satisfaction by improving product shipments, minimizing costs, and improving a firm‘s performance.  Improves decision making by improving the quality of information for all levels of management.

That leads to better analyses of overall business performance, more accurate sales and production forecasts, and higher profitability.

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

Business benefits include:  Deciding when and what to produce, store, and move  Rapidly communicating orders  Tracking the status of orders  Checking inventory availability and monitor inventory levels  Reducing inventory, transportation, and warehousing costs  Tracking shipments  Planning production based on actual customer demand  Rapidly communicating changes in product design

Customer relationship management systems enable a business to better manage its relationships with existing and potential customers. With the growth of the web, potential

customers can easily comparison shop for retail and wholesale goods and even raw materials, so treating customers better has become very important.

Business benefits include:  Providing information to coordinate all the business processes that deal with customers in sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention. This information helps firms identify, attract, and retain the most profitable customers; provide better service to existing customers; and increase sales.  Consolidating customer data from multiple sources and providing analytical tools for answering questions such as: What is the value of a particular customer to the firm over his/her lifetime?  Integrating customer-related processes and consolidate customer information from multiple communication channels, giving the customer a consolidated view of the company.  Providing detailed and accurate knowledge of customers and their preferences to help firms increase the effectiveness of their marketing campaigns and provide higher-quality customer service and support.

Knowledge management systems enable organizations to better manage processes for capturing and applying knowledge and expertise. These systems collect all relevant knowledge and experience in the firm and make it available wherever and whenever it is needed to improve business processes and management decisions. They also link the firm to external sources of knowledge.  KMS support processes for acquiring, storing, distributing, and applying knowledge, as well as processes for creating new knowledge and integrating it into the organization.  KMS include enterprise-wide systems for managing and distributing documents, graphics, and other digital knowledge objects; systems for creating corporate knowledge directories of employees with special areas of expertise; office systems for distributing knowledge and information; and knowledge work systems to facilitate knowledge creation.  KMS use intelligent techniques that codify knowledge and experience for use by other members of the organization and tools for knowledge discovery that recognize patterns and important relationships in large pools of data.

Explain how intranets and extranets help firms improve business performance.

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

(Learning Objective 2: How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance? AACSB: Application of knowledge)

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

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

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

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

Collaboration and social business are important because:



Changing nature of work. More jobs are becoming ―interaction‖ jobs. These kinds of jobs require face-to-face interaction with other employees, managers, vendors, and customers.

They require systems that allow the interaction workers to communicate, collaborate, and share ideas.

 

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

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



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



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



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

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

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

The business benefits of collaboration and social business are listed in Table 2.3, page 59: 

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



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



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



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



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

Describe a supportive organizational culture for collaboration.

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

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

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

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

 

Internet-based collaboration environments like Lotus Notes, Groove, and WebEx provide online storage space for documents, team communications (separate from email), calendars, and audio-visual tools members can use to meet face-to-face.

Email and Instant Messaging (IM) are reliable methods for communicating whenever and wherever around the globe.

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

Social networking is no longer just ―social.‖ Businesses are realizing the value of providing easy ways for interaction workers to share ideas and collaborate with each other.

Wikis are ideal tools for storing and sharing company knowledge and insights. They are often easier to use and cheaper than more proprietary knowledge management systems.

They also provide a more dynamic and current repository of knowledge than other systems.

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

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



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

Describe how knowledge management systems help organizations make better use of their structured, semistructured, and unstructured knowledge and also their tacit knowledge assets.

Knowledge management and their associated enterprise content management systems help manage company knowledge including semistructured, semistructured, and unstructured types of information. The ability of an organization capture, store, retrieve, distribute, and preserve vast amounts of data is critically important in this data-driven marketplace to be competitive. In the past SQL-based technologies were sufficient to maintain an organizations data. However, semistructured and unstructured types of information are difficult for these systems to effectively manage. Given the value of semistructured and unstructured data, knowledge management and ECMs help organizations these massive data troves.

Unfortunately, tacit knowledge is rarely written down. Some enterprise-wide KMS provide features and capabilities for addressing the challenges of tacit knowledge and provide assistance for locating employees that are experts within an organization that may help document important knowledge that is currently in tacit form.

(Learning Objective 3: Why are systems for collaboration, social business, and knowledge management so important, and what technologies do they use? AACSB: Application of knowledge) 5.

2-4 What is the role of the information system’s function in a business?

Describe how the information systems function supports a business.

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

Compare the roles programmers, systems analysts, information systems managers, the chief information officer (CIO), chief security officer (CSO), chief data officer (CDO), chief privacy officer (CPO), and chief knowledge officer (CKO) play.    

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

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

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

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

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

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

Chief privacy officer is responsible for ensuring that the company complies with existing data privacy laws.

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

(Learning Objective 4: What is the role of the information systems function in a business?

AACSB: Analytical thinking, Application of knowledge)

Discussion Questions

2-5 How could information systems be used to support the order fulfillment process illustrated in Figure 2.2? What are the most important pieces of information these systems should capture? Explain your answer.

Student answers to this question will vary.

2-6 Identify the steps that are performed in the process of selecting and checking a book out from your college library and the information that flows among these activities.

Diagram the process. Are there any ways this process could be improved to improve the performance of your library or your school? Diagram the improved process.

Student answers to this question will vary.

2-7 Use the Time/Space Collaboration and Social Tool Matrix to classify the collaboration and social technologies Sanofi Pasteur uses.

Student answers to this question will vary.

Hands-on MIS Projects Management Decision Problems

2-8 Don’s Lumber Company: The prices of lumber and other building materials are constantly changing. When a customer asks about the price on pre-finished wood flooring, sales representatives consult a manual price sheet and then call the supplier for the most recent price. The supplier in turn uses a manual price sheet, which has been updated each day. Often the supplier must call back Don‘s sales reps because the company does not have the newest pricing information immediately on hand. Assess the business impact of this situation, describe how this process could be improved with information technology, and identify the decisions that would have to be made to implement a solution. Who would make those decisions?

Manually updating price sheets leads to slower sales processes, pricing errors if sales reps are using outdated information, and customer dissatisfaction due to delays in obtaining information. By putting the data online using an extranet and updating it as necessary, sales reps consult the most current information immediately. That leads to faster sales and more satisfied customers.

Necessary decisions include how much information to make available online, who will have access to it, and how to keep the information secure. Senior management would likely make these decisions.

(Learning Objective 1: What major features of a business are important for understanding the role of information systems? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

2-9 Henry’s Hardware:

Owners do not keep automated, detailed inventory or sales records. Invoices are not maintained or tracked (other than for tax purposes). The owners use their own judgment in identifying items that need to be reordered. What is the business impact of this situation? How could information systems help Henry and Kathleen run their business? What data should these systems capture?

What decisions could the systems improve?

The business impact includes lost sales, over- and under-ordering products, improper sales accounting, and more costly inventory control. An information system could capture data that allows owners to maintain proper inventories, order only those products needed, and ensure proper sales accounting. Decisions on pricing, product levels, and inventory replenishment could be vastly improved based on data and not a best-guess venture.

(Learning Objective 2: How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance? AACSB: Analytical thinking, Application of knowledge)

Improving Decision Making: Using a Spreadsheet to Select Suppliers

Software skills: Spreadsheet date functions, data filtering, DAVERAGE functions.

Business skills: Analyzing supplier performance and pricing.

Although the format of the students’ answers will vary, a suggested solution can be found in the Microsoft Excel File named: ESS13ch02_solutionfile.xls.

2-10

This exercise requires some student knowledge of spreadsheet database functions. At a minimum, students should know how to sort the database by various criteria such as item description, item cost, vendor number, vendor, name, or A/P terms. Students may need to be told that A/P Terms is expressed as the number of days that the customer has to pay the vendor for a purchase. In other words, 30 designates 30 net days. The vendor that allows customers the longest amount of time to pay for an order would, of course, offer the most favorable payment terms.

Students will need to add additional columns for calculating the actual delivery time for each order and the number of days the delivery is late. The Actual Delivery Time can be calculated by subtracting the Promised Ship Date from the Arrival Date. The number of days late can be calculated by subtracting the Promised Transit Time from the Actual Delivery Time. If the number of days late is negative, it indicates that the order arrived early.

These numbers are useful when trying to determine who is the vendor with the best on-time delivery track record. Students can use the DAVERAGE function to determine the average delivery time for each vendor. Students can also use one of the database functions to determine the vendor with the best accounts payable terms. To determine the vendor with the lowest prices for the same item when it is supplied by multiple vendors, students can filter the database using the item description. This filtered list can then be sorted by item cost and vendor number.

(Learning Objective 2: How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance? AACSB: Written and oral communication, Analytical thinking, Application of knowledge)

Achieving Operational Excellence: Using Internet Software to Plan Efficient Transportation Routes

2-11

Obviously the shortest amount of time is more cost effective than the shortest distance since there‘s only a difference of 27.05 miles. Saving the 27 miles will take 2 hours, 24 minutes longer.

Encourage students to use the Advanced Tools option to quickly change back and forth between ―shortest time‖ and ―shortest distance.‖ Only to show how convenient these kinds of online tools are, ask students to use a regular map and calculator to draw out the two routes. (Lots of ughs!)

(Learning Objective 2: How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance? AACSB: Analytical thinking, Application of knowledge)

Shortest Distance and time: 7 hours, 57 min; 532 miles (Tolls included) Via I-80E and I-76 Alternate: 9 hours, 26 minutes; 595 miles (No Tolls) Via I-70E

Collaboration and Teamwork Project

2-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: Should Companies Embrace Social Business?

2-13 Identify the people, organization, and technology factors affecting adoption of internal corporate social networks.

People: Employees that are used to collaborating and doing business in more traditional ways need an incentive to use social software. Most companies are not providing that incentive: only a small number of social software users believe the technology to be necessary to their jobs. A successful social business strategy requires leadership and behavioral changes. Just sponsoring a social project is not enough -managers need to demonstrate their commitment to a more open, transparent work style.

Organization: Companies that have tried to deploy internal social networks have found that employees are used to doing business in a certain way and overcoming the organizational inertia and culture can prove difficult. Enterprise social networking systems were not at the core of how most of the surveyed companies collaborate. The social media platform that will work best depends on its specific business purpose. Firms should first identify how social initiatives will actually improve work practices for employees and managers since technologies won‘t benefit flawed business processes.

Technology: Ease of use and increased job efficiency are more important than peer pressure in driving adoption of social networking technologies. Content on the networks needs to be relevant, up-to-date, and easy to access; users need to be able to connect to people that have the information they need, and that would otherwise be out of reach or difficult to reach.

(Learning Objective 2-1: What are business processes? How are they related to information systems?, Learning Objective 2-2: How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance?, Learning Objective 2-3: Why are systems for collaboration, social business, and knowledge management so important, and what technologies do they use? AACSB: Analytical thinking, Application of knowledge)

2-14 Compare the experiences implementing internal social networks of the organizations described in this case. Why were some successful? What role did management play in this process?

NASA‘s Goddard Space Flight Center abandoned its enterprise social network called Spacebook because no one knew how the tools would help people do their jobs better and more efficiently. It didn‘t focus enough on people. It didn‘t take into consideration the organization‘s culture and politics.

ModCloth succeeded with its social networking journey with Yammer because it made the tools more accessible, demonstrated the value of the tools in pilot projects. Using Yammer proved to be useful for ModCloth to connect its workforce to employee ideas. Further, Yammer has helped reduce unnecessary duplication of work projects.

The Esquel Group also implemented Yammer to improve communication among employees, including communication in different languages. A major benefit for Esquel is that Yammer provides a platform for managers to listen to its workforce to identify problems and improve processes. A major benefit to Esquel is that improvements to the organization have helped reduce the amount of outsourcing typically required in its industry.

(Learning Objective 2-2: How do systems serve the different management groups in a business and how do systems that link the enterprise improve organizational performance?, Learning Objective 2-3: Why are systems for collaboration, social business, and knowledge management so important, and what technologies do they use? AACSB: Analytical thinking, Application of knowledge)

2-15 Should all companies implement internal enterprise social networks? Why or why not?

Answers will vary, but one position is yes, companies should implement internal enterprise social networks, if for no other reason than they are cheaper and easier than other systems to operate and reduce expenses in other areas. The systems also improve productivity, in some cases dramatically. Companies should provide incentives if they must to encourage adoption of the new collaboration methods. Executives should be the first to use them which will speed their adoption.

Executives must also tie these networks to financial results. Management must also encourage the necessary organizational cultural changes to help make the social networking tools a success.

(Learning Objective 2-1: What are business processes? How are they related to information systems? Learning Objective 2-3: Why are systems for collaboration, social business, and knowledge management so important, and what technologies do they use? AACSB: Analytical thinking, Application of knowledge)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

2-16 Identify and describe the capabilities of enterprise social networking software.

View rubrics in MyLab MIS.

2-17 Describe the systems used by various management groups within the firm in terms of the information they use, their outputs, and groups served.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 3 Achieving Competitive Advantage with Information Systems

Learning Objectives

3-1 How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage?

3-2 How do information systems help businesses compete globally?

3-3 How do information systems help businesses compete using quality and design?

3-4 What is the role of business process management (BPM) in enhancing competitiveness?

3-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline

3-1

How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage?

Porter‘s Competitive Forces Model Information System Strategies for Dealing with Competitive Forces The Internet‘s Impact on Competitive Advantage The Business Value Chain Model Synergies, Core Competencies, and Network-Based Strategies Disruptive Technologies: Riding the Wave

3-2

How do information systems help businesses compete globally?

The Internet and Globalization Global Business and System Strategies Global System Configuration

3-3

How do information systems help businesses compete using quality and design?

What is Quality?

How Information Systems Improve Quality

3-4

What is the role of business process management (BPM) in enhancing competitiveness?

What is Business Process Management?

3-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

3-D printing, 98

Mass customization, 84

Benchmarking, 88

Multinational, 95

Best practices, 89

Network economics, 92

Business ecosystem, 92

Platforms, 92

Business process management (BPM), 99

Primary activities, 88

Business process reengineering (BPR), Quality, 96 101 Competitive forces model, 81

Six Sigma, 97

Computer-aided design (CAD) system, 98

Support activities, 88

Core competency, 91

Switching costs, 85

Cycle time, 97

Total quality management (TQM), 96

Disruptive technologies, 93

Transnational, 95

Domestic exporter, 95

Value chain model, 86

Efficient customer response system, 84

Value web, 90

Franchiser, 95

Virtual company, 91

Teaching Suggestions The opening case, ―Technology Helps Starbucks Find Better Ways to Compete?‖ illustrates some of the ways that information systems help businesses sustain a competitive advantage and use technology to improve the in-store customer experience.

While Starbucks is introducing new food and drink options to improve customer satisfaction, it’s also providing several technologies including free Wi-Fi, and a mobile app that allows customers to order and pay without waiting in lines. The mobile app also includes a feature that can identify the songs being played in the store and save them to a playlist on Spotify.

Starbucks is also hoping customers will provide their e-mail addresses which allows the company’s software to instantly connect the customer to the Internet. Obtaining e-mail also gives Starbucks the opportunity to interact with the customer and target them with customized promotions.

Section 3-1: How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage?

This section is one of the most critical sections in the text. Understanding business strategy and how information systems can aid employees in making far-reaching and deep-rooted decisions is critical to the long-range success of any corporation. At this point, students need to focus on business level strategies and the various ways firms achieve an advantage over other firms.

They will learn how to use these strategies in order to address a key question: How can we compete effectively in a particular market?

The firm-level and industry-level strategies are analyzed in this section, and a key analytical tool, the competitive forces model, is introduced: traditional competitors, new market entrants, substitute products and services, and customer and supplier intimacy.

Take the opportunity to remind students that ―Basic Strategy 101: Align the IT with the Business Objectives‖ is one of the most important concepts they’ll learn in this class. Technology must serve the business, and business people must take an active role in helping shape IT in a business.

It’s a great exercise to have students name businesses and companies that use information system strategies for dealing with competitive forces: low cost leadership, product differentiation, focus on market niche, and strengthening customer and supplier intimacy. Ask your working students to describe the strategies pursued by their organizations.

Use Figure 3-2 (page 89) to raise class discussion on the value chain model. The text defines ―value chain‖ and its critical role in the success of a company, including its relationship to how companies think about and relate to their customers.

Ask your students to apply the value chain model to your university to see where technology is applied.

Note the emphasis on tying together the customers, manufacturers, and suppliers. Retailers such as Walmart also apply value chain and supply chain management principles. Walmart’s systems allow it to track in-store sales down to the department and item level, thus one can see why Walmart is such a strong competitor.

Students may identify closely with the section on disruptive technologies since they are likely to have experienced some of them firsthand. Table 3.4 (page 84) can be a great start to a lively discussion about the phenomenon. Ask your students to guess which ones might be coming in their lifetimes.

Interactive Session: Technology: Smart Products—Coming Your Way

Case Study Questions

1. Describe the role of information technology in the products described in this case. How is it adding value to these products? How is it transforming these products?

Role of information technology: Everyday products from shoes to toothbrushes to home thermostats will soon have sensors and metering devices connected to the internet. All the data generated by the use of these products will be collected and analyzed.

Value add: Some of the data will enhance the use and function of the devices for consumers. For example, a smart utility meter will let the company know when a customer loses service, resulting in faster repairs, and will also provide real-time billing information to customers based on energy usage, enabling them to pinpoint areas for energy savings. Companies will also be able to use the data to learn more about how customers use their products, enhance targeted marketing, and generate revenue from selling data or in-app ads and purchasing functions.

Product transformation: Products will get smarter and be more easily and effectively used. For example, Under Armour is trying to enhance its performance clothing with digital technology. Products will include services and apps that enhance their use and create new business opportunities.

2. How are these smart products changing operations and decision making for these organizations? How are they changing the behavior of their users?

Smart products expand opportunities for product and service differentiation, while enabling companies to improve both the product and the customer experience. Organizations can collect data that can help improve operations and decision making. They can use data to build ties to customers that will lead to

better services and stronger sales. For example, smart meters for electric utility customers permit more definitive voltage regulation, enhancing electric distribution-system efficiency, reducing costs, and providing savings that ultimately get reflected in lower customer bills.

Users will have more control of how and when they use smart products. For example, smart products enable fitness buffs to monitor their runs or bike rides, share stats, and compete with friends.

Customers with smart thermostats can use an online account dashboard with tools to track and improve their daily energy consumption.

3. Are there any ethical issues raised by these smart products, such as their impact on consumer privacy? Explain your answer.

There are always potential ethics issues when companies collect customer personal data. For example, Under Armour may choose not to sell identifiable personal data about individuals to third parties but does provide advertisers with aggregate information about app users. As more and more data get collected, it will be difficult to ensure that is used legally and ethically.

Section 3-2: How do information systems help businesses compete globally?

In this section, you can highlight the concept of competing in what has been referred to as the ―global village‖ or the more expansive term, ―globalization.‖ With a click of a mouse, customers can connect to websites and browse catalogs, order products, and obtain general or specific information. This arena is growing exponentially and is expected to continue to grow even faster.

The breadth and depth of this coverage will depend on faculty preferences, student backgrounds, and the orientation of the course. You may wish to point out that competing on the global scale is tempting but also very complex to set up and maintain. Specifically, this external environment is composed of foreign, international, and domestic components. An array of cultural, legal, political, economic, and technological characteristics that may directly influence the IS function can be incorporated in the context of this discussion. Ask students why organizations want to compete on a global scale. Let them consider all the business drivers that motivate firms and other organizations to ―go global.‖ Have students list how many of their friends and relatives work for organizations that do business on a global scale. Ask them how they are using the internet to expand their operations in foreign countries.

You might want to have students examine the difficulties of doing business in places like Eastern Europe, Russia and countries that were part of the former Soviet Union, and Vietnam. Case studies on these countries show students that political turmoil and cultural hostility, particularly in Russia, are just as big a barrier as the lack of an information infrastructure. What business drivers are encouraging firms to move to countries that have inherent political and cultural barriers?

The business challenges need to be considered in some detail. Cultural barriers and misunderstandings mean that some nations or nationalist movements within a country are not interested in globalization. The resistance of some Islamic groups to Westernization is an example. The unwillingness of China, Singapore, and Malaysia to allow unfettered intercommunication and internet access are examples of problems global companies likely face. Even in the European Union there is resistance to transnational data flows, particularly data moving outside the Union. While there has been some deregulation of the national telephone systems, it is still more difficult to hook up phones, use modems, or set up data and telecommunication systems than in the United States. Further, some nations have local content rules that make it more costly or difficult to internetwork.

Using some of the sources found in business magazines and journals, such as The Wall Street Journal, Business Week, Fortune, or Forbes, have students examine some stories of businesses who are successfully competing on a global scale. Have them determine which system strategy the companies likely use: domestic exporter, multinational strategy, franchisers, or transnational.

Section 3-3: How do information systems help businesses compete using quality and design?

This section provides students with an introduction to the methodology of competing on quality and design. In many instances, this process results in redesigning the organization. Although some of the techniques and methods are considered older or less satisfactory, students have a good chance of seeing these methods in the workplace. It is not a good idea to engage in a lengthy, philosophical discussion of the superiority of methods. However, it is a good idea to help students understand that there is no one best method, that each method is appropriate depending upon the situation and the requirements.

Section 3-4: What is the role of business process management (BPM) in enhancing competitiveness?

Change certainly should be a theme throughout the entire course. It takes a change agent to manage major changes, such as those brought on by business process management (BPM) and business process reengineering (BPR). Highlight the difference between the two terms: BPM is incremental and ongoing; BPR is a more radical approach to rethinking and redesigning business processes. Business process reengineering is a good example of the problems that information systems can face. First, people react negatively to what they may view as a buzzword. Secondly, business process reengineering implies, probably correctly, that the organization is either not doing things correctly or that the environment has changed, and the old ways will not work anymore. It takes some crises or changes in the environment to induce or engender the call for reengineering.

If you have the class time, ask your students to investigate recent horror stories of BPM and BPR projects that went wrong. Have them share their findings with the class and analyze why the projects failed.

Interactive Session: Organizations: Tommy Hilfiger Transforms Its Wholesale Sales Process with Digital Showrooms

Case Study Questions

1. How did Tommy Hilfiger’s previous wholesale sales process affect its business performance?

Hilfiger‘s management wanted the firm to take better advantage of digital technology to improve the way it operated. The wholesale sales process cried out for streamlining and simplification because it was a slow, manual process.

2. What people, organization, and technology factors contributed to Tommy Hilfiger’s problems with its wholesale sales business process?

People: Several times per year, buyers of Hilfiger merchandise for retail stores and department store chains would have to personally visit a Hilfiger wholesale showroom, which displayed physical samples of each item in the Hilfiger product line for the upcoming sales season. The buyers would inspect physical samples from a new collection and write down orders on paper order forms. The entire process of viewing and ordering items to stock retail stores might take three days.

Organization: Tommy Hilfiger encompasses eight sub brands, each selling 1,500 pieces of clothing every quarter. That translates into a great deal of product to create just to show and sell samples to a wholesale buyer and then produce them to sell to the end customer.

Technology: The company relied on writing down orders on paper order forms.

3. Diagram Tommy’s Hilfiger’s old and redesigned business process for ordering merchandise for a retail department store.

The old wholesale process of viewing and ordering items to stock retail stores was manual and slow. Manual processes slowed down processing and increased the chances of human error.

The ―digital transformation team‖ spent several weeks in Hilfiger showrooms observing how sales people worked with retail and department store buyers. The team recommended streamlining the wholesale ordering process by using digital showrooms to shorten the window between retailer previews of new collections and final delivery of new products to stores.

4. Describe the role of technology and digital showrooms in Tommy Hilfiger’s business process changes.

The team recommended streamlining the wholesale ordering process by using digital showrooms to shorten the window between retailer previews of new collections and final delivery of new products to stores. The digital showrooms feature interactive touchscreen workstations with ultrahigh-definition display screens where buyers can view every single item in the Tommy Hilfiger collection. They can zoom in to see design details and textures, and click every garment to display prices, color options, and size ranges, and place orders.

At the end of the process, buyers receive an email with an attached PDF document containing their final order. The system arranges for order delivery. Tommy Hilfiger used the Couchbase Data Platform as the technology foundation for its digital showroom. Couchbase uses NoSQL nonrelational data management technology (see Chapter 6), which provides more flexibility and scalability than traditional data management tools.

5. How did Tommy Hilfiger’s redesigned business process change the way the company worked? What was the business impact? Explain.

The digital showroom system has minimized production and transport of showroom samples because there is much less need to create, examine, and deliver samples to showroom locations around the world for every new collection.

Using the digital showroom, Tommy Hilfiger was able to cut sample production by 80 percent in European headquarters, and it’s doing the same with its digital showrooms all over the world. Costs to transport physical samples have also been reduced.

Section 3-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as an entry-level business development representative. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

3-1 How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage?

Define Porter’s competitive forces model and explain how it works.

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

(Learning Objective 1: How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage? AACSB: Application of knowledge) List and describe four competitive strategies enabled by information systems that firms can pursue.

The four generic strategies, each of which often is enabled by using information technology and systems include:  Low-cost leadership: Lowest operational costs and the lowest prices.  Product differentiation: Enable new products and services, or greatly change the customer convenience in using existing products and services.  Focus on market niche: Enable a specific market focus and serve this narrow target market better than competitors.  Strengthen customer and suppliers: Tighten linkages with suppliers and develop intimacy with customers.

(Learning Objective 1: How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage? AACSB: Application of knowledge.)

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

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

Product differentiation: Use information systems to create products and services that are customized and personalized to fit the precise specifications of individual customers. Examples: Google, eBay, Apple, Lands’ End. Focus on market niche: Use information systems to produce and analyze data for finely tuned sales and marketing techniques. Analyze customer buying patterns, tastes, and preferences closely in order to efficiently pitch advertising and marketing campaigns to smaller target markets. Examples: Hilton Hotels, Harrah’s.

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

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

The basic principle of IT strategy for a business is to ensure that the technology serves the business and not the other way around. The more successfully a firm can align its IT with its business goals, the more profitable it will be. Business people must take an active role in shaping IT to the enterprise. They cannot

ignore IT issues. They cannot tolerate failure in the IT area as just a nuisance to work around. They must understand what IT can do, how it works, and measure its impact on revenues and profits.

Define and describe the value chain model.

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

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

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

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

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

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

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

Because of the internet, competitive rivalry has become much more intense. Internet technology is based on universal standards that any company can use, making it easy for rivals to compete on price alone and for new competitors to enter the market. Because information is available to everyone, the internet raises the bargaining power of customers, who can quickly find the lowest-cost provider on the web.

Explain how information systems promote synergies and core competencies that enhance competitive advantage.

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

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

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

Explain how businesses benefit by using network economics.

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

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

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

A virtual company uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations. One company can use the capabilities of another company without being physically tied to that company. The virtual company model is useful when a company finds it cheaper to acquire products, services, or capabilities from an external vendor or when it needs to move quickly to exploit new market opportunities and lacks the time and resources to respond on its own.

Define and describe a business ecosystem and how it can provide competitive advantage.

Instead of participating in a single industry, some of today’s firms participate in industry sets—collections of industries that provide related services and products that deliver value to the customer. Business ecosystem is another term for these loosely coupled but interdependent networks of suppliers, distributors, outsourcing firms, transportation service firms, and technology manufacturers. Information technology plays an important role in enabling a dense network of interactions among the participating firms. Business ecosystems typically have one or a few keystone firms that dominate the ecosystem and create the platforms used by other niche firms.

Explain how disruptive technologies create strategic opportunities.

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

Disruptive technologies caused by technological changes can have different effects on different companies depending on how they handle the changes. Some companies create the disruptions and succeed very well.

Other companies learn about the disruption and successfully adopt it. Other companies are obliterated by the changes because they are very efficient at doing what no longer needs to be done. Some disruptions mostly benefit the firm. Other disruptions mostly benefit consumers.

(Learning Objective 1: How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network-based strategies help companies use information systems for competitive advantage? AACSB: Application of knowledge) 3-2 How do information systems help businesses compete globally?

Describe how globalization has increased opportunities for businesses.

Information systems and the internet help companies operate internationally by facilitating coordination of geographically dispersed units of the company and communication with faraway customers and suppliers.

Businesses today want to be competitive in the world economy because it opens up new markets, provides avenues to new suppliers, and decreases (in some cases) the costs of doing business. Firms that can sell their products on a global scale can reach a much larger marketplace; firms that can produce goods and services on a global scale can also achieve extraordinary cost reductions, permitting them to reduce costs or at least keep the costs down. Firms that cannot compete on this global scale are disadvantaged.

List and describe the four main ways of organizing a business internationally and the types of systems configuration for global business organizations.

There are four main ways of organizing a business internationally: 

Domestic exporter: heavy centralization of corporate activities in a home country. Production, sales, marketing, finance, and other such functions are set up to optimize resources in the home country.

Foreign marketing is totally reliant on the domestic home base.



Multinational: concentrates financial management and control in a central home base, but decentralizes production, sales, and marketing to suit local market conditions.



Franchiser: create, design, and finance the product in the home country, but rely on foreign operations for further production, marketing, and human resources. Often, the product must be produced locally because it is perishable.



Transnational: a stateless, truly globally managed firm. It has no single national headquarters, but instead has many regional headquarters and perhaps a world headquarters. Nearly all of the valueadded activities are managed from a global perspective without reference to national borders.

According to Figure 3.5 (page 96), there are four different system configurations: 

Centralized: systems development and operations occur totally at the domestic home base.



Duplicated: systems development occurs totally at the home base, but operations are handed over to autonomous units in foreign locations.



Decentralized: each foreign unit designs its own, totally unique solutions and systems.



Networked: systems development and operations occur in an integrated and coordinated fashion across all units.

(Learning Objective 2: How do information systems help businesses compete globally? AACSB: Application of knowledge) 3-3 How do information systems help businesses compete using quality and design?

Define quality and compare the producer and consumer definitions of quality.

Quality is a form of differentiation. It can be defined from both producer and customer perspectives. 

Producer definition of quality: Signifies conformance to specifications or the absence of variation from those specifications.



Customer definition of quality: First, customers are concerned with the quality of the physical product, which means its durability, safety, ease of use, and installation. Second, customers are concerned with the quality of service, by which they mean the accuracy and truthfulness of advertising, responsiveness to warranties, and ongoing product support. Finally, customer concepts of quality include psychological aspects: the company’s knowledge of its products, the courtesy and sensitivity of the sales and support staff, and the reputation of the product.

Describe the various ways in which information systems can improve quality.

Information systems can enhance quality by: 

Simplifying a product or service and the production process. The fewer steps in a process, the less time and opportunity for an error to occur.



Facilitating benchmarking. To set strict standards for products, services, and other activities, and then measure performance against those standards.



Using customer demands to improve products and services. By improving customer service and making it the number one priority, the quality of the product itself will improve.



Reducing product development cycle time. Shorter cycle times mean that problems are caught earlier in the process, often before the production of a defective product is completed, saving some of the hidden costs of producing it. Employees are less likely to make mistakes with shorter cycle times.



Improving design quality and precision. Computer-aided design (CAD) software has been a major contributor to quality improvements in many companies. CAD systems automate the creation and revision of designs, using computers and sophisticated graphics software.

Improving production precision and tightening production tolerances. Quality can be enhanced by making the production process more precise, thereby decreasing the amount of variation from one part to another.

(Learning Objective 3: How do information systems help businesses compete using quality and design?

AACSB: Application of knowledge)

3-4 What is the role of business process management (BPM) in enhancing competitiveness?

Define BPM and explain how it helps firms become more competitive.

Business process management (BPM) aims to continuously improve business processes using a variety of tools and methodologies to understand existing processes, design new processes, and optimize those processes. BPM is never concluded because continuous improvement requires continual change.

Organizations often have to change their business processes in order to execute their business strategies successfully. If these business processes use technology, they can be redesigned to make the technology more effective.

Distinguish between business process management (BPM) and business process reengineering (BPR).

Business process management (BPM) is generally incremental and ongoing. Business process reengineering (BPR) is a more radical approach to rethinking and redesigning business processes. Both of them pose many managerial challenges. BPR is defined as the radical redesign of business processes, combining steps to cut waste and eliminating repetitive, paper-intensive tasks to improve cost, quality, and service and to maximize the benefits of information technology.

BPR combines and streamlines the steps in a business process to eliminate repetitive and redundant work and to achieve dramatic improvements in quality, service, and speed. BPR is most effective when it is used to strengthen a good business model and when it strengthens processes that have a major impact on firm performance.

Executives report that the largest single barrier to successful business process change is organizational culture. Employees do not like unfamiliar routines, and often try to resist change. This is especially true of business process reengineering projects because the organization changes are so far-reaching.

List and describe the steps companies should take to make sure BPM is successful.

Steps companies can take to make sure BPM is successful include: 1. Identify processes for change: organizations need to understand what business processes need improvement. Managers need to determine what business processes are the most important and how improving these processes will help the business performance.

2. Analyze existing processes: existing business processes should be modeled and documented, noting inputs, outputs, resources, and the sequence of activities. The process design team identifies redundant steps, paper-intensive tasks, bottlenecks, and other inefficiencies.

3. Design the new process: the process design team will try to improve the process by designing a new one. A new streamlined ―to-be‖ process will be documented and modeled for comparison with the old process. The new process design needs to be justified by showing how much it reduced time and cost or enhanced customer service and value.

4. Implement the new process: The new process must be translated into a new set of procedures and work rules. New information systems or enhancements to existing systems may have to be implemented to support the redesigned process. The new process and supporting systems are rolled out into the business organization.

5. Continuous measurement: The new process must be continually measured because some process may deteriorate over time as employees fall back on old methods, or they may lose their effectiveness if the business experiences other changes.

(Learning Objective 4: What is the role of business process management (BPM) in enhancing competitiveness? AACSB: Application of knowledge)

Discussion Questions

3-5 It has been said that there is no such thing as a sustainable competitive advantage. Do you agree? Why or why not?

Student answers to this question will vary.

3-6 What are some of the issues to consider in determining whether the internet would provide your business with a competitive advantage?

Student answers to this question will vary.

3-7 It has been said that the advantage that leading-edge retailers such as Walmart have over competitors isn’t technology – it’s their management. Do you agree? Why or why not?

Student answers to this question will vary.

Hands-On MIS Projects

Management Decision Problems

3-8 Macy’s Inc.

Macy‘s wants to tailor merchandise more to local tastes based on sales patterns in each individual store. How could information systems help management implement this new strategy? What pieces of data should these systems collect to help management make merchandising decisions that support this strategy?

By collecting small pieces of sales data such as size, style, price, and even the time of purchases, each individual store can analyze local sales. Demographic information pulled in from external

sources would allow each store to analyze its local customers better and distinguish the typical customer that‘s likely to shop there. Flattening the organizational hierarchy allows local store management to decide which items to stock rather than distant managers who may not be as aware of local trends. Improving the efficient customer response system would directly link local consumer behavior to distribution, production, and supply chains. Focusing on market niches would allow local Macy‘s store managers to narrowly target local markets better than the competitors.

(Learning Objective 1: How do Porter‘s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies use information systems for competitive advantage? AACSB: Analytical thinking, Application of knowledge)

3-9 Tracfone Wireless

Despite its rock-bottom rates for mobile voice and data services, Tracfone‘s growth has been slowing. Management wants to know why this is happening and what can be done to attract more customers. Are customers rejecting Tracfone because of poor customer service, uneven network coverage, or low-cost wireless service charges offered by competitors such as Sprint and TMobile? How can the company use information systems to help find the answer? What management decisions could be made using information from these systems?

Using the Strategic Systems Analysis in Section 3-4, management should consider these organizational features:

    

What are the competitive forces at work in the industry, specifically the relative power of suppliers, customers, and substitute services over prices?

Is the basis of competition quality, price, or brand?

How is the industry currently using information technology, and is the organization behind or ahead of the industry in its application of information systems?

How is the company creating value for the customer?

What are the organization‘s core competencies?

Management should make these decisions to ensure the strategy works:

 

Has senior management correctly articulated an appropriate business strategy and goals for the organization?

Is the company using the right metrics to measure progress toward those goals?

(Learning Objective 1: How do Porter‘s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies use information systems for competitive advantage? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

Improving Decision Making: Using a Database to Clarify Business Strategy

Software skills: Database querying and reporting; database design.

Business skills: Reservation systems; customer analysis

3-10

This exercise encourages students to develop queries and reports to help them make better use of transaction data to understand their business. From analyzing these data, the hotel owners should be able to find ways of generating more revenue. The solutions provided here were created using the query wizard and report wizard capabilities of Access. Students can, of course, create more sophisticated reports if they wish, but valuable information can be obtained from simple query and reporting functions.

The existing database can be easily queried to find out the average length of stay per room type, the average number of visitors per room type, and the base income per room during a specified period of time. One can see from these queries and reports that ocean-facing rooms are the most popular and rooms overlooking side streets are the least popular. Side rooms appear to have the most occupants per room and longer average stays, suggesting that they are used primarily by budget-conscious families on vacation. The owners could consider raising the rates for oceanfacing rooms or emphasizing ocean views in their advertising and promotions. Additionally, they could step up promotions of their family vacation packages to increase occupancy rates for side rooms.

To answer questions more precisely about the strongest customer base or what types of packages to promote, additional information is required. The database would have to be modified to capture information on whether the rooms were actually rented using the vacation package, business discount package, or romantic weekend package options. The database could also be modified to more clearly identify discounts for long stays or extra charges for more than four guests. (The existing database reflects such discounts and charges in the room rate.) Students should be encouraged to think creatively about what other pieces of information should be captured on the database that would help the owners think strategically.

The answers for the report can be found in the Microsoft Access File named: Ess13ch03solutionfile.mdb.

(Learning Objective 1: How do Porter‘s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies use information systems for competitive advantage? AACSB: Analytical thinking, Application of knowledge)

Improving Decision Making: Using Web Tools to Configure and Price an Automobile

Software skills: Internet-based software Business skills: Researching product information and pricing

3-11 Answers will vary a great deal, and with the option of choosing a car other than the Ford Escape, each student will more than likely turn in a different report. You might suggest that the students use an Excel spreadsheet to compare the auto information from each of the websites. This will allow them to see line-byline, the differences and similarities between the prices, safety ratings, features, etc. Also, have the students write a brief summary of the reviews they read concerning the car and, in their final report, tell which decision they made, referring back to the reviews. The final report should also include a review of the websites with suggestions for improvement.

(Learning Objective 1: How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies use information systems for competitive advantage? AACSB: Written and oral communication, Analytical thinking, Application of knowledge)

Collaboration and Teamwork Project

3-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: Grocery Wars

3-13 Analyze Walmart and Amazon.com using the competitive forces and value chain models.

Walmart: It is the largest seller of groceries in the United States, and with Sam’s Club, accounts for about 25 percent of the US grocery market. Grocery accounts for 56 percent of Walmart’s total sales, and grocery shopping is a major driver of store traffic and customer loyalty. Walmart has invested and tested in clickand-collect programs, stand-alone grocery pick-up sites, and scanning and paying for items with smartphones.

Amazon: In 2017, Amazon acquired Whole Foods. The acquisition was the company’s largest and sent shock waves throughout the grocery industry. Before acquiring Whole Foods, Amazon had been expanding into groceries and physical locations, including bookstores, two Seattle drive-through grocery stores where customers can pick up online orders, and a convenience store called Amazon Go that uses sensors and software to let shoppers pay for purchases without waiting in line to check out.

(Learning Objective 3-1: How do Porter‘s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies use information systems for competitive advantage? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

3-14 Compare the role of grocery sales in Amazon and Walmart’s business strategies.

Grocery is where Walmart really shines. Online grocery sales have been a key part of Walmart’s ecommerce sales, and management expects online grocery expansion to be the main driver of Walmart’s sales growth going forward. The move into home delivery will help get more of Walmart’s in-store shoppers to start buying online as well, where they typically spend twice as much as in-store shoppers.

Several analysts have observed that Whole Foods’ urban and suburban locations are so valuable for Amazon’s delivery business that the deal could be worthwhile even if Whole Foods pretty much stopped selling food. When Amazon bought Whole Foods, it acquired 431 US upper-income, primelocation distribution points for everything it does.

Online grocery spending is growing much faster than traditional grocery shopping and could account for as much as 20 percent of total US food and beverage sales—more than $100 billion—by 2025.

(Learning Objective 3-1: How do Porter‘s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies use information systems for competitive advantage? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

3-15 What role does information technology play in each of these businesses?

Selling groceries online requires being able to deliver them in an accurate and timely manner. This has not been easy for Walmart, and inefficiencies or mistakes in fulfilling orders adds to costs. The company is intent on maintaining its position as the leading US grocer. Walmart has invested and tested in click-and-collect programs, stand-alone grocery pick-up sites, and scanning and paying for items with smartphones.

Information technology enables Amazon’s expertise in supply chain and delivery. The company plans to roll out same-day delivery service to more cities. Amazon and Whole Foods are integrating their point-of-sale systems to enable more of Amazon’s brands to be available at Whole Foods, and vice versa.

(Learning Objective 3-3: How do information systems help businesses compete using quality and design? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

3-16 Which company will dominate retailing? Explain your answer.

Student answers will vary. The winner of this epic struggle will be which company leverages its advantage better. While Walmart is struggling to improve its online presence, its real focus remains its brick-and-mortar stores. While Amazon appears to be ahead of Walmart in the ecommerce battle, it is working to expand its physical stores through the acquisition of Whole Foods.

Amazon is working on expanding its selection of goods to be as exhaustive as Walmart‘s. Amazon has allowed third-party sellers to sell goods through its website for a number of years, and it has dramatically expanded product selection through acquisitions such as its 2009 purchase of online shoe shopping site Zappos.com to give Amazon an edge in footwear.

(Learning Objective 3-3: How do information systems help businesses compete using quality and design? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

3-17 Describe the impact of the internet on each of the five competitive forces.

View rubrics in MyLab MIS.

3-18 Describe how computer-aided design (CAD) systems improve quality and operational efficiency.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 4 Ethical and Social Issues in Information Systems

Learning Objectives 6.

7.

8.

9.

10.

11.

4-1 What ethical, social, and political issues are raised by information systems?

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

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

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

4-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline

12.

4-1

What ethical, social, and political issues are raised by information systems?

A Model for Thinking about Ethical, Social, and Political Issues Five Moral Dimensions of the Information Age Key Technology Trends That Raise Ethical Issues 13.

4-2

What specific principles for conduct can be used to guide ethical decisions?

Basic Concepts: Responsibility, Accountability, and Liability Ethical Analysis Candidate Ethical Principles Professional Codes of Conduct Some Real-World Ethical Dilemmas 14.

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

Information Rights: Privacy and Freedom in the Internet Age Property Rights: Intellectual Property 15.

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

Computer-Related Liability Problems System Quality: Data Quality and System Errors Quality of Life: Equity, Access, and Boundaries Health Risks: RSI, CVS, and Cognitive Decline 4-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Accountability, 122

Liability, 122

Carpal tunnel syndrome (CTS), 141

Nonobvious relationship awareness (NORA), 121

Computer abuse, 139

Opt-in, 129

Computer crime, 139

Opt-out, 129

Computer vision syndrome (CVS), 141

Patent, 131

Cookies, 128

Privacy, 124

Copyright, 130

Profiling, 121

Digital divide, 140

Repetitive stress injury (RSI), 140

Digital Millennium Copyright Act,

Responsibility, 122

(DMCA), 133 Due process, 122

Risk aversion principle, 123

Ethical no-free-lunch rule, 123

Safe harbor, 127

Ethics, 118

Slippery slope rule, 123

Fair Information Practices (FIP), 125

Spam, 139

General Data Protection Regulation (GDPR), 126

Spyware, 129

Golden Rule, 123

Trade secret, 132

Immanuel Kant‘s categorical imperative, 123

Trademarks, 132

Information rights, 119

Utilitarian principle, 123

Informed consent, 129

Web beacons, 128

Intellectual property, 130

Teaching Suggestions

This is an interesting, stimulating chapter to present in class with the opportunity to create dynamic discussions. Your students will have a variety of opinions about the ethical issues presented in this chapter.

You may want to open the discussion by asking if any students have had first-hand experiences with personal data compromises. You may also ask students how they defend themselves against misuse of information systems and data. Most of them probably don’t.

The opening case, ―Are Cars Becoming Big Brother on Wheels?‖ shows that technology can be a doubleedged sword. It can be the source of many benefits such as locating an automobile maintaince problem. It can also create new opportunities for breaking the law or taking benefits away from others. Technology has created new opportunities and challenges regarding privacy issues.

Students may not realize that since 2014, every new car is equipped with an event data recorder (EDR) that records over a dozen datapoints including speed, seat belt use, and braking activity. In addition, when signing up for additional services, this may have provided consent to collect additional information providing a trove of data for automobile companies, Google, Spotify, and others to collect. In the future, newer cars will potentially track eye movements, the weight of drivers and passengers, and whether the driver is on the steering wheel. Yikes!

Section 4-1: What ethical, social, and political issues are raised by information systems?

Many people do not want to discuss or even think about technology-related ethical and social issues, at least not until a large scandal takes place that may affect them personally, like the Target Department Store data breach that occurred in December 2013. However, the use of new technology always presents these kinds of problems.

Throughout this chapter it is imperative that you discuss these issues so that students can see both the positive and negative sides of technology. It’s important for students to understand that almost every technology improvement opens the door to potential misuse and abuse. Table 4-2 (page 120) discusses technology trends that have helped create some of the ethical issues our society is now facing.

Ask your students to use Figure 4-1 to identify what they feel would be the five moral dimensions of information systems as it relates to their school. When asking them to complete this project, stress to them that the main management challenges posed by the ethical and social impact of information systems are the need to understand the moral risk of new technology and the difficulty of establishing corporate ethics policies that address information systems’ issues. For each of the five moral dimensions of information systems, corporations should develop a corporate ethics policy statement to guide individuals and to encourage appropriate decision making. The policy areas are: (1) information rights and obligations, (2) property rights and obligations, (3) system quality, (4) quality of life, and (5) accountability and control.

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

This section provides the basic concepts of responsibility, accountability, and liability as they apply to information systems’ issues. It’s easy to blame problems on a computer system but you should remind students that behind every computer is a human being. People have the responsibility to make wise decisions about how information systems are used and how data are protected against abuse and misuse.

Using the five-step process outlined in the subsection ―Ethical Analysis‖ leads the way to abiding by the ethical principles. You may want to review how codes of conduct apply to each information system user and manager.

You may want to discuss recent legal activity regarding Twitter postings and web postings. Lawsuits alleging slander and libel have been filed against people posting tweets that target individuals and businesses. Even though most of these lawsuits have not been settled, students should understand the accountability issues associated with everything they do and say on the internet.

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

This section is designed to teach students how they should protect information systems and data. Although most people immediately think of their own data, students should understand that they will have a responsibility to protect other people’s data once they enter the workforce, even if they don’t work in the Information Technology Department.

Regardless of how many laws governments pass, they are only as effective as those people who abide by them. Compare the opt-out privacy practices of U.S. companies vs. the opt-in privacy policies practiced in European Union countries. Have students give examples of how U.S. companies would have to change their business processes to accommodate EU rules.

This section provides more detail about the five moral dimensions mentioned in the first section.

Information technology makes it very easy to violate each of the dimensions. It’s important for students to

understand that intellectual property rights extend to most of the content they’ll find on the internet. Ask students how they would feel if they spent hours and hours creating content only to find out that someone else had swiped it and used it without permission or remuneration.

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

When discussing accountability, liability, and control, ask students if they have first-hand experience with data errors. Examples might include credit bureau errors, checking account errors, or incorrect information recorded in their student records. If so, ask them to explain the kinds of problems they experienced because of the errors. Then ask them to explain who they think should be responsible for detecting and correcting the errors.

Because most students probably have a Facebook account, it’s a good way to discuss how involved they should be in determining a company’s privacy policies. Facebook has had thousands of customers complain about its lack of concern for users’ privacy; in fact, thousands of users have quit using Facebook because of this issue. Ask students if they are aware of Facebook’s privacy policy. Have they even read it?

If not, why not? Are they concerned about the massive amount of data Facebook collects on them and that it uses their information to sell advertising, enriching the company but not the individual? Ask students to research Facebook’s privacy policies and give their opinion.

Interactive Session: Technology: The Boeing 737 MAX Crashes: What Happened and Why? Case Study Questions: 1. What is the problem described in this case? Would you consider it an ethical dilemma? Why or why not?

Yes, the Boeing 737 Max crashes pose an ethical dilemma. Boeing was so intent on saving time and money with the 737 MAX that safety took a back seat. The company pressured the Federal Aviation Administration (FAA) to allow it to self-certify a large portion of the 737 MAX’s development. With little oversight, Boeing focused on improving fuel efficiency as much as possible in record time.

Boeing failed to disclose the complexity of the new system to the FAA and failed to provide adequate pilot documentation and training.

2. Describe the role of people, organization, and technology factors in the Boeing 737 MAX safety problems. To what extent was management responsible?

The original version of MCAS relied on data from at least two types of sensors, but Boeing’s final version used just one. In both the Lion Air and Ethiopian Air crashes, it was a single damaged sensor that sent the planes into irrecoverable nosedives. According to three FAA officials, Boeing never disclosed this change to MCAS to FAA staff involved in determining pilot training needs. When Boeing asked to remove the description of the system from the pilot’s manual, the F.A.A. agreed. Consequently, most MAX pilots did not know about the software until after the first crash.

Boeing did not provide 737 MAX test pilots with detailed briefings about how fast or steeply MCAS could push down a plane’s nose, and that the system relied on a single sensor—rather than two—to verify the accuracy of incoming data about the angle of a plane’s nose.

Lawsuits will ultimately determine the extent to which management was responsible.

3. Is the solution provided by Boeing adequate? Explain your answer.

No. All 737 MAX planes are grounded and the future of the plane and Boeing itself are clouded.

All pilots flying 737 MAX planes were never trained using flight simulators. Instead, Boeing presented two-hour lessons about the new plane using iPads and gave pilots a 13-page handbook explaining differences between the 737 MAX and earlier 737 models. Boeing never trained pilots on the new MCAS software, and many pilots did not know this capability existed.

4. What steps could Boeing and the FAA have taken to prevent this problem from occurring?

For starters, Boeing could have fully disclosed the effects of moving the engine on flight capabilities and exactly what the software did to adjust for the stalling problem to the FAA. They could have provided sufficient training, documentation, and simulator software to enable pilots to fly the plane safely.

Interactive Session: People: How Harmful Are Smartphones?

Case Study Questions

1. Identify the problem described in this case study. In what sense is it an ethical dilemma?

The problem is that there are indications that smartphone use has detrimental effects on some users.

Of particular concern in this case are the risks for addiction and stunted development among young people.

This case poses an ethical dilemma because the potential benefits of the technology have to weighed against the potential harmful effects to users (and society).

Should the smartphone manufacturer (or phone operating system provider) be able to unilaterally decide that parents should or should not be able to control their children‘s devices?

2. Should restrictions be placed on children’s and teenagers’ smartphone use? Why or why not?

This question should generate lively discussion. Consider some guiding questions:   

Studies indicate that there is the potential for harm. Do we know enough yet to devise helpful restrictions?

Who would be responsible for applying restrictions?

Would restrictions be enforceable?

3. Can the problem of smartphones reducing cognitive skills be solved? Why or why not? Explain your answer.

This question is difficult to answer definitively. Consider guiding questions: 

Assuming that the option of banning smartphone use by minors is off the table, what would we need to know before attempting to develop a solution?

   

What would a technological solution look like?

What would a social-cultural solution look like?

What would a legal solution look like?

Would the solution need to be developed as a combination of the above?

Section 4-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as a junior privacy analyst. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

4-1 What ethical, social, and political issues are raised by information systems?

Explain how ethical, social, and political issues are connected and give some examples.

Figure 4-1 can be used to answer this question. Information technology has raised new possibilities for behavior for which laws and rules of acceptable conduct have not yet been developed. The introduction of new information technology has a ripple effect, raising new ethical, social, and political issues that must be dealt with on the individual, social, and political levels.

Ethical, social, and political issues are closely related. Ethical issues confront individuals who must choose a course of action, often in a situation in which two or more ethical principles are in conflict (a dilemma). Social issues spring from ethical issues as societies develop expectations in individuals about the correct course of action. Political issues spring from social conflict and are mainly concerned with using laws that prescribe behavior to create situations in which individuals behave correctly.

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

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

Table 4-2 (page 120) summarizes the four key technological trends responsible for heightening ethical concerns. These trends include:



Computing power doubles every 18 months

   

Data storage costs rapidly decline Data analysis advances Networking advances Mobile device growth

Increasing computer power, storage, and networking capabilities including the internet, can expand the reach of individual and organizational actions and magnify their impacts. The ease and anonymity with which information can be communicated, copied, and manipulated in online environments are challenging traditional rules of right and wrong behavior. Mobile devices such as cell phones enable tracking and data collection without user consent or knowledge.

Differentiate between responsibility, accountability, and liability.

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

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

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

Due process is a related feature of law-governed societies and is a process in which laws are known and understood, and ability exists to appeal to higher authorities to ensure that the laws are applied correctly.

(Learning Objective 1: What ethical, social, and political issues are raised by information systems?

AACSB: Ethical understanding and reasoning; analytical thinking) 4-2 What specific principles for conduct can be used to guide ethical decisions?

List and describe the five steps in an ethical analysis.

The five steps in ethical analysis include: 1.

2.

3.

4.

5.

Identify and describe the facts clearly.

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

Identify the stakeholders.

Identify the options that you can reasonably take.

Identify the potential consequences of your options.

Identify and describe six ethical principles.

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

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

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

Slippery slope rule—If an action cannot be taken repeatedly, it is not right to take at all.

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

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



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

These principles should be used in conjunction with an ethical analysis to guide decision making. The ethical analysis involves identifying the facts, values, stakeholders, options, and consequences of actions.

Once completed, you can consider which ethical principle to apply to a situation to arrive at a judgment.

(Learning Objective 2: What specific principles for conduct can be used to guide ethical decisions?

AACSB: Ethical understanding and reasoning; Application of knowledge)

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

Define privacy and fair information practices.

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

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

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

Contemporary information systems technology, including internet technologies, challenges traditional regimens for protecting individual privacy and intellectual property. Data storage and data analysis technology enable companies to easily gather personal data about individuals from many different sources and analyze these data to create detailed electronic profiles about individuals and their behaviors. Data flowing over the internet can be monitored at many points. The activities of website visitors can be closely tracked using cookies, web beacons, and other web monitoring tools. Not all websites have strong privacy protection policies, and they do not always allow for informed consent regarding the use of personal information.

Explain how the European Directive on Data Protection affects firms and organizations that collect, store, or process personal information.

In 2018 the European Commission implemented the EU General Data Protection Regulation (GDPR), which is arguably the most important privacy legislation in the last twenty years. The GDPR is an updated framework for protecting PII (personally identifiable information).

The new framework is intended to:  Strengthen the rights of citizens to their own personal information and to strengthen oversight of firms to ensure they implement these individual rights.  Harmonize conflicting data protection standards among the 28 European block nations and create a single EU agency to implement and enforce the regulation.  Enforce these conditions worldwide for all organizations that operate in the EU, or process data pertaining to EU citizens, regardless of where the organization is located.

The GDPR is clearly aimed at Facebook, Google, Twitter, and other ad-based web businesses that build collections of personal data by tracking individuals across the web, merging that data with other data from

firms and data brokers, in order to build comprehensive digital images (profiles) and to target these persons with ads.

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

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

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

Nevertheless, there is an emerging consensus among all parties that greater transparency and user control (especially making opt-out of tracking the default option) is required to deal with behavioral tracking.

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

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

In addition to legislation, a few technologies can protect user privacy during interactions with websites.

Many of these tools are used for encrypting email, for making email or surfing activities appear anonymous, for preventing client computers from accepting cookies, or for detecting and eliminating spyware. For the most part, technical solutions have failed to protect users from being tracked as they move from one site to another.

List and define four different regimes that protect intellectual property rights.

Intellectual property is defined as tangible and intangible products of the mind created by individuals or corporations. Intellectual property is subject to a variety of protections under four different legal traditions:    

Copyright Patent law Trademarks Trade secrets

Traditional copyright laws are insufficient to protect against software piracy because digital material can be copied so easily. Internet technology also makes intellectual property even more difficult to protect because digital material can be copied easily and transmitted to many different locations simultaneously over the net.

Webpages can be constructed easily using pieces of content from other websites without permission.

(Learning Objective 3: Why do contemporary information systems technology and the internet pose challenges to the protection of individual privacy and intellectual property? AACSB: Ethical understanding and reasoning; Application of knowledge) 4-4 How have information systems affected laws for establishing accountability and liability and the quality of everyday life?

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

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

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

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

List and describe the principal causes of system quality problems.

Three principle sources of poor system performance are:   

Software bugs and errors Hardware or facility failures caused by natural or other causes Poor input data quality

Zero defects in software code of any complexity cannot be achieved and the seriousness of remaining bugs cannot be estimated. Hence, there is a technological barrier to perfect software, and users must be aware of the potential for catastrophic failure. The software industry has not yet arrived at testing standards for producing software of acceptable but not perfect performance.

Although software bugs and facility catastrophes are likely to be widely reported in the press, by far the most common source of business system failure is data quality. Few companies routinely measure the quality of their data, but individual organizations report data error rates ranging from 0.5 to 30 percent.

Another source of poor system performance includes outages at cloud computing service providers. More and more firms rely on cloud providers and centralize their data and operations with a small group of cloud providers. Outages have called into question the reliability and quality of cloud services.

Name and describe seven areas of negative social cost related to information technologies and systems.

The negative social costs of introducing information technologies and systems are beginning to mount along with the power of the technology. Seven areas where technology creates potential quality of life issues or negative social costs include:

Big Tech: Concentration of Economic and Political Power Big Tech firms become oligopolies and monopolies that dominate the Web and mobile platforms. The wealth created by these firms translates into political influence: these firms have amassed an army of lobbyists in Washington and state capitals to ensure legislation that might affect their market and tax concerns, reflects their interests. Small companies and competitors can be crushed, preventing new, innovative companies from market access, or surviving long enough to prosper as independent firms.

Rapidity of Change: Reduced Response Time to Competition Information systems have helped to create much more efficient national and international markets. Today’s rapid-moving global marketplace has reduced the normal social buffers that permitted businesses many years to adjust to competition. Time-based competition has an ugly side; businesses may not have enough time to respond to global competitors and may be wiped out in a year along with jobs. We stand the risk of developing a just-in-time society with just-in-time jobs and just-in-time workplaces, families, and vacations.

Maintaining Boundaries: Family, Work, and Leisure Ubiquitous computing, telecommuting, nomad computing, mobile computing and the do-anything-anywhere computing environment weaken traditional boundaries that separate work from family and just plain leisure.

Family and friends historically have provided powerful support mechanisms for individuals, and they act as balance points in a society by preserving private life, providing a place for people to collect their thoughts, think in ways contrary to their employer, and dream.

Dependence and Vulnerability Businesses, governments, schools, and private associations, such as churches, are incredibly dependent on information systems and are, therefore, highly vulnerable if these systems fail. Think of what would happen if the nation’s electric power grid shut down, with no backup structure to make up for the loss of the system.

The absence of standards and the criticality of some system applications will probably call forth demands for national standards and perhaps regulatory oversight.

Computer Crime and Abuse New technologies, including computers, create new opportunities for committing crime by creating new, valuable items to steal, new ways to steal them, and new ways to harm others. Computer crime is the commission of illegal acts by using a computer or against a computer system. Computer abuse is the commission of acts involving a computer that may not be illegal but are considered unethical. The popularity of the Internet, email, and mobile phones has turned one form of computer abuse—spamming—into a serious problem for both individuals and businesses.

Employment: Trickle-Down Technology and Reengineering Job Loss Reengineering work is typically hailed in the information systems community as a major benefit of new information technology. It is much less frequently noted that redesigning business processes has caused millions of mid-level factory managers and clerical workers to lose their jobs. Some economists have sounded new alarms about information and computer technology threatening middle-class, white-collar jobs.

Other economists also believe that bright, educated workers who are displaced by technology will move to

better jobs in fast-growth industries. Missing from this equation are unskilled, blue-collar workers and older, less-well-educated middle managers. It is not clear that these groups can be retrained easily for high-quality, high-paying jobs.

Equity and Access: Increasing Racial and Social Class Cleavages Does everyone have an equal opportunity to participate in the digital age? Will the social, economic, and cultural gaps that exist in the United States and other societies be reduced by information systems technology? Or will the cleavages be increased, permitting the better-off to become even more better-off relative to others? Left uncorrected, this digital divide could lead to a society of information haves, who are computer literate and skilled, versus a large group of information have-nots, who are computer illiterate and unskilled.

Define and describe computer vision syndrome and repetitive stress injury and explain their relationship to information technology.

Computer vision syndrome (CVS) refers to any eyestrain condition related to display screen use in desktop computers, laptops, e-readers, smartphones, and handheld video games. CVS affects about 90 percent of people who spend three hours or more per day at a computer or using a computing device. Its symptoms, which are usually temporary, include headaches, blurred vision, and dry and irritated eyes. To combat the syndrome, computing users should take frequent breaks and rest their eyes.

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

Designing workstations for a neutral wrist position, using proper monitor stands, and footrests all contribute to proper posture and reduced RSI. Using ergonomically designed devices such as keyboards and mice are also options.

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

(Learning Objective 4: How have information systems affected laws for establishing accountability, liability, and the quality of everyday life? AACSB: Ethical understanding and reasoning; Information technology; Application of knowledge)

Discussion Questions

4-5 Should producers of software-based services, such as ATMs, be held liable for economic injuries suffered when their systems fail?

Student answers to this question will vary.

4-6 Should companies be responsible for unemployment caused by their information systems? Why or why not?

Student answers to this question will vary.

4-7 Discuss the pros and cons of allowing companies to amass personal data for behavioral targeting.

Student answers to this question will vary.

Hands-on MIS Projects Management Decision Problems

4-8

InfoFree‘s website is linked to massive databases that consolidate personal data on millions of people and businesses. Users can purchase marketing lists of consumers broken down by location, age, income level, home value, and interests. One could use this capability to obtain a list, for example, of everyone in Peekskill, New York making $150,000 or more per year. Do data brokers such as InfoFree raise privacy issues? Why or why not? If your name and other personal information were in this database, what limitations on access would you want in order to preserve your privacy? Consider the following data users: government agencies, your employer, private business firms, other individuals.

To answer these questions, students should be clear on what constitutes an ethical dilemma. As such, a dilemma is described as two diametrically opposed courses of action that support worthwhile values. There are a number of valid reasons why data is being collected and sold. For example, marketers buy lists of consumers broken down by location, demographics, and interests.

Their purpose in doing so is to market their products and services more efficiently.

Governments buy data to be used in law enforcement and counterterrorism activities. These practices are done in order to protect the citizens of the country. However, the buying and selling of personal data can have a more sinister agenda. Often this data is bought and sold illegally, and it is used to conduct criminal activity, take benefits away from others, and even cause death and destruction.

The collection of personal information on individuals and their impending invasion of privacy are bound to have an ethical dilemma attached. One of the most prevalent and discussed elements of these ethical dilemmas has been connected to the invasion of privacy. We live in an ―information society‖ and technology such as data gathering is viewed as being a double-edge sword. For example, after the September 11, 2001 terrorist attacks, ChoicePoint was very instrumental in helping the U.S. government screen candidates for the new federally controlled airport security workforce. However, shortly after that, ChoicePoint themselves came under attack for unscrupulous data selling practices.

(Learning Objective 1: What ethical, social, and political issues are raised by information systems? AACSB: Ethical understanding and reasoning; Reflective thinking)

4-9

This insurance company examines the options businesses have for monitoring employee usage of the internet. What kind of ethical dilemmas are created for employers and employees when a business monitors the activities of its employees? Calculate the amount of time each employee spends on the web and then rank the employees in the order of the amount of time each spent online. Do the students‘ findings and contents of the report indicate any ethical problems employees are creating? Is the company creating an ethical problem by monitoring its employees‘ use of the internet? Use the guidelines for ethical analysis presented in this chapter to develop a solution to the problems you have identified.

User Name

Total minutes

Legitimate minutes

Suspect minutes

Kelleher, Claire

248

96

152

McMahon, Patricia

127

44

83

Milligan, Robert

155

155

Olivera, Ernesto

40

40

Talbot, Helen

260

35

225

Wright, Steven

38

15

23

Although it appears that most of the employees are using the internet for non-business reasons, managers must be cautious about making accusations based on raw data. For instance, while Talbot may clearly be visiting personal, non-business websites like Nordstrom and eBay, perhaps she was asked by her supervisor to find a gift for another employee‘s birthday. Wright spent 15 minutes on the autobytel.com website. This could very well be a legitimate use of the internet since this is an insurance company. At first glance, it appears that McMahon is abusing her internet usage. But she may be spending 83 minutes on the iTunes site at the request of her boss.

The point is managers may be creating not just an ethical problem but relationship problems with employees if simple raw data is used to make unfounded accusations.

(Learning Objective 1: What ethical, social, and political issues are raised by information systems?; Learning Objective 4: How have information systems affected laws for establishing

accountability, liability, and the quality of everyday life?, AACSB: Ethical understanding and reasoning; Analytical thinking, Diverse and multicultural work environments, Application of knowledge)

Achieving Operational Excellence: Creating a Simple Blog

Software skills: Blog creation Business skills: Blog and webpage design

4-10 This exercise will not turn students into professional bloggers (although it could), but it will give them a feel for its basic functions. Students are asked to create a simple blog using software available at Blogger.com. Here are the elements they should include in their blog: 

Pick a sport, hobby, or topic of interest



Name the blog, give it a title, and choose a template



Post at least four entries



Upload an image



Add capabilities for other registered users



Briefly describe how your blog could be useful to a company selling products or services



List the tools available to Blogger that would make your blog more useful for business and describe the business uses of each

Each student’s blog will differ, depending on the content and design they have chosen. What students should take away from this exercise is that blogs are becoming legitimate business tools and not just social timewasters. Many companies now encourage employees to blog as a way to communicate with other employees, customers, suppliers, and business partners. Blogs are becoming a vital tool for virtual companies and work teams.

(Learning Objective 4: How have information systems affected laws for establishing accountability, liability, and the quality of everyday life? AACSB: Ethical understanding and reasoning; Application of knowledge)

Improving Decision Making: Analyzing Web Browser Privacy

Software skills: Web browser software Business skills: Analyzing web browser privacy protection features

4-11 This project will help develop internet skills for using the privacy protection features of leading web browser software.

Examine the privacy protection features and settings for two leading web browsers, such as Internet Explorer, Microsoft Edge, Mozilla Firefox, or Google Chrome. Make a table comparing the features of two of these browsers in terms of functions provided and ease of use.

How do these privacy protection features protect individuals?

Internet Explorer uses InPrivate Filtering to help protect users’ web browsing trails: InPrivate Filtering helps prevent website content providers from collecting information about sites you visit. Here's how it works.

Many webpages use content—such as advertisements, maps, or web analysis tools—from websites other than the one you are visiting. These websites are called content providers or third-party websites. When you visit a website with third-party content, some information about you is sent to the content provider. If a content provider offers content to a large number of the websites you visit, the content provider could develop a profile of your browsing preferences. Profiles of browsing preferences can be used in a variety of ways, including for analysis and serving targeted advertisements.

Usually this third-party content is displayed seamlessly, such as in an embedded video or image. The content appears to originate from the website you originally went to, so you may not know that another website might be able to see where you are surfing. Web analysis or web measurement tools report website visitors' browsing habits and are not always obvious to you. While these tools can sometimes appear as visible content (such as a visitor counter, for example), they are often not visible to users, as is often the case with web beacons. Web beacons are typically single-pixel transparent images whose sole purpose is to track website usage, and they do not appear as visible content.

InPrivate Filtering works by analyzing web content on the webpages you visit, and if it sees the same content being used on a number of websites, it will give you the option to allow or block that content. You can also choose to have InPrivate Filtering automatically block any content provider or third-party website it detects, or you can choose to turn off InPrivate Filtering.

Mozilla Firefox also uses privacy settings to prevent browsing tracking: ―Most major websites track their visitors' behavior and then sell or provide that information to other companies (like advertisers).‖ Firefox has a Do Not Track feature that lets you tell websites you don't want your browsing behavior tracked.

Tracking is a term that includes many different methods that websites, advertisers, and others use to learn about your web-browsing behavior. This includes information about what sites you visit, things you like, dislike, and purchase. They often use this information to show ads, products, or services specifically targeted to you.

When you turn on the Do Not Track feature, Firefox tells every website you visit (as well as their advertisers and other content providers) that you don't want your browsing behavior tracked.

Honoring this setting is voluntary — individual websites are not required to respect it. Websites that do honor this setting should automatically stop tracking your behavior without any further action from you.

Turning on Do Not Track will not affect your ability to log in to websites nor cause Firefox to forget your private information—such as the contents of shopping carts, location information, or login information. Note: You may see less relevant advertising on websites if you have the Do Not Track option activated.

How do these privacy protection features impact what businesses can do on the internet?

The privacy features disrupt the normal collection of individual data while they are in use. The features may not block the total collection of data however. Businesses may be prevented from gaining a complete picture of an individual‘s browsing habits rendering other data less useful in fully identifying a person.

Which does the best job of protecting privacy? Why? Answers will vary based on individual preferences and experiences. For instance, some students may not care if an employer can continue tracking pages they visit. Others may find it a nuisance to continually turn on the private filters for each tab window they use in the browser – as is the case with Internet Explorer.

(Learning Objective 3: Why do contemporary information systems technology and the internet pose challenges to the protection of individual privacy and intellectual property? AACSB: Ethical understanding and reasoning; Written and oral communication, Application of knowledge)

Collaboration and Teamwork Project

4-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem Solving Case: Facebook Privacy: Your Life for Sale

4-13 Perform an ethical analysis of Facebook. What is the ethical dilemma presented by this case?

The stakeholders involved in an ethical analysis of Facebook include Facebook (obviously), advertisers, data collecting agencies, Electronic Privacy Information Center (EPIC), and individual users.

Facebook collects an incredible amount of personal data on its users. It is using its ability to track online activity of its members to develop a frighteningly accurate picture of their lives. It gathers personal information about users, both with and without their consent, which can be used against them in other ways. Facebook‘s goal is to get its users to share as much data as possible, because the more Facebook knows, the more accurately it can serve relevant advertisements and thus, charge higher fees to advertisers.

Facebook‘s critics are concerned that the repository of personal data of the size that Facebook has amassed requires protections and privacy controls that extend far beyond those that Facebook currently offers.

(Learning Objective 1: What ethical, social, and political issues are raised by information systems? AACSB: Ethical understanding and reasoning; Analytical thinking, Application of knowledge)

4-14 What is the relationship of privacy to Facebook’s business model?

The less privacy Facebook offers to its users, the more valuable and useful its business model becomes. By providing more privacy to its users, the less data it collects, stores, and provides to advertisers. That makes its business model less valuable because advertisements cannot be as fully developed for individual users.

Facebook CEO Mark Zuckerberg says that people want the world to be more open and connected. He also wants the world to be more open and connected because his company stands to make more money in that world.

(Learning Objective 3: Why do contemporary information systems technology and the internet pose challenges to the protection of individual privacy and intellectual property? AACSB: Ethical understanding and reasoning; Analytical thinking, Reflective thinking)

4-15 Describe the weaknesses of Facebook’s privacy policies and features. What people, organization, and technology factors have contributed to those weaknesses?

People: Ninety-three percent of people polled believe that internet companies should be forced to ask for permission before using their personal information. Seventy-two percent want the ability to opt out of online tracking. Executives and managers must develop policies and procedures that address those concerns at the same time they are developing a competitive strategy to effectively use personal information to increase the company‘s value to advertisers. Privacy advocate groups like the Electronic Privacy Information Center want Facebook to restore its more robust privacy settings from 2009. If it does that, some of its value to advertisers will diminish.

Organization: Facebook‘s value and growth potential are determined by how effectively it can leverage the personal data that is aggregated about its users to attract advertisers. It also stands to gain from managing and avoiding the privacy concerns raised by its users and government regulators.

Technology: Facebook does not have a good history when it comes to privacy violations and missteps that raise doubts about whether it should be responsible for the personal data of hundreds of millions of people. It has settled lawsuits with the Federal Trade Commission in which they were barred from misrepresenting the privacy or security of its users‘ personal information. It was charged with deceiving its users by telling them they could keep their information on Facebook private, then repeatedly allowing it to be shared and made public. It has also come

under fire for collecting information about users who are not even logged into Facebook or have accounts with the company. It keeps track of activity on other sites that have ―Like‖ buttons or ―recommendations‖ widgets, and records the time of your visit and your IP address when you visit a site with those features, regardless of whether or not you click on them.

(Learning Objective 2: What specific principles for conduct can be used to guide ethical decisions? AACSB: Ethical understanding and reasoning; Analytical thinking, Application of knowledge)

4-16 Will Facebook be able to have a successful business model without invading privacy? Explain your answer. Could Facebook take any measures to make this possible?

Opinions will vary on this question. Certainly, Facebook‘s ability to leverage as much as possible from advertisers may be diminished if it cannot collect every nugget of information about its users to sell to advertisers. However, it could make up some of the lost revenue by charging users a premium fee for the company to not collect as much information and restore a higher level of privacy to those who are willing to pay for it.

The company can also allow users to view all the data it collects on them and allow them to delete information they deem necessary. They can also allow users to opt-out of the tracking systems much like European users already can.

Facebook should continue to explore additional revenue streams outside of what it already has in advertising.

(Learning Objective 3: Why do contemporary information systems technology and the internet pose challenges to the protection of individual privacy and intellectual property? AACSB: Ethical understanding and reasoning; Analytical thinking, Application of knowledge)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

4-17 What are the five principles of Fair Information Practices? For each principle, describe a business situation where the principle comes into play and how you think managers should react.

View rubrics in MyLab MIS.

4-18 What are five digital technology trends in business today that raise ethical issues for business firms and managers? Provide an example from business or personal experience when an ethical issue resulted from each of these trends.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 5 IT Infrastructure: Hardware and Software

Learning Objectives

5-1 What are the components of IT infrastructure?

5-2 What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?

5-3 What are the major types of computer software used in business and major software trends?

5-4 What are the principal issues in managing hardware and software technology?

5-5 How will MIS help my career?

16.

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

17.

Chapter Outline 18.

5-1

What are the components of IT infrastructure?

IT Infrastructure Components 5-2

What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?

Types of Computers Storage, Input and Output Technology Contemporary Hardware Trends

5-3

What are the major types of computer software used in business and major software trends?

Operating System Software Application Software and Desktop Productivity Tools HTML and HTML5 Web Services Software Trends

5-4

What are the principal issues in managing hardware and software technology?

Capacity Planning and Scalability Total Cost of Ownership (TCO) of Technology Assets Using Technology Service Providers Managing Mobile Platforms Managing Software Localization for Global Business

5-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Android, 173

N-tier client/server architectures, 160

Application server, 160

Object, 174

Application software, 157

Office 365, 175

Apps, 178

Offshore software outsourcing, 181

BYOD, 164

On-demand computing, 170

C, 174

Open source software, 177

C++, 174

Operating system, 172

Capacity planning, 179

Output devices, 161

Centralized processing, 160

Outsourcing, 180

Chrome OS, 173

Personal computer (PC), 159

Client, 160

Private cloud, 170

Client/server computing, 160

Public cloud, 170

Cloud computing, 166

Quantum computing, 165

Consumerization of IT, 164

Scalability, 179

Data center, 156

Server, 159

Data management software, 158

Service level agreement (SLA), 181

Distributed processing, 160

Service-oriented architecture (SOA), 177

Edge computing, 170

Software as a service (SaaS), 167

Extensible Markup Language (XML), 176

Software package, 175

Graphical user interface (GUI), 173

Software-defined storage (SDS), 165

Green computing (green IT), 171

Solid state drive (SSD), 161

Grid computing, 171

Spreadsheet software, 175

HTML5, 176

Supercomputer, 159

Hybrid cloud, 170

System software, 157

Hypertext Markup Language (HTML), 176

Tablet computer, 162

Input devices, 161

Total cost of ownership (TCO), 180

iOS, 173

UNIX, 173

Java, 174

Virtualization, 165

Legacy systems, 158

Visual Basic, 174

Linux, 174

Visual programming language, 174

Mainframe, 159

Web browsers, 175

Mashups, 178

Web hosting service, 181

Mobile device management (MDM), 182

Web server, 160

Multicore processor, 172

Web services, 176

Multitouch, 173

Windows 10, 173

Nanotechnology, 164

Workstation, 159

Android, 173

N-tier client/server architectures, 160

Application server, 160

Object, 174

Application software, 157

Office 365, 175

Apps, 178

Offshore software outsourcing, 181

BYOD, 164

On-demand computing, 170

C, 174

Open source software, 177

C++, 174

Operating system, 172

Capacity planning, 179

Output devices, 161

Centralized processing, 160

Outsourcing, 180

Chrome OS, 173

Personal computer (PC), 159

Client, 160

Private cloud, 170

Client/server computing, 160

Public cloud, 170

Cloud computing, 166

Quantum computing, 165

Consumerization of IT, 164

Scalability, 179

Data center, 156

Server, 159

Data management software, 158

Service level agreement (SLA), 181

Distributed processing, 160

Service-oriented architecture (SOA), 177

Edge computing, 170

Software as a service (SaaS), 167

Extensible Markup Language (XML), 176

Software package, 175

Graphical user interface (GUI), 173

Software-defined storage (SDS), 165

Green computing (green IT), 171

Solid state drive (SSD), 161

Grid computing, 171

Spreadsheet software, 175

HTML5, 176

Supercomputer, 159

Hybrid cloud, 170

System software, 157

Hypertext Markup Language (HTML), 176

Tablet computer, 162

Input devices, 161

Total cost of ownership (TCO), 180

iOS, 173

UNIX, 173

Java, 174

Virtualization, 165

Legacy systems, 158

Visual Basic, 174

Linux, 174

Visual programming language, 174

Mainframe, 159

Web browsers, 175

Mashups, 178

Web hosting service, 181

Mobile device management (MDM), 182

Web server, 160

Multicore processor, 172

Web services, 176

Multitouch, 173

Windows 10, 173

Nanotechnology, 164

Workstation, 159

Teaching Suggestions

Your students’ knowledge and comfort level with technology is likely to vary, making this chapter difficult to teach and test. The technically-adept know most of this material, and some of the nontechnical types may not find the chapter’s contents particularly interesting. You may want to approach the chapter from a business standpoint—the role of technology in the success of an organization.

One way to begin the chapter discussion is to present several horror stories. (Your students may even be able to provide stories of their own.) For example, many firms have found moving to a client/server

architecture is not the dream they had been led to believe. The shortage of support, programming, and management tools, as well as the shortage of staff who understand the technology and programs in such an environment, has doomed many such changes to client/server architecture. Also, you should mention to your students that programming problems have cost organizations millions of dollars and provide examples of programming projects that simply failed.

The opening case ―American Airlines Heads for the Cloud‖ demonstrates the benefits of using cloud to potentially replace legacy systems as a way to improve the customer experience. American Airlines had a goal of allowing customers the opportunity to rebook flights that were canceled due to bad weather.

Unfortunately, the legacy system didn’t allow for this because customer-facing applications were contained in silos and not able to integrate as needed.

The IBM Cloud suite of services included computer hardware, software, storage, networking, and other services. With this new partnership, a dynamic rebooking app was developed in less than five months.

The Cloud is now being used for additional customer-facing projects and helping American focus more time on future innovations, and less on legacy systems maintenance.

Section 5-1: What are the components of IT infrastructure?

This section familiarizes students with essential computer hardware terminology and concepts. Students are introduced to the five major components that make up an IT infrastructure. These include computer hardware, computer software, data management technology, networking and telecommunications technology, and technology services.

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Section 5-2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?

If possible, bring a system unit to class and allow students to see the computer systems parts. Students are often curious to see the inside of a computer and that the machine is not as mysterious as it first appears. You should consider organizing a tour of your university’s IT facilities or the facilities of a local company. Students are often eager to see information technology in action.

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Students should understand that organizations need to select the most appropriate hardware to handle their business requirements. The text introduces the different categories of computers and computer systems, i.e.

PCs, workstations, midrange, mainframe, supercomputers, virtual supercomputer (grid-computing), and computer networks and client/server computing. You should spend some time discussing the capabilities of the different computer types. This is a good place to discuss the trends that are occurring with technology. One part that is familiar to many of us is the continual increasing memory, speed, and storage capabilities of personal computers.

Consider spending most of your and your students’ time on hardware trends: mobile digital platforms including wearable technology, nanotechnology, cloud computing, virtualization, tablet computers, and multicore processors. That’s where many businesses are headed, and students are likely to bump into these trends when they enter the workforce.

Interactive Session: Technology: Is Business ready for Wearable Computers?

Case Study Questions 1. Wearables have the potential to change the way organizations and workers conduct business.

Discuss the implications of this statement.

Wearable devices offer a broad-based allure of hands-free data delivery that enables workers to perform tasks while receiving visual and aural cues. The devices contain multiple sensors that track various types of data, ultimately improving the workplace environment and lowering corporate costs. Feedback from the devices may promote productive collaboration and formulate personal benchmarks for effective communication among employees.

Businesses are allowing employees to use smartwatches that help them manage their time and communications such as incoming call information, text and mail messages, alerts, and event reminders.

Workers may couple the wearable devices with smartphones to access data, which are displayed on a screen in front of the user’s eyes. The worker will interact with the device using voice commands and maneuver around a warehouse or manufacturing plant to accomplish tasks.

As the technology progresses, many other uses for wearable devices will hopefully improve workers’ productivity and enhance the workplace environment.

2. What people, organization, and technology issues would have to be addressed if a company was thinking of equipping its workers with a wearable computing device?

People: Managers must ensure they seek employee buy-in for wearable devices by demonstrating how the workers’ environment will improve and their jobs will be enriched by the technology.

Organization: The possibilities for using collected and consolidated data that incorporate location, environment, and health information along with purchasing, search, and interaction histories are enticing to organizations that adopt wearable devices in the workplace. Care must be taken by the organization to ensure employee data is used responsibly and not used against an employee unless absolutely necessary.

Technology: Successful adoption of wearable computing depends not only on cost effectiveness but on the development of new and better apps and integration with existing IT infrastructure and the organizations’ tools for managing and securing mobile devices.

3. What kinds of businesses are most likely to benefit from wearable computers? Select a business and describe how a wearable computing device could help that business improve operations or decision making. ―The implications and uses of wearable technology are far reaching and can influence the fields of health and medicine, fitness, aging, disabilities, education, transportation, enterprise, finance, gaming and music.

The goal of wearable technologies in each of these fields will be to smoothly incorporate functional, portable electronics and computers into individuals’ daily lives.‖ (Tehrani, Kiana, and Andrew Michael. ―Wearable Technology and Wearable Devices: Everything You Need to Know.‖ Wearable Devices Magazine, WearableDevices.com, March 2014. Web. http://www.wearabledevices.com/what-is-a-wearabledevice/) Law enforcement officers and other public safety workers can use wearable devices to not only keep themselves safe but to help others. Police officers are already using body cameras to record their activities.

Firefighters can use wearable devices during calls to monitor their own bodies to prevent injury. They can record the fire’s activity as they fight it. Through the data collected, the Fire Chief can make decisions about fighting the fire while keeping people safe. Later, they can use the data to analyze the fire and to help train for future emergencies.

Fatigue is the number one cause of football player injuries. Coaches can monitor players’ physical conditions through the use of wearable technology and know when to rest the players to prevent injuries.

Interactive Session: Organizations: Look to the Cloud Case Study Questions

1. What business benefits do cloud computing services provide? What problems do they solve?        

Eliminate need for large up-front capital investments in systems.

Eliminate lengthy implementations on corporate computers.

Low cost subscriptions; no expensive licensing and maintenance fees.

No hardware for subscribers to purchase, scale, and maintain.

No operating systems, database servers, or applications servers to install.

No consultants and staff.

Accessible via standard web browser with behind-the-scene software updates.

Better scalability eliminates cost and complexity of managing multiple layers of hardware and software.

2. What are the disadvantages of cloud computing?

The disadvantages include:  Responsibility for data storage and control is transferred away from the organization to a third party.  Security risks and chances of data compromises are increased.  Risk diminishing system reliability.  Increase dependency on a third party to make everything work.  Huge investments in proprietary systems supporting unique business processes may be at risk.  The platform may not be attractive to larger companies for their application needs.

3. What kinds of businesses are most likely to benefit from using cloud computing? Why? Small to medium-sized businesses are probably the most likely ones to switch to cloud computing because of cost factors and the lack of having in-house resources to provide the same level of computing capacity.

Businesses who are trying to increase the sophistication of their computing capabilities could also benefit from switching to cloud computing as long as the two are compatible. Also, companies who have small sales and marketing teams can benefit from the software-as-a-service business model.

As the case study points out, companies like 99designs are good candidates for cloud computing. The company runs an online marketplace that connects companies and individuals who have design needs. Cloud computing allows them to easily scale computing capacity to meet the demands of their 1.6 million (and increasing) global users without high up-front investments.

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Section 5-3: What are the major types of computer software used in business and major software trends?

This section introduces students to the different types of software. You might take a quick survey of your students to see what operating systems and application software they currently use. Most of the answers will probably revolve around the Windows operating systems and Microsoft Office suite. However, it is possible that some of your students may use software that the rest of the class is not as familiar with. If this occurs, have your students explain why they use that particular operating system and application software.

Explain the business implications of choosing an operating system because of the effect on business capabilities. Some operating systems are better designed for networking, and other operating systems are better for speed.

Table 5.3 (page 173) provides a list of the leading PC and server operating systems. Ask your students to research these different operating systems. As part of their research, ask them to identify the features of the operating systems, as well as the market share for each operating system. Which is the most appropriate operating system? Also, ask your students to investigate the application programming languages mentioned in the text (C, C++, COBOL, and Visual Basic). Which is the most appropriate programming language for business?

Many of the more technically adept students might argue over what should be the appropriate operating system or the appropriate programming language. Students should be warned that in their managerial careers, they may have to sort out these issues because the selection of the proper operating system or software package must support the business, and the technical people may not understand that. You should talk about the superiority of some languages for some tasks. For instance, in web database development applications, Visual Basic is the language of choice. VB.NET is the first version of the language that was truly object-oriented. Point out to students that there are many examples of companies, organizations, and governments choosing the wrong language for the wrong problem and creating disaster.

New operating system software programs are introduced in this section: Windows 10, Google Chrome, and Android. Have students research these OS programs on the web and then compare and contrast them.

The most interesting part of this section, and students may not be familiar with it, is the Software for the Web, Web Services, and Software Trends. Since most students use the web and internet daily, you can have them explore how new software technologies are making their experiences richer and more efficient.

Have them explore cloud computing, mashups, and apps on the websites they use the most. Ask students to demonstrate how they might be using these new technologies on MySpace, Facebook, or any of the other social networking sites.

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Section 5-4: What are the principal issues in managing hardware and software technology?

This section discusses business issues that most students will not be familiar with. It stresses the importance of understanding the technology requirements for the digital firm and electronic commerce. Students may be surprised to learn that the total cost of ownership of technology assets extends beyond the purchase price of hardware and software. It’s not something many of them (or us) really think about. Outsourcing has gotten such a bad rap over the years that you may find some preconceived notions about it among your students. Have them research several different ways in which a business can outsource its technology needs such as web hosting services and on-demand computing.

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Section 5-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as an entry-level IT consultant. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

5-1 What are the components of IT infrastructure?

Define information technology (IT) infrastructure and describe each of its components.

A firm‘s IT infrastructure provides the foundation, or platform, for supporting all the information systems in the business.

The five major components of an information technology (IT) infrastructure are:

    

Computer hardware: technology for computer processing, data storage, input, and output.

Computer software: includes both system software and application software.

Data management technology: organizes, manages, and processes business data concerned with inventory, customers, and vendors.

Networking and telecommunications technologies: provide data, voice, and video connectivity to employees, customers, and suppliers.

Technology services: external consultants who run and manage infrastructure components.

(Learning Objective 1: What are the components of IT infrastructure? AACSB: Application of knowledge.)

5-2 What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?

List and describe the various types of computers available to businesses today.  Personal computers: Generally used when working alone or with a few other people in a small business.  Workstations: Desktop computers with more powerful mathematical and graphics-processing capabilities than a PC. Used primarily for advanced design or engineering work requiring powerful graphics or computational capabilities.  Servers: Specifically optimized to support a computer network, enabling users to share files, software, peripheral devices, or other network resources.  Mainframes: Large-capacity, high performance computers that process vast amounts of data very rapidly.  Supercomputers: Specially designed and more sophisticated computers used for tasks requiring extremely rapid and complex calculations with thousands of variables, millions of measurements, and thousands of equations.  Grid computing: Geographically remote computers connected into a single network to create a ―virtual supercomputer‖ by combining the computational power of all computers on the grid.

Define the client/server model of computing and describe the difference between a two-tiered and N-tier client/server architecture.

Client/server computing splits processing between ―clients‖ and ―servers.‖ Both are on the network, but each machine is assigned functions it is best suited to perform. The client is the user point of entry for the required function and is normally a desktop computer, workstation, or laptop computer. The user generally interacts directly only with the client portion of the application, often to input data or retrieve data for further analysis. The server provides the client with services.

Servers store and process shared data and also perform back-end functions not visible to users, such as managing network activities.

Two-tiered client/server architecture is the simplest form of client/server network. It consists of a client computer networked to a server computer, with processing split between the two types of machines.

N-tier client/server architecture is more complex than the simple two-tiered client/server network.

In this type of architecture, the work of the entire network is balanced over several different levels of servers, depending on the kind of service being requested.

Define and describe the mobile digital platform, BYOD, nanotechnology, grid computing, cloud computing, virtualization, green computing, and multicore processing.

Mobile digital platform: More and more business computing is moving from PCs and desktop machines to mobile devices like cell phones and smartphones. Data transmissions, web surfing, email and instant messaging, digital content displays, and data exchanges with internal corporate systems are all available through a mobile digital platform. Netbooks, small low-cost lightweight subnotebooks that are optimized for wireless communication and internet access, are included.

BYOD: Bring Your Own Device: Is a concept in which companies allow employees to use personal computing devices to access corporate networks. Devices may include cell phones, tablet computers, or other handheld computing devices. It‘s one aspect of the ‗consumerization of IT‘ in which new information technology that first emerges in the consumer market spreads into business organizations.

Nanotechnology: Uses individual atoms and molecules to create computer chips and other devices that are thousands of times smaller than current technologies permit. Nanotechnology shrinks the size of transistors down to the width of several atoms.

Grid computing: Connects geographically remote computers into a single network to create a ―virtual supercomputer‖ by combining the computational power of all computers on the grid.

Cloud computing: A model of computing where firms and individuals obtain computing power and software applications over the internet, rather than purchasing their own hardware and software. Data is stored on powerful servers in massive data centers and can be accessed by anyone with an internet connection and standard web browser. Cloud computing consists of three types of services:

  

Cloud infrastructure as a service: customers use processing, storage, networking, and other computing resources from cloud service providers to run their information systems.

Cloud platform as a service: customers use infrastructure and programming tools hosted by the service provider to develop their own applications.

Cloud software as a service: customers use software hosted by the vendor.

Virtualization: Is the process of presenting a set of computing resources (such as computing power or data storage) so that they can all be accessed in ways that are not restricted by physical

configuration or geographic location. Server virtualization enables companies to run more than one operating system at the same time on a single machine.

Green computing: Refers to the practices and technologies for designing, manufacturing, using and disposing of computers, servers, and associated devices such as monitors, printers, storage devices, and networking and communications systems to minimize their impact on the environment. Reducing computer power consumption has been a very high ―green‖ priority because technology is responsible for about two percent of the total U.S. power demand.

Multicore processing: Uses integrated circuits to which two or more processors have been attached for enhanced performance, reduced power consumption, and more efficient simultaneous processing of multiple tasks.

5-3 What are the major types of computer software used in business and major software trends?

Distinguish between application software and system software and explain the role played by the operating system of a computer.

System software surrounds and controls access to the hardware. It manages and controls a computer‘s activities. Some types of system software consist of computer language translation programs that convert programming languages into machine language that can be understood by the computer and utility programs that perform common processing tasks, such as copying, sorting, or computing a square root. The operating system allocates and assigns system resources, schedules the use of computer resources and computer jobs, and monitors computer system activities.

Application software works through the system software in order to develop specific business applications. This type of software includes traditional programming languages, fourth-generation languages, application software packages and desktop productivity tools, software for developing internet applications, and software for enterprise integration.

List and describe the major PC and server operating systems.

Table 5.3 (page 173) describes the leading PC and server operating systems.    

Windows 10: Most recent Windows operating system.

Windows Server: Most recent Windows OS for servers.

UNIX: Used for powerful PCs, workstations, and network servers. Supports multitasking, multi-user processing, and networking. It is portable to different models of computer hardware.

Linux: Open source, reliable alternative to UNIX and Windows OS that runs on many different types of computer hardware. Can be modified by software developers.

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OS X and macOS: OS for Macintosh computers that is stable and reliable, with powerful search capabilities, support for video and image processing, and an elegant user interface.

Most recent version is macOS Sierra. The iPhone operating system is derived from OS X.

Name and describe the major desktop productivity software tools.

Word processing: Allows users to make changes in the document electronically in memory, eliminating the need to retype entire pages to make corrections. It often includes advanced features such as spelling checkers and thesaurus programs.

Spreadsheets: Composed of a grid of columns and rows, spreadsheets are good at performing calculations on interrelated pieces of data. Used for applications in which numerous calculations with pieces of data must be related to each other. When you change a value or values, all other related values on the spreadsheet will be automatically recomputed. Spreadsheets provide computerized versions of traditional financial modeling tools and provide an easy-to-use method of performing what-if analysis.

Data management: Used for creating and manipulating lists and for combining information from different fields. Data management software typically has facilities for creating files and databases to store, modify, and manipulate data for reports and queries.

Presentation graphics: Allow users to create professional quality graphics presentations. This software can convert numeric data into charts and other types of graphics and can include multimedia displays of sound, animation, photos, and video clips.

Software suites: Combine the functions of the most important microcomputer software packages, such as spreadsheets, word processing, graphics, and data management. This integration provides a more general-purpose software tool and eliminates redundant data entry and data maintenance. Some low-cost desktop productivity suites can be downloaded from the web.

Web browsers: Easy-to-use software tools for accessing the web and the internet. Web browsers have become the primary interface for accessing the internet or for using networked systems based on internet technology.

Explain how Java and HTML are used in building applications for the web.

Java is used for building applications that run on the web and HTML is used for creating webpages. Java is an operating system that is processor independent. Its object-oriented programming language has become the leading interactive programming environment for the web.

Java enables users to manipulate data on networked systems using web browsers, reducing the need to write specialized software.

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

Define web services, describe the technologies they use, and explain how web services benefit businesses.

Web services are sets of loosely coupled software components that exchange information with each other using universal web communications standards and languages. They can be used as components of web-based applications linking the systems of two different organizations or to link disparate systems of a single company. Web services are not tied to a particular operating system or programming language. Different applications can use them to communicate with each other in a standard way without time-consuming custom coding.

XML is the foundation technology for web services. This language makes it possible for computers to manipulate and interpret their data automatically and perform operations on the data without human intervention.

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

Explain why open-source software is so important today and its benefits for business.

Open-source software is not owned by any company or individual. A global network of programmers and users manage and modify the software, fix errors in it, or make improvements to its functionality. By definition, open-source software is not restricted to any specific operating system or hardware technology. Several large software companies are converting some of their commercial programs to open source.

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

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

Define and describe cloud computing software services, mashups, and apps and explain how they benefit individuals and businesses.

Cloud computing is becoming popular for describing web-based applications that are stored and accessed via the ―cloud‖ of the internet. The software and the data they use are hosted on powerful servers in massive data centers and can be accessed by anyone with an internet connection and standard web browser. The best examples are Google Apps desktop productivity tools and Microsoft‘s Live software suite.

Mashups are new software applications and services based on combining different online software applications using high-speed data networks, universal communication standards, and open-source code. Users are able to create new software applications and services based on combining different online software applications. These new combined applications depend on high-speed data networks, universal communication standards, and open-source code. The idea is to take different sources and produce a new work that is ―greater than the sum‖ of its parts. Web mashups combine the capabilities of two or more online applications to create a kind of hybrid that provides more customer value than the original sources alone.

Apps are small pieces of software that run on the internet, on a computer, or on a mobile phone or tablet to provide additional functionality. Most of the attention goes to the apps that have been developed for the mobile digital platform. Apps turn smartphones and other mobile handheld devices into general-purpose computing tools.

Businesses benefit most from these new tools and trends by not having to re-invent the wheel. Apps have already been developed by someone else and a business can use them for its own purposes. Mashups let a business combine previously developed web applications into new ones with new purposes. They don‘t have to re-invent the previous applications from scratch—merely use them in the new processes. Organizations using cloud computing generally do not own the infrastructure. Instead, they purchase their computing services from remote providers and pay only for the amount of computing power they actually use.

(Learning Objective 3: What are the major types of computer software used in business and major software trends? AACSB: Application of knowledge) 5-4 What are the principal issues in managing hardware and software technology?

Explain why managers need to pay attention to capacity planning and scalability of technology resources.

The principle issues in managing hardware and software assets include capacity planning and scalability. Capacity planning is the process of predicting when a computer hardware system becomes saturated. It considers factors such as the maximum number of users that the system can accommodate at one time; the impact of existing and future software applications; and performance measures, such as minimum response time for processing business transactions.

Capacity planning ensures that the firm has enough computing power for its current and future needs.

Scalability refers to the ability of a computer, product, or system to expand to serve a large number of users without breaking down. Organizations must ensure they have sufficient computer processing, storage, and network resources to handle surging volumes of digital transactions and to make such data immediately available online.

Describe the cost components used to calculate the total cost of ownership (TCO) of technology assets.

When calculating the total cost of ownership of technology assets, a business must include the original cost of the hardware and software, installation costs, ongoing administration costs for hardware and software upgrades, maintenance, technical support, training, downtime, and even utility and real estate costs for running and housing the technology.

―Hidden costs‖ for support staff, downtime, and additional network management can make distributed client/server architectures—especially those incorporating handheld computers and wireless devices—more expensive than centralized mainframe architectures.

Identify the benefits and challenges of using outsourcing, cloud computing services, and mobile platforms.

In the past, most companies ran their own computer facilities and developed their own software.

Today, more and more companies are obtaining their hardware and software technology from external service vendors.

Outsourcing: The most important benefit of outsourcing technology management is that it allows a business to concentrate on its core competencies rather than focusing on technology issues.

Instead of purchasing all the necessary hardware and software for hosting a website, a business can use a web hosting service that maintains a large web server, or a series of servers, and provides fee-paying subscribers with space to maintain their websites.

Outsourcing custom software development or maintenance to outside firms benefits a company because it won‘t have to hire programmers, analysts, and managers with the necessary skills. An outsourcer often has the technical and management skills to do the job better, faster, and more efficiently. Even though it‘s often cheaper to outsource the maintenance of an IT infrastructure and the development of new systems to external vendors, a business must weigh the pros and cons

carefully. Service level agreements are formal contracts between customers and service providers that define the specific responsibilities of the service provider and the level of service expected by the customer.

Cloud computing services: Refer to services that deliver and provide access to hardware and software remotely as a web-based service. A business can rent software from another firm and avoid the expense and difficulty of installing, operating, and maintaining the hardware and software on its own. A business must carefully assess the costs and benefits of the service, weighing all people, organizational, and technology issues. It must ensure it can integrate the software with its existing systems and deliver a level of service and performance that is acceptable for the business.

Small and medium-sized businesses may find it more advantageous to use cloud computing services because of the minimal overhead and upfront costs. Large businesses will have to factor in whether cloud computing capabilities are sufficiently secure or reliable for their most critical systems. These firms may choose to handle their average processing loads in-house and pay for only as much additional computing power as the market demands. This arrangement enables firms to have a more flexible infrastructure, some of it owned by the firm, and some of it rented from giant computer centers run by technology specialists.

Mobile platforms: Integrating mobile platforms with the firm‘s existing IT infrastructure and applications may be quite a challenge for many organizations. Central coordination and oversight are essential. Firms must inventory the mobile devices and develop policies and tools for tracking, updating, and securing them and for controlling the data and applications that run on them. Gains in employees‘ productivity and efficiency must be balanced against increased costs of integrating the devices into the firm‘s IT infrastructure and from providing technical support. The total cost of ownership for each device is much higher than typical IT hardware.

Explain why software localization has become an important management issue for global companies.

A global organization must create systems that can be realistically used by multiple business units in different countries. Software applications may require local language interfaces including menu bars, commands, error messages, reports, queries, online data entry forms, and system documentation. The interfaces must be easily understood and mastered quickly in a variety of languages. Global systems must also consider differences in local cultures and business processes.

(Learning Objective 4: What are the principal issues in managing hardware and software technology?

AACSB: Analytical thinking)

Discussion Questions

5-5 Why is selecting computer hardware and software for the organization an important business decision? What people, organization, and technology issues should be considered when selecting computer hardware and software?

Student answers to this question will vary.

5-6 Should organizations use software service providers (including cloud services) for all their software needs? Why or why not? What people, organization, and technology factors should be considered when making this decision?

Student answers to this question will vary.

5-7 What are the advantages and disadvantages of cloud computing?

Student answers to this question will vary.

Hands-On MIS Projects Management Decision Problems

5-8 University of Pittsburgh Medical Center

Demand for additional servers and storage technology was growing by 20 percent each year.

UPMC was setting up a separate server for every application; servers and other computers were running different operating systems; it was using technologies from many different vendors.

This case provides an excellent example of how a business can inadvertently create a quagmire with technology. UPMC should consider virtualization as a way to manage its server situation.

Virtualization would allow the organization to consolidate many different applications on just a few servers. It could also allow the organization to run different operating systems on a single server.

UPMC could consider outsourcing its IT infrastructure so it could concentrate on its core processes. Sometimes an organization must use third-party vendors who specialize in technology, rather than trying to do everything itself.

(Learning Objective 1: What are the components of IT infrastructure? Learning Objective 2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends? AACSB: Application of knowledge, Analytical thinking.)

5-9 Quantas Airways

Quantas Airways needs to keep costs low while providing a high level of customer service.

Management had to decide whether to replace its 30-year-old IT infrastructure with newer technology or outsource it. What factors should be considered in the outsourcing decision? List and describe points that should be addressed in an outsourcing service level agreement.

Quantas should use the competitive forces model to help determine how much it should spend on its IT infrastructure. Then it should determine its total cost of ownership of technology assets. It should assess the costs and benefits of software-as-a-service outsourcing, weighing all the people, organizational, and technology issues, including the ability to integrate with existing systems and deliver a level of service and performance that is acceptable for the business. If it chooses to outsource its technology infrastructure, the service level agreement should define the specific responsibilities of the service provider and the level of service expected by Quantas. The SLA specifies the nature and level of services provided, criteria for performance measurement, support options, provisions for security and disaster recovery, hardware and software ownership and upgrades, customer support, billing, and conditions for terminating the agreement.

(Learning Objective 1: What are the components of IT infrastructure? Learning Objective 2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends? AACSB: Application of knowledge, Analytical thinking.)

Improving Decision Making: Using a Spreadsheet to Evaluate Hardware and Software Options

Software skills: Spreadsheet formulas Business skills: Technology pricing

5-10

This project requires students to use their web research skills to obtain hardware and software pricing information, and then use spreadsheet software to calculate costs for various system configurations. Answers may vary, depending on when students accessed the vendors‘ websites to obtain pricing information. The sample solution files provided are for purposes of illustration and may not reflect the most recent prices for desktop hardware and software products.

(Learning Objective 1: What are the components of IT infrastructure?, Learning Objective 2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?, Learning Objective 3: What are the major types of computer software used in business and major software trends? AACSB: Application of knowledge, Analytical thinking.)

An example solution file can be found in the Microsoft Excel file named: Ess13ch05solutionfile.xls.

Improving Decision Making: Using Web Research to Budget for a Sales Conference

Software skills: Internet-based software Business skills: Researching transportation and lodging costs

5-11

The students will likely find hotels that interest them personally. The template that has been provided has a checklist for all of the hotel requirements to help keep them on track. You can show this in class or distribute it for your students to use. They should also write a brief report detailing why they chose the hotel they did, and price should not be the only issue. Some students will go directly to an airline site and others will go to aggregate websites like Expedia or Travelocity. Ask them to rate the use of the website in their report as well.

(Learning Objective 3: What are the major types of computer software used in business and major software trends? AACSB: Application of knowledge, Analytical thinking.)

An example template can be found in the Microsoft Excel file named: Ess13ch05 electronic business project template.xls.

Collaboration and Teamwork Project

5-12. In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: What should firms do about BYOD? 5-13 What are the advantages and disadvantages of allowing employees to use their personal mobile devices for work?

Advantages: Employees using their own mobile devices would allow companies to enjoy all the same benefits of a mobile workforce without spending company funds on the devices. This includes increased employee satisfaction and workplace productivity. Mobility experts can help a company leverage mobility more effectively. Employees can be more productive and happier with a BYOD policy in place.

Disadvantages: IT departments need to overcome several logistical hurdles before allowing employees to use their own smartphones, including security, inventory management, support, integrating mobile devices into preexisting IT functions and systems, and measuring return on investment. When employees are not able to access critical data, or encounter other problems with their mobile devices, they will need assistance from the information systems department. Some devices are much more prone to hackers thereby threatening the security of corporate networks.

(Learning Objective 2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends? AACSB: Analytical thinking, reflective thinking, application of knowledge.)

5-14 What people, organization, and technology factors should be addressed when deciding whether to allow employees to use their personal mobile devices for work?

People: When employees make changes to their personal phone, such as switching cellular carriers, changing their phone number, or buying a new mobile device, companies will need to quickly and flexibly ensure that their employees are still able to remain productive.

Organization: A significant portion of corporate IT resources is dedicated to managing and maintaining a large number of devices within an organization. In the past, companies tried to limit business smartphone use to a single platform, making it easier to keep track of each mobile device and to roll out software upgrades or fixes.

Firms need an efficient inventory management system that keeps track of which devices employees are using, where the device is located, whether it is being used, and what software it is equipped with. For unprepared companies, keeping track of who gets access to what data could be a nightmare.

Technology: The mobile digital landscape is very complex and complicated, with a variety of devices and operating systems on the market that do not have well-developed tools for administration and security.

Android’s fragmentation and multiple versions make it more difficult and costly for corporate IT to manage. To access company information, the company’s networks must be configured to receive connections from a device.

Virtualization helps companies manage mobile devices easier. Companies often use technologies that allow them to wipe data from devices remotely or encrypt data if the device is stolen.

(Learning Objective 1: What are the components of IT infrastructure?, Learning Objective 2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?, AACSB: Application of knowledge, Analytical thinking.)AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

5-15 Compare and evaluate how the companies described in this case study dealt with the challenges of BYOD. Swiss Re and Brother have successfully implemented a BYOD policy with the use of an Enterprise Mobility Management (EMM) system called MobileIron. This system can support multiple operating systems, allowing for the management of different mobile devices and operating systems from a single platform. Both Swiss Re and Brother placed limitations on the types of devices employees can use, limiting the devices to Apple products that are the easiest to support and require little maintenance compared to other mobile tools. Swiss Re plans to extend their BYOD program to include Android devices in the future.

Arup Group Limited, a multinational professional services firm in London, has also used MobileIron, but allows a wider array of devices to be used. 65 percent of the devices within their BYOD program are based on iOS, 30 percent on Android, and the remainder on Windows for mobile devices.

(Learning Objective 1: What are the components of IT infrastructure?, Learning Objective 2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?, Learning Objective 3: What are the major types of computer software used in business and major software trends? AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

5-16 Allowing employees to use their own smartphones for work will save the company money. Do

you agree? Why or why not?

Allowing employees to use their own smartphones won’t necessarily save money when you consider the TCO and the extra efforts required on the part of the IT staff, especially if the smartphone becomes a point of entry for malware. There are significant concerns with securing company information accessed with mobile devices.

By using virtualization, employees can access their entire desktop on their smartphones and mobile handhelds and thus are able to use the same programs on the road that they use in the office. Placing virtualization software on employees’ personal tablets is less expensive than outfitting them with company-purchased laptops.

One of the biggest worries that managers have about mobility is the difficulty of measuring their return on investment.

(Learning Objective 2: What are the major computer hardware, data storage, input, and output technologies used in business and major hardware trends?, Learning Objective 4: What are the principal issues in managing hardware and software technology?; AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

5-17 What are the distinguishing characteristics of cloud computing and what are the three types of cloud services?

View rubrics in MyLab MIS.

5-18 What is the total cost of ownership of technology assets and what are its cost components?

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 6 Foundations of Business Intelligence: Databases and Information Management

Learning Objectives

6-1 What is a database, and how does a relational database organize data?

6-2 What are the principles of a database management system?

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

6-4 Why are data governance and data quality assurance essential for managing the firm‘s data resources?

6-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline 6-1

What is a database, and how does a relational database organize data?

Entities and Attributes Organizing Data in a Relational Database Establishing Relationships

6-2

What are the principles of a database management system?

Operations of a Relational DBMS Capabilities of Database Management Systems Non-Relational Databases, Cloud Databases, and Blockchain

6-3

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

The Challenge of Big Data Business Intelligence Technology Infrastructure Analytical Tools: Relationships, Patterns, Trends Databases and the Web

6-4

Why are data governance and data quality assurance essential for managing the firm’s data resources?

Assuring Data Quality

6-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Analytic platform, 210

Entity-relationship diagram, 198

Attributes, 196

Field, 194

Big data, 206

File, 195

Bit, 194

Foreign key, 197

Blockchain, 205

Hadoop, 209

Byte, 194

In-memory computing, 210

Data cleansing, 217

Key field, 196

Data definition, 203

Non-relational database management systems, 204

Data dictionary, 203

Normalization, 200

Data governance, 215

Online analytical processing (OLAP), 211

Data lake, 210

Primary key, 196

Data manipulation language, 203

Query, 203

Data mart, 209

Record, 195

Data mining, 212

Referential integrity, 200

Data quality audit, 217

Relational database, 196

Data warehouse, 209

Report generator, 204

Database, 195

Sentiment analysis, 213

Database management system (DBMS), 200

Structured Query Language (SQL), 203

Database server, 214

Text mining, 213

Distributed database, 205

Web mining, 213

Entity, 196

Teaching Suggestions

The essential message of this chapter is that "How businesses store, organize, and manage their data has a tremendous impact on organizational effectiveness." Data have now become central and even vital to an organization‘s survival.

The opening vignette, "Domino‘s Masters Data One Pizza at a Time,‖ shows that data are not easy to access and analyze without properly configured systems. At one time, Dominos had more than 11,000 business users along with other agencies maintaining separate data repositories.

The team‘s management implemented a solution by Talend, which provides enterprise application integration and data management using the cloud. The software consolidates point of-sale systems, supply chain centers and other systems into a single enterprise system. This single source helps improve business performance, processes, and provides much better analysis of customer buying patterns and customer responses to advertising and promotions.

Section 6-1: What is a database and how does a relational database organize data?

This section introduces basic key terms like field, record, file, database, entity, and attribute. Try using a simple spreadsheet print out to demonstrate these terms. If you have access to a relational DBMS during class time, you can demonstrate several of the concepts presented in this section. If you have time and as a class activity, ask your students to prepare an entity-relationship diagram, as well as normalize the data.

Your students will need guidance from you to complete this activity, but it will help them see and understand the logical design process.

Section 6-2: What are the principles of a database management system?

This section introduces database design and management requirements for database systems. Help your students see how a logical design allows them to analyze and understand the data from a business perspective, while physical design shows how the database is arranged on direct access storage devices. At this point, you can use the enrollment process at your university as an example. Have your students prepare a logical design for the enrollment process. Discuss the three operations of a relational DBMS: select, project, and join. A database management system is comprised of three components: a data definition language, data dictionary, and data manipulation language. If you have access to a relational DBMS during class time, you can demonstrate several of the concepts presented in this section.

The concept of using databases stored in cloud computing data centers is introduced in this section and piggybacks on cloud computing concepts introduced earlier in the text. Nonrelational database management systems (i.e., NoSQL) that are used for large volumes of structured and unstructured data that is difficult to use with traditional SQL-based tools is also introduced in this section.

Finally, a section on blockchain, a distributed database technology has been added to this edition of the text. Figure 6.13 on page 201 illustrates how a blockchain works.

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

This section focuses on how data technologies are actually used: data warehouses, data marts, business intelligence, multidimensional data analysis, and data mining. Regardless of their career choice, students will probably use some or all of these in their jobs. For example, data warehouses and data marts are important to many business functions. They are critical for those who want to use data mining technologies, which have many uses in management analysis and business decisions. Keep in mind as you teach this chapter that managing data resources can be very technical, but many students will need and want to know the business uses and business values. In the end, effectively managing data is the goal.

Doing it in a way that will enable your students to contribute to the success of their organization is the reason why most students are in this course.

This section also discusses text mining and web mining that are taking on significance as more data and information is stored in text documents and on the web. Web mining is divided into three categories: content mining, structure mining, and usage mining. Each one provides specific information on patterns in web data.

Interactive Session: People: Big Data Baseball Case Study Questions 1. How did information technology change the game of baseball? Explain.

The use of data analytics and big data have forever changed the game of baseball, and likely every other professional sport. As the cased summarizes in its open, ―the use of analytics has revolutionized the game of baseball as we know it, including defensive shifts, swing path changes, and how teams acquire and develop players.‖

2. How did information technology affect decision making at the Houston Astros and the Oakland Athletics? What kinds of decisions changed as the result of using big data?

The Michael Lewis’s Book Moneyball provides an example how the use of analytics and big data has changed the game of baseball. In this book, the Oakland Athletics used analytics to determine which players to recruit. Many of these decisions based on data were unconventional and didn’t follow prior recruiting strategies.

The Houston Astros used data analytics for on-the-field decision making and player selection. Further, data analytics also helped with decision making including where to position players on field.

3. How much was big data involved in the Houston Astros’ World Series victory?

In the final play of the 2017 World Series, the Astros were making game-time decisions that would likely never have been adopted in the past. On this final play, the Astros used a traditional starter to end the game.

They also positioned an infielder in right field. Based on the resulting victory, it appears big data likely contributed to the victory.

4. How much should baseball rely on big data and analytics? Explain your answer.

Although the use of analytics in baseball will be used moving forward, there are still subjective and instinctive decisions that will utilize traditional decision-making processes. Scouts and coaches will always have a vital role in all aspects of the game. As the case appropriately closes, ―There are nuances to defending against the opposition that are not statistically related, but statistics help when you don‘t know players well enough to know what to expect from them.‖

(Learning Objective 3: What are the principle tools and technologies for accessing information from databases to improve business performance and decision making? AACSB: Application of knowledge.)

Section 6-4: Why are data governance and data quality assurance essential for managing the firm’s data resources?

This section introduces students to some of the critical issues surrounding corporate data. Students should realize that setting up the database is only the beginning of the process. Managing the data is the real challenge. In fact, the main point is to show how data management has changed and the reason why data must be organized, accessed easily by those who need access, and protected from the wrong people accessing, modifying, or harming the data.

Developing a database environment requires much more than selecting database technology. It requires a formal information policy governing the maintenance, distribution, and use of information in the organization. The organization must also develop a data administration function and a data-planning methodology. The organization should use data planning techniques to make sure that the organization’s data model delivers information efficiently for its business processes and enhances organizational performance. There is political resistance in organizations to many key database concepts, especially the sharing of information that has been controlled exclusively by one organizational group. Creating a database environment is a long-term endeavor requiring large up-front investments and organizational change.

The text asks students to think of all the times they have received several pieces of the same direct mail, or several e-mails that are duplicates. This would be a good question to raise as most students would have experienced this problem. However, problems like these are just proverbial tip of the iceberg as studies indicate that more than 25 percent of the critical data in large Fortune 1000 companies’ databases are inaccurate. Earlier in the chapter, referential integrity is introduced as a way to ensure relationships between coupled tables remain constant. This part of the chapter would be a good time to review how principles such as referential integrity helps improve data quality assurance.

Interactive Session: Organizations: Databases Where the Data Aren’t There Case Study Questions 1. Define the problem described in this case. How serious a problem is it?

This case describes several tragedies that potentially could have been avoided had information been shared. For instance, the killer at the First Baptist Church in Sutherland Spring, Texas was prohibited by law from purchasing a firearm. Failures allowed him to pass background checks and obtain weapons.

2. What people, organization, and technology factors contributed to this problem?

Unfortunately, there is no satisfactory solution since currently there is no single database that contains up-to-date records regarding criminal history. Some organizations still use a paper-based system to track enforcement. Further, although federal law requires quarterly updates about those disqualified to purchase guns, some states allow compliance to be voluntary, unless state or federal requirements indicate otherwise.

3. What is the political and social impact of incomplete recordkeeping in the FBI NCIC and NICS databases?

This case illustrates how the impact of incomplete recordkeeping in the FBI NCIC and NICS databases cost lives and created blind spots in current background checks. There will always be errors when humans are involved in a process, but not having a single database to maintain background checks only exacerbates the problem.

(Learning Objective 4: Why are data governance and data quality assurance essential for managing the firm’s data resources? AACSB: Application of knowledge) Section 6-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as an entry-level data analyst. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

6-1 What is a database and how does a relational database organize data?

Define a database.

A group of related files makes up a database. Databases are at the heart of all information systems because they keep track of the people, places, and things that a business must deal with on a continuing, often instant basis.

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

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

Attribute is a piece of information describing a particular entity.

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

Define a relational database and explain how it organizes and stores information.

The relational database is the primary method for organizing and maintaining data in most modern information systems. It organizes data in two-dimensional tables with rows and columns called relations.

Each table contains data about an entity and its attributes. Each row represents a record and each column represents an attribute or field. Each table also contains a key field to uniquely identify each record for retrieval or manipulation.

Explain the role of entity-relationship diagrams and normalization in database design.

Relational databases organize data into two-dimensional tables (relations) with columns and rows. Each table contains data on an entity and its attributes. An entity-relationship diagram graphically depicts the relationship between entities (tables) in a relational database. A well-designed relational database will not have many-to-many relationships, and all attributes for a specific entity will only apply to that entity.

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

(Learning Objective 1: What is a database and how does a relational database organize data? AACSB: Analytical thinking.)

6-2 What are the principles of a database management system?

Define a database management system (DBMS), describe how it works, and explain how it benefits organizations.

A database management system (DBMS) is a specific type of software for creating, storing, organizing, and accessing data from a database. A DBMS consists of software that permits centralization of data and data management so that businesses have a single, consistent source for all their data needs. A single database services multiple applications. The most important feature of the DBMS is its ability to separate the logical and physical views of data. The user works with a logical view of data. The DBMS retrieves information so that the user does not have to be concerned with its physical location.

Define and compare the logical and physical views of data.

The DBMS relieves the end user or programmer from the task of understanding where and how the data are actually stored by separating the logical and physical views of the data. The logical view presents data as end users or business specialists would perceive them, whereas the physical view shows how data are actually organized and structured on physical storage media, such as a hard disk.

Define and describe the three operations of a relational database management system.

  

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

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

Join operation: Combines relational tables to provide the user with more information than is available in individual tables.

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

Name and describe the three major capabilities of a DBMS. A DBMS includes capabilities and tools for organizing, managing, and accessing the data in the database.

The principal capabilities of a DBMS include a data definition language, data dictionary, and data manipulation language. 

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



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



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

Define non-relational databases and describe their capabilities.

Non-relational database management systems use a more flexible data model and are designed for managing large data sets across many distributed machines and for easily scaling up or down.

There are four main reasons for the rise in non-relational databases: cloud computing, unprecedented data volumes, massive workloads for web services, and the need to store new types of data.

Non-relationship databases can process structured and unstructured data captured from websites, social media, and graphics. Traditional relational databases aren’t able to process data from most of those sources.

Non-relational databases can also accelerate simple queries against large volumes of structured and unstructured data. There’s no need to pre-define a formal database structure or change that definition if new data are added later.

(Learning Objective 2: What are the principles of a database management system? AACSB: Application of knowledge.)

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

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

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

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

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

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

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

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

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

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

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

Describe the capabilities of online analytical processing (OLAP).

Data warehouses support multidimensional data analysis, also known as online analytical processing (OLAP), which enables users to view the same data in different ways using multiple dimensions. Each aspect of information represents a different dimension.

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

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

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

Conventional data mining focuses on data that have been structured in databases and files. Text mining concentrates on finding patterns and trends in unstructured data contained in text files. The data may be in

emails, memos, call center transcripts, survey responses, legal cases, patent descriptions, and service reports.

Text mining tools extract key elements from large unstructured data sets, discover patterns and relationships, and summarize the information.

Web mining helps businesses understand customer behavior, evaluate the effectiveness of a particular website, or quantify the success of a marketing campaign. Web mining looks for patterns in data through:  Web content mining: Extracting knowledge from the content of webpages.  Web structure mining: Examining data related to the structure of a particular website.  Web usage mining: Examining user interaction data recorded by a web server whenever requests for a website’s resources are received.

Explain how users can access information from a company’s internal databases through the web.

Conventional databases can be linked via middleware to the web or a web interface to facilitate user access to an organization’s internal data. Web browser software on a client PC is used to access a corporate website over the internet. The web browser software requests data from the organization’s database, using HTML commands to communicate with the web server. Because many back-end databases cannot interpret commands written in HTML, the web server passes these requests for data to special middleware software that then translates HTML commands into SQL so that they can be processed by the DBMS working with the database. The DBMS receives the SQL requests and provides the required data. The middleware transfers information from the organization’s internal database back to the web server for delivery in the form of a webpage to the user. The software working between the web server and the DBMS can be an application server, a custom program, or a series of software scripts.

(Learning Objective 3: What are the principle tools and technologies for accessing information from databases to improve business performance and decision making? AACSB: Application of knowledge)

6-4 Why are data governance and data quality assurance essential for managing the firm’s data resources?

Define data governance and explain how it helps organizations manage their data Data governance encompasses policies and procedures for data governance and treats data as an organizational resource. Data governance establishes rules for sharing, disseminating, acquiring, standardizing, classifying, and inventorying information. Information policy lays out specific procedures and accountabilities, identifying which users and organizational units can share information, where information can be distributed, and who is responsible for updating and maintaining the information.

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

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

List and describe the most common data quality problems.

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

List and describe the most important tools and techniques for assuring data quality.

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

Data cleansing consists of activities for detecting and correcting data in a database that are incorrect, incomplete, improperly formatted, or redundant. Data cleansing not only corrects data but also enforces consistency among different sets of data that originated in separate information systems.

(Learning Objective 4: Why are data governance and data quality assurance essential for managing the firm’s data resources? AACSB: Application of knowledge)

Discussion Questions

6-5 It has been said that you do not need database management software to create a database environment. Discuss.

Student answers to this question will vary.

6-6 To what extent should end users be involved in the selection of a database management system and database design?

Student answers to this question will vary.

6-7 What are the consequences of an organization not having an information policy?

Student answers to this question will vary.

Hands-On MIS Projects Management Decision Problems 6-8 Emerson Process Management Emerson’s data warehouse was full of inaccurate and redundant data gathered from numerous transaction processing systems. The design team assumed all users would enter data the same way. Users actually entered data in multiple ways. Assess the potential business impact of these data quality problems. What decisions have to be made and steps taken to reach a solution?

Managers and employees can’t make accurate and timely decisions about customer activity because of inaccurate and redundant data. The company could be wasting resources pursuing customers it shouldn’t and neglecting its best customers. The company could be experiencing financial losses resulting from the inaccurate data.

Managers, employees, and data administrators need to identify and correct the faulty data and then establish better routines for editing data when it’s entered. The company should perform a data quality audit by

surveying entire data files, surveying samples from data files, or surveying end users for perceptions of data quality. The company needs to perform data cleansing operations to correct errors and enforce consistency among the different sets of data at their origin.

(Learning Objective 4: Why are data governance and data quality assurance essential for managing the firm’s data resources? AACSB: Analytical thinking, Reflective thinking, Application of knowledge) 6-9 Industrial supply company The company wants to create a single data warehouse by combining several different systems. The sample files from the two systems that would supply the data for the data warehouse contain different data sets.

What business problems are created by not having these data in a single standard format?

Managers are unable to make good decisions about the company’s sales and products because of inconsistent data. Managers can’t determine which products are selling the best world-wide; they can only determine product sales by region.

How easy would it be to create a database with a single standard format that could store the data from both systems? Identify the problems that would have to be addressed.

It may not be too hard to create a database with a single standard format if the company used middleware to pull both data sets into a consolidated database. The company should use specialized data-cleansing software that would automatically survey data files, correct errors in the data, and integrate the data in a consistent company-wide format. Problems that may occur would stem from inconsistent data names like the Territory and Customer ID in the old sets and data element names like Division in the new set. The data administrators, managers, and employees may have to track the data conversion and manually convert some data.

Should the problems be solved by database specialists or general business managers? Explain.

Both the database specialists and general business managers should help solve the problems. Data administrators are responsible for developing an information policy, planning for data, overseeing logical database design and data dictionary development, and monitoring how information system specialists and end-user groups use data. However, end-users and business managers have the final decision making authority and responsibility for the data.

Who should have the authority to finalize a single company-wide format for this information in the data warehouse?

Owners and managers are the only ones who have the authority to finalize the format for the information in the data warehouse. They could develop an information policy that specifies the organization‘s rules for sharing, disseminating, acquiring, standardizing, classifying, and inventorying information.

(Learning Objective 3: What are the principle tools and technologies for accessing information from databases to improve business performance and decision making? AACSB: Analytical thinking, Application of knowledge)

Achieving Operational Excellence: Building a Relational Database for Inventory Management Software skills: Database design, querying, and reporting Business Skills: Inventory Management

6-10

This exercise requires that students know how to create queries and reports using information from multiple tables. The solutions provided here were created using the query wizard and report wizard capabilities in Microsoft Access. Students can, of course, create more sophisticated reports if they wish.

The database would need some modification to answer other important questions about the business. The owners might want to know, for example, which are the fastest-selling bicycles. The existing database shows products in inventory and their suppliers. The owners might want to add an additional table (or tables) in the database to house information about product sales, such as the product identification number, date placed in inventory, date of sale, purchase price, and customer name, address, and telephone number. Management could use this enhanced database to create reports on bestselling bikes over a specific period, the number of bicycles sold during a specific period, total volume of sales over a specific period, or best customers. Students should be encouraged to think creatively about what other pieces of information should be captured on the database that would help the owners manage the business.

The answers to the following questions can be found in the Microsoft Access File named: Ess13ch06solutionfile.mdb.

1. Prepare a report that identifies the five most expensive bicycles. The report should list the bicycles in descending order from most expensive to least expensive, the quantity on hand for each, and the markup percentage for each.

2. Prepare a report that lists each supplier, its products, their quantities on hand, and associated reorder levels. The report should be sorted alphabetically by supplier. Within each supplier category, the products should be sorted alphabetically.

3. Prepare a report listing only the bicycles that are low in stock and need to be reordered. The report should provide supplier information for the items identified.

4. Write a brief description of how the database could be enhanced to further improve management of the business. What tables or fields should be added? What additional reports would be useful?

(Learning Objective 3: What are the principle tools and technologies for accessing information from databases to improve business performance and decision making? AACSB: Written and oral communication, Application of knowledge)

Improving Decision Making: Searching Online Databases for Overseas Business Resources

Software skills: Online databases Business skills: Researching services for overseas operations

6-11 List the companies you would contact to interview on your trip to determine whether they can help you with these and any other functions you think are vital to establishing your office.

Student answers will vary based on the companies they choose to contact.

Students may not understand that the World Wide Web is one massive data warehouse, but in non-technical terms that is exactly what it is. Remind them of this when they are completing this assignment. This assignment may best be accomplished in groups, where they can consolidate their findings into a written or oral presentation.

Rate the databases you used for accuracy of name, completeness, ease-of-use, and general helpfulness.

The U.S. Department of Commerce website contains a fair amount of economic information.

However, it may be simpler to direct your students to go to http://www.aol.com. The website for the Nationwide Business Directory of Australia is http://www.nationwide.com.au

(Learning Objective 3: What are the principal tools and technologies for accessing information from databases to improve business performance and decision making? AACSB: Analytical thinking, Application of knowledge)

Collaboration and Teamwork Project

6-12. In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: Does Big Data Provide the Answer?

6-13 What business benefits did the organizations described in this case achieve by analyzing and using big data?

This case described how businesses like Amazon, YouTube, the UK National Health Service, and New York City all benefit from making sense of big data. For instance, according to the case, big data analysis helps customers find the lowest prices and services on autos, computers, airfare, and hotels.

The UK National Health Service estimates savings of nearly 734 million dollars by analyzing large amounts of data to determine the most cost-effective method of treating common illnesses and chronic diseases. This data has been modified to create digital dashboards to further help with decision processes to improve care and lower costs.

New York City also benefits from analyzing big data to help fight crime. The city currently uses a mapping program to better identify crime and arrest locations and provides this information to managers to that are responsible for assigning critical resources in the area. This practical strategy helps send officers where they are most needed at a given time.

6-14 Identify two decisions at the organizations described in this case that were improved by using big data and two decisions that were not improved by using big data.

Improved: 

Police organizations can quickly identify crime hot spots and crime and arrest locations to help precinct commanders know quickly where to deploy officers.



UK National Health Services saves millions by analyzing data to determine the optimal treatment.

Not Improved: 

LEGO used data analyzes and determined they would move from smaller and more complex sets to larger and easier products. Visiting homes of customers and finding kids enjoyed LEGOs for the challenge, and not the instant gratification helped reverse this decision.



Some are concerned the tool called Patternizr, which is based on pattern recognition, perpetuates bias. As such, the new technology has generated a great deal of controversy and opposition.

6-15 List and describe the limitations to using big data.

Several companies have rushed to start big data projects without first establishing a business goal for this new information. Swimming in numbers and other data doesn‘t necessarily mean that the right information is being collected or that people will make smarter decisions. Experts in big data analysis believe too many companies, seduced by the promise of big data, jump into big data projects with nothing to show for their efforts. They start amassing and analyzing mountains of data without no clear objective or understanding of exactly how analyzing big data will achieve their goal or what questions they are trying to answer. Companies don‘t know what they‘re looking for because they think big data alone will solve their problem.

It often takes a lot of work for a company to combine data stored in legacy systems with data stored in Hadoop. Although Hadoop can be much faster than traditional databases for some tasks, it often isn‘t fast enough to respond to queries immediately or to process incoming data in real time (such as using smartphone location data to generate just-in-time offers).

It is difficult to find enough technical IT specialists with expertise in big data analytical tools, including Hive, Pig, Cassandra, MongoDB, or Hadoop. On top of that, many business managers lack numerical and statistical skills required for finding, manipulating, managing, and interpreting data. Even with big data expertise, data analysts need some business knowledge of the problem they are trying to solve with big data.

6-16 Should all organizations try to analyze big data? Why or why not? What people, organization, and technology issues should be addressed before a company decides to work with big data?

Answers will vary:

Just because an organization has data doesn‘t mean it has good information. There‘s a stark difference. Organizations must first determine a business goal for the information and then process the data towards that goal.

People: Many times, decisions made from data can be based on faulty context as was the case with Google‘s analysis of the flu outbreak. Managers must first determine the questions they are trying to answer before they begin analyzing data.

Organization: Having a lot of data without the organizational structure to support it doesn‘t accomplish much. People must be trained in using big data tools like Hadoop. Big data analysis doesn‘t necessarily show causation or which correlations are meaningful.

Technology: It takes a lot of work and time for a company to combine data stored in legacy systems with data stored in big data tools and programs like Hadoop. Sometimes the programs are not the right tool for the job. Big data poses challenges to information security and privacy.

(Learning Objective 6-3: What are the principal tools and technologies for accessing information from databases to improve business performance and decision making? AACSB: Analytical thinking, Application of knowledge.)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

6-17 Define web mining and describe the three ways that web mining looks for patterns in data.

View rubrics in MyLab MIS.

6-18 Discuss how the following facilitate the management of big data: Hadoop, in-memory computing, analytic platforms.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 7 Telecommunications, the Internet, and Wireless Technology

Learning Objectives

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31.

32.

33.

34.

7-1 What are the principal components of telecommunications networks and key networking technologies?

7-2 What are the different types of networks?

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

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

7-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

35.

Chapter Outline 7-1

What are the principal components of telecommunications networks and key networking technologies?

Networking and Communication Trends What is a Computer Network?

Key Digital Networking Technologies

7-2

What are the different types of networks?

Signals: Digital vs. Analog Types of Networks Transmission Media and Transmission Speed

7-3

How do the internet and internet technology work and how do they support communication and e-business?

What is the Internet?

Internet Addressing and Architecture Internet Services and Communication Tools The Web 7-4

What are the principal technologies and standards for wireless networking, communication, and internet access?

Cellular Systems Wireless Computer Networks and Internet Access RFID and Wireless Sensor Networks

7-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

3G networks, 254

Packet switching, 234

4G networks, 254

Peer-to-peer, 237

5G networks, 254

Personal area networks (PANs), 254

Bandwidth, 238

Predictive search, 248

Blog, 250

Protocol, 235

Blogosphere, 250

Radio frequency identification (RFID), 256

Bluetooth, 254

Router, 232

Broadband, 231

RSS, 250

Cable Internet connections, 238

Search engine marketing, 249

Chat, 242

Search engine optimization (SEO), 249

Dark web, 247

Search engines, 247

Digital subscriber line (DSL), 238

Semantic search, 248

Domain name, 239

Shopping bots, 249

Domain Name System (DNS), 239

Smartphones, 253

Email, 241

Social networking, 251

File Transfer Protocol (FTP), 241

Software-defined networking (SDN), 232

Hertz, 238

Switch, 232

Hotspots, 256

T1 lines, 238

Hubs, 232

Telnet, 241

Hypertext Transfer Protocol (HTTP), 246

Transmission Control Protocol/Internet Protocol (TCP/IP), 235

Instant messaging, 242

Unified communications, 243

Internet of Things (IoT), 251

Uniform resource locator (URL), 246

Internet Protocol (IP) address, 239

Virtual private network (VPN), 245

Internet service provider (ISP), 238

Visual web, 249

Internet2, 241

Voice over IP (VoIP), 242

IPv6, 241

Website, 246

Local area network (LAN), 236

Wide area networks (WANs), 237

Metropolitan area network (MAN), 237

Wi-Fi, 254

Microblogging, 250

Wiki, 250

Modem, 236

WiMax, 256

Near field communication (NFC), 257

Wireless sensor networks (WSNs), 258

Network operating system (NOS), 232

Teaching Suggestions

Chapter 7 presents crucial concepts and terminology since telecommunications, networks, and the internet are now introducing fundamental changes in businesses. The opening case, ―Tour De France Wins with Wireless Technology‖, illustrates some of the new capabilities and opportunities provided by wireless technology.

In order to increase viewer engagement, the Tour de France has adopted an array of digital technologies that help viewers gain more insight into the race. This includes a small, lightweight tracking sensor on each bike that collects data about the rider’s speed and location. These chips generate over 3 billion data points during the race.

These data points are combined with data feeds from other sources such as weather services, road gradients, and historical race data. This data is relayed to remote data centers in London and Amsterdam, where powerful algorithms analyze the data and generate real-time information.

This information is then provided to race organizers, broadcasters, teams, TV viewers, and fans in order to provide real-time statistics on the progress of the race. Despite the elaborate digital infrastructure required for this transfer of data, it can be all be done within as little as 2 seconds. The ability for fans to see live performance information has drastically increased Tour de France’s fan involvement.

The opening vignette provides a real world example of how organizations are utilizing wireless technology. It also shows how companies must continually evolve as technology improves.

Section 7-1: What are the principal components of telecommunications networks and key networking technologies?

Telecommunications and networks are vital to the majority of businesses today, and this section explains why. Because telecommunications technology serves as the foundation for electronic commerce and the digital economy, the concepts and terminology in Chapter 7 are important for both MIS and business majors. This section explains the basic configuration of networks, regardless of their size.

You may want to contrast the origin and history of telephone networks and computer networks. Then diagram how the two are converging into one pipeline for all types of communication transmissions.

Convergence is leading to more efficient transmission traffic and ubiquitous communications thanks to the internet.

A contemporary corporate network infrastructure relies on both public and private infrastructures to support the movement of information across diverse technological platforms. It includes the traditional telephone system, mobile cellular communications, wireless local area networks, videoconferencing systems, a corporate website, intranets, extranets, and an array of local and wide area networks, including the internet.

Contemporary networks have been shaped by the rise of client/server computing, the use of packet switching, and the adoption of TCP/IP as a universal communications standard for linking disparate networks and computers. Client/server networks have distributed much of organizations’ computing power to the desktop and factory floor. Packet switching makes more efficient use of network communications capacity by breaking messages into small packets that are sent independently along different paths in a network and then reassembled at their destination. Protocols provide a common set of rules that enable communication among diverse components in a telecommunications network. TCP/IP is a suite of protocols that has become the dominant model of achieving connectivity among different networks and computers. It is the connectivity model used in the internet.

One exercise you may try to help show how much we rely on communications today is to ask students to count the number of text messages, phone calls, emails, and IM messages they either sent or received in the last 24 hours or the last week. You could even go so far as to ask them to not send or receive any of these communications for a day to prove how reliant we’ve become on telecommunications.

Section 7-2: What are the different types of networks?

It may help for you to bring several props to show the different transmission media explained in this section. For example, bring twisted wire, coaxial cable, and fiber-optic cable to show to the class and discuss the advantages and disadvantages of each type of media. Students should note the different ranges (frequencies) of wireless media. Also, you should discuss bandwidth and its connection to frequencies, as this is a critical concept today. Table 7.1 (page 237) compares the range of four different area networks.

This section describes the different network topologies and how they pass data across a network. If you have students working in business, ask them to identify the network topologies used in their organizations.

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

Most students are familiar with the internet and motivated to discuss it. You might begin this section by asking students how they spend their time on the internet and how their online activities have changed since they started using the internet. Also, ask them to identify which

client platforms they currently use or have used. Ask your students to identify several of the many benefits that the internet offers to organizations. Ask them to provide specific examples that they have read about in the text or have personally observed.

The principal internet services and communication tools are email, chatting, instant messaging, newsgroups, telnet, file transfer protocol, and the web. Most students will probably be familiar with these services, having used them in their personal life. What they may not understand or relate to quite yet is how effective the tools are in a business setting. These tools reduce time and cost when firms must manage organizational activities and communicate with many employees. If you have students working in businesses, ask them to discuss the communications tools their organization uses. This section introduces a fairly new concept of unified communications. It also compares Web 2.0 with Web 3.0, which is now in the conceptual stage.

Make students aware that while the new information technology infrastructure provides many benefits and capabilities, it does require careful management and planning. Challenges posed by networking and the internet include loss of management control over information systems; the need for organizational change; and the difficulty of ensuring infrastructure scalability and reliability.

Interactive Session: People: Monitoring Employees on Networks: Unethical or Good Business?

Case Study Questions

1. Should managers monitor employee email and internet usage? Why or why not?

Answers will vary on this question. The case study statistics show that corporate misuse and abuse of email for personal reasons is exploding. Simply stated, employees who use company resources for work not related to the company are, in essence, engaged in ―service theft.‖ They are being paid to work for the company, and this does not include abusing corporate resources for personal time.

Companies are in business to generate profits for their shareholders. Managers certainly should be concerned with the loss of time and employee productivity, the additional traffic it creates on their networks that inhibits the efficiency for real business purposes, lost revenue or missed opportunities, as well as overcharging clients because of lost employee efficiencies. The company itself is responsible for the use of its resources and what employees do while using them. Adverse publicity can seriously affect a company and could even result in expensive lawsuits. Companies also fear email leakage of trade secrets. Other legal and regulatory problems involve the safe keeping of all emails that are generated on corporate equipment.

This information must be retained for specific time periods and may be requested as evidence in a lawsuit.

2. Describe an effective email and web use policy for a company.

Like all policies, an effective email and web use policy must be carefully designed and clearly communicated to all persons who use these corporate resources. There are several different policies in existence. Some companies allow absolutely no personal use of corporate networks, whereas others allow some degree of activity that is easily monitored. A good policy will detail exactly what type of activity is acceptable and what is not allowed. The policy should clearly articulate sanctions that will be followed for any and all offenses in relation to the policy. Most of all, rules for internet usage should be tailored to specific business needs and organizational cultures.

3. Should managers inform employees that their web behavior is being monitored? Or should

managers monitor secretly? Why or why not?

Opinions will vary according to personal values and workplace experiences. However, most students will probably answer that managers should inform employees that their web behavior is being monitored as a way to foster open communications and trust between both sides. Many consultants believe companies should write corporate policies on employee email and internet use. The policies should include explicit ground rules that state, by position or level, under what circumstances employees can use company facilities for email, blogging, or web surfing. The policies should also inform employees whether these activities are monitored and explain why.

Interactive Session: Organizations: The Internet of Things Aids Waste Management

Case Study Questions: 1. Identify the problem described in the case study. Is it a people problem, an organizational problem, or a technology problem? Explain your answer.

The city of San Francisco is working towards its goal of zero waste. They have partnered with two companies, Recology and Compology, to utilize new technologies that use the Internet of Things in order to help them achieve this goal.

People: San Francisco residents continue to send nearly 600,000 tons of waste to landfills each year.

Recology provides outreach and educational services to help members of the community become more aware of their recycling habits.

Organizational: While there are clear benefits to the city that come along with improved waste management, the city must also consider the costs of the investments they are making (i.e. purchasing IoT sensors for all trucks, plastic sorting, landfill gas capture systems).

Technology: The two companies have developed technologies that allow for optical sorting of plastics, conversion of landfill methane to electricity, paperless and more efficient fleet maintenance, and more efficient monitoring of waste streams and trash bins.

2. What role has information technology and the IoT played in helping cities deal with their waste management problems? Describe the IT applications that are being used for this purpose.

Information technology and the IoT has helped San Francisco to be more efficient in their waste management efforts in the following ways: - Optical sorting uses an infrared +sensor to sort plastics based on size, shape, and structure.

- Landfill gas capture systems convert the methane gas generated by landfills into electric power.

- Updated ERP systems allow for paperless fleet maintenance, along with more efficient tracking and management of truck fleets.

- IoT sensors at various points in waste stream help to monitor waste generation, recycling, and composting.

- IoT sensors attached to dumpsters allow for monitoring of trash containers for more efficient pickup schedules.

3. How successful are these IT applications as a solution? Explain your answer.

San Francisco has been able to divert 80 percent of its waste away from landfills with the use of the aforementioned technologies, but the remaining 20 percent will be more difficult. New technology alone

will not be sufficient in reaching Zero waste; city residents will need to become more vigilant about using recyclable products and curtailing wasteful habits.

Section 7-4: What are the principal technologies and standards for wireless networking, communication, and internet access?

Ask your students how many of them use cellular phones, smartphones, wireless laptops, tablet computers, or wireless e-book readers. Most students are excited to demonstrate their ―latest devices,‖ and you may wish to ask one of them to discuss the capabilities of theirs. Ask them to discuss what they like or dislike about the features found on their appliance.

If you have the class time, you can ask the campus IT director to discuss the telecommunications technology used on your campus, take a tour of the campus facilities, or invite an IT director from a local company to discuss his company’s telecommunications technology. Ask your students to find out what their university does in order to support mobile wireless communications. Have them investigate applications where Bluetooth, Wi-Fi, or hotspot technology is used and how it benefits them. Are they able to use their own personal appliances to connect and utilize these technologies on their campus?

Section 7-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as an automotive digital advisor. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

7-1 What are the principal components of telecommunications networks and key networking technologies?

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

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

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

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

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

(Learning Objective 1: What are the principal components of telecommunications networks and key networking technologies? AACSB: Application of knowledge)

7-2 What are the different types of networks?

Define an analog and a digital signal.

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

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

Distinguish between a LAN, MAN, and WAN.

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

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

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

(Learning Objective 2: What are the different types of networks? AACSB: Application of knowledge) 7-3 How do the internet and internet technology work and how do they support communication and e-business?

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

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

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

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

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

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

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

List and describe the principal internet services.

Table 7.3 (page 241) lists and describes the major internet services:

     

Email—person-to-person messaging; document sharing.

Newsgroups—discussion groups on electronic bulletin boards.

Chatting and instant messaging—interactive conversations.

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

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

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

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



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

Virtual private networks (VPN) are secure, encrypted, private networks that have been configured within a public network to take advantage of the economies of scale and management facilities of large networks, such as the internet. VPNs are low-cost alternatives to private WANs. VPNs give businesses a more efficient network infrastructure for combining voice and data networks.

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

    

Search engines are facilities on the web that help you find sites with the information and/or services you want. Examples: Google, Yahoo!, and MSN. Intelligent agent shopping bots use intelligent agent software for searching the internet for shopping information. Examples: MySimon and Froogle.

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

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

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

 

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

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

Describe how online search technologies are used for marketing.

Search engine marketing monetizes the value of the search process. Searching is one of the web‘s most popular activities with billions of queries performed each month. Search engines are the foundation for the most lucrative form of online marketing and advertising. When users enter a search term in a search engine, they receive two types of listings: sponsored links, for which advertisers have paid to be listed, and unsponsored organic search results. Advertisers can also purchase small text boxes on the side of search results pages. Paid, sponsored advertisements are the fastest growing form of internet advertising and are powerful new marketing tools that precisely match consumer interests with advertising messages at the right moment.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business? AACSB: Application of knowledge) 7-4 What are the principal technologies and standards for wireless networking, communications, and internet access?

Define Bluetooth, Wi-Fi, WiMax, and 3G and 4G and 5G networks.

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

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

WiMax has a wireless access range of up to 31 miles and a data transfer rate of up to 75 Mbps, making it suitable for providing broadband internet access in areas lacking DSL and cable lines.

The 802.16 specification also has robust security and quality-of-service features to support voice and video.

3G is a short term for third-generation wireless technology, especially mobile communications.

Cellular networks have evolved from slow-speed (1G) analog networks to high-speed, high-

bandwidth, digital packet-switched, third-generation (3G) networks with speeds ranging from 144 Kbps to more than 2 Mbps for data transmission.

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

5G is a short term for fifth-generation wireless technology. It is designed to support transmission of very large amounts of data (within the gigabit range) with fewer transmission delays and the ability to connect to many more devices than existing cellular systems.

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

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

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

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

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

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

5G networks: Will be used for self-driving vehicles, smart cities, and extensive us of the Internet of Things.

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

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

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

(Learning Objective 4: What are the principal technologies and standards for wireless networking, communications, and internet access? AACSB: Application of knowledge.)

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

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

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

(Learning Objective 4: What are the principal technologies and standards for wireless networking, communications, and internet access? AACSB: Application of knowledge)

Discussion Questions

7-5 It has been said that within the next few years, smartphones will become the single most important digital device we own. Discuss the implications of this statement.

Student answers to this question will vary.

7-6 Should all major retailing and manufacturing companies switch to RFID? Why or why not?

Student answers to this question will vary.

7-7 What are some of the issues to consider in determining whether the internet would provide your business with a competitive advantage?

Student answers to this question will vary.

Hands-On MIS Projects

Management Decision Problems

7-8 Floor tile company

Your company was asked by major retailing customers to begin using RFID to improve management of products. Use the web to identify the cost of hardware, software, and networking components for an

RFID system for your company. What factors should be considered? What are the key decisions that must be made in determining whether your firm should adopt this technology?

(The following information was copied from www.zebra.com)

What is the estimated incremental cost for adopting RFID?

If one is discussing incremental costs over and above what was invested in your bar code infrastructure, then you can say that you will be making an investment in tags, printer/encoders, readers, middleware, and professional services to integrate these components into your bar code legacy environment. If you are not working with bar codes already, obviously you will need to make an investment in back-office, manufacturing, or WMS systems to use RFID data.

What is a ballpark figure for implementing RFID in a warehouse and distribution process?

According to Forrester Research, a typical supplier that attempts to comply with a mandate can expect to spend as much as $9 million on RFID—depending on the size of its distribution network and sales volume. According to this research, the largest expenditures are tag costs and additional warehouse labor. However, this study provides a good perspective on the areas from which costs will derive.

How do smart label costs compare to conventional thermal/thermal-transfer printed labels?

A smart label runs in the vicinity of about $0.50 per label vs. about $0.01 for a conventional label.

This is mainly due to the addition of the tag. This cost is also variable based on the total volume printed and the economies of scale associated with large quantities.

What companies are currently developing RFID software? Is it all customized or are there off-the-shelf solutions?

Numerous start-up and established software providers—including those who provide ERP software—have developed applications to deal with RFID reader and printer/encoder management, plus ―tag data capture event‖ management. As with most business applications software, packages are typically customized to meet customers‘ requirements rather than being ready to go ―off the shelf.‖

How will RFID integrate with EDI software?

EDI messages contain data about business transactions. While the format of an EDI message may change to accommodate ―new data‖ (such as an EPC by comparison with a GTIN), fundamentally EDI message processors are unaware of the source of the data contained in messages. So, there should be no reason that RFID cannot integrate with EDI software, provided the data structures are fundamentally the same. However, one area of difference is that many EDI systems typically deliver data in periodic batch mode; in contrast, the strength of RFID is its ability to deliver real-time data, so systems are up-to-the-minute.

Key decisions that a company needs to make when considering adopting RFID include:

   

Hardware and software costs Implementation costs Return on investments How technology fits into overall business strategy

(Learning Objective 4: What are the principal technologies and standards for wireless networking, communications, and internet access? AACSB: Analytical thinking, Application of knowledge.)

7-9 BestMed Medical Supplies Corporation

BestMed sells products and equipment from over 700 different manufacturers to hospitals, health clinics, and medical offices. The company employs 500 people at seven different locations.

Management is considering adopting a unified communications system. What factors should be considered? What are the key decisions that have to be made in determining whether to adopt this technology? Use the web, if necessary, to find out more about unified communications and its costs.

Because the costs of purchasing and implementing a unified communication system will vary based on the chosen system, so too will student answers.

(The following information was copied from www.networkworld.com, Nov 2010)

From a broad perspective, Verizon Business suggests that organizations need to evaluate and measure how UC&C will benefit their organizations, determine whether the enterprise has

adequate in-house technical resources, personnel and network capacity; and define how to integrate UC&C into business processes to align the deployment with critical business initiatives.

At a more detailed level, Verizon Business suggested that in preparation for UC&C, enterprises should:

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  

Invest in advanced IP networks because ―UC&C starts with a capabilities-rich IP infrastructure [and] flexible and expansive IP networks serve as the foundation of a successful UC&C deployment.‖ Inventory technology and personnel resources to better understand the technological scope of UC&C deployments and ―help identify potential network, equipment, and application gaps.‖ Verizon Business also recommends a skills-assessment of technical staff ―to identify possible new hires and individuals requiring additional training.‖ Align technology with business objectives to ―make purchasing decisions with a focus on meeting specific business goals.‖ Any deployment should be designed to maximize the impact of UC&C on business processes. The enterprise should also establish benchmarks for success to better understand its ultimate objectives.

Create a comprehensive roadmap that is ―far reaching and covers areas such as technology and finances, as well as detailed deployment and implementation plans.‖ Tackle security at the onset, with a design that integrates ―seamlessly with a business‘ current network and leverage existing technology investments.‖ Determine capabilities for ongoing management and decide ―whether in-house staff has the skills and time required to effectively manage and troubleshoot performance issues.‖ As needed, enterprise should ―select a managed services provider with the people, tools, and processes to help provide consistent performance of UC&C applications.‖ Develop support systems and processes so that the corporate IT staff is prepared to address end-user performance issues and questions.

Train and educate end users ―to help users adopt and embrace these new tools so they can work more efficiently and productively.‖ Measure and modify, with built-in milestones planned that ―go beyond reliability and availability measurements to assess the impact of UC&C from a financial, customer service, business process, and end-user satisfaction perspective.‖

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

Improving Decision Making: Using Spreadsheet Software to Evaluate Wireless Services

Software skills: Spreadsheet formulas, formatting Business skills: Analyzing telecommunications services and costs

7-10

You would like to equip your sales force of 35, based in St. Louis, Missouri, with mobile phones that have capabilities for voice transmission, text messaging, internet access, and taking and sending photos. Use the web to select two wireless providers that offer nationwide voice and data service as well as good service in your home area. Examine the features of the mobile handsets and wireless plans offered by each of these vendors. Assume that each of the 35 salespeople will need to spend three hours per weekday between 8 a.m. and 6 p.m. on mobile voice communication, send 30 text messages per weekday, use 1 gigabyte of data per month, and send five photos per week. Use your spreadsheet software to determine the wireless service and handset that will offer the best pricing per user over a two-year period. For the purposes of this exercise, you do not need to consider corporate discounts.

Answers will vary, since plan rates and costs of mobile phones are constantly changing. The answer to this question can be found in the sample solution found in the Microsoft Excel file named ESS13ch07solutionfile.xls.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business? AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

Achieving Operational Excellence: Using Web Search Engines for Business Research

Software skills: Web search tools Business skills: Researching new technologies

7-11

Use Google and Bing to obtain information about ethanol as an alternative fuel for motor vehicles.

If you wish, try some other search engines as well. Compare the volume and quality of information you find with each search tool. Which tool is the easiest to use? Which produced the best results for your research? Why?

Answers will vary according to the search phrases students enter in the search engines. The object of this question should be for students to explore new search engines and web services and not stick with ―what they already know.‖ To that end, encourage students to use a different search engine than what they normally use and explore how their search results are framed—sponsored links or organic listings. Also encourage them to search for audio and video files, blogs, wikis, and Web 2.0 services about the subject. Is the information more useful, less useful, pertinent, or trustworthy? Do they prefer simple text documents, or do they find the newer web services more helpful?

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

Collaboration and Teamwork Project

7-12. In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem Solving Case: Google, Apple, and Facebook Battle for Your Internet Experience

7-13 Compare the business models and core competencies of Google, Apple, and Facebook.

Google: Its business model has always focused on the internet and the web. It began as one of many search engines. It quickly ran away from the pack with its copyrighted PageRank search algorithm which returns superior search results for web users. It also has developed extensive online advertising services for businesses of all sizes. Google provides value to the user by using an inexpensive, flexible infrastructure to speed up web searches and provide its users with a vast array of web-based services and software tools.

Apple: Its business model focuses on centralized control of almost all aspects of its hardware and software.

It believes smartphones and tablets should have proprietary standards and be tightly controlled. It only allows apps from its App store that have been vetted by the company to be loaded to its products. Apple has a very loyal user base that has steadily grown and most likely will stay with Apple products in the future.

Facebook: Facebook has built its business around social networking better than any other company. It has more worldwide users than any other company. Facebook Platform enables developers to build applications and websites that integrate with Facebook to reach its global network of users, and to build pesonalized and social products.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

7-14 Why is mobile computing so important to these three firms? Evaluate the mobile strategies of each firm.

This case demonstrates the fundamental paradigm shift from primarily desktop PC computing to mobile computing devices accessing services through the internet that is currently taking place. This environment is projected to be a $400 billion e-commerce marketplace where the major access device will be a mobile smartphone or tablet computer. Each company is vying for the lead in a world of ubiquitous computing based on internet access. The leader stands to make untold profits from advertising but in order to do that,

the leader needs to claim the largest user base.

Apps greatly enrich the experience of using a mobile device. Whoever creates the most appealing set of devices and applications will derive a significant competitive advantage over rival companies.

Google: Aggressively follows eyeballs. It has introduced the Android mobile operating system for a host of non-Apple devices. The Droid system adds features that Apple devices don’t have – the ability to run multiple apps at the same time. Uses an open non-proprietary system that allows users to grab apps from any source. Command of the smartphone operating system market provides built-in channels for serving ads to mobile devices. Google has successfully tailored its search results to respond to mobile searchers needs and accommodate smartphone functionality.

Apple: By far the current leader in the number of apps users can download – over one million. Apple has more than 1 billion active devices in circulation, creating a huge installed base of users willing to purchase services and a source of new revenue streams. Uses a closed proprietary system and apps that only provide ―one way in.‖ It unveiled Siri in 2011, which had the potential to serve as a market disruption technology by combining search, navigation, and personal assistant tools.

Facebook: Realized that much of its advertising revenue will come from mobile device searches. It overhauled its home page to increase the size of both photos and links and allow users to create topical streams. It de-cluttered smartphone screens. It gave advertisers more opportunties and more interesting information with which to target markets. Facebook has a mobile application suite that replaces the typical smartphone home screen. It essentially turns an Android mobile device into a Facebook phone.

(Learning Objective 4: What are the principal technologies and standards for wireless networking, communication, and internet access?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

7-15 Which company and business model do you think is most likely to dominate the internet and why?

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Students should consider these principles in their answers: The size, complexity, and bureaucracy of organizations affect the ability of any company to continue to innovate, grow, and expand its reach (see Chapter 3). As all three companies try to expand into mobile computing, their ability to ―turn on a dime‖ in the face of other competitors may be in serious jeopardy.

Google currently has the major share of the web-based advertising market, however Facebook and other market entrants will be a major threat to them. Apple has had a significant lead in mobile computing for several years. However, as more companies—Google, Facebook, and others—continue to expand into the arena, its lead will be threatened. Legal and regulatory compliance will be a major issue as this market grows and more concerns are expressed from external environments.

History is not on anyone’s side. Every major company that’s been a force in technology in one era has lost its lead in the next. For example, IBM was king of mainframe computing in the 1940s and 1950s. DEC was king in the mini-computer era during the 1970s. Microsoft was king in the 1980s and 1990s during the reign of desktop computers. Google reigns in the 2000s with its web-based services. Apple began as king of mobile computing devices. Will it remain on top as technology continues to evolve?

(Learning Objective 1: What are the principal components of telecommunications networks and key networking technologies?, Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

7-16 What difference would it make to a business or to an individual consumer if Apple, Google, or Facebook dominated the internet experience? Explain your answer.

Right now, Apple leads Google in the number of apps available to users. That gap is closing quickly thanks to Google’s improvements of the Android operating system and its encouragement to app developers. Open, non-proprietary systems historically have beat closed, proprietary systems because developers and users have a wider range of choices. Business managers must try to forecast which platform will provide the right choices for employees. Consumers must choose which platform will best fulfill their personal needs for the next two to three years. Switching costs play into both scenarios, not just in terms of phone purchases but the price of apps. Once a user purchases and adjusts to using a certain platform, it’s difficult and expensive to switch to a whole different system.

Apps greatly enrich the experience of using a mobile device, and without them, the predictions for the future of mobile internet would not be nearly as bright. Whoever creates the most appealing set of devices and applications will derive a significant competitive advantage over rival companies.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, Learning Objective 4: What are the principal technologies and standards for wireless networking, communication, and internet access?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

7-17 Compare Web 2.0 and Web 3.0.

View rubrics in MyLab MIS.

7-18 How do social search, semantic search, and mobile search differ from searching for information on the web using conventional search engines?

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 8 Securing Information Systems

Learning Objectives

8-1 Why are information systems vulnerable to destruction, error, and abuse?

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

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

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

8-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline 8.1

Why are information systems vulnerable to destruction, error, and abuse?

Why Systems are Vulnerable Malicious Software: Viruses, Worms, Trojan Horses, and Spyware Hackers and Computer Crime Internal Threats: Employees Software Vulnerability

8.2

What is the business value of security and control?

Legal and Regulatory Requirements for Electronic Records Management Electronic Evidence and Computer Forensics

8.3

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

Information Systems Controls Risk Assessment

Security Policy Disaster Recovery Planning and Business Continuity Planning The Role of Auditing 8.4

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

Identity Management and Authentication Firewalls, Intrusion Detection Systems, and Anti-malware Software Securing Wireless Networks Encryption and Public Key Infrastructure Securing Transactions with Blockchain Ensuring System Availability Security Issues for Cloud Computing and the Mobile Digital Platform Ensuring Software Quality

8.5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Acceptable use policy (AUP), 286

Intrusion detection systems, 290

Anti-malware software, 291

Keyloggers, 274

Application controls, 284

Malware, 273

Authentication, 288

Managed security service providers (MSSPs), 294

Biometric authentication, 288

Online transaction processing, 293

Botnet, 275

Password, 288

Bugs, 279

Patches, 280

Business continuity planning, 287

Pharming, 277

Click fraud, 278

Phishing, 276

Computer crime, 275

Public key encryption, 292

Computer forensics, 283

Public key infrastructure (PKI), 292

Computer virus, 273

Ransomware, 274

Controls, 271

Risk assessment, 285

Cybervandalism, 275

Sarbanes–Oxley Act, 282

Cyberwarfare, 278

Secure Hypertext Transfer Protocol (S-HTTP), 291

Denial-of-service (DoS) attack, 275

Secure Sockets Layer (SSL), 291

Digital certificates, 292

Security, 271

Disaster recovery planning, 286

Security policy, 285

Distributed denial-of-service (DDoS) attack, 275

Smart card, 288

Downtime, 293

Sniffer, 275

Drive-by download, 273

Social engineering, 279

Encryption, 291

Spoofing, 275

Evil twin, 277

Spyware, 274

Fault-tolerant computer systems, 293

SQL injection attack, 274

Firewall, 289

Token, 288

General controls, 284

Trojan horse, 274

Gramm–Leach–Bliley Act, 282

Two-factor authentication, 288

Hacker, 275

Unified threat management (UTM), 291

HIPAA, 282

War driving, 272

Identity management, 287

Worm, 273

Identity theft, 276

Zero-day vulnerabilities, 279

Information systems audit, 287

Teaching Suggestions The opening case ―The Electric Power Grid Becomes a Cyberwarfare Battleground‖ illustrates how the problem of securing information systems ranges from keeping viruses off a personal computer to protecting national interests and infrastructure. This case specifically describes how primarily Russian hackers are actively attempting to bring down the US electricity grid. The results would be catastrophic bringing down life support systems in hospitals, disruption of clean water supplies, and havoc on the financial and transportation systems.

The United States is diligently working to defend the grid and is ramping up defense efforts. The North American Reliability Corporation oversees the grid in the United States and Canada continues to issue standards on how electric companies can best protect their systems. Is particularly focusing on contractors and subcontractors that service the grid as a high-risk vulnerability.

Section 8-1: Why are information systems vulnerable to destruction, error, and abuse?

Corporate systems using the internet are especially vulnerable because the internet is designed to be an open system. As wireless systems become more popular, security challenges associated with them increase exponentially. Internal corporate systems are just as vulnerable to malicious actions from insiders as they are from those outside the system.

Students should understand how common viruses, Trojan horses, and wardriving are. They should understand how to protect themselves from these intrusions and, in turn, protect themselves from all the problems resulting from the threats.

Ask your students to research some of the latest malware threats. They can find information on malware by visiting one of the following websites or simply using a search engine such as Google to research this request. http://www.symantec.com/index.htm http://mcafee.com http://www.pandasecurity.com

Interactive Session: Technology: Meltdown and Spectre Haunt the World’s Computers

Case Study Questions:

1. How dangerous are Spectre and Meltdown? Explain your answer.

Spectre and Meltdown exploit flaws in nearly all modern processors. An attacker can make a program reveal data that should have been kept secret such as user and password information. Meltdown could be exploited to reveal data owned by other users and virtual servers hosted on the same hardware, making it especially dangerous for cloud computing host computers.

There is no evidence that Spectre and Meltdown have been exploited. However, this would be difficult to detect. Because these flaws are so fundamental to the hardware, only microcode and software fixes have been developed and released by technology vendors. These changes have limited performance features on the chips, resulting in a degraded performance by 5-10 percent.

2. What people, organization, and technology factors contributed to these security weaknesses?

People: It is difficult—if not impossible—for anyone to design hardware and computer systems that do not have exploitable flaws.

Organization: Nearly every company that manufactured computer chips in the last 20 years unknowingly included these exploitable security flaws.

Technology: The flaws arise from features built into chips that help them run faster. There are two specific variations of these flaws, called Meltdown and Spectre. Meltdown was so named because it ―melts‖ security boundaries normally enforced by hardware. Spectre is not manufacturer-specific and affects nearly all modern processors. It requires more intimate knowledge of the victim program‘s inner workings. Spectre‘s name comes from speculative execution, in which a chip is able to start work on predicted future operations in order to work faster.

3. How could these attacks have been prevented?

It is difficult to speculate on prevention. The most worrisome aspect of Meltdown and Spectre is that security vulnerabilities are not from flawed software but from the fundamental design of hardware platforms beneath the software. More security testing during development might have been possible.

4. What was the business and social impact of these attacks?

There is no evidence that Spectre and Meltdown have been exploited, but this would be difficult to detect. If anything good can be said about Spectre and Meltdown, it is that they have focused more global attention on software and hardware security and the need to develop more robust system architectures for secure computing.

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

Security and control are important but often neglected areas for information systems investments. Most companies today are naïve about how vulnerable their assets are. When developing and managing information security systems, the organization‘s primary concern is acquiring new weapons to fight and win the battle for system security. Remind your students that knowledge is the best first line of defense against the army of hackers, frauds, tricksters, saboteurs, and thieves who threaten the organization‘s precious information resources.

Most students and professors alike have all been affected at one time on another with a software virus. Ask students what malware they may have had on their computer systems, what problems it created for them, and how they were able to solve it.

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

Firms must use appropriate technologies to effectively protect their information resources. The best place to start is by establishing a well-defined set of general and application controls. Ask your students to research what types of security and control methods are employed by their university or workplace. In groups, ask them to present their findings in class.

Security policies and acceptable use policies are only as good as their enforcement. Many organizations, including universities, have acceptable use policies but, unfortunately, not many people know they exist, read them, or abide by them. Have students research the acceptable use policy for your university and explain it to the other students. Discuss the implications of following or not following the policy.

Security audits, both internal and external, are more important than ever in helping to secure corporate information systems. The Enron/Anderson scandal and the resultant federal laws have resulted in positive changes in how executives and managers view security. Stress this throughout the chapter as you discuss it with the students.

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

While students or their employers may say they want software quality or controls in information systems, few want to be bothered with the extra steps that quality assurance requires, or the limits on their freedom, funds, and extra time it takes to install controls and security.

Discuss with students how biometrics—such as the use of fingerprint imaging, retinal scans, or voice maps to authenticate users—can increase security. Ask your students to investigate the latest biometric systems and devices.

Establishing a good framework for security and control requires skillful balancing of risks, rewards, and the firm’s operational capabilities. Designing systems that are neither over-controlled nor under-controlled and implementing an effective security policy are major management challenges. Solutions include making security and control a higher management priority and installing security awareness throughout the firm.

Key management decisions include determining an appropriate level of control for the organization and establishing standards for system accuracy and reliability.

When processing takes place in the cloud, accountability and responsibility for protection of sensitive data still reside with the company owning that data. Understanding how the cloud computing provider organizes its services and manages the data is critical. Cloud computing is highly distributed. When you use the cloud, you may not know precisely where your data are being hosted.

Cloud users need to confirm that regardless of where their data are stored, they are protected at a level that meets their corporate requirements. They should stipulate that the cloud provider store and process data in specific jurisdictions according to the privacy rules of those jurisdictions. Cloud clients should find out how the cloud provider segregates their corporate data from those of other companies and ask for proof that encryption mechanisms are sound.

Cloud users should also ask whether cloud providers will submit to external audits and security certifications. These kinds of controls can be written into the service level agreement (SLA) before signing with a cloud provider. The Cloud Security Alliance (CSA) has created industrywide standards for cloud security, specifying best practices to secure cloud computing.

Interactive Session: Organizations: How Secure Is the Cloud?

Case Study Questions

1. What kinds of security problems does cloud computing pose? How serious are they?

Explain your answer.

Using the public cloud disrupts traditional cybersecurity models that many companies have built up over years. As companies make use of the public cloud, they need to revise their cybersecurity practices in order to consume public-cloud services in a way that enables them both to protect critical data and to fully exploit the speed and agility that these services provide.

Managing security and privacy for cloud services is similar to managing traditional IT infrastructures. However, the risks may be different because some, but not all, responsibilities shift to the cloud service provider. The category of cloud service (IaaS, PaaS, or SaaS) affects exactly how these responsibilities are shared. For IaaS, the provider typically supplies and is responsible for securing basic IT resources such as machines, storage systems, and networks.

The biggest threats to cloud data for most companies involve lack of software patching or misconfiguration. Many organizations have been breached because they neglected to apply software patches to newly identified security vulnerabilities when they became available or waited too long to do so.

2. What people, organization, and technology factors are responsible for cloud security problems? To what extent is cloud security a management issue?

People: Cloud service customers should carefully review their cloud services agreement with their cloud provider to make sure their applications and data hosted in cloud services are secured in accordance with their security and compliance policies.

Organizational: Although many organizations know how to manage security for their own data center—they‘re unsure of exactly what they need to do when they shift computing work to the cloud. There’s a misconception among many IT departments that whatever happens in the cloud is not their responsibility.

Technology: The biggest threats to cloud data for most companies involve lack of software patching or misconfiguration. Many organizations have been breached because they neglected to apply software patches to newly identified security vulnerabilities when they became available or waited too long to do so. Companies have also experienced security breaches because they did not configure aspects of cloud security that were their responsibility

3. What steps can organizations take to make their cloud-based systems more secure?

Cloud service customers should review their service agreements with their providers to ensure that their applications and data are secured in accordance with their security and compliance policies.

Organizations must clearly identify exactly how security responsibilities are shared with the cloud service provider.

Organizations must ensure that software security patches are applied promptly and correctly.

4. Should companies use the public cloud to run their mission-critical systems? Why or why not?

Companies need to carefully review their mission-critical systems requirements, including the impact to the business of down-time or a breech in security. They must revise their cybersecurity practices in order to consume public-cloud services in a way that enables them both to protect critical data and to fully exploit the speed and agility that these services provide. If a company uses a reliable vendor and is willing to understand and manage their responsibilities and those of the service provider, they can use cautiously move towards migrating their mission-critical systems.

Review Questions

8-1 Why are information systems vulnerable to destruction, error, and abuse?

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

The most common threats against contemporary information systems include technical, organizational, and environmental factors compounded by poor management decisions. Figure 8-1 (page 271) includes the following:     

Technical: Unauthorized access, introducing errors.

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

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

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

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

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

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

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

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

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

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

A hacker is an individual who gains unauthorized access to a computer system by finding weaknesses in security protections used by websites and computer systems. Hackers not only threaten the security of computer systems, but they also steal goods and information, damage systems, and commit cybervandalism.

They may intentionally disrupt, deface, or even destroy a website or corporate information system.

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

The Department of Justice defines computer crime as ―any violations of criminal law that involve a knowledge of computer technology for their perpetration, investigation, or prosecution.‖ Computer crime is

defined as the commission of illegal acts through the use of a computer or against a computer system. Table 8-2 (page 276) provides examples of computer crimes.

Computers as targets of crime:      

Breaching the confidentiality of protected computerized data.

Accessing a computer system without authority.

Knowingly accessing a protected computer to commit fraud.

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

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

Threatening to cause damage to a protected computer.

Computers as instruments of crime:        

Theft of trade secrets.

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

Schemes to defraud.

Using email for threats or harassment.

Internationally attempting to intercept electronic communication.

Illegally accessing stored electronic communications, including email and voice mail.

Transmitting or processing child pornography using a computer.

Click fraud: when an individual or computer program fraudulently clicks an online ad without any intention of learning more about the advertiser or making a purchase.

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

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

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

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

Describe the security and system reliability problems employees create.

The largest financial threats to business institutions come from employees. Some of the largest disruptions to service, destruction of e-commerce sites, and diversion of customer credit data and personal information have come from insiders. Employees have access to privileged information, and in the presence of sloppy internal security procedures, they are often able to roam throughout an organization’s systems without leaving a trace.

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

Explain how software defects affect system reliability and security.

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

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

(Learning Objective 1: Why are information systems vulnerable to destruction, error, and abuse?

AACSB: Analytical thinking) 8-2 What is the business value of security and control?

Explain how security and control provide value for businesses.

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

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

The business value of security and control:  

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

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

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

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

Recovering data from computers while preserving evidential integrity.

Securely storing and handling recovered electronic data.

 

Finding significant information in a large volume of electronic data.

Presenting the information to a court of law.

Recent U.S. government regulatory requirements include:   

Health Insurance Portability and Accountability Act (HIPAA) Gramm-Leach-Bliley Act Sarbanes-Oxley Act

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

(Learning Objective 2: What is the business value of security and control? AACSB: Application of knowledge.)

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

Define general controls and describe each type of general control.

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

General controls include software controls, physical hardware controls, computer operations controls, data security controls, controls over implementation of system processes, and administrative controls. Table 8-3 (page 277) describes each type of general control.

(Learning Objective 3: What are the components of an organizational framework for security and control? AACSB: Application of knowledge.)

Define application controls and describe each type of application control.

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

Application controls can be classified as:   

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

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

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

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

A risk assessment determines the level of risk to the firm if a specific activity or process is not properly controlled. Business managers working with information systems specialists can determine the value of

information assets, points of vulnerability, the likely frequency of a problem, and the potential for damage.

Controls can be adjusted or added to focus on the areas of greatest risk. An organization does not want to over-control areas where risk is low or under-control areas where risk is high.

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

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

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

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

Identity management consists of business processes and software tools for identifying valid system users and controlling their access to system resources. It includes policies for identifying and authorizing different categories of system users, specifying what systems or portions of systems each user is allowed to access, and the processes and technologies for authenticating users and protecting their identities.

Explain how information systems auditing promotes security and control.

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

(Learning Objective 3: What are the components of an organizational framework for security and control? AACSB: Analytical thinking) 8-4 What are the most important tools and technologies for safeguarding information resources?

Name and describe three authentication methods.

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

  

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

What you have: o A token is a physical device that is designed to provide the identity of a single user. o A smart card is a device that contains a chip formatted with access permission and other data.

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

Describe the roles of firewalls, intrusion detection systems, and anti-malware software in promoting security.

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

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

Anti-malware software is designed to check computer systems and drives for the presence of computer malware, viruses, and worms and often eliminates the malicious software, whereas antispyware software combats intrusive and harmful spyware programs. Often the software can eliminate the malware from the infected area. To be effective, anti-malware software must be continually updated.

Explain the how wireless networks are secured The initial security standard developed for Wi-Fi, called Wired Equivalent Privacy (WEP), was not very effective because its encryption keys were relatively easy to crack. The most recent version is WPA3, introduced in 2018. The new standard makes passwords even harder to crack and strengthens user privacy in public networks through individualised data encryption. Corporations can further improve Wi-Fi security by using it in conjunction with virtual private network (VPN) technology when accessing internal corporate data.

Explain how encryption protects information.

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

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

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

Distinguish between disaster recovery planning and business continuity planning.

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

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

Identify and describe the security problems cloud and mobile computing pose.

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

If mobile devices are performing many of the functions of computers, they need to be secured like desktops and laptops against malware, theft, accidental loss, unauthorized access, and hacking attempts. Mobile devices accessing corporate systems and data require special protection. Companies will need mobile device management tools to authorize all devices in use; to maintain accurate inventory records on all mobile devices, users, and applications; to control updates to applications; and to lock down or erase lost or stolen devices so they can’t be compromised.

Describe measures for improving software quality and reliability.

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

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

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

Online response time.

Number of known bugs per hundred lines of program code.



Early, regular, and thorough testing will contribute significantly to system quality. Testing can prove the correctness of work but also uncover errors that always exist in software. Testing can be accomplished through the use of: Walkthroughs: A review of a specification or design document by a small group of people.

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

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

  

(Learning Objective 4: What are the most important tools and technologies for safeguarding information resources? AACSB: Application of knowledge.)

Discussion Questions

8-5 Security isn’t simply a technology issue, it’s a business issue. Discuss.

Student answers to this question will vary.

8-6 If you were developing a business continuity plan for your company, where would you start?

What aspects of the business would the plan address?

Student answers to this question will vary.

8-7 Suppose your business had an e-commerce website where it sold goods and accepted credit card payments. Discuss the major security threats to this website and their potential impact. What can be done to minimize these threats?

Student answers to this question will vary.

Hands-On MIS Projects Management Decision Problems 8-8 Zynga Inc. Zynga operates online game sites that accommodate millions of players at once and played simultaneously by people all over the world. Prepare a security analysis for this internet-based business. What kinds of threats should it anticipate? What would be their impact on the business? What steps can it take to prevent damage to its websites and continuing operations?

Threats include:     

Hackers and crackers File sharing over peer-to-peer networks Malware including worms and Trojan horses Denial-of-service attacks Botnet attacks on network servers The company should determine the impact on its business by performing a risk assessment. Business managers working with information systems specialists should determine the value of information assets, points of vulnerability, the likely frequency of a problem, and the potential for damage.

Steps the company can take to prevent damage include:

  

Access controls: Prevent improper access to all the organization’s systems by unauthorized insiders and outsiders.

Firewalls: Prevent unauthorized users from accessing private networks.

Intrusion detection systems: Full-time monitoring tools placed at the most vulnerable points or ―hot spots‖ to

  

detect and deter intruders.

Anti-malware/antispyware: Check computer systems and drives for the presence of computer malware, viruses, and spyware.

Unified threat management systems: Combines all these tools into a single appliance. Since this seems to be a relatively small company, a UTM system would make security management much easier.

Recovery-oriented computing: Design the system to recover quickly and implement capabilities and tools to help operators pinpoint the sources of faults in multi-component system.

(Learning Objective 1: Why are information systems vulnerable to destruction, error, and abuse?, Learning Objective 2: What is the business value of security and control?, Learning Objective 4: What are the most important tools and technologies for safeguarding information resources?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge) 8-9 Security analysis statistics: Analyze high risk, medium risk, and low risk vulnerabilities by type of computing platform. A survey of your firm‘s IT infrastructure has identified a number of security vulnerabilities. Review the data about these vulnerabilities, which can be found in a table in MyLab MIS. Use the table to answer the following questions:

Calculate the total number of vulnerabilities for each platform. What is the potential impact of the security problems for each computing platform on the organization?

The total number of vulnerabilities for each platform is indicated in the far-right column of the table.

Potential impact of the security problems for each computing platform:







High risk vulnerabilities: Misuse of passwords allows hackers, crackers, and employees to access specific systems and files and steal data or change application programs; nonauthorized users could change applications or enter corrupt or faulty data; unauthorized programs could corrupt data or programs.

Medium risk vulnerabilities: Obviously it‘s not a good thing for users to be able to shut down systems – that should be restricted to high-level administrators; passwords and screen savers could allow viruses, worms, and Trojan horses to enter the system; outdated software versions make it more difficult to keep current software programs up-to-date and provide holes in which unauthorized users could enter a system.

Low risk vulnerabilities: Users‘ lack of knowledge is the single greatest cause of network security breaches. Password systems that are too easy or too difficult compromise system security and could create unintentional vulnerabilities from internal or external threats.

If you only have one information systems specialist in charge of security, which platforms should you address first in trying to eliminate these vulnerabilities? Second? Third?

Last? Why?



First platform to protect: Windows Vista Ultimate (high-level administrators)—administrators usually have access to areas that no other users have. The tasks that administrators perform affect the core operations of a system.

   

Second platform to protect: Windows Server (corporate applications)—if the corporate applications are down or corrupted, the entire organization will be unable to conduct business.

Third platform to protect: Sun Solaris (UNIX) (e-commerce and web servers)—after ensuring that internal operations are safe and secure, the next area to protect focuses on the ability to reach customers and for them to reach the company.

Fourth platform to protect: Windows Vista Ultimate user desktops and laptops —this area probably has fewer critical applications, files, and data than the corporate applications area.

Last platform to protect: Linux (email and printing services)—while it may be critical to a few users, it’s not likely that the organization will suffer huge damage or losses if email and print services are down for a while.

Identify the types of control problems illustrated by these vulnerabilities and explain the measures that should be taken to solve them.



General controls: Govern the design, security, and use of computer programs and the security of data files in general throughout the organization‘s information technology infrastructure. General controls apply to all computerized applications and consist of a combination of hardware, software, and manual procedures that create an overall control environment. o Windows Vista Ultimate (high-level administrators) o Sun Solaris (UNIX) (e-commerce and web servers)



Application controls: Specific controls unique to each computerized application, such as payroll or order processing. They include both automated and manual procedures that ensure that only authorized data are completely and accurately processed by that application. Application controls can be classified as input controls, processing controls, and output controls. o Windows Server (corporate applications) o Linux (email and printing services) o Sun Solaris (UNIX) (e-commerce and web servers) o Windows Vista Ultimate user desktops and laptops



Measures that should be taken to solve them include: o Create a security policy and an acceptable use policy. o Use authorization management systems. o Create a business continuity plan. o Complete an MIS audit that includes a security audit. o Apply access controls, firewalls, and anti-malware/antispyware to system. o Install an intrusion detection management system. o Determine if fault-tolerant or high availability computing is necessary.

What does your firm risk by ignoring the security vulnerabilities identified?

Information systems are vulnerable to technical, organizational, and environmental threats from internal and external sources. Managers at all levels must make system security and reliability their number one priority.

They must also impress upon all employees how important security is throughout the system. There are several ways the business value of security and control can be measured:  

The dollars a company spends to secure a system.

The amount of money spent to recover from system fraud and abuse.

  

The lost revenue from system downtime.

The amount of money spent on legal claims against a company if it experiences security breaches.

The damage done to a company’s reputation.

(Learning Objective 1: Why are information systems vulnerable to destruction, error, and abuse?, Learning Objective 2: What is the business value of security and control?, Learning Objective 4: What are the most important tools and technologies for safeguarding information resources?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge) Improving Decision Making: Using Spreadsheet Software to Perform a Security Risk Assessment Software skills: Spreadsheet formulas and charts Business skills: Risk assessment 8-10 Calculating anticipated annual loses from various security threats identified for a small company.

Remind students that setting security policies and procedures really means developing a plan for how to deal with computer security. One way to approach this task is:     

Look at what you are trying to protect.

Look at what you need to protect it from.

Determine how likely the threats are.

Implement measures that will protect your assets in a cost-effective manner.

Review the process continuously and improve things every time a weakness is found.

Reports should focus most on the last two steps, but the first three are critically important to making effective decisions about security. One old truism in security is that the cost of protecting yourself against a threat should be less than the cost of recovering if the threat were to strike you. Without reasonable knowledge of what you are protecting and what the likely threats are, following this rule could be difficult.

Answers to the questions can be found in the sample solution found in the Microsoft Excel file named MIS14ch08solutionfile.xls.

(Learning Objective 1: Why are information systems vulnerable to destruction, error, and abuse?, Learning Objective 2: What is the business value of security and control?, Learning Objective 4: What are the most important tools and technologies for safeguarding information resources?, AACSB: Written and oral communication, Analytical thinking, Reflective thinking, Application of knowledge) Improving Decision Making: Evaluating Security Outsourcing Services Software skills: Web browser and presentation software Business skills: Evaluating business outsourcing services 8-11 Developing your Internet skills in using the web to research and evaluate security outsourcing services.

Your students will provide several pros and cons to outsourcing. Most of them will conclude that the major pro would be a financial savings. As a con, they may say that finding a reliable contractor is not always an easy thing to do. Four companies that are proven business leaders are: Ansotech, Inc., Foundstone Enterprise, Counterpane Internet Security, and Panurgy.

(Learning Objective 1: Why are information systems vulnerable to destruction, error, and abuse?, Learning Objective 2: What is the business value of security and control?, Learning Objective 4: What are the most important tools and technologies for safeguarding information resources?, AACSB: Written and oral

communication, Analytical thinking, Reflective thinking, Application of knowledge)

Collaboration and Teamwork Project

8-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem Solving Case: Is the Equifax Hack the Worst Ever—and Why?

8-13 Identify and describe the security and control weaknesses discussed in this case.

Equifax is one of the three main US credit bureaus that maintain vast repositories of personal and financial data used by lenders to determine creditworthiness when consumers apply for a credit card, mortgage, or other loans. Equifax has more data on you than just about anyone else. If any company needs airtight security for its information systems, it should be credit reporting bureaus such as Equifax. Unfortunately, this has not been the case.

Equifax did not upgrade its technological capabilities to keep pace with its aggressive growth.

Their aggressive growth strategy and accumulation of data resulted in a complex IT environment.

This complexity and the antiquated nature of important Equifax information systems made IT security especially challenging.

The hack involved a known vulnerability in Apache Struts, a type of open-source software Equifax and other companies use to build websites. This software vulnerability had been publicly identified in March 2017, and a patch to fix it was released at that time. That means Equifax had the information to eliminate this vulnerability two months before the breach occurred. It did nothing.

This was not the first time Equifax had been hacked. Analyses earlier in 2017 performed by four companies that rank the security status of companies based on publicly available information showed that Equifax was behind on basic maintenance of websites that could have been involved in transmitting sensitive consumer information. A security analysis by Fair Isaac Corporation (FICO), found that public-facing websites run by Equifax had expired certificates, errors in the chain of certificates, or other web-security issues.

(Learning Objective 8-1: Why are information systems vulnerable to destruction, error, and abuse? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

8-14 What people, organization, and technology factors contributed to these problems?

People: Most attacks are the work of highly skilled professionals. However, when people don’t take the problem seriously and aren’t constantly on alert for hacking incidents and other network vulnerabilities, cyberattacks can go unnoticed until it’s too late. In this case, known web-security issues were identified and problems could have been prevented.

Organization: In late 2018, the US House Committee on Oversight and Government Reform published a new report on the Equifax breach. The report concluded that the incident was ―entirely preventable,‖ and occurred because Equifax had failed to implement an adequate security program to protect its sensitive data.

Technology: Equifax failed to maintain basic maintenance of websites and fared poorly in overall webservices security, application security, and software patching.

(Learning Objective 8-1: Why are information systems vulnerable to destruction, error, and abuse?

Learning Objective 8-2: What is the business value of security and control?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

8-15 What was the impact of the Equifax hack?

In 2017, Equifax reported that hackers had gained access to some of its systems and potentially the personal information of about 143 million US consumers, including Social Security numbers and driver‘s license numbers and issue dates. Credit card numbers for 209,000 consumers and personal information used in disputes for 182,000 people were also compromised.

Since the hack, Equifax has spent over $1 billion, including costs for litigation and fines, and will have to pay a settlement of up to $700 million to resolve investigations and lawsuits stemming from the data breach.

(Learning Objective 8-1: Why are information systems vulnerable to destruction, error, and abuse? Learning Objective 8-2: What is the business value of security and control? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

8-16 How can future data breaches like this one be prevented? Explain your answer.

There are measures every organization, public and private, can and should take to secure their systems and information. Section 8.4, “What are the most important tools and technologies for safeguarding information resources,” of this chapter provides a list:

    

Use appropriate identity management and authentication procedures and processes.

Use adequate firewalls, intrusion detection systems, and anti-malware software.

Secure wireless networks.

Use adequate encryption and public key infrastructures— this alone would have saved Sony a lot of grief and money.

Control Network Traffic with Deep Packet Inspection technology.

Many security experts believe that U.S. cybersecurity is not well-organized. Companies need to be even more diligent about incorporating security into every aspect of their IT infrastructure and systems development activities. According to Avivah Litan, a fraud analyst at Gartner Inc., to prevent data breaches such as Equifax‘s, organizations need many layers of security controls.

They need to assume that prevention methods are going to fail.

(Learning Objective 8-4: What are the most important tools and technologies for safeguarding information resources? AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

8-17 Describe three spoofing tactics employed in identity theft by using information systems.

View rubrics in MyLab MIS.

8-18 Describe four reasons why mobile devices used in business are difficult to secure.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 9 Achieving Operational Excellence and Customer Intimacy: Enterprise Applications

Learning Objectives

9-1 How do enterprise systems help businesses achieve operational excellence?

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

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

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

9-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline

9-1

How do enterprise systems help businesses achieve operational excellence?

What Are Enterprise Systems?

Enterprise Software Business Value of Enterprise Systems

9-2

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

The Supply Chain Information Systems and Supply Chain Management Supply Chain Management Software Global Supply Chains and the Internet Business Value of Supply Chain Management Systems 9-3

How do customer relationship management systems help firms achieve customer intimacy?

What is Customer Relationship Management?

Customer Relationship Management Software Operational and Analytical CRM Business Value of Customer Relationship Management Systems

9-4

What are the challenges that enterprise applications pose and how are enterprise applications taking advantage of new technologies?

Enterprise Application Challenges Next-Generation Enterprise Applications

9-5

How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Analytical CRM, 325

Partner relationship management (PRM), 323

Bullwhip effect, 317

Pull-based model, 320

Churn rate, 326

Push-based model, 320

Cross-selling, 324

Sales force automation (SFA), 323

Customer lifetime value (CLTV), 326

Social CRM, 330

Demand planning, 319

Supply chain, 314

Employee relationship management

Supply chain execution systems, 319

(ERM), 323 Enterprise software, 312

Supply chain planning systems, 318

Just-in-time strategy, 317

Touch point, 322

Operational CRM, 324 Analytical CRM, 325

Partner relationship management (PRM), 323

Bullwhip effect, 317

Pull-based model, 320

Churn rate, 326

Push-based model, 320

Cross-selling, 324

Sales force automation (SFA), 323

Customer lifetime value (CLTV), 326

Social CRM, 330

Demand planning, 319

Supply chain, 314

Employee relationship management (ERM), 323

Supply chain execution systems, 319

Enterprise software, 312

Supply chain planning systems, 318

Just-in-time strategy, 317

Touch point, 322

Operational CRM, 324

Teaching Suggestions The opening case, ―Avon Beautifies Its Supply Chain‖ illustrates how enterprise applications that integrate different business functions and provide consistent information throughout the company can boost productivity and save money.

Avon’s global supply chain was proving incapable of handling the increased demand it faced as the company expanded operations in Europe, the Middle East, and Africa. There was no central planning function responsible for demand, inventory, and supply planning across the enterprise. The existing system was highly manual, inflexible, and incapable of supporting the growth.

The company implemented JDA Software’s Manufacturing and Intelligent Fulfillment solutions to centralize planning for demand, inventory, and supply across its entire global enterprise. The JDA software collects supply chain data about inventory, future sales demands, transport schedules, and sales history from Avon’s many markets. The system uses these data to create more efficient distribution and manufacturing plans.

This software helped them achieve consistent forecast accuracy in a market that had historically been very difficult to predict. The software helped to reduce inventory levels and cost, improve customer service, and support more agile, profitable, and responsive operations. Since implementing the JDA software, Avon’s cost of servicing customers has been reduced and customer service ratings have increased to 99.5 percent.

Inventory levels have also dropped by 17 percent, providing savings of $20 million. Avon now has complete visibility into all aspects of its supply chain and will be able to enter new countries and markets much more easily.

Section 9-1: How do enterprise systems help businesses achieve operational excellence?

This section introduces enterprise systems and explains the benefits and disadvantages of installing them. There have been success stories as well as horror stories about companies who have used enterprise systems. Figure 9-1 is a good way to diagram how enterprise systems work. Use Table 9-1 to discuss various business processes that enterprise systems support. This table shows students how an enterprise system permeates every functional area in a business.

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

Section 9.2 goes into great depth about supply chain processes and how information can help managers control the supply chain better. Have your students give you examples of following the supply chain with retail purchases that they make. It discusses the increased difficulties of managing global supply chains and how using the internet can improve the flow of information.

Be sure to point out the management challenges of effectively implementing a successful supply chain system.

Interactive Session: Management: Soma Bay Prospers with ERP in the Cloud

Case Study Questions:

1. Identify and describe the problem discussed in this case. What people, organization, and technology factors contributed to the problem?

Due to political upheavals and poor economic conditions, Soma Bay was facing trying times. Their hotel occupancy rates fell from more than 50 percent in 2015 to just 25 percent in the first quarter of 2016. Their current systems were incapable of providing them with the information they needed to react to these downturns in intelligent ways.

People: The foreign exchange fluctuations and political upheavals were causing less people to visit their resort.

Organization: Managers needed access to timely reports that explained profitability and standardized business processes. Their current system didn‘t provide them these tools.

Technology: Soma Bay was using an unwieldy Excel-based system that made it difficult for managers to obtain information needed for sound decision making.

2. Why was an ERP system required for a solution? How did having a cloud-based ERP system contribute to the solution?

Soma Bay implemented JD Edwards Enterprise One ERP system from Oracle with applications and data residing in Oracle‘s Cloud Infrastructure as a Service. This ERP system allowed them to closely monitor operations and costs, create standardized business processes, and generate timely reports that identified profitability and growth drivers within the business. This helped Soma Bay to have a better understanding of costs and profitability, which allowed them to weather the downturn and implement a turnaround plan. The cloud storage came especially in handy when Soma Bay‘s data center was flooded, and they were able to recover quickly because they had backups stored in Oracle Cloud.

3. What were the business benefits of Soma Bay’s new enterprise system? How did it change decision making and the way the company operated?

JD Edwards Enterprise One contains more than 80 separate application modules that support Soma Bay in a wide range of their business processes. They‘ve gained better insight into their Financials, Procurement, Inventory Management, Job Cost, Real Estate Management, and many other areas of the business. This added insight into the financials of the company has helped managers to carefully control expenses and minimize losses. Because of this, they were able to weather the downturn and implement an aggressive turnaround plan that has led to a more stable operating model.

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

As the book states, ―…the internet and electronic commerce have put more power in the hands of customers.‖ A good example you can use to explain this statement is the increased amount of information available on the internet about automobiles, their pricing, and availability of purchasing options. You can also point to the availability of online banking and loan merchants to demonstrate the ability to comparison shop for monetary products. Because everyone has been a customer, you can discuss personal horror stories and how companies could have prevented them by having a good CRM system in place. This is a good time to actively engage Marketing majors in the class.

They may have already taken a marketing class with CRM or may be planning to take one in the near future.

Interactive Session: Organizations: CRM Helps Adidas Know Its Customers One Shoe Buyer at a Time

Case Study Questions

1. Analyze Adidas using the competitive forces and value chain model.

Adidas aims to attract and retain customers through the quality of their products and customer experience. There are many cheaper substitute products on the market, but Adidas chooses to compete by creating a personalized experience for their customers rather than lowering their prices.

Their flexible, personalized, and convenient customer service platform strengthens their value chain, which is concentrated in its primary activities such as operations, sales and marketing, and service.

2. What is Adidas’s business strategy? What is the role of customer relationship management in that strategy?

Adidas focuses their business strategy heavily on the customer experience. They do this by ensuring that their products are available for customers to purchase regardless of the channel they interact with the company through, providing personalized and convenient customer support, and tailoring the experience to meet each customer‘s needs. Customer relationship management allows them to gain insight into their customers and adapt what it presents to the customer to be as close to what the customer is actually looking for.

3. How do information systems support Adidas’s strategy?

In order to enhance the customer experience, Adidas partnered with Salesforce.com. Through the use of their cloud-based customer relationship management tools, they have been able to better identify key customer segments, develop closer ties to customers, and design differentiated experiences tailored to each customer‘s needs.

4. How did using Salesforce.com make Adidas more competitive? How did it change the way the company ran its business?

Using Salesforce Marketing Cloud, Adidas has been able to enhance customer interaction. This software includes predictive analytics to help them make decisions such as what channel to communicate to customers through.

Salesforce Service Cloud has helped Adidas‘s 1,100 customer service agents to automate service processes, streamline workflows, and respond to customers across a variety of social platforms. It has made it possible to deliver service that is more personalized and convenient.

Salesforce Commerce Cloud has enhanced the company‘s business throughout the globe, helping them use the knowledge of their customers to create better products.

5. Give an example of two business decisions that were improved by using Salesforce.com.

Students may cite any of the following examples:

-

Adidas developed a mobile app to customize the customer experience.

Adidas used Salesforce Marketing Cloud to better communicate with customers.

Adidas used Salesforce Service Cloud to enhance the customer service experience.

Adidas used Cloud services to unify the customer experience, preventing overlap between departments.

Adidas used Salesforce Commerce Cloud to deploy its centralized e-commerce site globally.

Section 9-4: What are the challenges that enterprise applications pose and how are enterprise applications taking advantage of new technologies?

This section explains the difficulties of implementing CRM, SCM, and enterprise systems and integrating them with other systems. New business processes must be built on enterprise-wide service platforms. The trend toward next-generation enterprise applications includes open source and on-demand solutions—popular solutions with small and medium-sized businesses that can‘t afford expensive licensing fees.

The text mentions Salesforce.com‘s ―Ideas‖ application that essentially replaces the outdated suggestion box. The website has an excellent demonstration of the product that you can direct students to at www.salesforce.com/products/ideas/.

Section 9-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job in manufacturing management. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

9-1 How do enterprise systems help businesses achieve operational excellence?

Define an enterprise system and explain how enterprise software works.

Enterprise software consists of a set of interdependent software modules that support basic internal business processes. The software allows data to be used by multiple functions and business processes for precise organizational coordination and control. Organizations implementing this software would have to first select the functions of the system they wish to use and then map their business processes to the predefined business processes in the software. A particular firm would use configuration tables provided by the software to tailor a particular aspect of the system to the way it does business. Table 9.1 (page 312) describes some of the major business processes supported by enterprise software. These include financial and accounting processes, human resources processes, manufacturing and production processes, and sales and marketing processes.

Describe how enterprise systems provide value for a business.

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

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

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

(Learning Objective 1: How do enterprise systems help businesses achieve operational excellence?

AACSB: Application of knowledge) 9-2 How do supply chain management systems coordinate planning, production, and logistics with suppliers?

Define a supply chain and identify each of its components.

A supply chain is defined as a network of organizations and business processes for procuring materials,

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

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

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

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

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

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

(Learning Objective 2: How do supply chain management systems coordinate planning, production, and logistics with suppliers? AACSB: Analytical thinking, application of knowledge)

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

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

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

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

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

(Learning Objective 2: How do supply chain management systems coordinate planning, production, and logistics with suppliers? AACSB: Analytical thinking)

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

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

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

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

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

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

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

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

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

(Learning Objective 3: How do customer relationship management systems help firms achieve customer intimacy? AACSB: Application of knowledge) Describe the tools and capabilities of customer relationship management software for sales, marketing, and customer service.

Customer relationship management systems typically provide software and online tools for sales, customer service, and marketing. Refer to Figure 9-8 for a diagram of the business processes that CRM software supports for sales, marketing, and service. Capabilities include the following: Sales:      

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

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

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

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

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

Support for direct-marketing campaigns through capabilities for capturing prospect and customer data, providing product and service information, qualifying leads for targeted marketing, and scheduling and tracking direct-marketing mailings or email.

Customer Service:   

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

Includes capabilities for assigning and managing customer service requests.

May also include web-based self-service capabilities.

Marketing:  

Supporting direct-marketing campaigns with capabilities for capturing prospects and customer data, providing product and service information for qualifying leads for targeted marketing, and scheduling and tracking direct-marketing mailings or email.

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

Distinguish between operational and analytical CRM.

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

Analytical CRM includes applications that analyze customer data generated by operational CRM applications to provide information for improving business performance management. Applications are based on data warehouses that consolidate data from operational CRM systems and customer touch points.

The database serves online analytical processing, data mining, and other data analysis techniques, and provides information related to customer lifetime values.

(Learning Objective 3: How do customer relationship management systems help firms achieve customer intimacy? AACSB: Analytical thinking)

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

List and describe the challenges enterprise applications pose.

Enterprise applications are very difficult to implement successfully. They require extensive organizational change, expensive new software investments, and careful assessment of how these systems will enhance organizational performance. Enterprise applications require both deep-seated technological changes and fundamental changes in business operations. Employees must accept new job functions and responsibilities.

They must learn new work activities and understand how data they enter into the system can affect other parts of the company. Enterprise applications introduce switching costs that make it very expensive to switch vendors. Multiple organizations will share information and business processes. Management vision and foresight are required to take a firm- and industry-wide view of problems and to find solutions that realize strategic value from the investment.

Explain how these challenges can be addressed.

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

Describe how enterprise applications are taking advantage of cloud computing and business intelligence.

Enterprise application vendors are delivering more value by developing systems that help managers obtain more meaningful information from the massive amounts of data these systems generate. These systems make it possible for enterprise applications to use HANA in-memory computing technology, making them capable of much more rapid and complex data analysis. These systems include tools for flexible reporting, ad hoc analysis, interactive dashboards, what if scenario analysis, machine learning, and data visualization.

These next generation enterprise applications also include cloud solutions that increase functionality on mobile platforms. Many large enterprise software vendors now feature cloud versions of their ERP systems.

More companies, including large Fortune 500 firms, are choosing to run all or part of their enterprise applications in the cloud.

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

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

(Learning Objective 4: What are the challenges that enterprise applications pose and how are enterprise applications taking advantage of new technologies? AACSB: Application of knowledge)

Discussion Questions

9-5 Supply chain management is less about managing the physical movement of goods and more about managing information. Discuss the implications of this statement.

Student answers to this question will vary.

9-6 If a company wants to implement an enterprise application, it had better do its homework. Discuss the implications of this statement.

Student answers to this question will vary.

9-7 Which enterprise application should a business install first: ERP, SCM, or CRM? Explain your answer.

Student answers to this question will vary.

Hands-on MIS Projects

Management Decision Problems 9-8 Toronto-based Mercedes-Benz Canada Fifty-five car dealers provided customer data on an ad hoc basis. There was no real incentive for dealers to share information with the company. How could customer relationship management (CRM) and partner relationship management (PRM) systems help solve this problem?

Comprehensive CRM packages contain modules for partner relationship management (PRM) and employee relationship management (ERM). PRM uses many of the same data, tools, and systems as CRM to enhance collaboration between a company and its selling partners. If a company does

not sell directly to customers but rather works through distributors or retailers, like Mercedes-Benz Canada does, PRM helps these channels sell to customers directly. It provides the ability to trade information and distribute leads and data about customers, integrating lead generation, pricing, promotions, order configurations, and availability. It also provides tools to assess its partners‘ performances so it can make sure its best partners receive the support they need to close more business.

PRM systems could provide dealers with information that Mercedes-Benz Canada gathers from other sources to help boost customer contacts and sales. In turn, Mercedes-Benz Canada could make it easier for dealers to report customer information to the home office and provide incentives for those that do so. The system could be set up to provide management with more timely information on dealers that do not provide information (perhaps via digital dashboards) and give the company an easier way to reach out to those dealers via a website, email, or online audio- and videoconferencing.

(Learning Objective 3: How do customer relationship management systems help firms achieve customer intimacy?, AACSB: Analytical thinking, Application of knowledge.)

9-9 Office Depot The company tries to offer a wider range of office supplies at lower costs than other retailers by using just-in-time replenishment and tight inventory control systems. It uses information from a demand forecasting system and point-of-sale data to replenish its inventory in its 1,600 retail stores. Explain how these systems help Office Depot minimize costs and any other benefits they provide. Identify and describe other supply chain management applications that would be especially helpful to Office Depot.

Supply chain management systems provide organizations with more information and tighter controls over the upstream and downstream portions of the supply chain. The information can alert managers and executives to those areas of the supply chain that may bog down the rest of the channels. Because Office Depot receives effective information through its supply chain management system and passes that to suppliers, it knows how many units of product customers want, when they want them, and when they can be produced. Components arrive at the moment they are needed for production (at suppliers), and finished goods are shipped as they leave the assembly line. Office Depot‘s SCM system also helps it avert the bullwhip effect because information about product demand is less distorted. That reduces the chances of holding excess inventory, warehousing, and shipping costs.

SCM applications that would be especially helpful to Office Depot are:

 

Demand planning: Determines how much product Office Depot needs to have suppliers produce to satisfy all of its customers‘ demands.

Supply chain execution system: Manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner. Information from this system can be shared with logistics and transportation partners to improve shipping and reduce costs.

(Learning Objective 2: How do supply chain management systems coordinate planning, production, and logistics with suppliers? AACSB: Application of knowledge)

Improving Decision Making: Using Database Software to Manage Customer Service Requests

Software skills: Database design; querying and reporting Business skills: Customer service analysis

9-10

The solution file represents one of many alternative database designs that would satisfy Prime Service‘s requirements. There are three tables for Accounts, Requests, and Service Representatives (the Prime Service representative providing the requested service). One can determine which service requests on a specific date require the highest priority by creating a report that sorts service request data first by date (in ascending order) and then by size of account (in descending order).

A suggested answer can be found in the Microsoft Access File named: ESS13ch9solutionfile.mdb.

(Learning Objective 3: How do customer relationship management systems help firms achieve customer intimacy? AACSB: Analytical thinking, Application of knowledge)

Achieving Operational Excellence: Evaluating Supply Chain Management Services

Software skills: Web browser and presentation software Business skills: Evaluating supply chain management services

9-11

What supply chain processes can each of these companies support for their clients?

UPS Logistics

Schneider

Taken from the UPS Logistics website:

Taken from the Schneider website:

No matter your product or your market, we've got the expertise to help make your business run better. Benefit from our established network of facilities and world-class technology and let our logistics team help you reduce costs and increase your global reach.

You have a set of logistic challenges.

Schneider Logistics has the solutions.

Success requires you to be in the right place, at the right time, with the right tools. Logistics puts you there.

Managing supply chains is a complicated business. You know it isn‘t just about moving goods. It‘s about replacing inventory with information. It‘s about creating product-level visibility. It‘s about staying connected with your supply chain partners.

Schneider Logistics helps you manage your supply chain to its maximum efficiency.

Services Offered:

Services Offered:

     

 Freight Management  Hosted Applications  Financial Services  Supply Chain Engineering  Business Intelligence  SUMIT CVA  SUMIT for Shippers  Schneider ExpressTrack

Distribution Transportation Management Post Sales/Service Parts Supplier Management Finished Vehicle Transportation Supply Chain Design and Planning Services

UPS Logistics Supply Chain Services ―Thriving in today's increasingly complex, global marketplace requires the integration of product, supply chain, and business strategies. Our supply chain design and planning services will help you create the supply chain you need to bring out the best in your company. Our designers and engineers will go beyond the abstract and produce a plan that will leverage the unmatched scope of UPS logistics capabilities to benefit your business.

What We Can Do for You:    

Streamline your distribution network, reducing costs, and improving customer service.

Provide insight into logistics design, re-engineering, and supply chain management.

Implement leading-edge information systems.

Implement benchmarking processes to measure productivity.

From site analysis and selection to supply chain modeling, network optimization, and parts planning, our services can help you start the process of making your supply chain a more effective part of your business operations. If you are looking to outsource your entire transportation network, we can provide the knowledge, experience, and relationships to help you design and manage your supply chain.‖

Schneider Logistics

―At Schneider Logistics, you have a set of logistics challenges. Schneider Logistics has the solutions. Schneider Logistics helps you manage your supply chain to its maximum efficiency. We do this by leveraging 60 years of transportation experience every time we tackle a tough logistics problem. We use our deep operating knowledge to create solutions as unique as your needs. We employ the brightest minds in the industry. We draw on our strong network of transportation providers. And we develop leading-edge technology to save you money and improve your customer service.

Schneider promotes the idea that you do not need a one-size-fits-all template created for a ―typical‖ supply chain. They view every customer and their needs as being unique.‖

Compare the supply chain management services these companies provide. Which company would you select to help your firm manage its supply chain? Why?

Responses to the question will vary. Perhaps those who do not possess an in-depth background with this type of technology will find the UPS Logistics site relatively easy to use. If they run into difficulties, they can easily access one of the many tutorials and determine what they need to do.

The Schneider Logistics site might be more difficult to use at first but after exploring it, it‘s relatively straightforward. The site has a powerful presentation and points out that they are a company that has years of operating knowledge; a large provider network; and leading-edge technology that helps the customer gain control over their supply chain partners, develop global, product-level visibility, lower costs and improve their service levels to their customers.

(Learning Objective 2: How do supply chain management systems coordinate planning, production, and logistics with suppliers? AACSB: Analytical thinking, Application of knowledge)

Collaboration and Teamwork Project

9-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem Solving Case: Clemens Food Group Delivers with New Enterprise Applications

9-13 Why would supply chain management and enterprise resource planning be so important for Clemens Food Group?

As a vertically coordinated company that deals with all steps of the process of getting food from the farm to the customers table, Clemens Food Group deals with an elaborate system that involves many moving parts. The fact that they deal with perishable goods makes their margin for error very slim. They must properly coordinate their supply chain management and have a firm grasp on the timeliness and accuracy of orders if they wish to succeed.

(Learning Objective 9-1: How do enterprise systems help businesses achieve operational excellence? Learning Objective 9-4: What are the challenges that enterprise applications pose, and how are enterprise applications taking advantage of new technologies? AACSB: Analytical thinking, Application of knowledge.)

9-14 What problems was the company facing? What people, organization, and technology factors contributed to the problem?

People: Clemens Food Group had 2,200 employees spread across a wide network of business segments, causing the tracking of all company activities to be difficult.

Organization: The company lacked a firm grasp on the timeliness and accuracy of orders and precise information about the status of activities throughout its network of farms and production facilities. They needed a new platform to provide better visibility into production, more efficient planning, and tighter control of processes.

Technology: Clemens Food‘s legacy systems were not able to keep up with production and the status of its products and warehouse activities.

(Learning Objective 9-4: What are the challenges that enterprise applications pose, and how are enterprise applications taking advantage of new technologies? AACSB: Analytical thinking)

9-15 Was SAP S/4HANA a good solution for Clemens Food Group? Explain your answer.

SAP S/4HANA proved to be an excellent solution for the problems Clemens Food Group was facing. It allowed them to cover all day-to-day processes of the business and provided the flexibility they needed as they expanded their operations. The deeper insights and visibility into

their processes that the new system gave them helped to improve customer service and improve efficiency.

(Learning Objective 9-1: How do enterprise systems help businesses achieve operational excellence? AACSB: Application of knowledge)

9-16 What people, organization, and technology issues had to be addressed to implement SAP S/4HANA at Clemens Food Group?

People: Clemens Food Group made it a priority to encourage project members to see the implementation of the new system as being led by the business, rather than just an IT project. This got people on board and helped during the testing cycle.

Organization: The company partnered with itelligence Group, who had experience guiding other meat-processing companies through similar large-scale implementations. They followed itelligence‘s suggestions about modifications, budget management, and the overall testing cycle.

Technology: Clemens Food Group had to ensure that their master data was cleansed of errors before implementing the new system. This would ensure that data about customers, employees, inventory, and suppliers would be consistent and accurate across the organization.

(Learning Objective 9-4: What are the challenges that enterprise applications pose, and how are enterprise applications taking advantage of new technologies? AACSB: Analytical thinking, Application of knowledge)

MyLab MIS

Go to the Assignments section of your MyLab MIS to complete these writing exercises.

9-17 What are three reasons why a company would want to implement an enterprise resource planning (ERP) system and two reasons why it might not want to do so.

View rubrics in MyLab MIS.

9-18 What are the sources of data for analytical CRM systems? Provide three examples of outputs from analytical CRM systems.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 10 E-Commerce: Digital Markets, Digital Goods

Learning Objectives

10-1 What are the unique features of e-commerce, digital markets, and digital goods?

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

10-3 How has e-commerce transformed marketing?

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

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

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

10-7 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline 10-1 What are the unique features of e-commerce, digital markets, and digital goods?

E-Commerce Today The New E-Commerce: Social, Mobile, Local

Why E-Commerce Is Different Key Concepts in E-Commerce: Digital Markets and Digital Goods in a Global Marketplace 10-2 What are the principal e-commerce business and revenue models?

Types of E-Commerce E-Commerce Business Models E-Commerce Revenue Models 10-3 How has e-commerce transformed marketing?

Behavioral Targeting Social E-Commerce and Social Network Marketing 10-4 How has E-Commerce affected business-to-business transactions?

Electronic Data Interchange (EDI) New Ways of B2B Buying and Selling 10-5

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

Location-Based Services and Applications Other Mobile Commerce Services Mobile App Payment Systems

10-6

What issues must be addressed when building an e-commerce presence?

Develop an E-Commerce Presence Map Develop a Timeline: Milestones

10-7

How will MIS help my career?

Key Terms The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Advertising revenue model, 356

Long tail marketing, 359

Affiliate revenue model, 359

Market creator, 355

Behavioral targeting, 359

Market entry costs, 348

Business-to-business (B2B), 353

Marketspace, 347

Business-to-consumer (B2C), 353

Menu costs, 350

Community providers, 355

Micropayment systems, 356

Consumer-to-consumer (C2C), 353

Mobile commerce (m-commerce), 353

Cost transparency, 349

Native advertising, 362

Crowdsourcing, 366

Net marketplaces, 368

Customization, 349

Personalization, 349

Digital goods, 351

Podcasting, 355

Direct goods, 368

Price discrimination, 349

Disintermediation, 350

Price transparency, 349

Dynamic pricing, 350

Private exchange, 367

Electronic Data Interchange (EDI), 366

Private industrial networks, 367

E-tailer, 354

Revenue model, 356

Exchanges, 368

Richness, 348

FinTech, 358

Sales revenue model, 356

Free/freemium revenue model, 358

Search costs, 348

Geoadvertising services, 369

Social graph, 362

Geoinformation services, 369

Social shopping, 365

Geosocial services, 369

Streaming, 355

Indirect goods, 368

Subscription revenue model, 356

Information asymmetry, 349

Transaction costs, 348

Information density, 348

Transaction fee revenue model, 358

Intellectual property, 354

Wisdom of crowds, 365

Location-based services, 369

Teaching Suggestions

The opening case, ―E-commerce Comes to the Dashboard: The Battle for the ―Fourth Screen,‖ illustrates the evolution of e-commerce from that of simply buying goods or services online to creating new marketing channels in areas that didn’t exist just a few years ago. After television, computers, and mobile

phones, car dashboards are emerging as the ―Fourth Screen‖ for future marketing opportunities. In fact, by 2030, dashboard-based products could generate $750 billion (yes, that’s with a b) in new revenue.

Future opportunities for car dashboards include advertisements based on a traveler’s location, ordering products like coffee or gasoline, and potentially saving money on car insurance by allowing companies to track driving habits.

Who will own this market? Currently auto makers and major technology companies like Google and Apple are battling for control of this market. Additional challenges such as driver distraction and privacy will need to be addressed before the revenue estimates possibly become a reality. These new dashboards are nothing like your grandparents 8-track tape.

Students are probably very familiar with most of the ideas presented in this chapter from a user’s standpoint. The task is to look behind the scenes and analyze how businesses are using technology to gain a competitive advantage and expand their operations to incorporate new channels that e-commerce provides.

Section 10-1: What are the unique features of e-commerce, digital markets, and digital goods?

This part of the text stresses the use of the internet and the World Wide Web for electronic commerce and business. Ask your students to identify several of the many benefits that the internet offers to organizations. Ask them to provide specific examples that they have read about in the text or have personally observed. If you have a student in your class who works for a company that participates in electronic business and electronic commerce, ask him/her to explain the company’s activities.

Section 10-1 discusses the importance of e-commerce in the business world today. The issues include the benefits of using internet technology to lower transaction and agency costs, bypass intermediaries, allow trading partners to directly communicate with each other and connect disparate systems, reduce delivery time for goods and services, make e-commerce available 24 hours a day, and replace existing distribution channels.

Table 10-3 provides a good way to compare digital markets with traditional markets. To help students understand the true impact of digital markets, have them name companies or products/services for each line item in the table. For instance, information asymmetry exposes the difference in shopping for cars or insurance. A good example of delayed gratification can be found in shopping for clothes or toys. The difference in switching costs can be found with banks or stockbrokers who have all your assets and/or liabilities combined into one account.

Discuss with your students how the internet has unbundled the information about products and services from the actual products and services. Ask the students to compare how they would shop for a car today, as opposed to how they might have shopped for a car ten years ago. Use this discussion to illustrate how the unbundling of information is disrupting traditional business models. If you have the time, ask your students to visit the Carmax.com website and determine how these kinds of sites reduce information asymmetry.

The most striking aspect of this section is that mobile phones are predicted to become the most common internet access device versus traditional desktop or laptop computers. Engage students in a discussion of the implications to both businesses and consumers of this trend.

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

Students are introduced to electronic commerce categories and related terminology. Even though millions of people use the web every day, many companies have found ways to personalize their interfaces with individual customers. That is a remarkable feat when you think about it. Have students visit websites that offer such personalization and report on the products or features they find. For instance, web portals like Yahoo! and Google let users customize the home page to fit their personal needs. Other e-commerce sites like Shutterfly (www.shutterfly.com) and Walgreen’s (www.walgreens.com) specialize in customers ordering one-of-a-kind items that have been personalized just for them with their own photos. Ask students to investigate how retailers can afford to offer these kinds of services.

This section reviews business models and revenue models that have emerged on the web in the last ten years. Table 10.5 is especially useful for exploring internet business models and gives excellent examples to help discern the ways businesses generate revenue. The section about social networking and the wisdom of crowds helps students understand the most popular Web 2.0 service – social networking.

Rather than looking at social networking sites from a personal, user point of view, students should explore the business opportunities these kinds of websites provide. Students will understand behavioral targeting techniques businesses use to market their products more effectively and at lower costs. They should pay close attention to the section of business-to-business e-commerce since most of them will probably use some form of it in their careers.

Interactive Session: Technology: Technology Small Business Loans from a FinTech App Case Study Questions 1. What distinguishes the FinTech services described in this case from traditional banks?

Explain your answer.

Tech firms such as Square are innovating not only with online payment services, but also with the business of loans. These tech firms are able to take advantage of their vast troves of customer data. Paypal, for instance has made more than $6 billion in small-business loans since 2013 by using data it collected while processing payments for Internet retailers.

2. How do the financial services described here use information technology to innovate?

Square evaluates whether a business can qualify for a loan by analyzing its vast database of credit card transactions. It looks at data on whether a business is attracting repeat customers, the number of chargebacks, business history, and processing volume. The lending process is then animated and makes it easy for customers to obtain and repay a loan. Most customers are not required to fill out a formal application. It is also important to note that application only takes a few clicks, with no long forms.

3. What are the advantages and disadvantages of small businesses obtaining loans from FinTech services? 

Advantages FinTech services evaluate large amounts of data to evaluate whether a business can quality for a loan or not.

Within this data, the company looks deeper to see whether a business is attracting repeat customers, business history, and processing volume. Additionally, the lending process is automated where it is easy for customers to obtain and repay a loan. Customers are then able to save time because the application of filling out a loan only takes a couple of minutes. Upon approval, the business loan is deposited into the borrower’s bank account as soon as the next business day. Online venders are also more likely to grant loans, doing so

at a quicker rate than traditional banks, and often without requiring collateral. This is especially appealing to first-time business owners. 

Disadvantages: The price for the speed and convenience of online lenders is interest rates higher than those charged by the banks. For example, Getting Better Fitness in Chicago had to pay 25 percent interest on a short-term loan from Kabbage. The gym later switched to 11 percent financing from PayPal Working Capital.

4. If you were a small business, what factors would you consider in deciding whether to use a FinTech service?

A small business would have to consider what priorities the customer is likely to value over another. For first-time business owners, it is important to understand that using a FinTech service such as Square, would likely not require the borrower to put down collateral. However, if there are customers who would rather have a lower interest rate, and a longer process time, it is important for the company to note that interest rates are typically lower when using a traditional bank. Additionally, companies need to take into consideration the vast amount of data mining that goes into FinTech Apps, which allow companies to better assess topics such as attracting repeat customers and looking into processing volume.

Section 10-3: How has e-commerce transformed marketing?

The internet and web have turned traditional marketing methods on their head. Because so much data are gathered on almost every internet user, marketers can target potential customers much easier than ever before through behavioral targeting messages. Social networking and the wisdom of crowds helps students understand the most popular Web 2.0 service—social media.

Rather than looking at social networking sites from a personal, user point of view, students should explore the business opportunities these kinds of websites provide.

Interactive Session: People: Engaging “Socially” with Customers Case Study Questions 1. Assess the people, organization, and technology issues for using social media technology to engage with customers.

People: Social media platforms including Facebook, Instagram, Twitter, and Snapchat, allow companies to engage consumers, amplify product messages, and discover trends and influencers.

Organization: Some companies, such as Nike, use a mix of content which includes celebrity endorsed and lifestyle-based performance shots. Using still imagery, animated imagery, and video to define ―moments‖ Nike has been very successful at adapting to the fact that followers are not just buying products, but they are buying the lifestyle that is associated with those products. However, companies should not just mimic what other companies have done in the past, but they should craft their content to be unique and aligned with their mission statement and target audience.

Technology: Mack Trucks, a leading US truck manufacturer, uses Oracle Eloqua Marketing Cloud Service and Oracle Social Cloud to link social activities to 175,000 profiles on its Oracle Eloqua database of customers and prospects. This allows the company’s marketing team to know if someone clicked on a Facebook post, enabling the company to further the lead until they are considered a qualified lead.

2. What are the advantages and disadvantages of using social media for advertising, brand

building, market research, and customer service?

Advantages:  



Advertising: Instagram has developed new offerings, specifically for its business accounts. This innovation on the popular social media site, has allowed companies to get quick messages and photos to target audiences, engage with them, and build closer relationships.

Brand Building: Mack Trucks used a variety of social media platforms to build excitement and awareness for their Anthem model. This included live streaming on both YouTube and Facebook, where they netted 7,000 email addresses from their teaser campaign along with 3700 people viewing the live stream launch. Those numbers are considered significant because Mack is a product that costs more than $100,000. This marketing also allowed Mack to gain 40,000 new social followers to their brand.

Market Research: Mack uses Oracle Eloqua Marketing Cloud Service, and Oracle Social Cloud to link social activity to 175,000 profiles in its Oracle Eloqua database of customers and prospects. Doing so allows the company to move customer prospects along the sale process until they are considered a qualified lead.

Disadvantages:



Social media campaigns can be tricky to orchestrate, and the results are not always predictable. For example, when social followers of Donald Trump called for boycotting Nordstrom and dropping Ivanka Trump’s clothing line, Nordstrom’s stock price rose, and the company outperformed many of its retail industry rivals in the following months. Additionally, many companies do not engage in conversations with their customers on social media sites, where doing so is critical to their success in collecting customer insights, questions, and concerns with their company.

3. Give an example of a business decision in this case study that was facilitated by using social media to interact with customers.

Starting in July 2017 Mack launched a series of biweekly YouTube videos to build excitement for the Anthem model, which was followed by a live stream of the Anthem unveiling on both YouTube and Facebook in September of that year. By using social media to promote this launch of their new product, 3700 people tuned in to view the livestreaming event. Additionally, the company was able to gain 40,000 new social media followers and net 7,000 email addresses. This achievement was considered to be ―significant numbers‖ because the Mack product cost more than $100,000.

4. Should all companies use social media technology for customer service and marketing? Why or why not? What kinds of companies are best suited to use these platforms?

Answers may vary: Before a company jumps into using Facebook and Twitter, it needs to make sure the "back room" mechanics are in place to process customer service requests. If the company's employees are not available for the unanticipated response volume, the plan could backfire.

Social media can provide a platform for widespread negative backlash to companies or retailers. Starbucks experienced a huge angry response from customers for a social issue promotion it began on Twitter and Facebook.

Companies who interface directly with consumers are probably more suited to using Facebook and Twitter promotions. However, all companies who create social media avenues with customers must realize that it’s not a mirror image of offline, traditional contacts. Relationships must be created and nurtured over time.

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

Students should pay close attention to this section because most of them will probably use some form of it in their careers. From electronic data interchanges (EDI) to private industrial networks and net marketplaces, B2B e-commerce has changed the way businesses do business. Figure 10.8 is a great example of net marketplaces that connect thousands of buyers to thousands of sellers.

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

M-commerce consists of selling anything over a mobile wireless device or Net appliance. It is also a method used by marketers to target advertising more directly to consumers. Wireless mobile devices are turning up everywhere. The newer appliances integrate several features traditionally only found in specialized products. For example, cell phones are equipped with cameras, internet options, text messaging, games, downloadable ring tones, etc. No doubt most students have used one or all these mcommerce products or services.

M-commerce is the fastest growing form of e-commerce, with six main areas of growth: locationbased services, software application sales, entertainment downloads, mobile display advertising, direct shopping services, and e-book sales. It might be interesting to take a poll of your students to see which one they think is the most popular service now and which one they think will be most popular two years from now.

A new section on mobile app payment systems has been added to this section that document the three main types of mobile payment apps:   

Near-field communications-driven systems o Smartphones and mobile devices make contactless payments o Examples include Apple Pay and Google Pay QR Code o Uses a two-dimensional barcode o Examples include Starbucks, Target, Walmart Peer-to-Peer (P2P) o Allows transfer of funds via the Internet o Examples include Venmo, Zelle

Section 10-6: What issues must be addressed when building an e-commerce presence?

This may be the first time students are exposed to the mechanics of designing and building an e-commerce website. No doubt they all have used e-commerce websites before, but they’ve probably never thought about the challenges facing business managers who are responsible for building a successful online business. While this section doesn’t offer a step-by-step guide to building a website, it does outline some of the organizational and technological decisions that need to be made before the site goes live. Successful e-commerce sites consider business objectives and use the right technology to meet them. Figure 10-10 provides alternatives to consider about building and hosting an e-commerce site in-house or outsourcing part or all of the operation.

If you have time, divide students into teams and have them work through the decisions associated with developing business objectives for an e-commerce site and then choosing the right technology to meet the

objectives. They don’t need to actually build the site – just complete all the preliminary work that must be done ahead of time.

Section 10-7: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as a junior e-commerce data analyst. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

10-1 What are the unique features of e-commerce, digital markets, and digital goods?

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

Students can answer this question by including information outlined in Table 10-1, which lists several business and technology trends shaping e-commerce today.

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

Table 10-2 (page 347) outlines eight unique features of e-commerce which include:  E-commerce technology is ubiquitous, meaning that it is available just about everywhere a computer can connect to the internet.  It has global reach, permitting commercial transactions to cross cultural and national boundaries far more conveniently and cost effectively than is true in traditional commerce.  It operates according to universal standards shared by all nations around the world, whereas most traditional commerce technologies differ from one nation to the next.  It provides information richness, enabling an online merchant to deliver to an audience of millions complex and rich marketing messages with text, video, and audio in ways not possible with traditional commerce technologies, such as radio, television, or magazines.  It is interactive, meaning it allows for two-way communication between merchant and consumer, and enables the merchant to engage a consumer in ways similar to a face-to-face experience but on a massive, global scale.  It increases information density (the total amount and quality of information available to all market participants).  It permits personalization and customization – merchants can target their marketing messages to specific individuals by adjusting the message to a person’s name, interests, and past purchases.  Social technology enables user content creation and distribution and supports social networks.

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

Digital markets are said to be more ―transparent‖ than traditional markets. Table 10-3 (page 351) describes distinguishing features of digital markets. The internet has created a digital marketplace where millions of people are able to exchange massive amounts of information directly, instantly, and for free. Information asymmetry is reduced. Digital markets are very flexible and efficient, with reduced search and transaction costs, lower menu prices, and the ability to change prices dynamically based on market conditions. Digital markets

provide many opportunities to sell directly to the consumer, bypassing intermediaries, such as distributors or retail outlets. Other features include delayed gratification, price discrimination, market segmentation, switching costs, and network effects.

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

(Learning Objective 1: What are the unique features of e-commerce, digital markets, and digital goods?

AACSB: Application of knowledge) 10-2 What are the principal e-commerce business and revenue models?

Name and describe the principal e-commerce business models.

Table 10-5 identifies seven internet business models:  E-tailer: Sells physical products directly to consumers or individual businesses.  Transaction broker: Saves users money and time by processing online sale transactions and generates a fee each time.  Market creator: Provides a digital environment where buyers and sellers meet, search for and display products, and establishes prices for those products; it can provide online auctions and reverse auctions.  Content provider: Creates revenue by providing digital content, such as digital news, music, photos, or video over the web.  Community provider: Provides an online meeting place where people with similar interests can communicate and find useful information.  Portal: Provides an initial point of entry to the web along with specialized content and other services.  Service provider: Provides Web 2.0 applications such as photo sharing, video sharing, and usergenerated content as services. Provides other services such as online data storage and backup.

Name and describe the e-commerce revenue models.

There are six e-commerce revenue models:  Advertising: Generates revenue by attracting a large audience of visitors who can then be exposed to advertisements. It’s the most widely used revenue model in e-commerce.  Sales: Companies derive revenue by selling goods, information, or services to customers.  Subscription: A website offering content or services charges a subscription fee for access to some or all of its offerings on an ongoing basis.  Free/freemium: Basic services or content are free while advanced or special features cost extra.  Transaction fee: A company receives a fee for enabling or executing a transaction.  Affiliate: Sites that steer customers to an affiliate business receive a referral fee or percentage of the revenue from any resulting sales.

(Learning Objective 2: What are the principal e-commerce business and revenue models? AACSB: Application of knowledge) 10-3 How has e-commerce transformed marketing?

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

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

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

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

Behavioral targeting refers to tracking the clickstreams of individuals for the purpose of understanding their interests and intentions, and exposing them to advertisements which are uniquely suited to their behavior.

Ultimately, this more precise understanding of the customer leads to more efficient marketing and larger sales and revenues. Behavioral targeting of millions of web users also leads to the invasion of personal privacy without user consent.

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

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

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

The products and services you buy will influence the decisions of your friends, and their decisions will in turn influence you. It‘s the ―word of mouth is the best advertising‖ theory in digital format.

Table 10-7 (364) has four features of social commerce that include: social sign-on, collaborative shopping, network notification, and social search recommendations.

(Learning Objective 3: How has e-commerce transformed marketing? AACSB: Application of knowledge)

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

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

Business-to-business transactions can occur via a company website, net marketplace, or private exchange.

Websites make it easy to sell and buy direct and indirect goods over the internet, compare suppliers, products, and prices, and even find out how others feel about the product. Further, supply chain linkages through intranets and extranets can support JIT, reduce cycle times, and support other practices of continuous improvement.

Because of the ease and efficiencies brought by the internet, business-to-business participants can save a significant amount of money and time.

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

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

(Learning Objective 4: How has e-commerce affected business-to-business transactions? AACSB: Application of knowledge.)

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

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

The most popular categories of m-commerce services and applications for mobile computing include:  Location-based services: Users can locate restaurants, gasoline stations, local entertainment, or call a cab.  Banking and financial services: Users can manage their bank accounts, check account balances, transfer funds, and pay bills using their cell phones.  Wireless advertising: Cell phones provide another avenue for advertisers to reach potential customers.

Cell phone service providers can sell advertising on phones.  Games and entertainment: Users can download video clips, news clips, weather reports, live TV programs, and short films designed to play on mobile phones.  Personalized services: Services that anticipate what a customer wants based on that person’s location or data profile, such as updated airline flight information or beaming coupons for nearby restaurants.  Mobile app payment systems: Mobile app payment systems are becoming popular with Apple Pay, Google Pay, Starbucks, Walmart, Target, and Venmo representing examples of widely used payment systems.

(Learning Objective 5: What is the role of m-commerce in business, and what are the most important m-commerce applications? AACSB: Application of knowledge.)

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

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

Figure 10.10 (page 372) lists the four types of e-commerce presence businesses should consider:  Websites: Traditional, mobile, and/or tablet platforms with search, display, apps, affiliates, and sponsorships as possible activities.  Email: Internal lists and/or purchased lists as a platform with newsletters, updates, and sales as possible activities.  Social media: Facebook, Twitter, and/or blogs as a platform with conversation, engagement, sharing, and/or advice as possible activities.  Offline media: Print and/or TV and radio as the platform with education, exposure, and/or branding as possible activities.

(Learning Objective 6: What issues must be addressed when building an e-commerce presence?

AACSB: Application of knowledge.)

Discussion Questions

10-7 How does the internet change consumer and supplier relationships?

Student answers to this question will vary.

10-8 The internet may not make corporations obsolete, but the corporations will have to change their business models. Do you agree? Why or why not?

Student answers to this question will vary.

10-9 How have social technologies changed e-commerce?

Student answers to this question will vary.

Hands-On MIS Projects

Management Decision Problems

10-10 Columbiana: A small, independent Caribbean island that wants to develop its tourist industry and attract more visitors. How can a web presence help? What internet business model would be appropriate? What functions should the website perform?

A website has the potential to introduce thousands and millions of people to a little-known resort destination at a significantly lower cost than other forms of marketing. The website can highlight the island‘s accommodations and show off its attractions. Webcams could be established around the

island to give potential tourists and visitors insight into the island‘s main attractions. A website makes it easier for potential visitors to contact hotels and book accommodations. The website can connect with airlines and provide information about flights with the ability to purchase airline tickets on partnering websites. Potential business models, depending on the features available on the site, include information broker, transaction broker, and even a social network where people with similar interests in these kinds of destinations can meet and discuss.

(Learning Objective 2: What are the principal e-commerce business and revenue models?, Learning Objective 3: How has e-commerce transformed marketing?, Learning Objective 6: What issues must be addressed when building an e-commerce presence?, AACSB: Analytical thinking, Reflective thinking, Application of knowledge.)

10-11 Company-sponsored blog: Visit the Blue Nile, Swatch, Lowe‘s, and Priceline websites.

Determine which of these websites would benefit most from adding a company-sponsored blog. List the business benefits of the blog. Specify the intended audience for the blog. Decide who in the company should author the blog and select some topics for the blog.

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

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Blue Nile: This company would probably benefit from a blog that would discuss different kinds of diamond products and other jewelry. The blog written by one of the company‘s diamond experts could help educate customers on what to look for, how to evaluate products, and what some of the latest products are.

Swatch: This iconic watchmaker markets to upscale, urbanites who like the latest fashions. The marketing manager could write a blog that shows how the newest products fit with the latest clothing styles and fashions. He/she could also use a blog to solicit photos from customers showing them wearing their Swatch purchases.

Lowe’s: Their site has a separate section titled ―Lowe‘s for Pros‖ that includes a business replenishment program, calculators to develop bid specifications, worksheets to help contractors develop bids, and a special Pro Help desk. A blog in this specialized area would help contractors get answers, find products, or become aware of specialty products.

Priceline.com: A blog written by a travel expert would review vacation destinations and provide travelers and tourists with tips and tricks of traveling to different locations. The site would sell more tickets to those destinations and increase profits for the site.

(Learning Objective 3: How has e-commerce transformed marketing? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

Improving Decision Making: Using Spreadsheet Software to Analyze a Dot-Com Business

Software skills: Spreadsheet downloading, formatting, and formulas Business skills: Financial statement analysis

10-12 Answers will vary, depending on the company they select and the time period over which it is analyzed. The files provided here are merely for purposes of illustration, and the income statement and balance sheet have been simplified. If students lack prior knowledge of financial statements, the instructor may have to devote extra time to explaining income statements, balance sheets, and financial ratios.

Alternatively, students can find material on understanding financial statements on financial websites such as Ameritrade (www.ameritrade.com).

The suggested answer files are ch10_solutionfiles.ppt and ch10_solutionfiles.xls.

(Learning Objective 2: What are the principal e-commerce business and revenue models?

AACSB: Written and oral communication, Analytical thinking, Reflective thinking, Application of knowledge.)

Achieving Operational Excellence: Evaluating E-Commerce Hosting Services

Software skills: Web browser software Business skills: Evaluating e-commerce hosting services

10-13 You would like to set up a website to sell towels, linens, pottery, and tableware from Portugal and are examining services for hosting small business internet storefronts. Your website should be able to take secure credit card payments and to calculate shipping costs and taxes. Initially, you would like to display photos and descriptions of 40 different products. Visit eHost.com, GoDaddy, and iPage and compare the range of e-commerce hosting services they offer to small businesses, their capabilities and costs. Also examine the tools they provide for creating an e-commerce site. Compare these services and decide which you would use if you were actually establishing a web store. Write a brief report indicating your choice and explaining the strengths and weaknesses of each.

In addition to writing a report explaining the strengths and weaknesses, ask students to apply the concepts of this chapter to their reports or at least to discuss them. Some of the topics should be electronic payment systems, dynamic pricing, banner and pop-up ads, and the internet business models.

(Learning Objective 1: What are the unique features of e-commerce, digital markets, and digital goods?

Learning Objective 6: What issues must be addressed when building an e-commerce presence? AACSB: Written and oral communication, Analytical thinking, Reflective thinking, Application of knowledge)

Collaboration and Teamwork Project

10-14 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: Can Uber be the Uber of Everything?

10-15 Analyze Uber using the competitive forces and value chain models. What is its competitive advantage?

Uber can claim two competitive forces: it is both a substitute service for regular taxis and other public transportation services, and it’s a new market entrant.

Instead of trying to hail a cab, you pull out your smartphone and tap the Uber app. A Google map pops up displaying your nearby surroundings. You select a spot on the screen designating an available driver, and the app secures the ride, showing how long it will take for the ride to arrive and how much it will cost. Once you reach your destination, the fare is automatically charged to your credit card. No fumbling for money.

That can also increase customer intimacy.

Uber runs much leaner than a traditional taxi company does. Uber does not own taxis and has no maintenance and financing costs. It does not have employees, so it claims, but instead calls the drivers independent contractors, who receive a cut of each fare. Uber is not encumbered with employee costs such as workers’ compensation, minimum wage requirements, background checks on drivers, driver training, health insurance, or commercial licensing costs. Uber has shifted the costs of running a taxi service entirely to the drivers and to the customers using their cell phones. Drivers pay for their own cars, fuel, and insurance. What Uber does is provide a smartphone-based platform that enables people who want a service—like a taxi—to find a provider who can meet that need.

(Learning Objective 2: What are the principal e-commerce business and revenue models?

Learning Objective 5: What is the role of m-commerce in business, and what are the most important m-commerce applications? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

10-16 What is the relationship between information technology and Uber’s business model?

Explain your answer.

Rates consider the typical factors of time and distance but also demand. Uber’s software predicts areas where rides are likely to be in high demand at different times of the day. This information appears on a driver’s smartphone so that the driver knows where to linger and, ideally, pick up customers within minutes of a request for a ride. Uber also offers a higher-priced town car service for business executives, as well as a ride-sharing service. Under certain conditions, if demand is high, Uber can be more expensive than taxis, but it still appeals to riders by offering a reliable, fast, convenient alternative to traditional taxi services.

10-17 How disruptive is Uber?

More than 40 million people use Uber each month. However, Uber’s over-the-top success has created its own set of challenges. By digitally disrupting a traditional and highly regulated industry, Uber has ignited a firestorm of opposition from existing taxi services in the United States and around the world. Who can compete with an upstart firm offering a 40 percent price reduction when demand for taxis is low? (When demand is high, Uber prices surge.) What city or state wants to give up regulatory control over passenger safety, protection from criminals, driver training, and a healthy revenue stream generated by charging taxi firms for a taxi license?

Critics fear that Uber and other on-demand firms have the potential for creating a society of part-time, lowpaid, temp work, displacing traditionally full-time, secure jobs—the so-called Uberization of work. Uber responds to this fear by saying it is lowering the cost of transportation, expanding the demand for ride services, and expanding opportunities for car drivers, whose pay is about the same as other taxi drivers.

(Learning Objective 1: What are the unique features of e-commerce, digital markets, and digital goods? Learning Objective 2: What are the principal e-commerce business and revenue models? Learning Objective 3: How has e-commerce transformed marketing? Learning Objective 6: What issues must be addressed when building an e-commerce presence? AACSB: Analytical thinking, Reflective thinking, Application of knowledge)

10-18 Are any ethical and social issues raised by Uber and its business model? Explain your answer. Does Uber’s business model create an ethical dilemma?

According to this case, many Uber drivers are making less than the minimum wage. Drivers are independent contractors who do not receive health insurance or other benefits. In fact, drivers pay for their own cars, maintaince and fuel. Further, to be profitable, many analysts believe Uber will need to take advantage of self-driving vehicles. This will reduce the number of available low paying jobs.

10-19 Is Uber a viable business? Explain your answer.

The company is still not profitable, although if Uber continues to triple revenue every year, the answer could be yes. But Uber has competitors, including Lyft in the United States and local firms in Asia and Europe.

New, smaller competing firms offering app-based cab-hailing services are cropping up, such as Sidecar and Via. Established taxi firms in New York and other cities are launching their own hailing apps and trumpeting their fixed-rate prices. Uber is pressing on, with new services for same-day deliveries, business travel accounts, and experiments with self-driving cars, which management believes will be key to longterm profitability. It is still too early to tell whether Uber and other on-demand businesses will succeed.

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

10-20 Describe the six features of social commerce. Provide an example for each feature, describing how a business could use that feature for selling to consumers online.

View rubrics in MyLab MIS.

10-21 List and describe the main activities involved in building an e-commerce presence.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 11 Improving Decision Making and Managing Artificial Intelligence

Learning Objectives

11-1 What are the different types of decisions, and how does the decision-making process work?

11-2 How do business intelligence and business analytics support decision making?

11-3What is artificial intelligence (AI)? How does it differ from human intelligence?

11-4What are the major types of AI techniques and how do they benefit organizations?

11-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your

Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline

11-1 What are the different types of decisions, and how does the decision-making process work?

Business Value of Improved Decision Making Types of Decisions The Decision-Making Process High-Velocity Automated Decision Making Quality of Decisions and Decision Making 11-2 How do business intelligence and business analytics support decision making?

What is Business Intelligence?

The Business Intelligence Environment Business Intelligence and Analytics Capabilities Business Intelligence Users 11-3 What is artificial intelligence (AI)? How does it differ from human intelligence?

Evolution of AI 11-4 What are the major types of AI techniques and how do they benefit organizations?

Expert Systems Machine Learning Neural Networks Genetic Algorithms Natural Language Processing, Computer Vision Systems, and Robotics Intelligent Agents 11-5 How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Artificial intelligence (AI), 403

Key performance indicators (KPIs), 402

Augmented reality (AR), 394

Knowledge base, 405

Balanced scorecard method, 402

Location analytics, 397

Business performance management (BPM), 402

Machine learning (ML), 406

Chatbot, 413

Natural language processing, 411

Choice, 389

Neural networks, 408

Computer vision systems, 412

Operational intelligence, 397

Data visualization, 392

Pivot table, 400

―Deep learning,‖ 409

Predictive analytics, 395

Design, 389

Robotics, 412

Drill down, 407

Semistructured decisions, 388

Expert system, 404

Sensitivity analysis, 400

Genetic algorithms, 410

Structured decisions, 388

Geographic information systems (GIS), 399

Supervised learning, 406

Implementation, 389

Unstructured decisions, 388

Inference engine, 405

Unsupervised learning, 407

Intelligence, 389

Virtual reality (VR) systems, 392

Intelligent agents, 413

Teaching Suggestions

The opening case, ―Machine Learning Helps Akershus University Hospital Make Better Treatment Decisions,‖ illustrates how the effective use of artificial intelligence can help employees and managers at all levels and in many different industries make better decisions. It provides a great example of how turning raw data into useful information can help make a team or company more successful.

Many organizations within the healthcare industry struggle to handle the massive amounts of data they collect about patients and treatments. Akershus University Hospital in Norway had this problem, having

amassed huge volumes of unstructured data that was extremely difficult and time consuming to extract meaningful information from.

Akershus is working to solve this problem by using artificial intelligence technology in IBM Watson Explorer. This technology analyzes both structured and unstructured data to uncover trends and patterns that would be difficult for humans to discern. It uses natural language processing to search data expressed in everyday language like ordinary speech.

With IBM Watson Explorer, Akershus has been able to rapidly mine large volumes of data in order to find correlations, answer questions, and draw conclusions. One example is when they used Watson Explorer to determine that they were striking the right balance between harmful effects and potential benefits of conducting CT scans on their patients.

The vignette shows how artificial intelligence can speed up the process of interpreting data, and even find information that humans might have not found without it.

Section 11-1; What are the different types of decisions, and how does the decision-making process work?

This section of the text focuses on the management aspects of information systems, and how the main contribution of information systems has been to improve decision making, both for individuals and groups. As an exercise, randomly ask your students to classify different types of decisions and at what management level they would expect those decisions to be made. For example, the location of a new plant would be an unstructured type of decision and made at the senior management level, whereas, the daily production of pea soup would be a structured decision and made at the operational management level. Ask students to determine the management level of their school, and give examples of structured, semistructured, and unstructured decisions.

Figure 11-1 depicts the types of decisions made at three management levels. Figure 11-2 breaks down the decision-making process into four concrete stages. Have students diagram a decision such as where they will go on spring break or what they will do during their summer recess. When they are done, ask them to evaluate their decision based on the qualities listed in Table 11.2 (page 390): accuracy, comprehensiveness, fairness, speed (efficiency), coherence, and due process.

Section 11-2: How do business intelligence and business analytics support decision making?

This section explores the emerging business intelligence and business analytics industries that are one of the fastest growing and largest segments in the U.S. software market. It builds on information presented in previous chapters and lets students begin putting the pieces together of all the material presented so far. You might have students critically analyze how they may take information about a situation they are in (or have been in) from the environment, understand its meaning, and then attempt to act on that information. Then have them correlate the process to how a business would do the same.

Students should be encouraged to do web searches on BI and BA vendors and compare the various products available to businesses. SAP, Oracle, IBM, SAS Institute, and Microsoft are a good list of vendors from which to start. What makes one stand out more than the others? Which would work well for small- or medium-sized businesses and which would work better for large-sized businesses? What decisions do managers have to make when selecting one vendor over another? Discuss with them the pros and cons of selecting a one-stop integrated solution for BI and BA capabilities versus multiple best-ofbreed vendor solutions.

Interactive Session: Technology: Siemens Makes Business Processes More Visible Case Study Questions 1. Identify the problem in this case study. What people, organization, and technology factors contributed to the problem?

People: Managing and tracking the work of over 372,000 employees was proving to be extremely difficult. Managers and supervisors were responsible for all processes and things were falling between the cracks.

Organization: With their current manual system of managing business processes, Siemens AG couldn‘t properly find processes that could be improved upon in order to help the organization.

Technology: Siemens AG needed software that would allow them to track their business processes and determine areas of inefficiency that could be improved.

2. Describe the capabilities of process mining software. Was this an effective solution?

Explain your answer.

Process mining software analyzes company data in order to find areas of inefficiency that may have been difficult to find without it. It constructs logical models in order to visualize all business processes. With these visualizations, users can see at a glance where inefficiencies are occurring.

This proved to be an effective solution for Siemens AG. They were able to identify slowdowns in parts procurement, late product deliveries, and billing inefficiencies that were costing the company millions of dollars.

3. How did process mining change decision making at Siemens?

Comparing the company‘s target operating models to the as-is process allowed Siemens to find inefficiencies such as bottlenecks, unnecessary detours, manual interventions, and compliance issues. They were then able to focus on these areas and improve the processes, saving the company millions of dollars.

4. What people, organization, and technology issues need to be addressed when implementing process mining systems?

People: Some long-term managers were resistant to process mining because they felt that they already knew how to handle business processes efficiently.

Organization: The organization had to take their findings from Process DAsh and alter their as-is business processes. They also had to promote analytics adoption throughout the all divisions by identifying individuals who were receptive to process mining.

Technology: The company established a unit called Process DAsh to actively support global process optimization. This process collected and analyzed ERP data to identify bottlenecks in production, delivery, and payment using Celonis Process Mining analysis and visualization software.

Interactive Session: People: Predictive Maintenance in the Oil and Gas Industry Case Study Questions 4. Why is predictive maintenance so important in the oil and gas industry? What problems does it solve?

Companies within the oil and gas industry are deeply affected by unplanned downtime. A single day of unproductivity can cost a company as much as $25 million. Predictive maintenance can help to minimize the amount of unproductive days and maximize revenue.

5. What is the role of the Internet of Things (IoT) and Big Data analytics in predictive maintenance?

Sensors (IoT) placed in oil fields and in oil and gas pipelines monitor real-time operations and collect data. This data is analyzed to predict equipment failure and address issues before they become costly problems. This prevents companies from having to physically inspect equipment in difficult (and expensive) to reach remote locations only to find no issues.

6. How did BP and Royal Dutch Shell’s predictive maintenance applications change business operations and decision making?

BP and Shell have both placed sensors on their oil wells and pipelines to collect data relevant to the maintenance of these assets. This data enables pipeline operators to assess risk and make real-time decisions about where field service crews should be deployed along the pipeline. It also helps them predict well flows and the useful life of each well.

7. Give an example of how predictive maintenance systems could be used in another industry.

Student answers will vary but should include an example similar to the one outlined in the case in which predictive maintenance systems help a company/industry assess risk and mitigate loss.

Section 11-3: What is artificial intelligence (AI)? How does it differ from human intelligence?

This section introduces students to artificial intelligence and relates it to the way that humans think and act. Help your students to understand the difference between human intelligence and artificial intelligence, and how we haven‘t yet been able to develop AI systems that fully demonstrate human intelligence. Explain how AI systems are being implemented in many industries and are transforming how business is conducted.

The section goes on to discuss the evolution of AI, pointing out major developments within the last decade such as the development of Big Data databases, e-commerce, the Internet of Things, and social media. Lastly, the section points out examples of AI that students may be more familiar with, such as personal assistants on their cellular devices, as well as speechactivated systems in automobiles.

Section 11-4: What are the major types of AI techniques and how do they benefit organizations?

In this section, students are introduced to expert systems, cased-based reasoning, fuzzy logic systems, neural networks, genetic algorithms, and intelligent agents. When discussing the material from this section, remind your students of the history of our discipline. In the early 1980s, expert systems were believed to represent the future of artificial intelligence and of computers in general. To date, however, they have not lived up to expectations. Many expert systems help human experts in such fields as medicine and engineering, but they are often very expensive to produce and are helpful only in special situations. Nonetheless, many are beneficial, and students must understand the limitations and the strengths. Ask your students to locate an expert system and evaluate its strengths and limitations. Expert system demonstrations and reviews are easily located on the web. If you have the class time, ask your students to present their findings to the class.

As a final note on artificial intelligence, you should mention to your students that it is applied in many programs with which they are familiar. For example, the intelligent help system of many application packages is a feature that students should know. The wizards, as the text shows, are examples of intelligent agents. Sometimes the level of intelligence of these agents does not need to be high, such as the agents or robots that look for specific pieces of information on the internet.

Section 11-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as an entry-level data analyst. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions 11-1 What are the different types of decisions, and how does the decision-making process work?

List and describe the different decision-making levels and groups in organizations and their decision-making requirements.

Figure 11.1 illustrates the answer to this question. Each of these levels has different information requirements for decision support, and responsibility for different types of decisions.

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Senior management deals mainly with unstructured decisions.

Middle management deals with semistructured decisions.

Operational management deals with structured decisions.

Distinguish among an unstructured, semistructured, and structured decision.

Decisions are classified as structured, semistructured, and unstructured.   

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

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

Semistructured decisions have elements of both unstructured and structured decisions.

Only part of the problem has a clear-cut answer provided by an accepted procedure.

List and describe the stages in decision making.

Stages in the decision-making process include:

   

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

Design involves identifying and exploring various solutions to the problem.

Choice consists of choosing among solution alternatives.

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

(Learning Objective 1: What are the different types of decisions, and how does the decisionmaking process work? AACSB: Application of knowledge.)

11-2 How do business intelligence and business analytics support decision making?

Define and describe business intelligence and business analytics.

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

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

List and describe the elements of a BI environment.

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

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

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

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

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

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

List and describe the analytic functionalities BI systems provide.

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

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

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

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

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

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

Describe how virtual reality and augmented reality enhance data visualization and decision making.

Virtual reality systems provide the ability to create three-dimensional data visualizations. These interactive visualizations provide new opportunities such as helping customers visualize products before they buy them or teaching factory workers how to use complex equipment in a test environment.

Augmented reality works in a similar fashion by laying digital data and images onto a physical realworld environment. This allows for the enhancement of the perception of reality, making the surrounding real world of the user more interactive and meaningful. Companies can use this technology to provide more context and information with their product or service, such as the yellow first down lines on televised football games, image-guided surgeries, engineering design, and many others.

Define predictive analytics and location analytics and give two examples of each.

Predictive analytics use statistical analysis, data mining techniques, historical data, and assumptions about future conditions to predict future trends and behavior patterns. It includes the ability to model future events and behaviors based on past events and behaviors. Two examples of the uses of predictive analytics include: 1) insurance companies can predict driver behavior based on age, gender, geographic location, and driving records to help establish the proper cost of policies; and 2) retailers can predict the probability of customers responding to price changes and product offers based on past purchases, location, buying habits, and marketing campaigns.

Location analytics allow companies to gain insight from the geographic locations of current and potential customers to make decisions on product offers, new business locations, or how well products and services are working. Two examples of location analytics include: 1) where to open new stores based on current buying patterns of potential customers in the area; and 2) street maintenance requirements of local governments based on the number of vehicles transiting a particular area.

List each of the types of BI users and describe the kinds of systems that provide decision support for each type of user.

Figure 11.4 provides a graphic depicting two basic types of business intelligence users:  

Power users: About 20 percent of employees who produce reports, new analyses, models, and forecasts. This group includes IT developers, super users, business analysts, and analytical modelers.

Casual users: The other 80 percent of employees that include customers/suppliers, operational employees, senior managers, managers/staff, and business analysts.

Senior executives take advantage of business intelligence to monitor firm activities with dashboards and scorecards. Middle managers and analysts immerse themselves in data and software, entering queries, and slicing and dicing the data along different dimensions. Operational employees, along with customers and suppliers, use pre-packaged reports.

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

Balanced scorecard method: A framework for operationalizing a firm's strategic plan by focusing on measurable outcomes on four dimensions of the organization's performance: financial, business process, customer, and learning and growth. This method causes managers to focus on more than just financial performance. It includes things managers can influence on a day-to-day basis, like business process efficiency, customer satisfaction, and employee training.

Business performance management: Attempts to systematically translate a firm's strategies into operational targets. Strategies may include differentiation, low-cost producer, market share growth, and scope of operation. A set of key performance indicators (KPIs) are developed to measure progress toward the targets. The firm measures its performance by using information from its enterprise database systems.

(Learning Objective 2: How do BI and business analytics support decision making? AACSB: Application of knowledge.)

11-3 What is artificial intelligence (AI)? How does it differ from human intelligence?

Define artificial intelligence (AI).

Artificial intelligence involves the attempt to build computer systems that think and act like humans. At a very basic level, artificial intelligence programs take data input, process that data, and produce outputs.

Explain how AI differs from human intelligence.

Humans feel emotions such as love and hate. These emotions we feel play a role in choosing what objectives we pursue. This is commonly referred to as ―human intelligence‖ or ―common sense‖.

Artificial intelligence differs from human intelligence in that no computer programs have yet been able to demonstrate generalized human intelligence or common sense. Human intelligence is vastly more complex and sophisticated.

(Learning Objective 3: What is artificial intelligence (AI)? How does it differ from human intelligence? AACSB: Application of knowledge.)

11-4 What are the major types of AI techniques and how do they benefit organizations?

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

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

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

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

Define machine learning, explain how it works, and give some examples of the kinds of problems it can solve.

Machine learning is the study of how computers can improve their performance, without explicit commands programmed by humans, by training algorithms to learn patterns from previous data and examples provided by humans. A machine that learns can recognize patterns in data based on its experience or prior learnings.

Google‘s ability to recognize the meaning and intent behind user queries rather than merely matching keywords is based on machine learning. A business can benefit from machine learning technology by not having to program every minor detail or concept into a computer, but rather rely on the computer to learn on its own.

Compare supervised and unsupervised learning.

Supervised learning is when the system is ―trained‖ by humans. The system is provided specific examples of desired inputs and outputs identified by humans in advance. The system learns from these examples and is then able to take similar inputs and determine outputs.

In unsupervised learning there is no feeding of examples from humans. The system is asked to process the data and report whatever patterns it finds.

Define neural networks and deep learning neural networks, describing how they work and how they benefit organizations.

Neural networks are used for solving complex, poorly understood problems for which large amounts of data have been collected. They find patterns and relationships in massive amounts of data that would be too complicated and difficult for a human being to analyze. Neural networks discover this knowledge by using hardware and software that parallel the processing patterns of the biological or human brain. Neural networks ―learn‖ patterns from large quantities of data by sifting through data, searching for relationships, building models, and correcting over and over again the model‘s own mistakes.

Neural network applications in medicine, science, and business address problems in pattern classification, prediction, financial analysis, and control and optimization. In medicine, neural network applications are used for screening patients for coronary artery disease, for diagnosing patients with epilepsy and Alzheimer‘s disease, and for performing pattern recognition of pathology images. The financial industry uses neural networks to discern patterns in vast pools of data that might help investment firms predict the performance of equities, corporate bond ratings, or corporate bankruptcies. Visa International uses a neural network to help detect credit card fraud by monitoring all Visa transactions for sudden changes in the buying patterns of cardholders.

Deep learning neural networks are more complex. They have many layers of transformation of the input data to produce a target output. These networks are used almost exclusively for pattern detection on unlabeled data where the system is not told what to look for specifically. They‘re still in their infancy, but some believe that deep learning neural networks will help us come closer to the ―Grand Vision‖ of AI, where ML systems are able to learn like a human being.

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

Genetic algorithms (adaptive computation) are useful for finding the optimal solution for a specific problem by examining a very large number of alternative solutions for that problem. They are based on techniques inspired by evolutionary biology, such as inheritance, mutation, selection, and crossover (recombination). A genetic algorithm works by representing a solution as a string of 0s and 1s. The genetic algorithm searches a population of randomly generated strings of binary digits to identify the right string representing the best possible solution for the problem. As solutions alter and combine, the worst ones are discarded, and the better ones survive to go on to produce even better solutions. Genetic algorithms are used to solve problems that are very dynamic and complex, involving hundreds or thousands of variables or formulas. The problem must be one where the range of possible solutions can be represented genetically, and criteria can be established for evaluating fitness. Genetic algorithms expedite the solution because they can evaluate many solution alternatives quickly to find the best one.

Intelligent agents are software programs that use a built-in or learned knowledge base to carry out specific, repetitive tasks for an individual user, business process, or software application. By watching the user of a program or system, an intelligent agent may customize the software system to meet the user‘s needs, reducing software support costs. Intelligent agents can be used as wizards to help users do or learn how to perform a given task. Intelligent agents can be used to carry out ―smart‖ searches of the database, data warehouse, or the internet, reducing search costs, and avoiding the problems of misdirected searches.

Define and describe computer vision systems, natural language processing systems, and robotics and give examples of their business applications.

Computer vision systems deal with how computers can emulate the human visual system to view and extract information from real-world images. Such systems also incorporate image processing, pattern recognition, and image understanding. An example is Facebook‘s facial recognition tool called DeepFace, which is nearly as accurate as the human brain in recognizing a face. DeepFace will help Facebook improve the accuracy of Facebook‘s existing facial recognition capabilities to ensure that every photo of a Facebook user is connected to that person‘s Facebook account.

Computer vision systems are also used in autonomous vehicles such as drones and self-driving cars, industrial machine vision systems (e.g. inspecting bottles), military applications, and robotic tools.

Natural language processing is a technology that makes it possible for a machine to understand spoken or written words expressed in human (natural) language, and to process that information.

You can also see natural language processing at work in the voice search feature of contemporary search engines such as Google or Yahoo!, spam filtering systems, and in-text mining sentiment analysis. Siri, Cortana, and Alexa are examples of natural language processing.

Robotics deals with the design, construction, operation, and use of movable machines that can substitute for humans, as well as computer systems for their control, sensory feedback, and information processing. Robots cannot substitute entirely for people but are programmed to perform a specific series of actions automatically. They are often used in dangerous environments (such as bomb detection and deactivation), manufacturing processes, military operations (drones), and medical procedures (surgical robots). Of special interest today are robots used in manufacturing, which are increasingly taking over more production functions that used to be performed by humans.

(Learning Objective 4: What are the major types of AI techniques and how do they benefit organizations? AACSB: Application of knowledge.)

Discussion Questions

11-5 If businesses used DSS, GDSS, and ESS more widely, would they make better decisions? Why or why not?

Student answers to this question will vary.

11-6 How much can business intelligence and business analytics help companies refine their business strategy? Explain your answer.

Student answers to this question will vary.

11-7 How intelligent are AI techniques? Explain your answer.

Student answers to this question will vary.

Hands-on MIS Projects Management Decision Problems 11-8 U.S. Pharma Corporation

Dealerships for Toyota and other automobile manufacturers keep records of the mileage of cars they sell and service. Mileage data are used to remind customers of when they need to schedule service appointments, but they are used for other purposes as well. What kinds of decisions does this piece of data support at the local level and at the corporate level? What would happen

if this piece of data were erroneous, for example, showing a mileage of 130,000 instead of 30,000?

How would it affect decision making? Assess its business impact.

Students will vary in their answers. Elements should address in the knowledge portal include ways to acquire, disseminate, and apply knowledge. Responses should demonstrate an understand of the way data can be used to drive decisions within a business and the potential impact of bad data.

(Learning Objective 4: What are the major types of AI techniques and how do they benefit organizations? AACSB: Application of knowledge.)

11-9 Applebee’s The largest casual dining chain in the world wants to develop menus that are tastier and contain more items that customers want and are willing to pay for. How might information systems help management implement this strategy? What pieces of data would Applebee’s need to collect? What kinds of reports would be useful to help management make decisions on how to improve menus and profitability?

Applebee’s can use data from transaction processing systems and point-of-sale systems to track which menu items sell the best. The company can use external demographic data to understand potential customers by accessing data about ages, income levels, and the number of children per family. The company can also use external weather data to track which menu items should be advertised. For instance, if the weather prediction calls for a snowstorm, the company can feature hot soups and sandwiches. Managers can use trend reports to determine which menu items are selling the best at any particular time. Reports broken into regions may be helpful since tastes differ based on geographic location. Grits sell well in the South but poorly in the Northwest. Reports on how well individual items sell during specific times of the day or week may be helpful to adjust marketing campaigns.

(Learning Objective 1: What are the different types of decisions, and how does the decision-making process work? AACSB: Analytical thinking.)

Improving Decision Making: Using Pivot Tables to Analyze Sales Data Software skills: Pivot tables Business skills: Analyzing sales data 11-10 This project gives you an opportunity to learn how to use Excel’s PivotTable functionality to analyze a database or data list.

Use the data file for Online Management Training Inc. described earlier in the chapter.

This is a list of the sales transactions at OMT for one day. You can find this spreadsheet file at MyMISLab this chapter.

Use Excel’s Pivot Table to help you answer the following questions:

1. Where are the average purchases higher? The answer might tell managers where to focus marketing and sales resources or pitch different messages to different regions.

2. What form of payment is the most common? The answer could be used to emphasize in advertising the most preferred means of payment.

3. Are there any times of day when purchases are most common? Do people buy the products while at work (likely during the day) or at home (likely in the evening)?

4. What’s the relationship between regions, type of product purchased, and average sales price?

(Learning Objective 2: How do business intelligence and business analytics support decision making? AACSB: Analytical thinking, Application of knowledge.)

Improving Decision Making: Using Intelligent Agents for Comparison Shopping Software skills: Web browser and shopping bot software Business skills: Product evaluation and selection 11-11

This project will give you experience using shopping bots to search online for products, find product information, and find the best prices and vendors. Select a digital camera you might want to purchase, such as the Canon PowerShot SX530 or the Olympus Tough TG-5. Visit MySimon, BizRate.com, and Google Shopping to do price comparisons for you. Evaluate these shopping sites in terms of their ease of use, number of offerings, speed in obtaining information, thoroughness of information offered about the product and seller, and price selection. Which site or sites would you use and why? Which camera would you select and why? How helpful were these sites in making your decision?

Answers will vary on which camera to purchase. The point of the question is for students to explore the idea of using bots to help them navigate all the various sites and gather as much information as possible, as quickly and easily as possible. It doesn’t matter which camera they choose, or even which shopping bot they like best. The idea is to critically examine the technology and determine how it helps them make better decisions.

(Learning Objective 4: What are the major types of AI techniques and how do they benefit organizations? AACSB: Application of knowledge.)

Collaboration and Teamwork Project

11-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: Can Cars Drive Themselves – And Should They?

Case Study Questions

11-13 What are the people, organizational, and technology challenges posed by selfdriving car technology?

People: Self-driving cars offer people cheaper and easier transportation, but they come with potential safety and security risks that must be considered. Some believe that in a world of selfdriving cars, almost all traffic accident would be eliminated.

Organization: The cost per mile of self-driving taxis will be about 80 percent less than that of a traditional taxi, but organizations must consider the safety and security risks, along with the monetary investment, that self-driving vehicles pose.

Technology: Self-driving cars require powerful computer systems that must process large amounts of data generated by sensors, cameras, and other devices.

(Learning Objective 11-2: How do business intelligence and business analytics support decision making? AACSB: Analytical thinking, Application of knowledge)

11-14 Are self-driving cars good business investments? Explain your answer.

Student answers will vary but should discuss the potential benefits of self-driving cars (decreased costs, convenience) versus the potential downfalls (security, safety).

(Learning Objective 11-1: What are the different types of decisions, and how does the decisionmaking process work? Learning Objective 11-2: How do business intelligence and business analytics support decision making? AACSB: Analytical thinking, Application of knowledge)

11-15 What ethical and social issues are raised by self-driving car technology?

Safety is the most prominent issue self-driving technology is currently facing. Some believe that a world of self-driving vehicles would eliminate almost all traffic accidents, but others are skeptical.

Security is another issue; automakers must keep systems safe from intruders who want to crash or weaponize cars.

(Learning Objective 11-1: What are the different types of decisions, and how does the decisionmaking process work? Learning Objective 11-2: How do business intelligence and business analytics support decision making? AACSB: Analytical thinking, Application of knowledge)

11-16 Will cars really be able to drive themselves without human operators? Should they?

Researchers don‘t believe that a fully autonomous car that can handle any situation as well as a human will be available any time soon. Developments in human-driven vehicles with some level of self-driving technology have increased safety to a point that autonomous vehicles may struggle to match. This makes the need for fully self-driving cars less compelling.

(Learning Objective 4: What are the major types of AI techniques and how do they benefit organizations? AACSB: Application of knowledge.)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

11-17 Give three examples of data used in location analytics and explain how each can help businesses.

View rubrics in MyLab MIS.

11-18 How do each of the following types of systems acquire and represent knowledge: expert system, neural network, genetic algorithm?

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.

Chapter 12 Making the Business Case for Information Systems and Managing Projects

Learning Objectives

12-1 How should managers build a business case for the acquisition and development of a new information system?

12-2 What are the core problem-solving steps for developing new information systems?

12-3 What are the alternative methods for building information systems?

12-4 How should information systems projects be managed?

12-5 How will MIS help my career?

Learning Catalytics is a ―bring your own device‖ student engagement, assessment, and classroom intelligence system. It allows instructors to engage students in class with real-time diagnostics. Students can use any modern, web-enabled device (smartphone, tablet, or laptop) to access it. For more information on using Learning Catalytics in your course, contact your Pearson Representative. The lecture notes for this text includes a Learning Catalytics activity for each introductory case.

Chapter Outline

12-1 How should managers build a business case for the acquisition and development of a new information system?

The Information Systems Plan Portfolio Analysis and Scoring Models Determining Solution Costs and Benefits 12-2 What are the core problem-solving steps for developing a new information system?

Defining and Understanding the Problem Developing Alternative Solutions Evaluating and Choosing Solutions Implementing the Solution 12-3 What are the alternative methods for building information systems?

Traditional Systems Development Life Cycle Prototyping End-User Development Application Software Packages, Software Services, and Outsourcing Mobile Application Development: Designing for a MultiScreen World Rapid Application Development for E-Business 12-4 How should information systems projects be managed?

Project Management Objectives Managing Project Risk and System-Related Change 12-5 How will MIS help my career?

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Acceptance testing, 435

Parallel strategy, 436

Agile development, 444

PERT charts, 447

Business case, 427

Phased approach, 436

Capital budgeting, 431

Pilot study, 436

Component-based development, 445

Portfolio analysis, 429

Customization, 440

Production, 437

Direct cutover strategy, 436

Project, 445

Documentation, 436

Project management, 445

End-user development, 439

Prototyping, 438

Ergonomics, 449

Rapid application development (RAD), 444

Feasibility study, 435

Request for Proposal (RFP), 440

Formal planning and control tools, 447

Responsive web design, 442

Gantt chart, 447

Scope, 446

Implementation, 446

Scoring model, 430

Information requirements, 434

System testing, 435

Information systems plan, 428

Systems analysis, 433

Intangible benefits, 430

Systems design, 435

Joint application design (JAD), 444

Systems development life cycle (SDLC), 438

Maintenance, 437

Tangible benefits, 430

Mobile web app, 442

Test plan, 436

Mobile website, 442

Unit testing, 435

Native app, 442

User–designer communications gap, 446

Organizational impact analysis, 451

Teaching Suggestions

Throughout the textbook, the Laudon’s have stressed that information systems are sociotechnical and part of the organization. This is an important point to reiterate to your students. A new information system changes the way the organization operates. Successful organizations choose to change their structure and operations over time. They choose information systems designed to mirror organizational changes and to help the organization achieve its business objectives. New systems can change organizational political arrangements and power relationships. The information systems plan is the first step to link the business plan to information systems. The information systems plan helps an organization answer the following questions: What do we need to do? Who needs the information? Who creates it? How can we create a system that will change our strategy or even the business we are in?

The opening case, ―Angostura Builds a Mobile Sales System,‖ illustrates some of the steps required to design and build new information systems. It also illustrates some of the benefits of a new system solution.

The problem described in this vignette is an example of the typical problems associated with manual systems: they’re time consuming, error-ridden, very cumbersome, with very little ability to manipulate data and glean information.

Angostura Limited‘s ability to handle sales orders was hampered by outdated and inefficient manual processes that raised costs, slowed down work, and limited the company‘s ability to serve its customers. Angostura decided that instead of relying on manual processes and tracking, it should develop a sales process that was more streamlined and efficient and that it should use mobile technology. The solution was to redesign the sales order process to use mobile devices and software and allow orders to be entered through iPads and transmitted to the firm‘s backend ERP system.

The company identified a set of detailed information requirements for the improved sales process and spent more than a year evaluating system solutions from five mobile vendors. One important requirement was that the application should be able to automatically update the availability of purchased products from the company‘s overall inventory and integrate with the firm‘s back-end SAP ERP system. Another requirement was that the mobile system be able to operate offline so that a sales representative could still input an order on a mobile device even if there was no online connectivity. Once online, the device could then send the order through to the ERP system.

Angostura partnered with IDS Scheer and itCampus consultants to develop a mobile sales solution running on Apple iPads. The solution includes an offline customer database, product catalog, customer-specific pricing, order entry, order preview, and integration with Bluetooth wireless printers. It was quickly created using SAP NetWeaver Gateway technology to connect various devices and platforms to SAP software.

Angostura‘s experience illustrates some of the steps required to plan, build, and implement new information systems. Building a new system for mobile sales orders entailed analyzing the organization‘s problems with existing systems, assessing information requirements, selecting appropriate technology, and redesigning business processes and jobs. The information requirements were incorporated into the design of the new system, which represented a process of planned organizational change.

Angostura succeeded with this project because its management clearly understood that strong project management and attention to organizational change were essential to success. As you work through the steps of problem solutions, try to devise ways to put the material into context with your students‘ everyday problems.

Section 12-1: How should managers build a business case for the acquisition and development of a new information system?

This section reviews how companies consider many alternatives for solving problems and improving performance, including the development of new information systems or the enhancement of existing ones.

Companies select the systems solution that promises the greatest benefit to the business. One key to getting the project approved is to make the business case for why the solution selected provides the greatest value to the organization when compared to other solutions.

Section 12-2: What are the core problem-solving steps for developing new information systems?

This section reviews the four steps in the problem-solving process: define and understand the problem; develop alternative solutions; choose the best solution; and implement the solution. Often, organizations believe they know exactly what problem they want to solve so they fail to fully work through the first step.

Unfortunately, they end up trying to solve the wrong problem. Other times, the problem an organization defines may not address all three components of an information system – people, organizations, and technology. One exercise you might try is to have students form small groups, determine a problem on campus, and work through the four-step problem-solving process from all three facets – people, organization, and technology.

Section 12-3: What are the alternative methods for building information systems?

The traditional systems lifecycle methodology is usually only used for very large, complex systems. The SDLC is the oldest method for building information systems. It is inflexible and does not allow easy changes at any step along the way. However, it can be effective for highly structured systems such as accounting, payroll, or complex manufacturing systems. Government defense or space systems are often mandated to use the system life cycle methodology because of the rigorous milestones generated by the method.

End-user development is a hot area. You may want to note that originally, personal computers and spreadsheets were attempts by end users to provide their own end-user tools to get around application backlogs. End-user computing is difficult to manage and support. However, if managed correctly, it can be an effective way to meet end-user needs. And, as usual, make sure you emphasize that whether the organization uses end-user development or some other approach, the purpose of the system is to serve the strategies of the company and the end users.

Today, employees and customers expect, and even demand, to be able to use a mobile device of their choice to obtain information or perform a transaction anywhere and at any time. To meet these needs, companies will need to develop mobile websites, mobile apps, and native apps as well as traditional information systems. Once an organization decides to develop mobile apps, it has to make some important choices, including the technology it will use to implement these apps (whether to write software for a native app or mobile web app) and what to do about a mobile website.

Technologies and business conditions are changing so rapidly that companies are adopting shorter, more informal development processes for many of their mobile and web-based applications. The term rapid application development (RAD) refers to the process of creating workable systems in a short period of time. RAD includes the use of visual programming and other tools for building graphical user interfaces, iterative prototyping of key system elements, the automation of program code generation, and close teamwork among end users and information systems specialists. Agile development, a widely used approach, focuses on rapid development and frequent delivery of working software, with continual user involvement. It breaks down a large project into a series of small subprojects that are completed in short periods of time using iteration and continuous feedback. Improvement or addition of new functionality takes place within the next iteration as developers clarify requirements.

Interactive Session: Technology: Systems Development is Different for Mobile Apps Case Study Questions

1. What people, organization, and technology challenges need to be addressed when building mobile applications?

People: You can’t just port a website or desktop application to a smartphone or tablet. It’s a different systems development process. Managers need to understand and support the idea that each website or process requires a different set of processes. It may sound more expensive to develop apps and websites that way, but in the long run it will pay off with greater customer satisfaction.

Organization: A mobile strategy involves more than selecting mobile devices, operating systems, and applications. It also involves changes to business processes, changing the way people work and the way a firm interacts with its customers.

Technology: Developing mobile apps or a mobile website has some special challenges. The user experience on a mobile device is fundamentally different from that on a PC. There are special features on mobile devices such as location-based services that give firms the potential to interact with customers in meaningful new ways. Mobile technology can streamline processes, make them more portable, and enhance them with capabilities such as touch interfaces, location and mapping features, alerts, texting, cameras, and video functionality. The technology can also create less efficient processes or fail to deliver benefits if the mobile application is not properly designed.

2. How does user requirement definition for mobile applications differ from traditional systems analysis?

Mobile apps should not be built for the sake of going mobile but for genuinely helping the company become more successful. The mobile app will need to be connected in a meaningful way to the systems that power the business. It‘s important to understand how, why, and where customers use mobile devices and how these mobile experiences change business interactions and behavior.

3. Describe how Great-West’s invoice approval process changed after the mobile application was deployed.

At Great-West Financial, company employees spend more time serving customers in the field than in the office and need a connection to the company‘s ERP financials system from wherever they are working to process accounts payable invoice approvals. Great-West uses a single app so that employees do not have to go to one place to approve invoices and another to approve everything else.

The app looks and feels as similar as possible to the application user‘s access on their desktops.

The user sees the same data fields on the invoice header and line item on a mobile device as on a desktop computer screen and the steps in the invoice approval process are the same. The mobile app incorporates the necessary invoice approval codes into its line-item detail, rather than displaying these codes on a PDF attachment. A pop-up notification on the mobile app eliminates the need for users to log into the app before knowing about an invoice.

Section 12-4: “How should information systems projects be managed?

Spend some time discussing why so many information system projects fail. Was it because the system wasn’t built correctly or was it how the project was managed or mismanaged that caused the failure? This section provides students with an introduction to the methodology of project management. Although some

of the techniques and methods are considered older or less satisfactory, students have a good chance of seeing these methods in the workplace. It is not a good idea to engage in a lengthy, philosophical discussion of the superiority of methods. However, it is a good idea to help students understand that there is no one best method, that each method is appropriate depending upon the situation and the requirements.

You should remind students of the biggest problems: It takes too long to build systems and they often do not work as intended. Of course, this is not always true, but building systems is difficult and labor intensive. Change certainly should be a theme throughout the entire course. The user-designer communication gap is a good example of a common problem that can cause an information systems project to fail. The last portion of the section provides some suggestions about managing global projects.

Interactive Session: Organizations: Arup Moves Project Management to the Cloud

Case Study Questions

1. What is the relationship between information technology, project management, and Arup’s business model and business strategy?

Arup has over 13,000 staff based in 85 offices across 35 countries throughout the globe. The company defines itself as one where professionals of diverse disciplines—engineers, planners, designers, financial experts, consulting specialists, and sustainability professionals—can work together to deliver projects and services of greater quality than by working in isolation.

Arup‘s information systems group is working on all the right IT projects for furthering the business and is doing so in the right way. Until recently Arup‘s IT staff relied on Microsoft Excel spreadsheets or Microsoft Word documents as their project management tools. Reports were sporadic and in diverse formats, collaboration was limited, project delivery styles were inconsistent, and there was no central visibility into what was happening with each project.

2. How does Microsoft Project Online support Arup’s business strategy? How did it change the way the company works?

Arup decided to adopt Microsoft Project Online to improve project management. Project Online is Microsoft‘s cloud-based project management tool, and it helps organizations efficiently plan projects, track status, and collaborate with others from any location and any device.

3. What people, organization, and technology issues did Arup have to address when selecting Project Online as its global project portfolio management tool?

People:

A large global workforce working on diverse and disparate projects was difficult to track, manage and assess. Members of Arup‘s global team wanted to have immediate access to project data at any time wherever they are working. The cloud solution also makes it possible to report on projects using live data, with the system able to tie into other processes such as service and change management.

Organization: Arup‘s Global IT Portfolio Management Office had to spend 40 hours per month compiling reports manually. By the time it created a status report, the report was already out of date. Arup also wanted to be able to more easily share best practices and new ideas across the teams in the organization. Project Online gives Arup instant views into the status of all of its IT projects.

Technology: Arup‘s Global IT Portfolio Management Office wanted immediate views of all global projects. With Microsoft Project Online, Arup‘s management can examine and classify projects throughout the entire enterprise based on their red, green, and amber status indicators.

Section 12-5: How will MIS help my career?

This section addresses how the chapter‘s elements and information can help in securing a good job as an entry-level junior business systems analyst. These types of jobs are becoming more popular as information technology becomes more important in the workplace.

Review Questions

12-1 How should managers build a business case for the acquisition and development of a new information system?

The business case for an IT investment describes the problem facing the organization that can be solved by investing in a proposed system solution. Provide an analysis of whether an information system project is a good investment by calculating its costs and benefits. Tangible benefits are quantifiable, and intangible benefits cannot be immediately quantified but may provide quantifiable benefits in the future. Benefits that exceed costs should then be analyzed using capital budgeting methods to make sure they represent a good return on the firm‘s invested capital.

Organizations should develop an information systems plan that describes how information technology supports the company‘s overall business plan and strategy. Portfolio analysis and

scoring models can be used to evaluate alternative information systems projects. traditional systems lifecycle is a formal methodology for managing the development of systems and is still the principal methodology for large projects.

12-2 What are the core problem-solving steps for developing new information systems?

List and describe the problem-solving steps for building a new system.

Figure 12.1 (page 428) outlines the four steps of the problem-solving process:

   

Defining and understanding the problem entails defining the problem and identifying its causes, solution objectives, and information requirements.

Developing alternative solutions entails defining alternative solutions and most likely paths to follow given the nature of the problem.

Choosing the best solution entails an assessment of the technical, financial, and organizational feasibility of each alternative and selection of the best solution.

Implementing the solution entails finalizing design specifications, acquiring hardware and software, testing, providing training and documentation, conversion, and evaluating the system once it is in production.

Define information requirements and explain why they are important for developing a system solution.

Information requirements involve identifying who needs what information, where, when, and how. They define the objectives of a new or modified system and contain a detailed description of the functions the new system must perform. Gathering information requirements is perhaps the most difficult task of the systems analyst, and faulty requirements analysis is a leading cause of systems failure and high systems development costs.

List the various types of design specifications required for a new information system.

Systems design shows how the chosen solution should be realized. A system design is the model or blueprint for an information system solution and consists of all the specifications that will deliver the functions identified during systems analysis. These specifications should address all of the technical, organizational, and people components of the system solution. Table 12.1 (page 429) lists the types of specifications that would be produced during system design. They include: output, input, user interface, database, processing, manual procedures, security and controls, conversion, training and documentation, and organizational changes.

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

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

 

System testing: testing the entire system as a whole to determine whether program modules are interacting as planned.

Acceptance testing: the system undergoes final certification by end users to ensure that it is ready for installation.

Describe the roles of documentation, conversion, production, and maintenance in systems development.

  



Documentation shows how the system works from both a technical and end-user standpoint.

Conversion is the process of changing from the old system to the new system.

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

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

(Learning Objective 1: How should managers build a business case for the acquisition and development of a new information system?, AACSB: Application of knowledge.)

12-3 What are the alternative methods for building information systems?

Define the traditional systems lifecycle and describe its advantages and disadvantages for systems building.

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

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

Technical specialists translate the design specifications into software during the programming phase. After that, technical specialists develop test plans and conduct unit, system, and acceptance tests. Business users provide test data and scenarios and validate test results.

During the conversion phase, technical specialists prepare a conversion plan and supervise conversion.

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

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

  

It is highly structured.

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

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

Disadvantages are:   

It is very costly and time-consuming.

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

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

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

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

Prototyping is most valuable when requirements are uncertain and cannot be entirely pre-specified or when the appropriate design solution is unclear. Prototyping is especially helpful for designing end-user interfaces (screens and reports) and for determining elusive requirements of decision-support type applications.

Prototyping can help reduce implementation costs by capturing requirements more accurately at an earlier point in the implementation process. It is not so useful for very structured, well-understood, or routine problems.

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

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

Define end-user development and explain its advantages and disadvantages.

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

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

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

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

Describe the advantages and disadvantages of developing information systems based on application software packages.

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

Software packages provide several advantages:      

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

Programs are pretested, reducing testing time and technical problems.

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

Periodic enhancement or updates are supplied by the vendor.

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

The vendor supplies documentation.

The disadvantages of application software packages are:  There are high conversion costs for systems that are sophisticated and already automated.  They may require extensive customization or reprogramming if they cannot easily meet unique requirements.  A system may not be able to perform many functions well in one package alone.

Define outsourcing. Describe the circumstances in which it should be used for building information systems. List and describe the hidden costs of offshore software outsourcing.

Outsourcing is the process of turning over an organization’s computer center operations, telecommunications networks, or applications development to external vendors who provide these services.

Outsourcing is seen as a way to control costs or to develop applications rather than try to use in-house staff.

Advantages of outsourcing are:   

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

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

The internet and networking technologies have drastically reduced costs associated with using offshore outsourcing firms.

The main disadvantage is that firms hiring outsourcers tend to underestimate costs of:      

Identifying and evaluating vendors.

Transitioning to a new vendor.

Improving internal software development methods to match those of vendors.

Monitoring vendors to make sure they are meeting contract requirements.

Coping with cultural differences.

Handling human resources issues, such as terminating or relocating domestic employees.

These hidden costs undercut some of the anticipated benefits from outsourcing. Firms should be especially cautious when using an outsourcer to develop or operate applications that give some type of competitive advantage.

(Learning Objective 2: What are the core problem-solving steps for developing a new information system?, AACSB: Application of knowledge.)

Explain how businesses can rapidly develop e-business applications?

Rapid application design is a process for developing systems in a very short time period by using prototyping, fourth-generation tools, and close teamwork among users and systems specialists. RAD allows the creation of working software in a very short time through objects and automation of much of the code generation. Usually they depend on interfaces to databases.

RAD, agile development, joint application design (JAD), cloud-based platforms, and reusable software components (including web services) can be used to speed up the system’s development process. Mobile application development must address multiple platforms, small screen sizes, and the need to conserve resources.

Describe the issues that must be addressed when developing mobile applications.

Because mobile devices have a much smaller screen size, it’s easier to use fingers and multi-touch gestures rather than a keyboard to maneuver through websites and applications. Mobile apps must be optimized for specific tasks, but not too many. Saving resources like bandwidth, screen space, memory, processing, data entry, and user gestures is a top priority.

Website designers must design the sites specifically for mobile interfaces and create multiple mobile sites to meet the needs of smartphones, tablets, and desktop browsers. Responsive web design enables websites to automatically change layouts according to the visitor’s screen resolution, whether on a desktop, tablet, or smartphone. A mix of flexible grids and layouts, flexible images, and media queries that optimize the design for different viewing contexts is necessary. Users across a broad range of devices and browsers will have access to a single source of content, laid out to be easy to read, and navigate with minimum resizing, panning, and scrolling.

(Learning Objective 2: What are the core problem-solving steps for developing a new information system?, AACSB: Application of knowledge.)

12-4 How should information systems projects be managed?

Information systems projects and the entire implementation process should be managed as planned organizational change using an organizational impact analysis.

Explain the difference between tangible and intangible benefits.

Tangible benefits can be quantified and assigned a monetary value. Intangible benefits are classified as nonquantifiable and cannot be assigned a monetary value.

List six tangible benefits and six intangible benefits.

Students can use Table 12.2 (page 431) to answer this question.

Tangible benefits include: Increased productivity, lower operational costs, reduced workforce, lower computer expenses, lower outside vendor costs, lower clerical and professional costs, reduced rate of growth in expenses, reduced facility costs, and increased sales.

Intangible benefits include: Improved asset utilization, improved resource control, improved organizational planning, increased organizational planning, increased organizational flexibility, more timely information, more information, increased organizational learning, legal requirements attained, enhanced employee goodwill, increased job satisfaction, improved decision making, improved operations, higher client satisfaction, and better corporate image.

List and describe the major components of an information systems plan.

Students can use Table 12.3 (page 432) to answer this question. Major components of an information systems plan include: (1) Purpose of the Plan, (2) Strategic Business Plan Rationale, (3) Current Systems, (4) New Developments, (5) Management Strategy, (6) Implementation of the Plan, and (7) Budget Requirements.

Describe how portfolio analysis and scoring models can be used to establish the worth of systems.

Portfolio analysis and scoring models can be used to evaluate alternative information systems projects.

Portfolio analysis is used to help in evaluating alternative system projects. Portfolio analysis inventories all the firm’s information systems projects and assets, including infrastructure, outsourcing contracts, and licenses. Firms try to improve the return on their information system portfolios by balancing the risk and return from their systems investments. By using portfolio analysis, management can determine the optimal mix of investment risk and reward for their firms, balancing riskier, high-reward projects with safer, lowerreward ones.

Scoring models give alternative systems a single score, based on the extent to which they meet selected objectives. Table 12.4 (page 436) can be used to explain how a simple scoring system works.

Explain the importance of implementation for managing the organizational change surrounding a new information system.

The term implementation refers to the entire process of organizational change surrounding the introduction of a new information system. Information systems design and the entire implementation process should be managed as a planned organizational change using an organizational impact analysis. A very large percentage of information systems fail to deliver benefits or solve the problems for which they were intended because the process or organizational change surrounding system building was not properly addressed. The principal causes of information system failure are (1) insufficient or improper user participation in the systems development process, (2) lack of management support, (3) high levels of complexity and risk, and (4) poor project management.

Define the user-designer communication gap and explain the kinds of implementation problems it creates.

The user-designer communication gap deals with the relationship that exists between end users and information systems specialists. These two groups have different backgrounds, interests, and priorities, which have traditionally been a problem for information systems implementation efforts. These differences create user-designer communications gaps. Information systems specialists often have a highly technical orientation to problem solving, focusing on technical solutions in which hardware and software efficiency is optimized at the expense of ease of use or organizational effectiveness. End users prefer systems that are oriented toward solving business problems or facilitating organizational tasks.

List and describe the factors that influence project risk and describe strategies for minimizing project risks.

Strategies you can follow to increase the chances of a successful system include:      

New systems that involve challenging and complex technology can be helped by recruiting project leaders with strong technical and administrative experience.

If the firm does not have staff with the required technical skills or expertise, outsourcing or using external consultants are options that may be pursued.

Using formal planning and control tools, such as Program Evaluation and Review Technique (PERT) or Gantt charts, improves project management by listing the specific activities that make up a project, their duration, and the sequence and timing of task.

Promote user participation by making user education and training easily available, and by providing better incentives for users who cooperate.

Exercise sensitivity to ergonomic issues.

Solve organizational problems prior to introducing new systems.

(Learning Objective 4: How should information systems projects be managed? AACSB: Analytical thinking.)

Discussion Questions

12-5 Discuss the role of business end users and information system professionals in developing a system solution. How do both roles differ when the solution is developed using prototyping or enduser development?

Student answers to this question will vary.

12-6 It has been said that systems fail when systems builders ignore people problems. Why might this be so?

Student answers to this question will vary.

12-7 Why is building a system a form of organizational problem-solving?

Student answers to this question will vary.

Hands-on MIS Projects Management Decision Problems 12-8 Warm and Toasty Heating Oil Company By changing the process of delivering bills at the time the company delivers oil to the customer, they reduce the lag time between delivering oil and receiving payments. Prior to the change there was a minimum of two weeks that the company could not receive payment simply because it hadn't billed the customer. By leaving the bill and a return envelope at the time of delivery, customers can pay immediately. That improves the company's cash flow. The process change required delivery persons to learn how to calculate and print out bills. The company probably also had to change the way it handled its billing process and customer payments.

(Learning Objective 3: What are the alternative methods for building information systems?, Learning Objective 4: How should information systems projects be managed?, AACSB: Analytical thinking, Application of knowledge.)

12-9 Caterpillar The company wants to end its support for its Dealer Business System (DBS), which it licenses to its dealers to help them run their businesses. The software is becoming out of date and senior management wants to turn support over to Accenture Consultants. The dealers were never required to use the system but it had become a de facto standard for business processes. Approximately 150 dealers worldwide use some version of the system. Before Caterpillar turns the product over to Accenture, what factors and issues should it consider? What questions should it ask? What questions should its dealers ask?

Using an information systems plan, senior managers can analyze the idea of turning the system over to outside consultants and determine strategies for doing so. Step 2, Strategic Business Plan Rationale, requires managers to evaluate the current situation and business organization against changing environments. Using Step 3, Current Systems, Caterpillar executives, Accenture consultants, and a select number of dealers can determine the major systems for supporting business functions and processes and current infrastructure capabilities of dealers. It also requires them to evaluate anticipated future demands. Step 4, New Developments, allows Accenture and the dealers to understand the business rationale and the applications’ role in strategy for the continued use of the system by dealers. They would also have to evaluate new infrastructure capabilities dealers would require, especially with software updates. Step 5, Management Strategy, and Step 6, Implementation Plan, require Accenture, dealers, and Caterpillar executives to understand and develop plans for migrating the system away from corporate use to the dealers.

(Learning Objective 3: What are the alternative methods for building information systems?, Learning Objective 4: How should information systems projects be managed?, AACSB: Analytical thinking, Application of knowledge.)

Improving Decision Making: Using Database Software to Design a Customer System for Auto Sales Software skills: Database design, querying, reporting, and forms Business skills: Sales lead and customer analysis 12-10

Prepare a systems analysis report detailing Ace‘s problem and a system solution that can be implemented using PC database management software. Then use database software to develop a simple system solution. Your systems analysis report should include the following:

1. Description of the problem and its organizational and business impact.

2. Proposed solution, solution objectives, and solution feasibility.

3. Costs and benefits of the solution you have selected. The company has a PC with internet access and the full suite of Microsoft Office desktop productivity tools.

4. Information requirements to be addressed by the solution.

5. Management, organization, and technology issues to be addressed by the solution, including changes in business processes.

Based on the requirements you have identified, design the database and populate it with at least ten records per table. Consider whether you can use or modify the existing customer database in your design. Print out the database design. Then use the system you have created to generate queries and reports that would be of most interest to management. Create several prototype data input forms for the system and review them with your instructor. Then revise the prototypes.

The example solution file represents one of many alternative database designs that would satisfy Ace‘s requirements.

(Learning Objective 1: How should managers build a business case for the acquisition and development of a new information system? Learning Objective 3: What are the alternative methods for building information systems? AACSB: Written and oral communication, Analytical thinking, Application of knowledge)

Achieving Operational Excellence: Analyzing Website Design and Information Requirements

Software skills: Web browser software Business skills: Information requirements analysis, website design

12-11 Visit the website of your choice and explore it thoroughly. Prepare a report analyzing the various functions provided by that website and its information requirements. Your report should answer these questions: What functions does the website perform? What data does it use? What are its inputs, outputs, and processes? What are some of its other design specifications? Does the website link to any internal systems or systems of other organizations? What value does this website provide the firm?

Because web systems play such a central role in today’s information systems world, the purpose of this project is to give students experience in evaluating a web system and thinking through how well it meets IS requirements. After selecting a website, students should begin this project by developing a set of requirements they think the system will meet (strengths and weaknesses must be measured against some standards).

Students should use Table 12-1 (page 429), Design Specifications, to evaluate the website and develop system specifications that will deliver the functions they developed in the requirements analysis. Probably the most important specifications will be output, input, user interface, and connectivity.

(Learning Objective 1: How should managers build a business case for the acquisition and development of

a new information system? Learning Objective 3: What are the alternative methods for building information systems? AACSB: Written and oral communication, Analytical thinking, Application of knowledge)

Collaboration and Teamwork Project

12-12 In MyLab MIS, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google Sites, Google +, or other open source collaboration tools to complete the assignment.

Business Problem-Solving Case: Pennsylvania’s Unemployment Compensation Modernization System: Unfinished Business

Case Study Questions

12-13 Assess the importance of the Unemployment Compensation Modernization System project for the state of Pennsylvania.

The Pennsylvania Department of Labor and Industry (DLI) is responsible for the administration and operation of the state‘s unemployment compensation program, which provides temporary income to replace lost wages for qualified workers. DLI employs over 500 people and has approximately 200 offices statewide to serve Pennsylvania‘s 6.4 million workers and nearly 300,000 employers. Unemployment compensation (UC) claims are usually filed online or by telephone or mailed to a UC service center.

The legacy mainframe system for processing unemployment benefits was over 40 years old and increasingly expensive to maintain and difficult to modify. This limited functionality for case management and integrating newer tools and technologies to enhance productivity.

(Learning Objective 3: What are the alternative methods for building information systems?

AACSB: Analytical thinking, Application of knowledge.)

12-14 Why was unemployment compensation modernization a risky project in Pennsylvania?

Identify the key risk factors.

UCMS was considered a large-scale software project due to its complexity, large number of information requirements and business rules, and its cost. DLI‘s solicitation for vendor proposals for UCMS exhibited ambiguity in communicating all of these requirements, and also neglected to define and describe quantitative and qualitative performance measures and metrics for the proposed system.

(Learning Objective 1: How should managers build a business case for the acquisition and development of a new information system?, Learning Objective 3: What are the alternative methods for building information systems?, Learning Objective 4: How should information systems projects be managed?, AACSB: Analytical thinking, Application of knowledge.)

12-15 Classify and describe the problems encountered by the UCMS projects. What people, organization, and technology factors were responsible for these problems?

People: The people involved in the project lacked continuity and experience. The average person spent less than one year on the project before being rotated. A project of this complexity and magnitude requires a high degree of continuity in knowledge throughout the system development cycle, but this was never achieved. During requirements determination, DLI didn‘t have enough user subject matter experts to participate in joint application design (JAD) sessions with technical members of the project team. Thirty-six JAD subcontractors were prematurely removed from the project, leaving IBM with an incomplete understanding of unemployment claims processing business requirements.

IT test experts were not included in the project. A large-scale software-intensive system such as UCMS requires a rigorous and disciplined testing strategy, but this was not implemented. IBM decided to use DLI users to help develop test scripts. They provided the business expertise, but IBM did not use IT test experts on its end. User acceptance testing was initiated before completing system tests for Phase 2 and Phase 3.

Organization: Ineffective project management and constant changes in the contractor‘s workforce prevented transfer of essential knowledge for the entire project, a loss of ―project memory.‖ Since the UCMS project‘s start, 638 different contractors and staff members worked on the project. Most of the project workforce spent less than one year on the project and 75 percent spent less than two years. All of these discontinuities and workforce churn most likely contributed to IBM‘s schedule delays and inability to provide an accurate picture of the state of the project.

DLI lacked sufficient staffing and experience for effective oversight and management of the contract and project. There was no formal delegation of roles and responsibilities for managing the project. No one at DLI was held accountable. DLI essentially relied on the contractor to self-

manage. DLI staff had approved IBM’s representation of business system requirements without fully understanding what they were approving.

Technology: Migrating from a 40-year-old legacy mainframe system is challenging under the best of circumstances. The bidding process alone took three years. IBM had extensive systems experience and technology knowledge, but its proposal underestimated the project‘s scope and complexity.

Rigorous software testing came too late in the project. DLI did not specify a minimum of metrics for UCMS system performance, so there were no identifiable criteria and evidence for determining that Phase 2 and Phase 3 application releases were stable. The deficiencies in the project led to a higher number of software defects than industry norms, software code that was excessively complex (which makes testing too difficult), and late discovery of missing business requirements.

Most of the software defects were serious, and 50 percent were not discovered until the User Acceptance test, late in the system development cycle. Without thorough and complete testing throughout the development process, there is no way to know how many of the total defects residing in software will be discovered as a system is being used.

(Learning Objective 1: How should managers build a business case for the acquisition and development of a new information system?, Learning Objective 3: What are the alternative methods for building information systems?, Learning Objective 4: How should information systems projects be managed?, AACSB: Analytical thinking, Application of knowledge.)

12-16 What could have been done to mitigate the risks of these projects?

A risk mitigation strategy for these projects could include improvements to the identification and communication of requirements and progress metrics, continuity in personnel and project knowledge, project management and communication between DLI and the contractor, accountability, and a more rigorous software testing strategy.

Staffing discontinuities and workforce churn most likely contributed to IBM‘s schedule delays and inability to provide an accurate picture of the state of the project. The Carnegie Mellon study found many flaws in the systems development process. IBM had extensive systems experience and technology knowledge, but its proposal underestimated the project’s scope and complexity. DLI lacked sufficient staffing and experience for effective oversight and management of the contract and project. There was no formal delegation of roles and responsibilities for managing the project. No one at DLI was held accountable. DLI essentially relied on the contractor to self-manage.

A large-scale, software-intensive system such as UCMS requires a rigorous and disciplined testing strategy, but this was not implemented. IBM‘s software development and testing program for this project lacked rigor. This resulted in a higher number of software defects than industry norms, software code that was excessively complex (which makes testing too difficult), and late discovery of missing business requirements.

(Learning Objective 1: How should managers build a business case for the acquisition and development of a new information system?, Learning Objective 3: What are the alternative methods for building information systems?, Learning Objective 4: How should information systems projects be managed?, AACSB: Analytical thinking, Application of knowledge.)

MyLab MIS

Go to the Assignments section of your MyLab to complete these writing exercises.

12-17 Describe four system conversion strategies.

View rubrics in MyLab MIS.

12-18 Compare the two major types of planning and control tools.

View rubrics in MyLab MIS.

For an example illustrating the concepts found in this chapter, view the videos in MyLab MIS.