Essentials of MIS, Global Edition, 14th edition Kenneth C Laudon Solution Manual

Essentials of MIS, Global Edition, 14th edition By Kenneth C. Laudon

Email: Richard@qwconsultancy.com

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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 systemrelated 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

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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 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 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 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 How will MIS help my career?

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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, 35 Business processes, 40 Change management, 46 Computer hardware, 41 Computer literacy, 39 Computer software, 41 Critical thinking, 47 Culture, 40 Data, 37 Data management technology, 41 Extranets, 41 Feedback, 38 Information, 38

Information system (IS), 37 Information systems literacy, 39 Information technology (IT), 37 Information technology (IT) infrastructure, 41 Input, 38 Internet, 41 Intranets, 41 Management information systems (MIS), 39 Network, 41 Networking and telecommunications technology, 41 Output, 38 Processing, 38 World Wide Web, 41

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 non-technical 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.

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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.

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6 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?

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Operational excellence: UPS has maintained leadership in small-package delivery services despite stiff .

7 competition from FedEx and the U.S. Postal Service by investing heavily in advanced information technology.

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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.

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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.

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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 value-added 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?

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8 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: Organizations: Will AI Kill Jobs?

Case Study Questions 1. What are the various views on the impact of AI on jobs? What do you think will happen in your country?

There are three views on what AI will do to jobs: (a) Job killer: AI applications will become smart enough to perform most tasks, will never get tired, and will never talk back. They will be ideal employees, which is why they will gradually replace human employees completely and leave everyone out of a job. (b) Job changer: There will be a division of labor between human workers and AI. AI applications will do simple, trivial, and boring tasks involving large amounts of data, freeing their human colleagues to focus on complex and challenging assignments. People and machines will complement each other. (c) Job creator: Just like how the rise of the Internet has generated a huge demand for expertise in web programming, website design, e-marketing, and so on, AI will create new jobs. For example, AI initiatives needs teams of experts to work out algorithms, write computer programs, feed materials for training, fine-tune models, and fix them when they are out of order.

All three cases may exist in all countries. Countries which rely more on primary (agriculture) and secondary (manufacturing) industries are more like to experience case (a) in these industries.

Countries which depend on tertiary (service) industries are more likely to experience cases (b) and (c). All cases will lead to the same consequences: education and (re-)training. In case (a), education and training will help workers change jobs if AI applications evolve to perform their current job roles. In case (b), the complicated jobs assigned to human workers may need advanced knowledge to perform. In case (c), new occupations require new knowledge and skills developed through education and training. Lifelong learning is the key to keep one afloat in the job market and adaptable to the ever-changing world.

2. Some people think that AI does not kill jobs but transforms business models. Do you agree? Why or why not?

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9 AI will kill jobs and transform business models as well. An enterprise needs to review its business processes and decide which will be done by AI and which by human employees before introducing AI applications as to optimize man–machine cooperation for the best results.

In some situations, a company may need to redefine its business rules, workflow, job descriptions, and even organizational structure, in addition to reviewing the way it does business, to maximize the results of AI initiatives. Companies may also need to create entirely different roles for managing intelligent technologies. Therefore, AI transforms not only the business model but also the ecosystem of the whole company.

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.

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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 full-blown international communications system has drastically reduced the costs of operating and transacting business on a global scale.

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(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?

Describe the three activities in an information system that produce the information that organizations need.

Organizations need information to make decisions, control operations, analyze problems, and create new products or services. These activities can be categorized as input, processing, and output. Input captures and collects raw data from within the organization or from its external environment. Processing converts this raw input into meaningful forms. Output transfers the processed information to the people, who use it in various activities. (AACSB: Application of knowledge)

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) Explain the differences between information and data; why is the former essential to the latter?

Information refers to data that have been shaped into a form that is meaningful and useful to human beings. Data, in contrast, are streams of raw facts that represent events occurring in organizations or other environments before they have been organized and arranged into a form that users can understand and use. (AACSB: Application of knowledge)

Describe how the parts of an organization’s culture can be found embedded in its information systems.

Each organization has a unique culture (or fundamental set of assumptions, values, and ways of doing things) that has been accepted by most of its members, which is often reflected in its information systems.

An organization that focuses on customer service will have customer service orientated aspects and systems embedded into its information system. An organization that prides itself on the freshness of its products and ingredients will focus on developing sophisticated tracking and usage systems. (AACSB: Application of knowledge)

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

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11 Explain why it is essential to consider the problem solving process a process and not an event.

The chosen solution may only apply to and work for the current problem; it may need to be constantly monitored and adapted over time. In some cases, the chosen solution may not actually solve the problem, so a new approach may be necessary. In other cases, the solution may appear to work, but subtle changes in the root cause of the problem may render the solution irrelevant or less effective. Problems, like other aspects of business considerations and systems, are liable to change. Therefore, the business should be aware of potential solutions in case the situation changes.

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

Identify and describe the people related techniques that might be used to implement solutions to problems.

Implementing solutions involves building the solution first and then introducing it into the

organization. Often, this is an integral part of change management, which comprises processes and techniques that businesses use to successfully implement change. Most information systems necessitate changes to the firm’s business processes. It may be necessary to design new, more efficient business processes. There may be a need to introduce the change to groups of employees, create new training modules to bring employees quickly up to speed on the new information system and processes, and finally, offer rewards or incentives to encourage people to enthusiastically support the changes. Implementation also includes measuring outcomes. After a solution has been implemented, it must be evaluated to determine how well it is working and whether any additional changes are required to meet the original objectives. This information is fed back to the problem solvers. Therefore, based on experience, the causes of the problem can change over time, solutions can be adapted, and new choices made.

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

Explain how you might distinguish between technological, organizational and people perspectives in relation to information systems.

The technical approach to information systems emphasizes the use of mathematical models to study information systems, and the physical technology and formal capabilities of these systems.

The disciplines that contribute to the technical approach are computer science, management science, and operations research. Computer science is concerned with establishing theories of computability, methods of computation, and methods of efficient data storage and access.

Management science emphasizes the development of models for decision making and management practices. Operations research focuses on mathematical techniques to optimize selected parameters within organizations, such as transportation, inventory control, and transaction costs. The information systems field is also concerned with behavioral issues that arise in the development and long-term maintenance of information systems. Issues such as strategic business integration, design, implementation, utilization, and management cannot be explored effectively with the models used in the technical approach. Other behavioral disciplines .

12 contribute important concepts and methods. For instance, sociologists study information systems with an eye toward how groups and organizations shape the development of systems and how systems affect individuals, groups, and organizations. Psychologists study information systems to understand how human decision makers perceive and use formal information. Economists study information systems with an interest in understanding the production of digital goods, the dynamics of digital markets, and how new information systems change control and cost structures within a firm. The behavioral approach does not ignore technology. Indeed, information systems technology is often the stimulus for a behavioral problem. But this approach does not generally focus on technical solutions. Instead, it concentrates on changes in attitudes, management and organizational policy, and behavior.

(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

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13 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 Information systems are too important to be left to computer specialists. Do you agree? Why or why not?

Student answers to this question will vary.

1-6 If you were setting up the web site for a business firm, what management, organization, and technology issues might you encounter?

Student answers to this question will vary.

1-7 How have global and national statutes and regulations impacted the use of 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 .

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1-8 Magical Toys: Magical Toys is in dire need of an easy-to-use information system to keep track of its sales and inventory.

The information system in question can either be part of a bigger system for the whole enterprise or just a system for procurement and sales, depending on the company’s needs and size. It should be able to perform in real time, which means that the managers should be able to view sales and stock at any given time for each store separately or for the entire chain. This also means that the employees are free to focus on serving customers and that some errors will be avoided. However, no information system can deal with inconsistencies in inventory due to shoplifting, miscalculations in the number of goods delivered to the store, and so on. Therefore, inventory checks are still necessary.

1-9 Bargain Land: Bargain Land wants to keep costs as low as possible and has therefore not yet implemented an automated method for keeping track of inventory at each store.

The company has no up-to-date knowledge of stock levels and inventory. There is the potential for carrying either too much or too little inventory with no available real-time stock records. There is no ability to identify whether business problems relating to stock losses are internal or external issues. Any theft is not readily noticeable as there is no up-to-date record. There is the potential to over order or to carry surplus or redundant stock. Redundant stock will lead to pricing problems as stock might need to be sold off at a further discounted price, thereby impacting on profits, cash flows and the company's ability to reinvest. The company is unable to differentiate individual store performance in real-time and to account for seasonal trends and differing customer expectations and tastes.

The company needs to determine the actual business problems—mismanagement of inventory, too little or too much inventory, no ability to track inventory. The lack of an information system to manage inventory is actually increasing the company's costs rather than decreasing them. Clarity is required around the exact problem the company wants to solve. As the company wants to reduce costs, the lack of an information system is counteracting this aim. The lack of ability to monitor the sales and performance of individual stores in real-time affects both the company's and the individual stores' ability to effectively target its customer base. A decision needs to be made about the complexity of the information system required to fulfill the company's needs. A simple, off-the-shelf software package may be sufficient whilst still keeping costs down.

(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.

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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.

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16 ❖ 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. .

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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.

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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?

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

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.

Chapter Outline 2-1

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

The Information Systems Department Information Systems Services How will MIS help my career? .

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

Business, 67 Information systems department, 92 Business intelligence, 74 Information systems managers, 92 Business processes, 68 Interorganizational system, 79 Chief data officer (CDO), 93 Knowledge management systems (KMS), 79 Chief information officer (CIO), 92 Knowledge workers, 70 Chief knowledge officer (CKO), 93 Management information systems (MIS), 74 Chief privacy officer (CPO), 92 Middle management, 70 Chief security officer (CSO), 92 Operational management, 70 Collaboration, 82 Portal, 76 Customer relationship management (CRM) Production or service workers, 70 systems, 79 Data workers, 70 Programmers, 92 Decision-support systems (DSS), 74 Senior management, 70 Digital dashboard, 77 Social business, 83 E-government, 81 Structured knowledge, 91 Electronic business (e-business), 81 Supply chain management (SCM) systems, 78 Electronic commerce (e-commerce), 81 Systems analysts, 92 End users, 93 Tacit knowledge, 91 Enterprise applications, 77 Teams, 82 Enterprise content management (ECM) systems, Telepresence, 86 91 Enterprise systems, 78 Transaction processing systems (TPS), 73 Executive support systems (ESS), 76

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.

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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)

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

Summary and exception reports

Middle managers

Interactive; simulations; analysis

Professionals, staff managers

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Executive Support Systems (ESS)

analysis tools.

Aggregate data; external, internal

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;

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22 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 e-business 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: Japan Embraces E-governance Tools for Tokyo 2020 Case Study: Suggested Answers: 1. Describe the identity verification system and describe the inputs, business processes, and the outputs of the system.

The inputs, processes, and outputs of the IT applications planned for Tokyo 2020 are listed below.

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Electronic Visa System: The inputs include detailed personal information, travel plans and schedules, supplementary documents, and payment authorization for visa fees. The process includes evaluating the personal and passport information provided by the applicant. The outputs include the evaluation outcome and a visa if applicable.

Identity Verification System: The inputs include a an on-the-spot photo of the face of the user and a digital image of the user stored in the identity lanyard. The process includes comparing the images from the two sources. The outputs include the comparison results and access allowance or denial.

Crowd Forecasting System: The inputs include images captured by police vehicles. The processes include forecasting the possibility of crowds gathering around competition arenas and identifying any abnormal situations. The outputs include congestion forecasts, phone messages for guiding spectators to less crowded exits, and flagging of abnormal situations for follow-up by the police.

Heatstroke Warning System: The inputs include heat index information from the Ministry of the Environment, crowd forecast data, and real-time weather data from Yahoo! Japan. The processes include calculating the risk level and deciding whether to issue a heatstroke warning.

The outputs include the risk of heatstroke and heatstroke warnings to the public and workers of Tokyo 2020.

2. Discuss how these IT applications strengthen the relationship between citizens and their government.

Each of these IT applications serve different purposes of e-government.

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Electronic Visa System: The Electronic Visa System is a new online channel for applying for a one-time entry visa to Japan in additional to the traditional method of doing it in person at any Japanese embassy or consulate. The simplified and streamlined visa application and issuance processes also improve efficiency. Therefore, the Electronic Visa System helps to improve delivery of government services and make government operations more efficient.

Identity Verification System: The Identity Verification System decides whether the user is an accredited attendee within 0.3 seconds, making security checks faster and more secure. Therefore, the Identity Verification System helps to make government operations more efficient.

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23 • •

Crowd Forecasting System: The Crowd Forecasting System helps spectators leave venues through less crowded exits after the end of an event. Therefore, the Crowd Forecasting System helps to empower citizens by giving them easier access to information.

Heatstroke Warning System: The Heatstroke Warning System issues warnings to the public and to the workers of Tokyo 2020 so that they can take countermeasures in time. Therefore, the Heatstroke Warning System helps to empower citizens by giving them easier access to information.

3. What are the implementation challenges of these systems? How can they be addressed?

These IT applications to be employed in Tokyo 2020 have various implementation challenges.  Electronic Visa System •

Identity theft and forgery of documents: Since the application for the electronic visa, including supplementary documents, is submitted online, personal appearance at a visa office is not mandatory. Hence, identity theft or submission of falsified documents is possible. The Japanese government may reduce this risk by requiring the applicants to submit multiple supplementary documents issued by the government of the applicant or authenticated third parties (such as credit card companies) and by handling high-risk applicants manually.

 Identity Verification System •

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•

High implementation costs: The cost of developing such a system from scratch will be quite high, since facial recognition requires top-quality cameras and advanced technology to ensure accuracy and speed. The average cost of installing and implementing such a system would be high considering the number of kiosks involved. Using an existing system developed by the private sector would lower the risks and costs associated with system development.

Changes in appearance: If the facial image of the authenticated participant was collected some time before the event, there may be some discrepancies between the photo in the database (and the identity lanyard) and the facial image captured by the camera in the kiosk and may result in false alarms. This is particularly the case with junior spectators, whose appearance may change rapidly within several months. Then, checking the identity of the user will require human involvement. Equipment should be available at kiosks for replacing the facial image of the authenticated participant if necessary.

Testing and fine-tuning: The performance of the facial recognition system depends on its design. The system should be tested repeatedly in various scenarios with different camera angles, background colors, etc. and should be fine-tuned for optimal performance.

 Crowd Forecasting System • Computation power: Tokyo 2020 has numerous venues widely scattered across the crowded Tokyo metropolitan area. The crowd forecasting system must be scalable to analyze the large quantity of images captured by the cameras installed on police vehicles. Tokyo may test the computation power of this system beforehand in other events at these venues.

 Heatstroke Warning System 4. What people, organization, and technology factors contributed to development of these IT applications?

The people, organizational, and technological factors that contributed to the development of these IT applications include the following.

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People factors include a limited number of workers due to the shrinking workforce of the country and the large number of participants of Tokyo 2020, including athletes, workers, volunteers, spectators, and journalists.

Organization factors include government initiation and good collaboration between the public and private sectors, a specific goal of hosting Tokyo 2020.

Technology factors include technological know-how, good infrastructure such as 5G networks, and the potential to apply IT applications in other contexts.

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.

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25 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 theatrequality 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)

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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?

Describe with examples how business processes are tied to the specific functional area of an organization.

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.

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

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

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27 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.

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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, decision-support 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?

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28 Describe the characteristics of business intelligence and explain why it is important in terms of decision making.

Most organizations have business intelligence systems that focus on delivering information to support management decision making. Business intelligence comprises all the activities related to the data and software tools used for organizing, analyzing, and providing access to the data. These data are designed to help managers and other enterprise users make more informed decisions. Business intelligence is useful for decision making at all levels of management. (AACSB: Application of knowledge)

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.

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29 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, userfriendly software.

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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 a digital dashboard works.

Data from an ESS are presented in the form of a digital dashboard. On a single screen, it displays graphs and charts of the key performance indicators for managing a company. Digital dashboards are an increasingly popular tool for management decision-makers. Senior management have the necessary data at their fingertips to guide their work. Data captured at the factory or sales floor level are immediately made available for high-level or detailed views in executive dashboards and reports. A digital dashboard is a vital part of the real-time management of an organization and its operations. (AACSB: Application of knowledge)

Explain how and why an organization might want to implement enterprise applications. What might be involved?

It is difficult to ensure that all the systems within an organization work in harmony . Most organizations have a collection of new and legacy systems that simply do not interact with one another. One possible solution to this problem is to implement an enterprise application. The organization can thus invest in systems that span all of its functional areas. Enterprise applications can help make the business more flexible and productive by helping coordinate business processes more closely and integrating groups of processes to ensure that they focus on the efficient management of resources and customer service.

(AACSB: Application of knowledge)

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Explain how customer relationship management helps an organization manage their interactions with customers.

Customer relationship management (CRM) systems aim to provide information to coordinate all the business processes that deal with customers. This includes sales, marketing, and customer service. The idea is to optimize revenue, customer satisfaction, and customer retention. CRM information can help businesses identify, attract, and retain the most profitable customers. This is achieved by enabling the business to provide better service to its existing customers and, thereby, increase sales. (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?

List the ways in which businesses have changed working conditions, procedures and systems to encourage social business.

Social business refers to the use of social networking platforms—including Facebook, Twitter, and internal corporate social tools—to engage employees, customers, and suppliers. These tools enable workers to set up profiles, form groups, and “follow” each other’s status updates. The goal of social business is to deepen group interactions within and outside the firm to expedite and enhance information sharing, innovation, and decision making.

Typically, a business uses a wide range of applications. These include: • • • • • • • •

Social networks: Connect people through personal and business profiles Crowdsourcing: Harness collective knowledge to generate new ideas and solutions Shared workspaces: Coordinate projects and tasks; co-create content Blogs and wikis: Publish and rapidly access knowledge; discuss opinions and experiences Social commerce: Share opinions about purchasing or purchase on social platforms File sharing: Upload, share, and comment on photos, videos, audio files, and text documents Social marketing: Use social media to interact with customers; derive customer insights Communities: Discuss topics in open forums; share expertise

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

Explain the purpose and the mission of a team within a business organization.

Employees may collaborate informally, in groups that are not an official part of the firm’s organizational structure, or formally in teams. Teams have a specific mission that someone in the business assigns to them. Team members need to collaborate to accomplish specific tasks and achieve the team mission, which might be, for instance, to “win the game,” or “increase online sales by 10 percent.” Teams are often short-lived, depending on the problems that they have to tackle and the time it takes to find a solution and accomplish the mission.

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

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Distinguish between horizontal and vertical communication in an organization.

Firms, especially large ones, had a reputation in the past for being “command and control” organizations in which top leaders thought through important matters, and then ordered lower-level employees to execute senior management plans. The job of middle management was supposedly to pass messages up and down the hierarchy (horizontal communication). Command and control firms required lower-level employees to carry out orders without asking too many questions. These lower-level employees were not responsible for improving processes and received no rewards for teamwork or team performance. If one work group needed help from another, it was up to the bosses to figure it out. Employees never communicated horizontally, which gave management complete control of the process. Together, the expectations of the management and employees formed a culture—a set of assumptions about common goals and how people should behave. Many business firms still operate this way.

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

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 audiovisual 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 groupeditable 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

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32 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) 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.

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.

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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 MoiMoiPixel: Heli is a manager at MoiMoiPixel, a Finnish startup developing free, fast-paced casual games for mobile platforms. MoiMoiPixel has been a success, gathering over 10 million returning players within a very short time. Nevertheless, the company is bleeding due to associated costs of hosting the game for all these players and paying salaries to the current staff of 40. Heli realizes the company doesn’t know the players at all—when they play, why they play, where they live, and so on. Further, there is no communication at all with the players, and simply meeting at the coffee machine and sending emails is not enough to communicate efficiently with the growing staff. Help Heli by providing three suggestions for improving revenue and communication using information systems.

An information system can benefit the company in several ways. It can improve revenue by recording the players’ information onto a database and then giving them incentives to play more through personalized ads and offers. It can implement a messenger application to make communication between employees easier and thereby ensure that all employees know what work needs to be done and at the right time.

Communication with players can improve if the company invests in CRM software, which has the ability

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34 to keep track of incoming support tickets. Also, if the company makes it mandatory to register a valid email address in order to play the games, it could send out messages to all ten million players even if they are not playing the game at the time of the message.

(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? AACSB: Analytical thinking, Application of knowledge.)

2-9 PetFence: PetFence makes custom-made fences to protect cats and dogs in household gardens. The company takes orders via email, designs the fence together with the client, and builds it in the client’s garden. Finally, an invoice is sent to the client. PetFence depends on having just the right amount of necessary parts—too few and the work is delayed; too many and the storage fills up quickly. As business transactions are agreed on over the phone or by email, they sometimes forget to charge clients and pay suppliers.

Moreover, email requests from prospective clients are often lost in the email flood, leading to missed sales opportunities and credibility issues. In what ways could information systems help PetFence? What issues can information systems not help them with?

An information system can help PetFence keep track of leads, actual sales, and customer correspondence in general. If the system has an integrated module for invoicing, the risk of forgetting to bill the client is minimized. In addition, if the system has a part dedicated to suppliers, it is easier to keep track of the relations and agreements with the various enterprises. However, no information system aimed at business is completely self-dependent. In other words, even after installing an information system, PetFence would still need to be more observant and less sloppy in its communication with suppliers and clients, billing of clients, and paying suppliers and taxes.

(Learning Objective 2-1: What are business processes? How are they related to information systems? AACSB: Analytical thinking, Reflective 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.

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35 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.

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36 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)

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37 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.

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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

3-2

3-3

3-4 3-5

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 How do information systems help businesses compete globally?

The Internet and Globalization Global Business and System Strategies Global System Configuration How do information systems help businesses compete using quality and design?

What is Quality?

How Information Systems Improve Quality What is the role of business process management (BPM) in enhancing competitiveness?

What is Business Process Management?

How will MIS help my career?

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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, 124 Benchmarking, 114 Best practices, 115 Business ecosystem, 118 Business process management (BPM), 125 Business process reengineering (BPR), 127 Competitive forces model, 107 Computer-aided design (CAD) system, 124 Core competency, 117 Cycle time, 123 Disruptive technologies, 119 Domestic exporter, 121 Efficient customer response system, 110 Franchiser, 121

Mass customization, 110 Multinational, 121 Network economics, 118 Platforms, 118 Primary activities, 114 Quality, 122 Six Sigma, 123 Support activities, 114 Switching costs, 111 Total quality management (TQM), 122 Transnational, 121 Value chain model, 112 Value web, 116 Virtual company, 117

Teaching Suggestions : The opening case illustrates that information systems have the potential to disrupt and redefine the business model of an entire industry.

By developing a user-centric, mobile application, a higher level of service than that offered by the branch of a traditional banking institution can be achieved. At the same time, the cost structure is kept extremely lean. This combination ensures a sustainable competitive advantage over traditional players.

The potential of N26 and other FinTech providers is huge; their market valuations have grown to more than $3 billion in a just few years. In comparison, Deutsche Bank, the largest traditional banking institution in Germany, has a market value of approximately $15 billion. However, N26 employs 1,300 people, while Deutsche Bank has 97,000 employees.

The case shows how technology and new competitors can provide a completely new understanding of the business model and customer needs. This new information will force many banks to challenge their business model, rethink their information systems portfolio, and modify their structure to stay competitive in future.

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40 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: Organizations: Strategic Information Systems at Hong Kong Disneyland Case Study Questions 1. Discuss the various strategies that Hong Kong Disneyland adopts to attract visitors. .

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Being a theme park, Disneyland needs to attract visitors. As there are so many tourist spots in Hong Kong, Disneyland needs comprehensive information about its visitors to provide them with a unique experience at the park. Considering customers as a competitive force, Disneyland collects important information from its online sales and point of sales terminals. Disneyland uses this information to send email notifications to visitors about new events or rides. Moreover, frequent visitors are awarded free passes. The innovative technology, MagicBand, has played an important role in collecting real-time information, such as credit card details, tickets, and hotel keys. Disneyland uses all this information strategically in order to attract more visitors.

2. What problem did Disneyland face as it began to draw more visitors to the theme park?

How was it resolved?

Although tracking important information about visitors and updating them about new rides and characters gave Disneyland a strategic advantage, it created a new problem—more visitors meant that everyone had to wait longer. To solve this problem, Disneyland started sending customized messages to visitors, informing them about the waiting periods at different rides. To send these customized messages, Disneyland used information systems. The data from point of sales terminals (ticketing counters) is segregated to mine important information about visitors. Based on this information, Disneyland manages the crowd and reduces the waiting time for various rides. With the introduction of the MagicBand technology, Disneyland has gone a step further—it now collects real-time information about rides that visitors have taken and each visitor’s exact location in the park. Disneyland uses this information to direct visitors to rides with the least waiting time.

3. How does Hong Kong Disneyland manage its suppliers?

Suppliers are an important factor in the management of eateries and souvenir shops. Disneyland does not tolerate wastage or items going out of stock at the various shops located inside the park.

So these shops share real-time data—about items sold and inventory—with suppliers. This has helped Disneyland curtail wastage and manage inventory at optimum levels. MagicBand, a wrist band given to all visitors, stores their credit card information; the results have been remarkable.

Disneyland tracks what each visitor spends on products at the park in real-time. Thus, it records visitors’ spending patterns. This information is then shared with suppliers, who are better able to manage the inventory at Disneyland.

4. How does Hong Kong Disneyland determine which theme or character to introduce in the park?

Hong Kong is a tourist hub with many attractions; Disneyland keeps innovating to ensure that it is Hong Kong’s main attraction. In order to introduce new themes and characters at Disneyland, understanding visitors’ preferences is important. This is done by observing the reactions of audiences to Disney movies at the Disney Studio. Cameras in the studio capture the facial movements of the audience. Then, experts analyze the movements, based on which Disneyland decides which character or theme is most appealing. Accordingly, that theme or character is introduced in the park.

5. Visit the websites of Ocean Park and Hong Kong Disneyland and compare their strategic features. How can Hong Kong Disneyland improve its website over that of Ocean Park? .

42 Students need to apply their understanding of the text to answer this question. They should take into account the various competitive forces in the market and relate them to the important features highlighted on the Ocean Park and Disneyland websites. Based on their individual observations and with guidance from a subject matter expert, students should make suggestions that would give Disneyland a strategic advantage over Ocean Park.

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43 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 .

44 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.

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45 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?

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46 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, .

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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

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48 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 lowestcost 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

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49 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)

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50 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 value-added 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? .

51 AACSB: Application of knowledge) 3-3 How do information systems help businesses compete using quality and design?

Define TQM and explain, who, within an organization has associated responsibilities.

TQM holds that achieving quality control is an end in itself. Everyone is expected to contribute to the overall improvement of quality—the engineer avoids design errors, the production worker spots defects, the sales representative presents the product properly to potential customers, and the secretary avoids typing mistakes. Total quality management encompasses all the functions within an organization. TQM is based on quality management concepts developed by American quality experts. Japanese management adopted the goal of zero defects, focusing on improving their products or services before shipment rather than correcting mistakes after delivery. Japanese companies often hold the workers who actually make the product or deliver the service accountable for quality consistency, as opposed to a separate quality control department.

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

Describe the purpose and the value of benchmarking.

Organizations have effectively achieved quality by setting strict standards for products, services, and other activities, and then measuring performance against those standards. Companies may use external industry standards, standards set by other companies, internally developed high standards, or a combination of the three. All these approaches come under an umbrella term: benchmarking.

Benchmarking has three distinct purposes and associated values. Internal benchmarking allows the business to establish best practices throughout the organization. This is particularly useful if there is no identifiable competitor whose practices can be examined and compared. Competitive benchmarking is especially useful when an organization wants to examine and evaluate its current position in comparison to the performance and standards of another leading organization in the same or similar market. Strategic benchmarking is used to track international performance. It involves the organization looking outside of its own industry to identify key characteristics of successful organizations in order to compare itself to external performers.

(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?

Explain why technological improvements might not be sufficient in themselves to make a business more effective.

Technology alone is often not enough to make organizations more competitive, efficient, or qualityoriented. Instead, the organization itself needs to evolve to leverage the power of information technology. This transformation may require minor adjustments to work activities, or entire business processes may need to be redesigned. Business process management (BPM) addresses such needs. Most organizations will do almost anything to avoid making changes to basic assumptions. Technological changes that threaten commonly held cultural assumptions usually face a great deal of resistance. However, sometimes, the only sensible way for a firm to move forward is

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52 to adopt a new technology that directly opposes the existing organizational culture. When this occurs, the adoption of the new technology stalls while the culture slowly adjusts.

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

Explain how a business can go about identifying the processes for change.

One of the most important strategic decisions that a firm needs to make is not how to use computers to improve business processes, but identifying which business processes need improvement. When systems are used to strengthen the wrong business models or processes, the business only becomes more efficient at doing what it should not do. As a result, the firm becomes vulnerable to competitors who may have discovered the right business model. Considerable time and money may also be spent on improving business processes that have little impact on overall firm performance and revenue. Managers need to determine which business processes are most important and how improving these processes will help the business perform.

(Learning Objective 4: What is the role of business process management (BPM) in enhancing competitiveness?, AACSB: Analytical thinking.)

Explain the value and purpose of tools provided by software companies in relation to BPM. These tools help businesses identify and document processes that require improvement, create models of improved processes, capture and enforce business rules for performing processes, and integrate existing systems to support new or redesigned processes. BPM software tools also provide analytics to verify that process performance has indeed been improved and to measure the impact of process changes on key business performance indicators.

(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.

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Hands-On MIS Projects Management Decision Problems 3-8 Dolce: To compete better globally, Dolce has decided to let customers design their own kitchens through a web-based interface. The client needs to insert the exact measurements and make requests for appliances and furniture materials, and then the order will go to the Italian factory, where the kitchen’s parts will be assembled, packaged, and sent to the client. How can Dolce take advantage of information systems to succeed with this concept?

By using the web to let end customers order their own kitchens, Dolce can keep higher margins than its competitors who rely on retailers. In addition, since Dolce is controlling the customers’ purchasing processes, the inventory can be kept to a minimum. An enterprise resource planning (ERP) system can help the company achieve these tasks. Since the customers’ data are collected, Dolce can also target local markets and individuals better than its competitors.

(Learning Objective 3-3: How do Porter’s competitive forces model, the value chain model, synergies, core competencies, and network economics help companies develop competitive strategies using information systems? Learning Objective 3-4: What are the challenges posed by strategic information systems, and how should they be addressed? 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?

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(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 .

55 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-by-line, 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: Offline, Online, and Back: The Evolution of the UK Grocery Market 3-13 Analyze the cost leadership strategy of Tesco based on Porter’s Competitive Forces Model. Why would it be a smart move to close one of its online shopping sites?

When analyzing Tesco’s strategy based on Porter’s Competitive Forces Model, one needs to understand Tesco’s competitive advantage over other grocery companies. Tesco chose a cost leadership strategy in order to counter all the five forces mentioned in Porter’s model—the threat of substitute products, the threat of rivals, the threat of new entrants, the power of suppliers, and the power of customers. Organizations deploying a cost leadership strategy use information systems to maintain the lowest operational costs. By using this strategy, Tesco has managed to maintain the lowest costs in the industry and is able to offer its products and services to a broad market at the lowest prices. Tesco keeps its costs low by producing large quantities of products, thus spreading its costs and minimizing the costs of production, and by minimizing costs across the supply chain.

By controlling its operating costs, Tesco is able to price its products competitively and generate high profit margins, thus gaining a significant competitive advantage. In implementing a cost leadership strategy, Tesco has focused on creating internal efficiencies that will help it withstand external pressures.

Tesco decided to close one of its e-commerce websites to avoid incurring more losses and other challenges including the high costs of fulfilment and online marketing. Trying to compete with internet giants like Amazon was probably a mistake. Amazon has been the market leader in the ecommerce industry; it offers a wide variety of products at low prices, making it a serious threat to

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56 competitors. By shutting down its less successful website, Tesco has the chance to focus its investments on one platform and attain higher customer satisfaction. Considering changing customer behaviors, where customers are becoming increasingly willing to shop online for groceries, closing the website selling items other than food in order to focus more on grocery selling helps Tesco prepare for the future. Tesco is known for leveraging IT to provide its customers with a range of products and services based on their needs and lifestyles. One example of this is the huge success of Tesco's virtual stores in South Korea. The next step for Tesco will be to develop a strategy for the United Kingdom that focuses on Tesco’s customers and offers services tailored to their needs.

3-14 Do you think Aldi and Lidl’s strategy of venturing into e-commerce is a good idea?

Although e-commerce is a huge opportunity for all supermarkets since it helps them reach a wider target audience, it is a risky proposition for discount supermarkets to start selling groceries online. Customers are attracted to Aldi and Lidl because they are simple and less costly.

However, as in the case of Tesco, these supermarkets may lose this appeal if they are not able to cover their costs and may have to shut down their e-commerce platforms.

E-commerce is a trend nowadays due to the limited time people have for physical shopping and their need to use their free time more efficiently. If Aldi and Lidl are successful in online grocery retail, the big four supermarkets in the United Kingdom may lose their market share since, every year, more customers are switching to discount supermarkets. If discount supermarkets such as Aldi and Lidl are able to maintain their low-price strategy in their online stores as well, they will be able to gain a competitive advantage over other big supermarkets in the United Kingdom.

3-15 Comment on Tesco’s strategy of opening a discount chain. Do you think it could recover Tesco’s former market position? Explain your answer.

Considering changing customer behaviors in the last few years, especially the switch to discount supermarkets, Tesco’s strategy to open a discount chain could be successful. As discussed in the case, people have switched to budget supermarkets in response to inflation and the economic recession. Tesco has the power and the expertise to make this initiative successful. This strategy could also help Tesco regain the market share it has lost.

In parallel, attempts made by big supermarkets to enter the discount brand market have also been unsuccessful. For instance, in 2014, Sainsbury’s partnered up with Netto to launch a UK discounter, but two years later, they had to close their 16 stores since it did not generate any profits. Additionally, Tesco tried to enter the discount brand market in the 1980s, but it had to give up after four years since there were fears that it might undermine the main brand.

However, it is possible that this time, the circumstances might be different; a combination of online and offline business might be the best approach.

3-16 How much potential do you see for virtual stores (like the ones Tesco introduced in South Korea) in the United Kingdom?

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57 Tesco’s virtual stores in South Korea were successful due to their ability to adapt to local customer needs. South Koreans needed a solution to address their main problem—limited free time for shopping. Thus, Tesco “virtually” created a new market based on people’s lifestyles.

Before launching this kind of initiative in the UK, there is a need for market research and analysis to estimate how people will respond to this type of innovation. It should also be noted that people from South Korea are usually able to adapt to new technologies quickly and accept innovations easily. If this is not the case with the United Kingdom, there is a risk of not achieving a sufficient transaction volume on the platform.

Furthermore, the complexity of setting up and rolling out such a platform should not be underestimated. The ramp-up cost for developing the solution and setting up physical displays in highly frequented areas like subway stations or bus terminals are usually quite high. Apart from this, a smooth digital platform needs to be developed and a reliable storage and delivery system also needs to be set up.

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.

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Chapter 4 Ethical and Social Issues in Information Systems Learning Objectives 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 4-1

4-2

4-3

4-4

4-5

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 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 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 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 How will MIS help my career? .

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

Accountability, 148 Carpal tunnel syndrome (CTS), 167

Liability, 148 Nonobvious relationship awareness (NORA), 147 Opt-in, 155 Opt-out, 155 Patent, 157 Privacy, 150 Profiling, 147 Repetitive stress injury (RSI), 166 Responsibility, 148

Computer abuse, 165 Computer crime, 165 Computer vision syndrome (CVS), 167 Cookies, 154 Copyright, 156 Digital divide, 166 Digital Millennium Copyright Act, (DMCA), 159 Due process, 148 Ethical no-free-lunch rule, 149 Ethics, 144 Fair Information Practices (FIP), 151 General Data Protection Regulation (GDPR), 152 Golden Rule, 149 Immanuel Kant’s categorical imperative, 149 Information rights, 145 Informed consent, 155 Intellectual property, 156

Risk aversion principle, 149 Safe harbor, 153 Slippery slope rule, 149 Spam, 165 Spyware, 155 Trade secret, 158 Trademarks, 158 Utilitarian principle, 149 Web beacons, 154

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 double-edged 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

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60 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 .

61 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: .

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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.

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63 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? .

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Explain what nonobvious relationship awareness is.

NORA is a powerful profiling application. It can take information about people from many disparate sources, such as employment applications, telephone records, customer listings, and criminal records, and correlate the data to find obscure connections. NORA scans data and extracts information as the data are being generated. The technology is considered a valuable tool for security, but it does have privacy implications because it can provide a highly detailed report of the activities and associations of a single individual. (AACSB: Application of knowledge).

Describe the net impact of the doubling of computer power every eighteen months.

This development has allowed most organizations to use information systems for their core production processes. However, it also means that enterprises’ dependence on systems and their vulnerability to system errors and poor data quality have increased. Social rules and laws have not yet adjusted to this dependence. (AACSB: Application of knowledge)

List some of the ethical issues in information systems that have been given new urgency by the rise of the Internet and electronic commerce.

Internet and digital firm technologies have made it easier than ever to assemble, integrate, and distribute information. This has raised new concerns regarding the appropriate use of customer information, protection of personal privacy, and protection of intellectual property. (AACSB: Application of knowledge)

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.

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65 • •

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?

Explain the purpose and the significance of GDPR in its current form.

The purpose of GDPR is to protect EU citizens from privacy and data breaches. In many respects, the current version is similar to the previous one, but there are some significant changes. The first, and most important, is the increased territorial scope of the legislation. It now applies to all companies processing the personal data of data subjects residing in the EU, regardless of the company’s location. It also covers the processing of personal data of data subjects in the EU by a controller or processor not established in the EU. The penalties are stiffer, too; an organisation is liable to a fine of up to 4 percent of the global turnover. Consent has been strengthened as well; breaches must be reported within 72 hours. Data subjects are entitled to a copy of any data about them. There is also the “right to be forgotten,” which means that a data subject can demand that information stored on them is erased.

(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.)

Distinguish between opt-in and opt-out in respect of data collection online.

Opt-in and opt-out refer to informed consent or a lack thereof provided by a user (typically a website visitor or a registered member of an online forum, social network, or other hosting facility). With opt-in, the site must have the user’s permission in order to collect data about them; otherwise, they are prohibited from doing so. This approach is better for the user as the default is that the site cannot collect data unless it has explicit permission. Opt-out is the opposite approach.

The assumption here is that the site can collect data unless the user specifically states that it cannot.

(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.)

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66 Explain the value of a patent and how it protects the intellectual property of an individual or organization.

A patent grants the individual or organization a monopoly over the invention or creation for 20 years. It must be a novel and original invention that is noticeably and definitely different from anything else that currently exists. The patent allows the inventor to exploit the invention, financially or otherwise, for 20 years before other individuals or organizations can copy it.

(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.)

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 optout 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.

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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?

Identify the most common reason for business system failure.

Although software bugs and facility catastrophes are more widely reported in the press, the most common source of business system failures by far is data quality. Few companies routinely measure the quality of their data, but organizations report data error rates ranging from 0.5 to 30 percent. (AACSB: Application of knowledge).

Describe why all organizations have become dependent and vulnerable as a result of using information systems.

In most organizations, if the systems fail, there is no backup structure or content. There are no universal regulatory or standard-setting forces in place. The absence of these standards means that different organizations will be affected in different ways should their information systems fail.

(AACSB: Application of knowledge)

Describe computer crime with an example.

Computer crime is the commission of illegal acts through the use of a computer or against a computer system. Computers or computer systems can be the target a crime (as in destroying a company’s computer center or files) or the instrument of a crime (as in stealing computer lists by illegally gaining access to a computer system from a home computer). Accessing a computer system without authorization, or without the intent to harm, even by accident, is now a crime in many countries. (AACSB: Application of knowledge)

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Explain what is meant by the term digital divide.

Access to information, knowledge, and computers through educational institutions and public libraries is inequitably distributed along ethnic and social class lines, as is the case with many other information resources. This is a country-wide and a global problem. Even though access has improved in developed and developing countries in recent years, and the gap in those countries is narrowing to an extent, there are millions of homes and individuals with little or no access at all.

(AACSB: 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 FashionToday: The company keeps track of each customer’s information. Yara is a young woman who struggles to find things her size but is a regular shopper at FashionToday. One day, she receives a text message announcing a new line of clothes named FTXL. Clearly, she has been selected based on her submitted body size measurements. Five days later, she receives an ad for weight-loss supplements from Herbs4Life, an affiliate of FashionToday. Has FashionToday violated Yara’s privacy? Is this potentially offensive to people like Yara?

There are two sides to this dilemma: an ethical one and a legal one. In the case that Yara, when registering at FashionToday, has checked a box stating that her customer data can be shared with the company’s affiliates, there should be no legal problem regarding her right to privacy.

However, being overweight might be a sensitive issue for many, and if Yara feels offended by these messages, something is obviously wrong with the ethical thinking of FashionToday (regardless of the company or Herbs4Life’s intentions, which may be well-meaning). Since Yara

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69 has been a customer at FashionToday and has perhaps never even heard of Herbs4Life, it should be evident that Herbs4Life’s marketing is more problematic than FashionToday’s. (Learning Objective 4-1: 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 Kelleher, Claire McMahon, Patricia Milligan, Robert Olivera, Ernesto Talbot, Helen Wright, Steven

Total minutes 248

Legitimate minutes 96

Suspect minutes 152

127

44

83

155

155

40

40

260 38

35 15

225 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 .

70 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 time-wasters. 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.

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71 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 thirdparty 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.

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72 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.

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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.

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74 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.

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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?

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 5-1 5-2

5-3

5-4

5-5

What are the components of IT infrastructure?

IT Infrastructure Components 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 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 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 How will MIS help my career?

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

Android, 199 N-tier client/server architectures, 186 Application server, 186 Object, 200 Application software, 183 Office 365, 201 Apps, 204 Offshore software outsourcing, 207 BYOD, 190 On-demand computing, 196 C, 200 Open source software, 203 C++, 200 Operating system, 198 Capacity planning, 205 Output devices, 187 Centralized processing, 186 Outsourcing, 206 Chrome OS, 199 Personal computer (PC), 185 Client, 186 Private cloud, 196 Client/server computing, 186 Public cloud, 196 Quantum computing, 191 Cloud computing, 192 Consumerization of IT, 190 Scalability, 205 Data center, 182 Server, 185 Data management software, 184 Service level agreement (SLA), 207 Distributed processing, 186 Service-oriented architecture (SOA), 203 Edge computing, 196 Software as a service (SaaS), 193 Extensible Markup Language (XML), 202 Software package, 201 Graphical user interface (GUI), 199 Software-defined storage (SDS), 191 Green computing (green IT), 197 Solid state drive (SSD), 187 Grid computing, 197 Spreadsheet software, 201 HTML5, 202 Supercomputer, 185 Hybrid cloud, 196 System software, 183 Hypertext Markup Language (HTML), 202 Tablet computer, 188 Input devices, 187 Total cost of ownership (TCO), 206 iOS, 199 UNIX, 199 Java, 200 Virtualization, 191 Legacy systems, 184 Visual Basic, 200 Linux, 200 Visual programming language, 200 Mainframe, 185 Web browsers, 201 Mashups, 204 Web hosting service, 207 Mobile device management (MDM), 208 Web server, 186 Multicore processor, 198 Web services, 202 Multitouch, 199 Windows 10, 199 .

77 Nanotechnology, 190

Workstation, 185

Android, 199 Application server, 186 Application software, 183 Apps, 204 BYOD, 190 C, 200 C++, 200 Capacity planning, 205 Centralized processing, 186 Chrome OS, 199 Client, 186 Client/server computing, 186 Cloud computing, 192 Consumerization of IT, 190 Data center, 182 Data management software, 184 Distributed processing, 186 Edge computing, 196 Extensible Markup Language (XML), 202 Graphical user interface (GUI), 199 Green computing (green IT), 197 Grid computing, 197 HTML5, 202 Hybrid cloud, 196 Hypertext Markup Language (HTML), 202 Input devices, 187 iOS, 199 Java, 200 Legacy systems, 184 Linux, 200 Mainframe, 185 Mashups, 204 Mobile device management (MDM), 208 Multicore processor, 198 Multitouch, 199 Nanotechnology, 190

N-tier client/server architectures, 186 Object, 200 Office 365, 201 Offshore software outsourcing, 207 On-demand computing, 196 Open source software, 203 Operating system, 198 Output devices, 187 Outsourcing, 206 Personal computer (PC), 185 Private cloud, 196 Public cloud, 196 Quantum computing, 191 Scalability, 205 Server, 185 Service level agreement (SLA), 207 Service-oriented architecture (SOA), 203 Software as a service (SaaS), 193 Software package, 201 Software-defined storage (SDS), 191 Solid state drive (SSD), 187 Spreadsheet software, 201 Supercomputer, 185 System software, 183 Tablet computer, 188 Total cost of ownership (TCO), 206 UNIX, 199 Virtualization, 191 Visual Basic, 200 Visual programming language, 200 Web browsers, 201 Web hosting service, 207 Web server, 186 Web services, 202 Windows 10, 199 Workstation, 185

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Teaching Suggestions This chapter covers hardware and software—two computer-side components of the six elements in an information system. Money spent on hardware and software used to be sunk cost regardless of the scale of operation. Now, however, such investment on infrastructure can be scalable, depending on the organization’s needs, using cloud computing, thanks to high-speed internet. The opening case illustrates how a consumption-based cloud solution helps Hermes UK, a parcel delivery company in the UK, to flourish.

Even though it was operating in a promising business environment as the second-largest player in the market, Hermes UK was desperately trying to figure out how to turn a profit and still offer delivery at the lowest possible cost. The company had hard-to-please customers and fierce competition. Apart from external threats, there was an internal challenge—the company’s information system was failing to fulfill its operational needs. As the demand for the delivery service fluctuated and the number of parcels rose to as high as 300 million, the data could not be processed in real time. Instead, it was processed in batches, with delays.

The delivery specialist retired some legacy systems, redesigned some processes, and migrated its data and operations to Amazon Web Services (AWS). Delivery information updates were pushed to customers in real time; previously, they were pushed every two hours. This consumption-based cloud solution instantly solved the system scalability problem that has long plagued Hermes UK. It can now process incoming delivery instructions within 15 minutes and get through up to 1.5 million packages per day. The cloud solution also enables the firm to manage spikes in information processing demand.

Besides, the migration project gave the company the opportunity to restructure its data model from being parcel-based to becoming customer-oriented. Hermes UK also invested in hardware to collect customer preferences about the parcel delivery process. Now, customer-based views of data can be done easily; this enables the company to offer personalized services to individuals. Thus, the consumption-based cloud solution not only enhances the operational excellence of the delivery company, but it also improves customer relations.

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.

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 (gridcomputing), 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: Open Source Innovation: The New Competitive Advantage?

Case Study Questions 1. What is open source software? How is it different from proprietary software?

Open source software are computer software whose source code has been made available to the public.

They are generally developed by a community of several hundred thousand programmers from around the world. They can also be modified by anyone and distributed freely. In contrast, proprietary software are developed and owned by a company. They are distributed as object code and, thus, are also called as closed source. There are restrictions on copying and modifying proprietary software.

2. What had motivated Baidu to open source its AI software? How did Baidu benefit from open sourcing?

Baidu wanted to keep up with global tech giants who had already released their AI code, such as Torch toolkit from Facebook and TensorFlow by Google, into the public domain. In addition to it being a competitive necessity, Baidu also wanted to access and attract experts in deep learning to counter the trend of AI professionals being concentrated in a few global companies that are becoming intellectual monopolies.

Baidu benefitted from tapping into a larger community of researches and engineers, which enabled it to develop, modify, and test the code at a lower cost, which in turn helped it innovate at a faster pace. In addition, Baidu became the springboard for AI innovation in China, setting the foundation for a variety of deep-learning applications in all facets of society such as business, healthcare, and transportation.

3. Why did Fujitsu adopt open source strategy? How did Fujitsu benefit from it?

Fujitsu adopted an open source strategy because keeping the software proprietary was no longer very profitable. In addition, it realized that “the software could innovate and expand much more rapidly” at a lower cost with the participation of the community. Additionally, it was an opportunity for Fujitsu to pioneer a platform and develop new competencies without a lot of investment.

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80 Besides the many expected benefits such as lower costs and a faster pace of innovation, Fujitsu enjoyed many unexpected benefits such as forming new business partnerships. Fujitsu became the partner of choice for vendors using OCSM such as ImageWare Systems, which builds cloud-based identity management solutions. The two companies partnered to create Biometrics-as-a-Service, which incorporates a cloud-based biometric identity management suite called GoVerifyID.

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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81 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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82 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.

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?

Explain why a small business might opt for a PC and why a larger business might opt for workstations and a server.

Smaller businesses might need a more versatile system that can be used in a variety of locations.

The system is likely to have a single user. The system will be relatively powerful and rely on .

83 cloud-based storage solutions. A larger business might opt for a series of workstations that are linked together and use a server for its main connectivity and storage requirements. The workstations may be specifically designed to carry out particular tasks for the organization, such as dealing with website issues, online sales, inventory management, accounting, or stock control.

Larger businesses use workstations to allow different individuals, or groups within the organization, to access the data necessary to carry out their functions. For instance, the sales team needs to access inventory systems to ensure that products are in stock and ready for sale. Then, the sales team generates an invoice or statement for the customer. The production or warehousing team needs access to the sales data to make and/or assemble the order for the customer, and organize the shipment.

(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.)

Identify the type of business likely to use grid computing and explain why this is a good option.

Grid computing allows a business to harness the combined power of a number of geographically remote computers; so, a business that has multiple locations is more likely to use such a system.

Most computers in a business only ever use a fraction of their computing power for routine work.

Grid computing combines and utilizes this unused power. As such, the organization can have access to powerful computers without having to buy them.

(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.)

Define and describe the essential characteristics of cloud computing and how these characteristics are important to users.

The key characteristics of cloud computing are: • • • • •

On-demand self-service: Consumers can obtain computing capabilities, such as server time or network storage, on their own, as needed.

Ubiquitous network access: Cloud resources can be accessed using standard network and internet devices, including mobile platforms.

Location-independent resource pooling: Computing resources are pooled to serve multiple users; virtual resources are dynamically assigned according to user demand. The user generally does not know where the computing resources are located.

Rapid elasticity: Computing resources can be rapidly provisioned, increased, or decreased to meet changing user demand.

Measured service: Charges for cloud resources are based on the amount of resources actually used.

(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.)

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84 5-3 What are the major types of computer software used in business and the 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, multiuser 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.

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.

Describe what is meant by the term scalability.

Scalability refers to the ability of a computer, product, or system to expand to serve a large number of users without breaking down. New applications, mergers and acquisitions, and changes in business volume all impact the system’s workload and must be considered when planning hardware capacity.

(AACSB: Application of knowledge)

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

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85 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 .

86 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.

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87 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

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88 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

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89 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.

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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 pre-existing 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.)

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91 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

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92 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.

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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

6-2

6-3

6-4

6-5

What is a database, and how does a relational database organize data?

Entities and Attributes Organizing Data in a Relational Database Establishing Relationships 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 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 Why are data governance and data quality assurance essential for managing the firm’s data resources?

Assuring Data Quality How will MIS help my career?

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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, 236 Attributes, 222 Big data, 232 Bit, 220 Blockchain, 231 Byte, 220 Data cleansing, 243 Data definition, 229 Data dictionary, 229 Data governance, 241 Data lake, 236 Data manipulation language, 229 Data mart, 235 Data mining, 238 Data quality audit, 243 Data warehouse, 235 Database, 221 Database management system (DBMS), 226 Database server, 240 Distributed database, 231 Entity, 222

Entity-relationship diagram, 224 Field, 220 File, 221 Foreign key, 223 Hadoop, 235 In-memory computing, 236 Key field, 222 Non-relational database management systems, 230 Normalization, 226 Online analytical processing (OLAP), 237 Primary key, 222 Query, 229 Record, 221 Referential integrity, 226 Relational database, 222 Report generator, 230 Sentiment analysis, 239 Structured Query Language (SQL), 229 Text mining, 239 Web mining, 239

Teaching Suggestions The All-Asian Satellite Television and Radio Operator (Astro) case that opens this chapter illustrates the importance of controlling data and the effects that a failure to do so has upon decision making. Astro, in the face of increased competition, was not able to leverage its data effectively until it reconfigured its technological infrastructure around a cloud-based data lake.

The organization has been continually collecting data about its customers from several different sources but was not able to effectively act upon this data until the data sources were integrated into a single repository.

Organizing its various divisions around a data lake means that the company is able to make more informed decisions and engage in more effective analytics and standardized practices across its functional units.

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95 The case reinforces the importance of data in the 21st century. Data is the lifeblood of an organization; therefore, it is imperative that firms effectively collate, manage, and interrogate their data. For Astro, understanding customers is the key to providing an improved, tailor-made service, which can only be done by leveraging data effectively. For this firm, and many others, the means to this end is through data analytics, which is only possible through the appropriate management of data.

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

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96 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: The Paradise Papers and Big Data Journalism Case Study Questions 1. Why was it a challenge to place all the documents from the Paradise Papers in one database?

It was difficult to consolidate the Paradise Papers because of the sheer number of the documents that were leaked—13.4 million files had to be “processed”. Moreover, the documents were in several formats—emails, drawings, photos, handwritten notes, and so on. These documents had to be processed so as to be readable by machines. As indicated in the text, several software programs that could perform optical character recognition were used to overcome this challenge.

2. Protecting the identity of a whistleblower or whistleblowers is of vital importance to journalists. Give at least one reason why this is so important.

There are two major issues here, as identified in the case. First, this information was highly sensitive. If the identity of the whistleblower were known, various individuals or companies could initiate legal proceedings against them. As a matter of fact, Appleby, the company from which many of the leaked files originated, initiated legal proceedings against BBC and The Guardian. These cases were settled in 2018. Second, revealing the identity of the whistleblower(s) would negatively impact the future of investigative journalism. Future whistleblowers may think twice before sending confidential documents to news outlets. Also, the reputation of news outlets like BBC and The Guardian would be shattered—no potential whistleblower would trust them in the future.

3. Explain why cooperation between data experts and journalists was vital to the efficient analysis of data.

As indicated in the text, this effort required close cooperation between data analysts and journalists. The data analysts needed to create a “knowledge center” that was easy to use by journalists, many of whom are not well versed in computer technology. Meanwhile, the journalists had to provide the data analysts with clear and reliable information about the companies and individuals mentioned in the leaked documents. In some cases, companies were referred to by name, but, as the documents came from various sources, there were many references in the documents to the same company or individual. This sort of cooperative effort is vital to the success of big data journalism.

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97 4. News outlets have been experiencing a severe crisis of profitability. What do you think are the causes of this crisis? What role can big data analytics play in countering it?

As indicated in the text, newspapers once had a monopoly on reporting the news. However, this trend changed when news channels like CNN came into existence. Many people stopped buying newspapers and, instead, started watching news channels. Later, with the rise of the internet, news channels also lost popularity. The revenues of both newspapers and news channels have been under pressure for some time now; both news sources need to take steps to attract readers and viewers. Sharing interesting content (such as revelations on Bono and his business ventures in Lithuania) is a good strategy to increase the number of readers and viewers and, in turn, the revenue of the outlet.

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.

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98 Interactive Session: Organizations: DEWA: Evolving Utilities for a Smart City Case Study Questions 1. Identify the main challenge faced by DEWA in this case study.

For the Dubai Electricity and Water Authority (DEWA), the main challenge is growing substantially and simultaneously improving quality. This is particularly difficult considering that Dubai is a desert, with harsh weather and scarce water resources. The population and economic growth in this region is among the fastest in the world.

Compared to other countries that do not depend so heavily on desalination plants for water supply, the margin of error here is very small and expensive. The Dubai government earlier identified that in order to provide the best services to its citizens, DEWA has to make maximum use of technology. DEWA collaborated with various companies and identified areas to improve its technology while working to handle the increase in generation and supply of electricity and water. Some of the issues identified that were making the overall process slow and expensive were: • Delays in upstream and downstream activities, which were hindering decision making • Paper-based and manual processes • Inventory control • Finding the required information was cumbersome as it meant sifting through papers • Limited access to information on a mobile device while on the field • Lack of variety in payment options 2. Explain how people-based, organizational, and technological factors were involved in this challenge.

DEWA was formed through the merger of two utility companies, Dubai Electricity Company and the Dubai Water Department. As with any merger, this meant that different organizational cultures had to be integrated. These two organizations had evolved differently, which meant that their business processes and organizational approaches also differed. They had different levels of technology use, so aligning them and training the staff and management was also a challenge. Technology played a significant role in improving delivery and making fast decisions, so it was important to integrate it into the organization’s culture.

3. Why is accurate and consistent data particularly important for DEWA? Dubai has limited natural water resources, which is why it has to rely on thermal desalination technology. The lack of freshwater makes it even more essential to reduce waste during transmission. Desalination plants add to global warming as they consume a massive amount of energy. While DEWA has limited options in how it generates electricity and sources its water, with access to real-time, accurate data, it can reduce the time it takes to make individual decisions, thus making the process more efficient.

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99 For example, it is mentioned that in a particular year, there was an almost 30 percent growth in new connections. For utility companies in general and DEWA in particular, satisfying customers is a big challenge when one has to work with limited resources.

Thus, access to data can help streamline the demand with the supply and enable accurate predictions on this basis.

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.

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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 welldesigned relational database will not have many-to-many relationships, and all attributes for a specific entity will only apply to that entity.

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100 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.

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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.

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101 •

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

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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.

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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?

Explain why businesses may be more interested in big rather than smaller datasets.

Businesses are interested in big data because they have the potential to reveal more patterns and more interesting anomalies than smaller datasets. In practice, this can allow a business to predict aspects of customer behavior and other phenomena that can help derive business value. (AACSB: Application of knowledge)

Describe how a business might use a data mart.

A data mart is a subset of a data warehouse in which a summarized or highly focused portion of the organization’s data is placed in a separate database for a specific population of users.

Organizations may choose to collate sales and marketing data to focus on customer information and profiles. Businesses with different sales channels may choose to keep data collection and use separate; for example, separating the data related to online sales, telephone sales, and in-store sales. (AACSB: Application of knowledge)

Describe the capabilities of Hadoop Distributed File System for data storage.

A business may use Hadoop to handle vast quantities of unstructured, semi-structured, and structured data. It is an open-source software framework managed by the Apache Software

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102 Foundation which enables the distributed parallel processing of huge amounts of data across inexpensive computers. It breaks big data problems down into smaller problems, distributes them among up to thousands of inexpensive computer processing nodes, and then combines the results into a smaller dataset that is easier to analyze. (AACSB: Application of knowledge)

Explain how in-memory computing can be used to facilitate data analysis.

It relies on a computer’s main memory (RAM) for data storage. Users can access data stored in the system’s primary memory, eliminating bottlenecks arising from retrieving and reading data in a traditional disk-based database, thereby dramatically shortening query response times. Inmemory processing makes it possible for very large sets of data to reside entirely in memory.

Complex business calculations that used to take hours or days can be completed within seconds, and can even be accomplished on handheld devices. (AACSB: Application of knowledge)

Explain what is meant by clustering in the context of data mining.

In some respects, clustering works in a similar way to classification in that no groups have been identified. Data mining tools can discover different groupings within the data. Clustering allows the tools to identify similar characteristics or behaviors. (AACSB: Application of knowledge)

Describe sentiment analysis and suggest why a business might use it.

This form of text mining is used to analyze transcripts of calls to customer service centers, to identify major service and repair issues, or to measure customer sentiments about the company.

Sentiment analysis software can mine text comments in email messages, blog posts, social media conversations, or survey forms to detect favorable and unfavorable opinions about specific subjects. (AACSB: Application of knowledge)

6-4 Why are data governance and data quality assurance essential for managing the firm’s data resources?

Explain the importance of ensuring data quality and what might be involved.

Well-designed databases and information policies go a long way in ensuring that a business has the information it needs. However, additional steps must be taken to ensure that the data in organizational databases remain accurate and reliable. When data are inaccurate, untimely, or inconsistent with other sources of information, they may lead to incorrect decisions, product recalls, and financial losses. Correcting these errors at the source and following best practices for enhancing data quality can increase the efficiency of the sales process. If a database is properly designed and enterprise-wide data standards have been established, instances of duplicate or inconsistent data should be minimal. However, most data quality problems, such as misspelled names, transposed numbers, or incorrect or missing codes, stem from errors during data input.

The incidence of such errors is rising as companies move their businesses online and allow customers and suppliers to enter data on their websites to update internal systems directly.

(Learning Objective 4: Why are information policy, data administration, and data quality assurance essential for managing the firm’s data resources?, AACSB: Application of knowledge.)

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103 Explain what is involved in a data quality audit.

Data quality analysis often begins with a data quality audit, which is a structured survey of the accuracy and level of the completeness of the data in an information system. Data quality audits can be performed by surveying entire data files, samples from data files, or end users for their perceptions of data quality. Typically, a data quality audit has three stages. The first is a review to determine whether proper corporate management arrangements to ensure data quality are in place and are being applied on a daily basis. Second, there is a review of the arithmetic completeness and acceptability of data. In stage three, there is a review based on risk assessment. There is also an in-depth review of samples to test the arrangements being made to secure data quality and the delivery of accurate, timely, and accessible information. It is important to understand that the purpose of a data quality audit is not to examine systems for data production or the accuracy of data recording, but to look at the cumulative audit knowledge.

(Learning Objective 4: Why are information policy, data administration, and data quality assurance essential for managing the firm’s data resources?, AACSB: Application of knowledge.)

Identify other individuals or organizations that might be affected by poor data quality.

Data quality problems are not just business problems. They also pose serious problems for individuals, affecting their financial position and jobs. Inaccurate or outdated data about consumers’ credit histories, which credit bureaus maintain, can prevent creditworthy individuals from obtaining loans or can lower their chances of finding or keeping jobs. Mixed data entry is one of the main reasons for poor data quality. It means that the organization has failed to create an established procedure for data formatting. Usually, this is because of open text fields in online forms and other documents. Another major issue is poor data migration and integration, which is a result of irregular, misplaced, or missing data values; in other words, the data are not “clean” and are inconsistent. Finally, there is data decay which, in effect, means that the data are not up to date (e.g., old cell phone numbers and email addresses).

(Learning Objective 4: Why are information policy, data administration, 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.

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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

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105 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.

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106 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)

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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.

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Improved: Police organizations can quickly identify crime hot spots and crime and arrest locations to help precinct commanders know quickly where to deploy officers.

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UK National Health Services saves millions by analyzing data to determine the optimal treatment.

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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

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108 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.

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109 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.

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Chapter 7 Telecommunications, the Internet, and Wireless Technology Learning Objectives 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.

Chapter Outline 7-1

7-2

7-3

7-4

7-5

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 What are the different types of networks?

Signals: Digital vs. Analog Types of Networks Transmission Media and Transmission Speed 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 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 How will MIS help my career?

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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, 280 4G networks, 280 5G networks, 280 Bandwidth, 264 Blog, 276 Blogosphere, 276 Bluetooth, 280 Broadband, 257 Cable Internet connections, 264 Chat, 268 Dark web, 273 Digital subscriber line (DSL), 264 Domain name, 265 Domain Name System (DNS), 265 Email, 267 File Transfer Protocol (FTP), 267 Hertz, 264 Hotspots, 282 Hubs, 258 Hypertext Transfer Protocol (HTTP), 272 Instant messaging, 268 Internet of Things (IoT), 277 Internet Protocol (IP) address, 265 Internet service provider (ISP), 264 Internet2, 267 IPv6, 267 Local area network (LAN), 262 Metropolitan area network (MAN), 263 Microblogging, 276 Modem, 262 Near field communication (NFC), 283 Network operating system (NOS), 258

Packet switching, 260 Peer-to-peer, 263 Personal area networks (PANs), 280 Predictive search, 274 Protocol, 261 Radio frequency identification (RFID), 282 Router, 258 RSS, 276 Search engine marketing, 275 Search engine optimization (SEO), 275 Search engines, 273 Semantic search, 274 Shopping bots, 275 Smartphones, 279 Social networking, 277 Software-defined networking (SDN), 258 Switch, 258 T1 lines, 264 Telnet, 267 Transmission Control Protocol/Internet Protocol (TCP/IP), 261 Unified communications, 269 Uniform resource locator (URL), 272 Virtual private network (VPN), 271 Visual web, 275 Voice over IP (VoIP), 268 Website, 272 Wide area networks (WANs), 263 Wi-Fi, 280 Wiki, 276 WiMax, 282 Wireless sensor networks (WSNs), 284

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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.

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113 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.

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114 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: Management: Singapore Shuts Down 2G Network, Moves to 4G and 5G Case Study Questions 1. What do 2G, 3G, and 4G refer to? Explain one difference among them.

2G, 3G, and 4G refer to various generations of mobile communication technologies. They differ in terms of data transfer rates, standards, frequency bands used, etc.

2G refers to the second generation of cellular technologies, including standards like GPRS and EDGE. These technologies transfer mobile data in kilobits per second (Kbps). 3G refers to the third generation of cellular technologies, which use a data transfer rate of megabits per second (Mbps). 4G, the fourth generation of mobile phone technologies, is also known as LTE (long term evolution) and improves the data transfer rate of 3G so that it can deliver online content to users as quickly as possible.

2. What is meant by “wireless spectrum” and “spectrum crunch”? What measures were taken to alleviate the spectrum scarcity?

The electromagnetic spectrum is the range of all possible electromagnetic waves, arranged according to their frequencies and wavelengths. However, only a subset of the spectrum, called the wireless spectrum, is used for wireless communications. The demand for the spectrum has increased dramatically in recent years due to the increase in data transmission over the Internet and the rapid spread of wireless devices such as smartphones, tablets, computers, and IOT devices. The spectrum is a finite natural resource, and such a dramatic increase in its demand has led to spectrum scarcity, known as spectrum crunch.

The Singapore government has implemented a few initiatives to solve the spectrum scarcity problem. In 2009, unused radio spectra called white spaces, which was used for TV broadcasting, was allocated to wireless communications. When the license for the 2G spectrum expired in 2017, the government decided to shut down the 2G network and recycle the allocated spectrum for 4G. Similarly, in 2015, when the WiMax (another wireless broadband service in Singapore) license expired, the government decided to reclaim and reallocate the spectrum for 4G.

3. “The decision to shut down 2G was easy technically but hard in terms of implementation.” Do you agree with this statement? Why or why not?

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Yes, we agree with the statement. The implementation was challenging as many stakeholders were involved—123,000 users, including foreign and domestic workers, the elderly, and children.

Migrating these users to 3G/4G networks required the collective efforts of the public sector (government), the private sector (telecoms companies), and the people (PPP partnership). The government and the telecom companies undertook various initiatives to reach out to 2G users through roadshows; advertisements on the radio, on televisions, and in newspapers; as well as posters and brochures at community centres, libraries, and foreign worker dormitories. The government also rolled out IT courses to educate the elderly on how to use smartphones and other IT skills. Telecom companies provided special promotions and discounts on smartphones. The public also played an important role by donating their used 3G phones to help foreign and domestic workers.

Interactive Session: Technology: Toyota: Making Cars Talk for Road Safety Case Study Questions: 1. What are the pros and cons of the V2X technology?

The pros of the V2X technology: • • • • • • • • • • •

Safe driving: The V2X technology can pick up signals further away from a vehicle, in blind spots, and in extreme weather, compared to sensors or cameras.

Accident reduction: V2X is expected to reduce road accidents by up to 80 percent, especially those involving collision.

Coordinate traffic flow: V2X communicates with traffic data centers, which helps in diverting vehicles to different routes.

Optimize mobility: V2X enables vehicles to move synchronously and at a safe distance from each other. This helps achieve a balance between fully utilizing the capacity of a road and safe driving.

Improve congestion: By analyzing incoming V2N data, cloud-based data centers can predict traffic jams and suggest alternative routes to individual drivers to alleviate traffic.

Save fuel: V2X reduces congestion by getting multiple trucks to drive as a convoy, which leads to less fuel being used as it is more aerodynamic.

Reduce pollution: Less fuel consumption implies less pollution to the environment.

Enable automatic driving: V2X is one of the enablers of driver-less vehicles.

Enable platooning: A convoy of trucks moving synchronously enables drivers to take turns to rest in long-distance driving.

Enable green wave: Green wave technology enables traffic lights to turn green synchronously, to allow continuous traffic flow in the same direction.

Urban planning: Data collected through V2X communications can be used for analyzing traffic patterns at different hours and estimating the need for new roads or other facilities.

The cons of the V2X technology: • •

Data security: Since V2X is connected to a network, there are increased chances of being hacked, data leakage to unauthorized parties, etc.

Privacy issue: Broadcasting data regarding one’s motor vehicle enables easy localization of its position and tracking of its movements. This may result in privacy violations if no security measures such as data encryption are undertaken.

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Huge investment: V2X requires initial investments in roadside facilities, including receiver-transmitters to send or receive signals and sensors or cameras to monitor the status of the road.

Different standards: A vehicle equipped with a particular standard of V2X communication cannot use it when it enters a country using a different standard, unless it has devices of the different standards.

2. What can be done to speed up the adoption of V2X technology among vehicle owners?

The following measures may help to accelerate the adoption of V2X technology among vehicle owners: • Public education: Educating people on how V2X technology can help reduce collisions and other road accidents by up to 80 percent can help increase adoption of V2X technology.

• Forming alliances: V2X communication requires the cooperation of car manufacturers, telecommunication service providers, chipset manufacturers, etc.

Forming alliances will speed up the research and development of relevant products and services.

• Provide economical motivation: The total ownership cost of a V2X device should be reasonable.

• Address security and privacy concerns: For example, data transmitted in V2X communications should be encrypted.

3. What other applications can you think of for the ITS Connect?

Any answer that makes good sense is acceptable. For example, a “Downward Slope Prompt” to remind drivers to slow down in the next section of the road, which is a downward slope. The message is similar to the intersection information.

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?

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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 circuitswitching 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)

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118 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?

Explain the role of a Tier 1 Internet Service Provider (ISP) An internet service provider (ISP) is a commercial organization with a permanent internet connection that sells temporary connections to retail subscribers. A Tier 1 ISP is at the top of the internet access pyramid. Such ISPs share internet traffic with other Tier 1 providers. This is accomplished through peering agreements. These ISPs are the backbone of the internet, as they provide infrastructure to all other internet providers. Without these ISPs, internet traffic could not be shared around the world.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, AACSB: Analytical thinking.)

Explain the differences between instant messaging, emails and chat (or chatbot) services.

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119 At nearly all workplaces, employees communicate using chat or instant messaging tools. Chatting enables two or more people who are connected to the internet to hold live, interactive conversations. Chat systems now support voice and video chat in addition to written conversations. Many online retail businesses offer chat services on their websites to attract visitors, encourage repeat purchases, and improve customer service. Instant messaging is a type of chat service that enables participants to create their own private chat channels. The instant messaging system alerts the user whenever someone on their private list is online so that they can initiate chat sessions. Email enables messages to be exchanged between computers; it is possible to route messages to multiple recipients, forward messages, and attach text documents or multimedia files to messages.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, AACSB: Application of knowledge.)

Define and describe the purpose of unified communications.

Unified communications integrate disparate channels for voice communications, data communications, instant messaging, email, and electronic conferencing into a single experience in which users can seamlessly switch between different communications modes. Presence technology shows whether a person is available to receive a call. The key benefit of unified communications is that users can access a wide range of software suites as opposed to using a series of standalone solutions for various communication needs. An organization can access an affordable, flexible, and extensible platform. In nearly all cases, there is a cloud-based system that eliminates the need to deal with maintenance and upgrades internally. Individual users can use a system that is highly capable, accessible, and user-friendly. They only need to use one program instead of having to juggle data and tasks across a range of applications. For organizations using unified communications, the data and access to that data is more centralized, and can be accessed and updated across the organization in real time.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, AACSB: Application of knowledge.)

Explain what is meant by the term tunneling and why it might be important to businesses.

Several competing protocols are used to protect data transmitted over the public internet, including point-to-point tunneling protocol (PPTP). In a process called tunneling, packets of data are encrypted and wrapped inside IP packets. By adding this wrapper around a network message to hide its content, business firms create a private connection within the public internet. In the case of PPTP, this ensures that proprietary data are secure even in communications over public networks. Only authorized users can access this private network, called a virtual private network.

This is provided by the ISP (it is referred to as “virtual” as it is created in a tunneled environment). In instances when layer two tunneling protocol (L2TP) is used, the organization deploys a combination of PPTP and layer 2 forwarding (a Cisco alternative to Microsoft’s PPTP).

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, AACSB: Application of knowledge.)

Explain the purpose and the value of search engine optimization (SEO).

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Search engine optimization (SEO) is the process of improving the quality and volume of traffic on a website by employing a series of techniques to help the website achieve a higher ranking on major search engines when certain keywords and phrases are entered into the search field. One technique is to make sure that the keywords used in the website description match keywords that prospective customers are likely to include in searches.

(Learning Objective 3: How do the internet and internet technology work and how do they support communication and e-business?, AACSB: Application of knowledge.)

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, highbandwidth, digital packet-switched, third-generation (3G) networks with speeds ranging from 144 Kbps to more than 2 Mbps for data transmission.

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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.

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122 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 LionClaw: LionClaw is a Singapore-based clothing brand with a sustainability profile. Management now wants each garment to be accompanied by a tag with a link to a website where the customer can read more about the work environment in the clothing factory, where the fabric is coming from, and so on. Use the web to search for an RFID, NFC, or QR code system for generating codes and printing tags. Work out the differences and choose from these systems to determine the best option for LionClaw.

All these technologies have their strengths and weaknesses. They are also typically used for different purposes: RFID and NFC tags are mostly used by store clerks when checking inventory and similar tasks, since each individual product can have its own ID. In fashion retailing, QR codes are mostly aimed at customers. The QR code can be printed on the clothing tag and, when scanned with a smart phone, it would typically link the customer to a specific web page; for instance, the code on a winter jacket could lead to a web page that informs the customer where the goose down used in the jacket was acquired. In LionClaw’s case, a QR code should probably be recommended. (Learning Objective 7-4: What are the principal technologies and standards for wireless networking, communications, and Internet access? AACSB: Analytical thinking, Application of knowledge.)

(Learning Objective 7-4: What are the principal technologies and standards for wireless networking, communications, and Internet access? AACSB: Analytical thinking, Application of knowledge.)

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123 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: • •

•

• • •

• • •

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.”

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124 (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

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125 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

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126 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

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127 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.

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128 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.

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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

8.2

8.3

8.4

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 What is the business value of security and control?

Legal and Regulatory Requirements for Electronic Records Management Electronic Evidence and Computer Forensics 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 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 .

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8.5

Security Issues for Cloud Computing and the Mobile Digital Platform Ensuring Software Quality 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), 312 Anti-malware software, 317 Application controls, 310 Authentication, 314 Biometric authentication, 314 Botnet, 301 Bugs, 305 Business continuity planning, 313 Click fraud, 304 Computer crime, 301 Computer forensics, 309 Computer virus, 299 Controls, 297 Cybervandalism, 301 Cyberwarfare, 304 Denial-of-service (DoS) attack, 301 Digital certificates, 318 Disaster recovery planning, 312 Distributed denial-of-service (DDoS) attack, 301 Downtime, 319 Drive-by download, 299 Encryption, 317 Evil twin, 303 Fault-tolerant computer systems, 319 Firewall, 315 General controls, 310 Gramm–Leach–Bliley Act, 308 Hacker, 301 HIPAA, 308 Identity management, 313 Identity theft, 302 Information systems audit, 313

Intrusion detection systems, 316 Keyloggers, 300 Malware, 299 Managed security service providers (MSSPs), 320 Online transaction processing, 319 Password, 314 Patches, 306 Pharming, 303 Phishing, 302 Public key encryption, 318 Public key infrastructure (PKI), 318 Ransomware, 300 Risk assessment, 311 Sarbanes–Oxley Act, 308 Secure Hypertext Transfer Protocol (S-HTTP), 317 Secure Sockets Layer (SSL), 317 Security, 297 Security policy, 311 Smart card, 314 Sniffer, 301 Social engineering, 305 Spoofing, 301 Spyware, 300 SQL injection attack, 300 Token, 314 Trojan horse, 300 Two-factor authentication, 314 Unified threat management (UTM), 317 War driving, 298 Worm, 299 Zero-day vulnerabilities, 305

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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.

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132 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.

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133 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 overcontrolled 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

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134 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: Management: Phishing for Money: Dangerous Emails Case Study Questions 1. Explain the difference between spear phishing and bulk phishing. Which of the two forms of phishing do you think is most difficult to spot by victims, and why?

“Bulk phishing” is a form of phishing that is directed toward a large group of individuals.

Sometimes, phishing emails are sent out to millions of people. Most Internet users have received these emails at some point and can easily spot them as clear cases of phishing. For instance, you may receive a message saying that you have won a big prize in a lottery, even though you have never participated in any sweepstake or lottery in the recent past. Alternately, an email supposedly from the tax service of your country will claim that there are arrears in your payments, and that you should transfer the amount to a certain bank account. Such emails are easy to spot—their style is very general—for instance, instead of addressing you by your name, they will address you as “dear customer”. All in all, these emails are relatively easy to spot as phishing emails.

“Spear phishing” is very often more difficult to spot. Such emails are addressed to specific people, for example, the CEO of a big company or to one of their financial officers. This form of phishing is often well planned. Digital criminals who have access to the data systems of a company can find out how to make their emails appear more credible by studying the writing style of major managers in the company and, sometimes, they may even refer to emails that were sent in the past. This form of phishing is hard to counter, especially if the criminals have hacked into the email account of the targeted person.

2. The CEO of your company received a fraudulent email and made a payment to digital criminals. He wonders now whether he should contact the police. What factors should he take into consideration before taking a decision?

As indicated in the piece, the decision to go public with a phishing scandal may affect the reputation of the company negatively. Several questions need to be asked before taking action.

First, how much money was lost? If it was a relatively small sum, it may be better to keep things

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135 quiet. Second, to what extent have the data systems of the company been compromised? If it is clear that the sender of the phishing email had access to major company systems, it may be more useful to go public and file a report with the police. If this is avoided and a second data disaster takes place, the reputation of the company will be even more negatively affected—the company will be asked why they did not take any action following the first instance. Third, how likely are the police to action? In many countries, the digital division of the police force is understaffed, so filing a report may not lead to anything. Additionally, it may be necessary to formulate guidelines to avoid further phishing. For instance, if a financial officer transferred money because they did not want to bother the CEO, then there is a need to rewrite the rules to make sure that money transfers are relatively safe in the future.

3. Dashlane advises clients to send emails without attachments. Do you think that not adding attachments to emails will help protect companies against phishing stacks?

To begin, this is probably not a realistic way of proceeding. Most corporate emails have attachments and links and it would be impossible to avoid them completely. Also, if the email account of a manager in the company has been hacked, digital criminals do not even need attachments to trick the recipient of the email into transferring money. Finally, phishing is not restricted to only emails but can be done through text messages as well.

4. Give two pieces of advice to a company or individual on increasing protection against a phishing attack.

The best course of action, if there is any doubt, is to call and verify. For instance, if you get an email from what seems to be your national tax service and you are not sure whether it is “real”, call the tax office or even visit it in person. Also, when you get an email indicating that you won an enormous prize in a sweepstake that you have never heard of, it is most likely to be a bulk phishing scam. In these cases, the email will ask you to transfer a small amount of money to (supposedly) get your prize. However, when you do that, you will be led to a fake website and the organization behind the phishing email will be able to access the details of your bank account. A second piece of advice would be to spend time and money on antivirus software—update all these programs regularly as they include a list of suspicious websites. If a link transfers you to a malicious website, your antivirus software will issue a warning.

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 81 (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.

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136 • •

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.

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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:

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• • • • • • • •

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.

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138 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 inadequate security and control may result in serious legal liability.

Organizations need to protect not only their own information assets but also those of their customers, employees, and business partners. Failure to do so may make the organization vulnerable to costly litigations associated with data exposure or theft. An organization can be held liable for creating needless risk and harm if it fails to take appropriate protective actions to prevent the loss of confidential information, data corruption, or breaches of privacy. (AACSB: Application of knowledge)

Define the term electronic evidence and explain its importance.

In court cases today, there is a demand for access to evidence in the form of digital data stored on portable storage devices, CDs, computer hard disk drives, and in emails, instant messages, and ecommerce transactions. Email is currently the most common type of electronic evidence. In a legal action, an organization may be obligated by law to comply with a discovery request for access to information that may be used as evidence. (AACSB: Application of knowledge)

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

Distinguish between implementation and administrative controls.

Implementation controls audit the system’s development process at various points to ensure that the process is being properly controlled and managed. Administrative controls formalize standards, rules, procedures, and control disciplines to ensure that the organization’s general and application controls are being properly executed and enforced.

(Learning Objective 3: What are the components of an organizational framework for security and control?, AACSB: Application of knowledge.)

Explain what is meant by general controls and what they apply to in information systems. .

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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.

(Learning Objective 3: What are the components of an organizational framework for security and control?, AACSB: Application of knowledge.)

Describe how systems builders decide which controls are necessary.

Once the risks have been assessed, system builders concentrate on the control points that have the greatest vulnerability and potential for loss. In this case, controls should focus on ways to minimize the risk of power failures and user errors because anticipated annual losses are highest in these two areas. Controls are methods, policies, and organizational procedures that ensure the safety of the organization’s assets, the accuracy and reliability of its records, and its operational adherence to management standards. Controls are required to ensure the integrity, confidentiality, and accuracy of data. Each system application that deals with critical financial reporting data requires controls to make sure that the data are accurate. Controls to secure the corporate network, prevent unauthorized access to systems and data, and ensure data integrity and availability, in the event of a disaster or other disruption of service, are also essential.

(Learning Objective 3: What are the components of an organizational framework for security

and control?, AACSB: Application of knowledge.)

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.

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140 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?

Describe the nature of a token in the context of authentication.

A token is a physical device, similar to an identification card, that is designed to provide the identity of a single user. Tokens are small gadgets that typically fit on key rings and display passcodes that change frequently. (AACSB: Application of knowledge)

Describe how two-factor identification can help to reduce fraud, hacking and security breaches.

Systems or accounts that use a single password or card are low in security. Two-factor identification increases secures access by validating users through multi-step processes. To be authenticated, a user must provide two means of identification—one is typically a physical token, such as a smartcard or chip-enabled bank card, and the other is typically data, such as a password or PIN (personal identification number). Biometric data, such as fingerprints, iris prints, or voice prints can also be used as authenticating mechanisms. A common example of two-factor authentication is a bank card—the card itself is the physical item and the PIN is the data that goes with it. (AACSB: Application of knowledge)

Explain how an intrusion detection system works.

An intrusion detection system monitors the most vulnerable points or “hot spots” of networks to detect and deter intruders. It generates an alarm if it finds a suspicious or anomalous event. A scanning software looks for patterns indicative of known methods of computer attacks (such as bad passwords), checks to see if important files have been removed or modified, and sends warnings of possible vandalism or system administration errors. (AACSB: Application of knowledge)

Explain why an organization might choose to use a unified threat management system.

UTM systems reduce costs and improve manageability. They are combinations of various security tools, including firewalls, virtual private networks, intrusion detection systems, web content filtering, and antispam software. (AACSB: Application of knowledge)

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141 Explain how a digital certificate works and why one might give a site visitor a greater sense of security.

Digital certificates are data files used to establish the identity of users and electronic assets while securing online transactions. A digital certificate system uses a trusted third party, known as a certificate authority (CA), to validate a user’s identity.

A public key encryption system is a series of public and private keys that lock data when they are transmitted and unlocks the data when they are received. The sender locates the recipient’s public key in a directory and uses it to encrypt a message. The message is sent in encrypted form over the Internet or a private network. When the encrypted message arrives, the recipient uses his or her private key to decrypt the data and read the message. (AACSB: Application of knowledge)

Explain why small businesses in particular might opt to use managed security service providers.

It is mainly because they lack the resources or expertise to provide a secure high-availability computing environment. They can outsource many security functions to MSSPs that monitor network activity and perform vulnerability testing and intrusion detection. (AACSB: Application of knowledge)

Explain how employing software metrics can improve system quality and reliability.

Software metrics are objective assessments of a system in the form of quantified measurements.

Metrics allow the information systems department and end users to jointly measure the performance of the system and identify problems as they occur. (AACSB: Application of knowledge)

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 .

• •

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•

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 VidHongKong: VidHongKong is planning a new Internet venture for renting and watching movies online. Their planned solution comprises a newly built web portal, a new database for keeping records of movies, movie rentals and customers, a new CRM system, and specialized software for connecting the new system to their existing information system. Perform a security analysis for the new venture. Consider examples of risks for the new website, the new database, the new CRM system, the link to the existing information system, and the end products (the movies).

Threats due to illegal activity include (but are not limited to): • • • • • •

Malware including worms, Trojan horses, and ransomware Denial-of-service attacks for the web site and botnet attacks on network servers Attacks on the database, such as SQL injection attacks Theft of customer data and company data via the link to the existing information system Phishing File sharing over peer-to-peer networks of the movies

Threats due to other reasons include (but are not limited to): •

Coding errors, causing the rental system to behave incorrectly .

143 • •

Unstable server environment, decreasing the uptime of the system User errors by VidHonKong personnel, such as web editors causing information to be missing or inaccurate

(Learning Objective 8-1: Why are information systems vulnerable to destruction, error, and abuse? 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.

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144 •

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 .

145 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.

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146 (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: Bulgaria: A Whole Nation Hacked 8-13 Identify and describe the security and control issues related to the hacking technique discussed in this case.

As indicated in this case, the hacker (or hackers) probably used a weakness in the system that was set up to file VAT returns from outside Bulgaria. Through this weakness, the hacker was able to use a SQL injection to extract data from the database of the Bulgarian tax services. The hacker essentially sent corrupted input into the system. In the book, the analogy of an automated bus is used to explain the situation. The bus simply follows orders, so if the orders are corrupted, it will follow them anyway.

The main question here is, of course, why did the system not realize that the input was corrupted?

According to Bulgarian experts, cybersecurity is not well developed in their country, and as a result, the basic steps required to prevent an attack by SQL injection were not taken. For instance, prepared statements limit the kind of input the system accepts, thus preventing hacks. Other ways of minimizing the risk of SQL attacks are using the right software and updating it, applying patches, and running regular tests on the system.

8-14 What managerial issues are faced by Bulgarian civil servants in charge of cybersecurity?

A major issue has been that managers at the Bulgarian tax service have simply not been able to attract enough IT experts to work for them. These managers may very well be aware that their databases have security issues, but they simply cannot find the right people to solve them. The reason is obvious: private companies offer much higher salaries than the Bulgarian state. Also, cybersecurity experts may migrate to high-income countries like Germany and France. Another problem is that the few cybersecurity experts that are available mostly focus on protecting “critical” software infrastructure like computer programs used by defense facilities. Bulgaria is a member of NATO, and many Bulgarian officials fear that “external powers” may try to hack defense facilities to spy on NATO.

8-15 Discuss the potential impact of the Bulgarian tax hack.

The impact may be enormous for several reasons. First, the scope of the hack is staggering. Only a thorough investigation will indicate how much data was illegally accessed, but it appears that basic information about almost everyone who pays taxes in Bulgaria was obtained. Second, these

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147 basic data (like date of birth, social security number, and so on) do not change over time, so the threat of criminal abuse will remain for many years to come. Third, there are criminal gangs specializing in this kind of crime, so if the hacker wanted to sell the data obtained, then there would be plenty of buyers available. Only two months after the hack took place, reports of elderly people in Bulgaria being targeted in money scams started to emerge; of course, it is difficult to establish if these scams were based on data hacked from the tax services. In the long run, there are two major dangers as far as financial scams are concerned: identity theft (the identity information of victims could be used by criminals to make expensive online purchases) and credit card fraud. Third, there is also a strong political impact. Few people like paying taxes, but they will dislike it even more if they cannot be sure that their data is secure with the Bulgarian state.

8-16 How can data breaches like this be prevented?

A first step would be to make the system as secure as possible. This can be done by reviewing the software used to run government systems. Is the software being updated regularly? Are patches being applied? Updating and applying patches are the first steps to increasing cybersecurity. The best way to do this would be to establish a special cybersecurity squad who can carry out these tasks. It would be ideal to hire a non-Bulgarian company for this, but the costs of that may be prohibitive. A good way forward would be, as the Bulgarian Prime Minister suggested, to increase the salaries of cybersecurity experts. If these salaries are increased significantly, then more experts will choose to work for the Bulgarian state. However, this may not be easy. Since Bulgaria is a member of the European Union, Bulgarians enjoy freedom of movement within the union. As there is a shortage of cybersecurity experts almost everywhere, Bulgarian IT specialists could easily move to countries like Germany, Belgium, or France.

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.

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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

9-2

9-3

9-4

9-5

How do enterprise systems help businesses achieve operational excellence?

What Are Enterprise Systems?

Enterprise Software Business Value of Enterprise Systems 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 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 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 How will MIS help my career?

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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, 351 Bullwhip effect, 343 Churn rate, 352 Cross-selling, 350 Customer lifetime value (CLTV), 352 Demand planning, 345 Employee relationship management (ERM), 349 Enterprise software, 338 Just-in-time strategy, 343 Operational CRM, 350 Analytical CRM, 351 Bullwhip effect, 343 Churn rate, 352 Cross-selling, 350 Customer lifetime value (CLTV), 352 Demand planning, 345 Employee relationship management (ERM), 349 Enterprise software, 338 Just-in-time strategy, 343 Operational CRM, 350

Partner relationship management (PRM), 349 Pull-based model, 346 Push-based model, 346 Sales force automation (SFA), 349 Social CRM, 356 Supply chain, 340 Supply chain execution systems, 345 Supply chain planning systems, 344 Touch point, 348 Partner relationship management (PRM), 349 Pull-based model, 346 Push-based model, 346 Sales force automation (SFA), 349 Social CRM, 356 Supply chain, 340 Supply chain execution systems, 345 Supply chain planning systems, 344 Touch point, 348

Teaching Suggestions Opening Case: Warehouse Management in Norauto The opening case, “Warehouse Management in Norauto,” illustrates how companies use supply chain management systems in their daily operations and how the adoption of appropriate information technologies and systems helps companies prosper.

Norauto, a specialist in car repair and maintenance, expanded its operations from France to Spain, Poland, and Argentina. The warehouse management system that Norauto had previously used had become obsolete and was unable to support the growth of the company. Taking into consideration the specific business needs of the auto industry, Norauto turned to Manhattan Associates, a consultant, to replace its old system. Manhattan Associates led the process of business process reengineering for the company. It also conducted slotting optimization for the Norauto warehouse in Lesquin in Northern .

150 France. The consultant provided Norauto with a reliable warehouse management system that has the capacity to handle a large variety of auto parts and is scalable.

Norauto has abandoned the conventional paper and barcode reader approaches, and has decided, instead, to implement Vocollect’s voice solution to meet its ergonomic, qualitative, and productivity objectives.

This migration resulted in a radical change in how order pickers do their jobs—orders are guided by voice synthesis and transmitted to the order picker's headset via a small pocket computer.

The outcomes of the change have been promising. The number of errors in order fulfilment has dropped significantly. The new solution has resulted in both improved productivity and a lower error rate. The initial costs have been recuperated in just eleven months. Above all, the solution has helped the company provide better services to its customers.

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.

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151 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

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152 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

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153 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?

Identify six financial and accounting processes supported by enterprise systems.

Financial and accounting processes include general ledger, accounts payable, accounts receivable, fixed assets, cash management and forecasting, product–cost accounting, cost–center accounting, asset accounting, tax accounting, credit management, and financial reporting. (AACSB: Application of knowledge)

Explain how enterprise systems provide valuable information for improving management decision making.

Enterprise systems give organizations access to real-time data on their sales, inventory, and production.

Organizations can use this information to create more accurate sales and production forecasts. Enterprise software includes analytical tools for using data captured by the system to evaluate overall organizational performance. Enterprise systems provide data that have common standardized definitions and formats that are accepted by the entire organization; performance figures mean the same thing across the company.

Enterprise systems allow senior management to easily find out, at any moment, how a particular organizational unit is performing, which products are the most and least profitable, and the costs incurred by the company as a whole. (AACSB: Application of knowledge)

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

List four likely parts of a retailer’s supply chain.

Answers are likely to include suppliers, manufacturing plants, distribution centers, retail outlets, and customers. (AACSB: Application of knowledge)

Distinguish between upstream and downstream portions of the supply chain.

The upstream portion of the supply chain includes the company’s suppliers, the suppliers’ suppliers, and the processes for managing relationships among them. The downstream portion consists of the

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154 organization’s processes for distributing and delivering products to the customers. (AACSB: Application of knowledge)

Identify the supply system likely to be used by a manufacturer with perfect information on future orders.

This type of manufacturer would know exactly how many units of product their customers want, when they want them, and when they can be produced. Thus, it would be possible to implement a highly efficient just-in-time strategy. Components would arrive exactly when they are needed, and finished goods would be shipped as soon as they left the assembly line. (AACSB: Application of knowledge)

Identify the most important and complex aspect of supply chain planning.

One of the most important—and complex—supply chain planning functions is demand planning, which determines how much product a business needs to make to satisfy all of its customers’ demands.

(AACSB: Application of knowledge)

Explain how supply chains costs can impact on an organization’s profitability.

If a product is not available when customers want it, they may try to purchase it from someone else.

Having more precise control of the supply chain enhances the firm’s ability to have the right product available at the right time for customer purchases. (AACSB: Application of knowledge

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.

Identify three potential touch points for a retailer and explain what a touch is.

A touch point (also known as a contact point) is a method of interaction with the customer, such as via telephone, email, customer service desk, conventional mail, Facebook, Twitter, web site, wireless device, or retail store. (AACSB: Application of knowledge).

Describe the nature and purpose of sales force automation (SFA).

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.

These modules provide sales prospects, contact information, product information, product configuration capabilities, and sales quote generation capabilities. The system assembles information about a particular

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Commented [p1]: Considering this indentation level as 9-3-1 (first section ) so, we have replaced pickup content from this point onwards.

155 customer’s past purchases to help the salesperson make personalized recommendations. (AACSB: Application of knowledge)

Describe cross-selling and why it is important to a business.

Cross-selling is the marketing of complementary products to customers. It means creating extra sales among customers who are in the process of purchasing or have already purchased products or services from the business. These extra sales generate additional profit at a lower cost, as the eliminate the costs associated with trying to generate sales from new potential customers. (AACSB: Application of knowledge)

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.

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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

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157 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 .

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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 Taken from the UPS Logistics 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.

Success requires you to be in the right place, at the right time, with the right tools. Logistics puts you there.

Services Offered: • Distribution • Transportation Management • Post Sales/Service Parts • Supplier Management • Finished Vehicle Transportation • Supply Chain Design and Planning Services

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Schneider Taken from the Schneider website: You have a set of logistic challenges. Schneider Logistics has the solutions.

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: • Freight Management • Hosted Applications • Financial Services • Supply Chain Engineering • Business Intelligence • SUMIT CVA • SUMIT for Shippers • Schneider ExpressTrack

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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)

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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: Fast Fashion, Big Data, and Zara 9-13 Considering the example of the Japanese customer who wanted to buy a scarf, what methods does Zara use to analyze and predict customer behavior? Does data analytics help Zara know their customers better than they know themselves?

As indicated in the case, Zara tries to understand what designs, styles, and colors customers like. The story given in the case of the Japanese woman who wanted to buy a pink scarf but could not find it in the Zara store in Tokyo is a good example of how attentive Zara is to the needs of customers—a store assistant in the Tokyo store made a digital note of what the woman was looking for, and as a result, Zara started to produce pink scarfs in response to the demand.

Such an attentiveness to the needs of customers has several consequences for the company: (a) (b)

(c)

(d)

There needs to be a digital center at the headquarters of the company where inputs from stores like the one in Tokyo are studied.

There needs to be a culture within the company of focusing on the needs of customers and communicating those needs to the headquarters of Zara in Spain. If the store assistant in Japan had not made a note of the woman’s desire to buy a pink scarf and then had not communicated it to the office in Spain, then Zara would have been unaware of product demand and would not have produced the scarves.

There needs to be a close link between the digital division of Zara and its team of designers.

When the digital team produces valuable information regarding the tastes of customers, the designers need to immediately respond and design clothing that, according to the department’s analysis, will be popular among Zara's customers.

Very often, production needs to be fast as customers tastes may change rapidly. Sourcing goods from nearby countries is therefore the most rational choice as communication with suppliers tends to be faster and easier. Zara prefers to work with companies over a long period to make communication faster and easier.

9-14 Zara sources its products mostly in Europe. Give a list of advantages and disadvantages of sourcing in countries like Spain and Portugal as opposed to sourcing in, for instance, Bangladesh.

An obvious disadvantage of sourcing in European countries is the relatively high cost of labor in those countries. No European country can compete—as far as labor costs go—with a country like Bangladesh.

However, there are many advantages to sourcing from European countries. One of those is that—as indicated in Question 1—communication is often easier with managers of companies in, for instance, Spain, both in a direct sense (all the managers concerned speak Spanish) and a cultural sense (they understand each other better). Easy communication is important in fast fashion, as a company like Zara tries to put new items of clothing in stores as quickly as possible.

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161 9-15 Explain the dangers that a fast-fashion company like Zara faces.

In this case, three dangers are indicated. The first of these is that some other fast fashion company may beat Zara at its own game. In the text, the example of Boooo.com was given, a British internet-based company. The second danger is violation of intellectual property—Zara designs are “inspired” by the catwalk, but sometimes, these designs get dangerously close to catwalk designs. The third danger is that millennials may start to dislike fast fashion as it has negative consequences for the environment.

Zara is, of course, aware of these dangers. As far as the first danger goes, Zara is testing new technologies to make shopping in Zara stores a more pleasurable experience (for instance, by using location intelligence). It has also been trying to boost online sales to compete better with new startups that focus exclusively on online sales. Regarding the second danger, Zara tries to make sure that designs “inspired" by the catwalk never get too close to the original. Every new Zara design should be tested by experts to make sure that no catwalk designer can file legal complaints against the company. The third danger (the lack of sustainability) is a serious one; Zara should do its best to prove that it is taking more steps towards being a “green” company.

(Learning Objective 9-1: How do enterprise systems help businesses achieve operational excellence?

AACSB: Application of knowledge.)

9-16 What does Zara mean by “location intelligence”? Is this a good way to draw customers to physical shops and convince them to not do their shopping online?

Nowadays, every company that has physical stores like Zara needs to compete with online shops as well.

Many brick-and-mortar shops try to entice shoppers by making shopping an “experience”—for instance, shops have musicians playing in them, supermarkets have spits where free food is handed out, book shops invite writers for events, and so on. Zara is experimenting with “location intelligence”, which seems to mean, amongst other things, that shoppers will get personal recommendations in the shop. If such a system works well, it will undoubtedly boost the number of people visiting a Zara shop. It should be added that in recent years Zara has also been trying to boost its online presence.

(Learning Objective 9-4: What are the challenges posed by enterprise applications and how are enterprise applications taking advantage of new technologies? AACSB: Analytical thinking, Application of knowledge.)

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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.

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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

10-2

10-3

10-4

10-5

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

Types of E-Commerce E-Commerce Business Models E-Commerce Revenue Models How has e-commerce transformed marketing?

Behavioral Targeting Social E-Commerce and Social Network Marketing How has E-Commerce affected business-to-business transactions?

Electronic Data Interchange (EDI) New Ways of B2B Buying and Selling What is the role of m-commerce in business, and what are the most important mcommerce applications?

Location-Based Services and Applications Other Mobile Commerce Services Mobile App Payment Systems

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10-7

What issues must be addressed when building an e-commerce presence?

Develop an E-Commerce Presence Map Develop a Timeline: Milestones 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, 382 Affiliate revenue model, 385 Behavioral targeting, 385 Business-to-business (B2B), 379 Business-to-consumer (B2C), 379 Community providers, 381 Consumer-to-consumer (C2C), 379 Cost transparency, 375 Crowdsourcing, 392 Customization, 375 Digital goods, 377 Direct goods, 394 Disintermediation, 376 Dynamic pricing, 376 Electronic Data Interchange (EDI), 392 E-tailer, 380 Exchanges, 394 FinTech, 384 Free/freemium revenue model, 384 Geoadvertising services, 395 Geoinformation services, 395 Geosocial services, 395 Indirect goods, 394 Information asymmetry, 375 Information density, 374 Intellectual property, 380 Location-based services, 395

Long tail marketing, 385 Market creator, 381 Market entry costs, 374 Marketspace, 373 Menu costs, 376 Micropayment systems, 382 Mobile commerce (m-commerce), 379 Native advertising, 388 Net marketplaces, 394 Personalization, 375 Podcasting, 381 Price discrimination, 375 Price transparency, 375 Private exchange, 393 Private industrial networks, 393 Revenue model, 382 Richness, 374 Sales revenue model, 382 Search costs, 374 Social graph, 388 Social shopping, 391 Streaming, 381 Subscription revenue model, 382 Transaction costs, 374 Transaction fee revenue model, 384 Wisdom of crowds, 391

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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.

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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-tobusiness 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.

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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.

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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?

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168 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.

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169 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.

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170 Section 10-5: What is the role of m-commerce in business, and what are the most important m-commerce 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 m-commerce products or services.

M-commerce is the fastest growing form of e-commerce, with six main areas of growth: location-based 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 ecommerce 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.

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171 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 ecommerce 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

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172 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 user-generated content as services. Provides other services such as online data storage and backup.

Name and describe the e-commerce revenue models.

There are six e-commerce revenue models: • Advertising: 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)

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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, highquality 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.

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174 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 mcommerce 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.

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175 • •

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

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10-10 Small sports store: As the owner of a small sports store, you have noticed that many customers have a favorite type of golf ball. You figure that golf balls could be of special commercial interest to an online business for several reasons: they are often lost and in need of replacement, there is a big variety of golf balls, because of their small size they are easily shipped worldwide, and many golfers are well-off. Create a strategy for selling the golf balls online and identify the most appropriate Internet business model.

As the owner of a small sports store named The Golfer, you have noted that there are several factors involved in the online sale of golf balls. For one, they are easy and inexpensive to ship. Since the seasons change little at the equator, they can also be sold throughout the year, thus prolonging the store’s season. Another advantage is that golf balls have a long shelf life, so The Golfer would not be afflicted by temporary declines in sales. Finally, golf balls are not subject to ethical or cultural issues in the same way as, say, fashion clothing can be.

An easy strategy would be to run the new venture as an international web shop. The web shop could be backed by ads on social media and online golfing forums. However, if the company has more ambitious plans, it is also possible to build an online community of golf players, with the web shop at the heart of the platform. The platform could then include: • • •

Feature content from other providers, such as golf travel stories Bi-directional flow of ad campaigns with affiliates, such as golf travel agencies or resorts Customer-to-customer relationships via forums or online chat for discussing golf apparel as well as experiences relating to golf

By recording the online activities of the customers, The Golfer could then also feature automatically created personal ads for each customer, based on previous purchases, recommendations in forums, surveys, and so on.

By definition, selling consumer goods over the Internet means an enterprise is an e-tailer. A more ambitious plan, as outlined above, would greatly expand The Golfer´s business opportunities and give more facets to its business model. For example, by becoming a portal, The Golfer could also turn into a community provider using affiliates’ ads as a revenue stream, a transaction broker (by redirecting visitors to affiliates selling hotel nights or golf travels), a service provider, or even a market creator, if registered users are allowed to sell used golf gear via the site.

Building an extensive online venture is time-consuming and costly. What is very interesting about this particular case is that this platform can be built gradually. Thus, the company could start out with a web shop and then proceed through interactions with registered users and affiliates. That way, the risk of doing too much at a time becomes limited. (Learning Objective 10-2: What are the principal ecommerce business and revenue models? Learning Objective 10-3: 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: Nelly, Gina Tricot, and H&M are all Swedish clothing retail brands. Examine each of their websites and compare them. How do they differ from each other in terms of tone, approach, overall concept, market segmentation, value proposition (quality and pricing), revenue model, and market strategy?

Discuss how some of the topics brought up in this chapter may enhance their businesses.

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177 In general, since these are competitors in the online retail fashion business, it is not surprising that their web sites look and function in similar ways. However, there are differences in terms of their target groups and style, which are listed below: • • •

Nelly.com is heavily focused on young women and immediate sales. The website carries a relatively high-class feeling. The homepage also links to an Instagram feed that features people dressed in clothes from Nelly.com.

GinaTricot.com seems to target somewhat older women, which is evident from both their models and the style of their clothing. It is worth noting that Gina Tricot keeps their Instagram feed on the homepage.

H&M is a much larger company than the other two, as is clear from their website. The homepage features apps and other features that are not available at the other stores. It also has a more polished look and is much less focused on immediate sales. HM.com also has a much wider target group than the other websites.

Thanks to e-commerce, these three fashion chains can revamp their (online) stores on a daily or even hourly basis, connect with customers and engage them by presenting them the opportunity of being seen on the homepage, and have real-time control of stock, earnings, and the supply chain. (Learning Objective 10-3: 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

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178 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)

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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 parttime, low-paid, 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

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180 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 long-term 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.

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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

11-2

11-3 11-4

11-5

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 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 What is artificial intelligence (AI)? How does it differ from human intelligence?

Evolution of AI 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 How will MIS help my career?

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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), 429 Augmented reality (AR), 420 Balanced scorecard method, 428 Business performance management (BPM), 428 Chatbot, 439 Choice, 415 Computer vision systems, 438 Data visualization, 418 “Deep learning,” 435 Design, 415 Drill down, 433 Expert system, 430 Genetic algorithms, 436 Geographic information systems (GIS), 425 Implementation, 415 Inference engine, 431 Intelligence, 415 Intelligent agents, 439

Key performance indicators (KPIs), 428 Knowledge base, 431 Location analytics, 423 Machine learning (ML), 432 Natural language processing, 437 Neural networks, 434 Operational intelligence, 423 Pivot table, 426 Predictive analytics, 421 Robotics, 438 Semistructured decisions, 414 Sensitivity analysis, 426 Structured decisions, 414 Supervised learning, 432 Unstructured decisions, 414 Unsupervised learning, 433 Virtual reality (VR) systems, 418

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

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183 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 largesized businesses? What decisions do managers have to make when selecting one vendor over

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184 another? Discuss with them the pros and cons of selecting a one-stop integrated solution for BI and BA capabilities versus multiple best-of-breed 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.

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185 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 1. 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.

2. 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.

3. 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.

4. 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.

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186 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 speech-activated 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.

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187 •

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 infrastructure and analytics toolsets.

Business intelligence infrastructure is the underlying foundation of powerful database systems that capture all the relevant data to operate the business. The data may be stored in transactional databases or combined and integrated into an enterprise-data warehouse or a series of interrelated data marts. A business analytics toolset is a set of software tools used to analyze data and produce reports, respond to managers’ questions, and track the progress of the business using key indicators of performance.

(Learning Objective 2: How do BI and business analytics support decision making? AACSB: Application of knowledge.)

Describe ways that user facing interfaces make business analytics software suites more usable.

User interfaces, such as online screens and commands, are the parts of an information system through which the end user interacts with the system. The end user interacts with the system and the interface includes the type of hardware and the series of on-screen commands and responses required for users to work with the system. User interfaces have become more visual and

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188 intuitive. Businesspeople are no longer tied to their desks and desktops. They often learn quicker from visual representations of data than from dry reports with columns and rows of information.

Today’s business analytics software suites emphasize visual techniques, such as dashboards and scorecards.

(Learning Objective 2: How do BI and business analytics support decision making? AACSB: Application of knowledge.)

Explain the purpose of a parameterized report.

Parameterized reports allow users to enter several parameters in a pivot table to filter data and isolate the impacts of the parameters. For instance, enter the region and time of day to understand how the sales of a product varies depending on the region and time.

(Learning Objective 2: How do BI and business analytics support decision making? AACSB: Application of knowledge.)

Explain why predictive analytics are incorporated into BI applications.

Predictive analytics are being incorporated into numerous business intelligence applications in sales, marketing, finance, fraud detection, and healthcare. One of the most well-known applications is credit scoring, which is used throughout the financial services industry.

Telecommunications companies use predictive analytics to identify which customers are most profitable, which are most likely to leave, and which new services and plans will be most likely to retain customers. Healthcare insurers have been analyzing data for years to identify which patients are most likely to generate high costs. Many companies employ predictive analytics to predict responses to direct marketing campaigns. By identifying customers who are less likely to respond, companies are able to lower their marketing and sales costs by focusing their resources on customers who have been identified as promising.

(Learning Objective 2: How do BI and business analytics support decision making? AACSB: Application of knowledge.)

Describe how a decision maker might be able to use geographic information systems (GIS).

A geographic information system (GIS) is a special category of tools that helps decision makers visualize problems that require knowledge about the geographic distribution of people or other resources. GIS software ties location data to points, lines, and areas on a map. Some GIS have modeling capabilities to modify data and automatically revise business scenarios.

(Learning Objective 2: How do BI and business analytics support decision making? AACSB: Application of knowledge.)

Describe a pivot table and suggest who might use it.

A pivot table is a spreadsheet tool used to reorganize and summarize two or more dimensions of data in a tabular format. Spreadsheets have a similar feature for multidimensional analyses, which

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189 manager “super users” and analysts employ to identify and understand patterns in business information that may be useful for semi-structured decision making.

(Learning Objective 2: How do BI and business analytics support decision making? AACSB: Application of knowledge.)

Explain why predictive analytics are incorporated into BI applications.

Predictive analytics are being incorporated into numerous business intelligence applications in sales, marketing, finance, fraud detection, and healthcare. One of the most well-known applications is credit scoring, which is used throughout the financial services industry.

Telecommunications companies use predictive analytics to identify which customers are most profitable, which are most likely to leave, and which new services and plans will be most likely to retain customers. Healthcare insurers have been analyzing data for years to identify which patients are most likely to generate high costs. Many companies employ predictive analytics to predict responses to direct marketing campaigns. By identifying customers who are less likely to respond, companies are able to lower their marketing and sales costs by focusing their resources on customers who have been identified as promising.

(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.

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Commented [j1]: EMIS Replacement content same as “Explain why predictive analytics are incorporated into BI applications.” Please suggest.

190 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

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191 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

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192 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.

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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 decisionmaking 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.

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194 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 .

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11-13 What are the people, organizational, and technology challenges posed by self-driving 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.)

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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.

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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

12-2

12-3

12-4

12-5

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 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 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 How should information systems projects be managed?

Project Management Objectives Managing Project Risk and System-Related Change How will MIS help my career?

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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, 461 Agile development, 470 Business case, 453 Capital budgeting, 457 Component-based development, 471 Customization, 466 Direct cutover strategy, 462 Documentation, 462 End-user development, 465 Ergonomics, 475 Feasibility study, 461 Formal planning and control tools, 473 Gantt chart, 473 Implementation, 472 Information requirements, 460 Information systems plan, 454 Intangible benefits, 456 Joint application design (JAD), 470 Maintenance, 463 Mobile web app, 468 Mobile website, 468 Native app, 468 Organizational impact analysis, 477

Parallel strategy, 462 PERT charts, 473 Phased approach, 462 Pilot study, 462 Portfolio analysis, 455 Production, 463 Project, 471 Project management, 471 Prototyping, 464 Rapid application development (RAD), 470 Request for Proposal (RFP), 466 Responsive web design, 468 Scope, 472 Scoring model, 456 System testing, 461 Systems analysis, 459 Systems design, 461 Systems development life cycle (SDLC), 464 Tangible benefits, 456 Test plan, 462 Unit testing, 461 User–designer communications gap, 472

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?

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199 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, customerspecific 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

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200 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. .

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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?

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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

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203 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.

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204 • • •

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.

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(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?

Explain why the systems life cycle is inappropriate for many small businesses.

The traditional systems life cycle methodology is used to build large, complex systems that require rigorous and formal requirements analyses, predefined specifications, and tight controls over the system building process. This approach can be costly, time-consuming, and inflexible. Although systems builders can go back and forth between stages in the life cycle, the systems life cycle is predominantly a “waterfall” approach in which tasks in one stage are completed before work for the next stage begins.

Activities can be repeated, but volumes of new documents must be generated and steps retraced if requirements and specifications need to be revised. This encourages the freezing of specifications relatively early on in the development process. The life cycle approach is not suitable for many small desktop systems, which tend to be less structured and more individualized.

(Learning Objective 3: What are the alternative methods for building information systems?, AACSB: Application of knowledge.)

Identify the two groups that can work together using Joint Application Design (JAD) Joint application design (JAD) is used to accelerate the generation of information requirements and to develop the initial systems design. JAD brings end users and information systems specialists together in an interactive session to discuss the system’s design. If properly prepared and facilitated, JAD sessions can speed up the design phase significantly and involve users intensively. The JAD process allows the organization to accelerate the generation of information requirements by having end users and information systems specialists collaborate in intensive interactive design sessions.

(Learning Objective 3: What are the alternative methods for building information systems?, AACSB: Application of knowledge.)

Identify the aspects that can be addressed by carrying out an organizational impact analysis.

Organizational impact analysis involves the study (and explanation) of how a proposed system will affect organizational structure, attitudes, decision making, and operations. To integrate information systems successfully in the organization, thorough and fully documented organizational impact assessments must be given attention during development.

(Learning Objective 3: What are the alternative methods for building information systems?, AACSB: Application of knowledge.)

Define request for proposal (RFP) and identify what happens next.

When a system is developed using an application software package, the systems analysis includes a package evaluation. The most important evaluation criteria are the functions that the package provides, flexibility, user friendliness, hardware and software resources, database requirements, installation and maintenance efforts, documentation, vendor quality, and cost. The package evaluation process is often

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206 based on a request for proposal (RFP), which is a detailed list of questions submitted to packaged software vendors. When a software package is selected, the organization no longer has total control over the systems design process. Instead of tailoring the system’s design specifications directly to user requirements, the design effort consists of trying to mold user requirements to the features of the package.

If the organization’s requirements conflict with how the package works and the package cannot be customized, the organization has to adapt to the package and change its procedures.

(Learning Objective 3: What are the alternative methods for building information systems?, AACSB: Analytical thinking, Application of knowledge.)

Explain how customization works when services or packages are designed for a specific business or organization.

Customization is the modification of a software package to meet an organization’s unique requirements without destroying the software package’s integrity. If an organization has unique requirements that the package does not address, many packages include capabilities for customization. Customization features allow software packages to be modified to meet an organization’s unique requirements without destroying the integrity of the s=-oftware. If a great deal of customization is required, additional programming and customization work may become so expensive and time-consuming that they negate many of the advantages of software packages. Here are some examples of customized software solutions: •

• •

The fast food giant, McDonalds, has a simple and intuitive customized point-of-sale (POS) technology. It is designed to allow employees with minimal training to learn how to use it and quickly integrate into the team. The software is designed to fit the employees rather than the other way around.

Uber has its own intelligent dispatching system. The software system instantly matches available drivers with ride hailers and cuts out human error.

YouTube has customized software that suggests highly relevant and timely content to viewers.

The package recognizes patterns in viewing and preferred content. The software allows users to amend their viewing suggestions, and actively suggests the sharing of material across social networks. This has kept YouTube ahead of all other video sharing platforms.

(Learning Objective 3: What are the alternative methods for building information systems?, AACSB: Application of knowledge.)

Define and describe component based development.

Component-based development expedites application development by grouping objects into suites of software components that can be combined to create large-scale business applications. Businesses use component-based development to create e-commerce applications by combining commercially available components for shopping carts, user authentication, search engines, and catalogs with pieces of software for their unique requirements.

(Learning Objective 3: What are the alternative methods for building information systems?, AACSB: Application of knowledge.)

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

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207 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 non-quantifiable 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.

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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, lower-reward 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.

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209 • •

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

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210 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.

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211 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: Maersk’s TradeLens: Digitizing the Global Supply Chain Case Study Questions

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212 12-13 Assess the importance of the TradeLens project for Maersk.

TradeLens plays a strategic role in Maersk; it allows it to gather data points to spot inefficiencies within supply chains and to suggest solutions to clients. The new system has the ability to enhance the efficiency and security of global trade, which have been hampered by data being trapped in organizational silos, paper-based processes, and clearance processes subject to fraud.

Through the implementation of TradeLens, Maersk is able to process more than ten million discrete shipping events and thousands of documents every week, providing shippers, carriers, freight forwarders, customs officials, port authorities, and other trading partners a consistent and unified view of transactions.

Its position as a world leader in container logistics is ensured.

12-14 What core problem-solving steps has Maersk gone through in developing the new system?

Understanding the problem and developing alternative solutions: At the initiation stage, Maersk and IBM organized a series of “thinking workshops” to determine the practicability of blockchain technology in the supply chain and to develop pilots.

Evaluating and choosing solutions: In June 2016, Maersk and IBM carried out their first pilot project in the form of a shipment from Kenya to Holland. In February 2017, they collaborated with a freight forwarder and a customs authority and tested a blockchain-enabled shipment.

Implementing solutions: After the success of the pilot tests, in January 2018, Maersk and IBM announced their blockchain-enabled global supply chain project, TradeLens. In August 2018, Maersk and IBM its TradeLens.

12-15 Describe the problems encountered by the TradeLens project. What management, organization, or technology factors were responsible for these problems?

The implementation of TradeLens was met with skepticism about its benefits to shippers and its broader claims of productivity. Shippers and the larger logistics industry wrestled with questions about the cost, imminent applicability, and value of such an innovation. Furthermore, Maersk and IBM struggled to sign partners on to this shipping blockchain. At the initial stage, only one other carrier agreed to be part of the platform, Pacific International Lines (PIL). These factors indicated that Maersk had primarily failed at managing stakeholders during the system development life cycle, which had resulted in a bubble of uncertainty among stakeholders.

Management and organization factors: First, Maersk failed to involve relevant stakeholders (e.g., supply chain partners) in system development. Indeed, Maersk is the owner of the joint venture that owns TradeLens and enjoys a benefit not shared by other participants from the use of this solution. Therefore, stakeholders had concerns about using TradeLens, which might enrich this large competitor, despite the potential benefits of such a blockchain-enabled shipping platform. Such concerns were not addressed during system development or prior to implementation.

Further, Maersk’s rivals performed better in this aspect. COSCO, CMA CGM, Evergreen Marine, OOCL, and Yang Ming developed their own blockchain solution, named the Global

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213 Shipping Business Network (GSBN). The GSBN was built by CargoSmart and has the backing of several terminals and ports worldwide. The involvement of more stakeholders in system development rendered this project more acceptable.

Technology factors: Maersk overlooked the uniqueness of the TradeLens project. TradeLens is a blockchain-enabled solution that requires wide acceptance and deployment to be fully functional. The success of this innovation relies on onboarding other large carriers who will act as trust anchors and run blockchain nodes on the network.

12-16 What has Maersk done to mitigate the problems of the TradeLens project?

Maersk has responded to the stakeholders’ varying concerns about TradeLens through three major actions. First, they established an operational subsidiary to manage staff on the project and to ensure the independence of TradeLens from other business units of Maersk. Second, Maersk and IBM have formed a TradeLens Advisory Board, which provides guidance and feedback to establish open and fair standards and to ensure that the new system is a solution built through the collaboration of all ecosystem participants and stakeholders. Third, they are carrying out an audit to certify the project’s compliance with ISO 27001 IT security standards to ease stakeholders’ distrust and concerns about security.

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.

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 1 Business Information Systems in Your Career

Copyright © 2020 Pearson Education Ltd.

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?

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Video Cases • Case 1: Business in the Cloud: Facebook, Google, and eBay Data Centers

• Case 2: UPS Global Operations with the DIAD and Worldport • Instructional Video: Tour IBM’s Raleigh Data Center

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PCL Construction: The New Digital Firm (1 of 2) • Problem – Highly distributed locations – Paper intensive industry – Paper processing driving up costs

• Solutions – Digitize documents – Streamline business processes – Project management system – Mobile apps – Cloud computing Copyright © 2020 Pearson Education Ltd.

PCL Construction: The New Digital Firm (2 of 2) • Use of powerful analytics to drive business operations and management decisions • Demonstrates how technology can be used to improve management control and decision making • Illustrates the features of a digital firm

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How Information Systems are Transforming Business • In 2018, more than 150 million businesses had dot-com addresses registered.

• 230 million adult Americans shopped online; 190 million purchased online.

• Internet advertising continues to grow at around 15 percent per year.

• New laws require businesses to store more data for longer periods.

• Changes in business result in changes in jobs and careers.

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Key Challenges in Management Information Systems • New technologies – Artificial intelligence – Cloud computing, Big Data, Internet of Things – Mobile digital platform

• Management – Return on investment (ROI) – Online collaboration – Social networking

• Organizations – Security and privacy – Social business – Telework gains Copyright © 2020 Pearson Education Ltd.

Globalization Challenges and Opportunities: A Flattened World • Internet and global communications have greatly reduced economic and cultural advantages of developed countries.

– Drastic reduction of costs of operating and transacting on global scale – Competition for jobs, markets, resources, ideas – Dependence on imports and exports – Requires new understandings of skills, markets, opportunities

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Business Drivers of Information Systems • Businesses invest in IT to achieve six important business objectives.

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2.

3.

4.

5.

6.

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

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Operational Excellence • Improved efficiency results in higher profits.

• Information systems and technologies help improve efficiency and productivity.

• Example: Walmart – Power of combining information systems and best business practices to achieve operational efficiency—and over $514 billion in sales in 2019 – Most efficient retail store in world as result of digital links between suppliers and stores

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New Products, Services, and Business Models • Information systems and technologies enable firms to create new products, services, and business models.

• Business model: how a company produces, delivers, and sells its products and services • Example: Apple – Transformed old model of music distribution with iTunes – Constant innovations—iPod, iPhone, iPad, etc.

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Customer and Supplier Intimacy • Customers who are served well become repeat customers who purchase more.

– Mandarin Oriental Hotel ▪ Uses IT to foster an intimate relationship with its customers, keeping track of preferences, and so on

• Close relationships with suppliers result in lower costs.

– JC Penney ▪ IT to enhance relationship with supplier in Hong Kong

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Improved Decision Making • If managers rely on forecasts, best guesses, and luck, they will misallocate employees, services, and inventory.

• Real-time data improves ability of managers to make decisions.

• Verizon: web-based digital dashboard to update managers with real-time data on customer complaints, network performance, and line outages

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Competitive Advantage • Often results from achieving previous business objectives

• Advantages over competitors: – Charging less for superior products, better performance, and better response to suppliers and customers – Examples: Apple, Walmart, and UPS are industry leaders because they know how to use information systems for this purpose

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Survival • Businesses may need to invest in information systems out of necessity; it is simply the cost of doing business.

• Keeping up with competitors – Citibank’s introduction of ATMs

• Federal and state regulations and reporting requirements – Toxic Substances Control Act and the Sarbanes-Oxley Act

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What Is an Information System?

(1 of 2) • Information technology: the hardware and software a business uses to achieve objectives • Information system: interrelated components that manage information to: – Support decision making and control – Help with analysis, visualization, and product creation

• Data: streams of raw facts

• Information: data shaped into meaningful, useful form

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What Is an Information System?

(2 of 2) • Activities in an information system that produce information: – Input – Processing – Output – Feedback

• Sharp distinction between computer or computer program versus information system

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Figure 1.1 Data and Information

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Figure 1.2 Functions of an Information System

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The Role of People and Organizations • Information systems literacy – Includes behavioral and technical approach

• Computer literacy – Focuses mostly on knowledge of IT

• Management information systems (MIS) – Focuses on broader information systems literacy – Issues surrounding development, use, impact of information systems used by managers and employees – Focuses on firm performance, productivity, and competitive challenges

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Figure 1.3 Information Systems Are More Than Computers

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Dimensions of Information Systems (1 of 3) • Organizations – Coordinate work through structured hierarchy and business processes – Business processes: related tasks and behaviors for accomplishing work ▪ Examples: fulfilling an order, hiring an employee ▪ May be informal or include formal rules

– Culture embedded in information systems ▪ Example: UPS’s concern with placing service to customer first

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Dimensions of Information Systems (2 of 3) • People – Information systems require skilled people to build, maintain, and use them.

– Employee attitudes affect their ability to use systems productively.

– Role of managers: ▪ Perceive business challenges ▪ Set organizational strategy ▪ Allocate human and financial resources ▪ Creative work: new products, services

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Dimensions of Information Systems (3 of 3) • Technology – IT Infrastructure: Foundation or platform that information systems are built on ▪ Computer hardware ▪ Computer software ▪ Data management technology ▪ Networking and telecommunications technology – Internet and web, extranets, intranets – Voice, video communications

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Interactive Session – Technology: UPS Competes Globally with Information Technology • Class discussion – What are the inputs, processing, and outputs of UPS’s package tracking system?

– What technologies are used by UPS? How are these technologies related to UPS’s business strategy?

– What strategic business objectives do UPS’s information systems address?

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

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The Problem-Solving Approach • Few business problems are simple or straightforward.

• Most business problems involve a number of major factors that can fall into three main categories: – Organization – Technology – People

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A Model of the Problem-Solving Approach (1 of 7) •

Problem solving: four-step process 1.

2.

3.

4.

Problem identification Solution design Choice Implementation

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A Model of the Problem-Solving Approach (2 of 7) • Problem identification includes: – Agreement that problem exists – Definition of problem – Causes of problem – What can be done given resources of firm

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A Model of the Problem-Solving Approach (3 of 7) • Typical organizational problems – Outdated business processes – Unsupportive culture and attitudes – Political in-fighting – Turbulent business environment, change – Complexity of task – Inadequate resources

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A Model of the Problem-Solving Approach (4 of 7) • Typical technology problems – Insufficient or aging hardware – Outdated software – Inadequate database capacity – Insufficient telecommunications capacity – Incompatibility of old systems with new technology – Rapid technological change

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A Model of the Problem-Solving Approach (5 of 7) • Typical people problems – Lack of employee training – Difficulties of evaluating performance – Legal and regulatory compliance – Work environment, ergonomics – Poor or indecisive management – Lack of employee support and participation

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A Model of the Problem-Solving Approach (6 of 7) • Solution design – Often many possible solutions – Consider as many as possible to understand range of solutions

• Solution Evaluation and Choice – factors include: – Cost – Feasibility given resources and skills – Length of time needed to implement solution

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A Model of the Problem-Solving Approach (7 of 7) • Implementation – Building or purchasing solution – Testing solution, employee training – Change management – Measurement of outcomes – Feedback, evaluation of solution

• Problem solving is a continuous process, not a single event – Sometimes chosen solution doesn’t work or needs adjustment Copyright © 2020 Pearson Education Ltd.

Figure 1.4 Problem Solving Is a Continuous Four-Step Process

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The Role of Critical Thinking in Problem Solving (1 of 2) • Without critical thinking, easy to jump to conclusions, misjudge a problem, and waste resources • Critical thinking: – Sustained suspension of judgment with an awareness of multiple perspectives and alternatives – Ability to collect and analyze data that might help understand the nature of the problem; a “data driven” approach

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The Role of Critical Thinking in Problem Solving (2 of 2) • Four elements of critical thinking: 1. Maintaining doubt and suspending judgment 2. Being aware of different perspectives ▪ Including technology, organization, and people perspectives

3. Testing alternatives and letting experience guide 4. Being aware of organizational and personal limitations

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The Connections Among Business Objectives, Problems, and Solutions • When firms cannot achieve business objectives these objectives become challenges.

• Information systems often present solutions, partially or fully, to these challenges.

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How Information Systems Will Affect Business Careers (1 of 9) • Success in today’s job market requires a broad set of skills.

• Job candidates must have problem-solving skills as well as technical skills so that they can complete specific tasks.

• The service sector will account for 95 percent of the new jobs that are created or open up by 2022.

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How Information Systems Will Affect Business Careers (2 of 9) • Accounting: – Accountants increasingly rely on information systems to summarize transactions, create financial records, organize data, and perform financial analysis.

– Skills: ▪ Knowledge of databases and networks ▪ Online financial transactions and reporting systems ▪ How systems are used to achieve accounting functions

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How Information Systems Will Affect Business Careers (3 of 9) • Finance: – Relationship between information systems and financial management and services is so strong that many advise finance majors to co-major in information systems.

– Skills: ▪ Use systems for financial reporting, direct investment activities, implementation of cash management strategies ▪ Plan, organize, implement information systems strategies for the firm

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How Information Systems Will Affect Business Careers (4 of 9) • Marketing: – No field has undergone more technology-driven change in the past five years than marketing and advertising.

– Skills: ▪ Work with databases for tracking and reporting on customer behavior, product performance, customer feedback, product development ▪ Enterprise systems for product management, sales force management, customer relationship management

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How Information Systems Will Affect Business Careers (5 of 9) • Operations management in services and manufacturing: – Production managers, administrative service managers, and operations analysts – Skills: ▪ Hardware and software platforms for operations management ▪ Use database and analytical software for coordinating and optimizing resources required for producing goods and services

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How Information Systems Will Affect Business Careers (6 of 9) • Management: – The job of management has been transformed by information systems.

– Impossible to manage business today without information systems – Skills: ▪ Use of information systems for each function of job, from desktop productivity tools to applications coordinating the entire enterprise

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How Information Systems Will Affect Business Careers (7 of 9) • Information systems: – Fast changing and dynamic profession because information technologies are among most important tools for achieving business firms’ key objectives – Domestic and offshore outsourcing – Skills: ▪ Uses of new and emerging hardware and software to achieve six business objectives ▪ An ability to take a leadership role in the design and implementation of new information systems

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How Information Systems Will Affect Business Careers (8 of 9) • Outsourcing and offshoring: – Two types: outsourcing to domestic U.S. firms and outsourcing to low-wage countries such as India, China – Production programming, system maintenance, call centers – Benefits: ▪ Lower cost of building and maintaining systems within U.S. ▪ Increased need for managerial positions

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How Information Systems Will Affect Business Careers (9 of 9) • Common requirements for all majors – How I T helps achieve six business objectives – Central role of databases – Business analytics and intelligence systems – Working with specialists and systems designers – Ethical, social, legal environment and issues ▪ Use of IT to meet legal requirements

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Interactive Session – Will AI Kill Jobs?

• Class discussion – Identify the problem described in this case study. In what sense is it an ethical dilemma?

– Should more tasks be given to AI? Why or why not? Explain your answer.

– Can the problem of AI reducing employment be solved?

Explain your answer.

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How Will MISHelp My Career?

• The Company: Power Financial Analytics Data Services Inc. • Position Description • Job Requirements

• Interview Questions

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 2 Global E-business and Collaboration

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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 and social business so important, and what technologies do they use?

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

2.5 How will MIS help my career?

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Video Cases • Case 1: Vision X Grows with SAP Business One

• Case 2: CEMEX – Becoming a Social Business • Instructional Video 1: US Foodservice Grows Market with Oracle CRM on Demand

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Enterprise Social Networking Transforms Sharp Into a More Innovative Connected Organization (1 of 2) • Problem – Hierarchical top-down processes and culture – New competitors

• Solutions – Improve productivity – Reduce costs – Increase innovation Copyright © 2020 Pearson Education Ltd.

Enterprise Social Networking Transforms Sharp Into a More Innovative Connected Organization (2 of 2) • Use of new information systems to improve their performance and remain competitive

• Demonstrates importance of teamwork and collaboration to innovation and profit growth • Illustrates importance of organizational culture and business processes for knowledge dissemination

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Organizing a Business: Basic Business Functions (1 of 2) • Business: formal organization that makes products or provides a service in order to make a profit • Four basic business functions – Manufacturing and production – Sales and marketing – Finance and accounting – Human resources

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Organizing a Business: Basic Business Functions (2 of 2) • Five basic business entities – Suppliers – Customers – Employees – Invoices/payments – Products and services

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Figure 2.1 The Four Major Functions of a Business

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Business Processes • Logically related set of tasks that define how specific business tasks are performed – The tasks each employee performs, in what order, and on what schedule – E.g., Steps in hiring an employee

• Some processes tied to functional area – Sales and marketing: identifying customers

• Some processes are cross-functional – Fulfilling customer order

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Figure 2.2 The Order Fulfillment Process

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How IT Enhances Business Processes • Automation of manual processes • Change the flow of information • Replace sequential processes with simultaneous activity

• Transform how a business works • Drive new business models

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Managing a Business and Firm Hierarchies • Firms coordinate work of employees by developing hierarchy in which authority is concentrated at top.

– Senior management – Middle management – Operational management – Knowledge workers – Data workers – Production or service workers

• Each group has different needs for information.

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Figure 2.3 Levels in a Firm

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The Business Environment • Businesses depend heavily on their environments for capital, labor, supplies, and more.

• Global environment – Technology and science, economy, politics, international change

• Immediate environment – Customers, suppliers, competitors, regulations, stockholders

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Figure 2.4 The Business Environment

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The Role of Information Systems in a Business • Firms invest in information systems in order to: – Achieve operational excellence – Develop new products and services – Attain customer intimacy and service – Improve decision making – Promote competitive advantage – Ensure survival

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Systems for Different Management Groups • Transaction processing systems (TPS) – Keep track of basic activities and transactions of organization

• Systems for business intelligence – Address decision-making needs of all levels of management ▪ Management information systems (MIS) ▪ Decision support systems (DSS) ▪ Executive support systems (ESS)

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Transaction Processing Systems • Serve operational managers

• Principal purpose is to answer routine questions and to track the flow of transactions through the organization – E.g., inventory questions, granting credit to customer

• Monitor status of internal operations and firm’s relationship with external environment • Major producers of information for other systems • Highly central to business operations and functioning

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Figure 2.5 A Payroll TPS

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Management Information Systems • Provide middle managers with reports on firm’s performance, to help monitor firm and predict future performance • Summarize and report on basic operations using data from TP S

• Provide weekly, monthly, annual results, but may enable drilling down into daily or hourly data • Typically not very flexible systems with little analytic capability

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Figure 2.6 How MIS Obtain Their Data from the Organization’s TPS

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Figure 2.7 Sample MIS Report

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Decision Support Systems • Serve middle managers

• Support nonroutine decision making – Example: What is impact on production schedule if December sales double?

• Often use external information as well from TPS and MIS • Model driven DSS – Voyage-estimating systems

• Data driven DSS – Intrawest’s marketing analysis systems

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Figure 2.8 Voyage-Estimating Decision Support System

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Executive Support Systems • Serve senior managers

• Address strategic issues and long-term trends – E.g., what products should we make in five years?

• Address nonroutine decision making

• Provide generalized computing capacity that can be applied to changing array of problems • Draw summarized information from MIS, DSS, and data from external events • Typically use portal with web interface, or digital dashboard, to present content Copyright © 2020 Pearson Education Ltd.

A Digital Dashboard

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Systems for Linking the Enterprise • Enterprise applications – Systems that span functional areas, focus on executing business processes across the firm, and include all levels of management

• Four major types – Enterprise systems – Supply chain management systems – Customer relationship management systems – Knowledge management systems

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Figure 2.9 Enterprise Application Architecture

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Enterprise Systems • Also called enterprise resource planning (ERP) systems

• Integrate data from key business processes into single system • Speed communication of information throughout firm

• Enable greater flexibility in responding to customer requests, greater accuracy in order fulfillment • Enable managers to assemble overall view of operations

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Supply Chain Management (SCM) Systems • Manage relationships with suppliers, purchasing firms, distributors, and logistics companies • Manage shared information about orders, production, inventory levels, and so on – Goal is to move correct amount of product from source to point of consumption as quickly as possible and at lowest cost

• Type of interorganizational system – Automating flow of information across organizational boundaries Copyright © 2020 Pearson Education Ltd.

Customer Relationship Management (CRM) Systems • Help manage relationship with customers

• Coordinate business processes that deal with customers in sales, marketing, and customer service • Goals: – Optimize revenue – Improve customer satisfaction – Increase customer retention – Identify and retain most profitable customers – Increase sales

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Knowledge Management Systems • Manage processes for capturing and applying knowledge and expertise

• Collect relevant knowledge and make it available wherever needed in the enterprise to improve business processes and management decisions • Link firm to external sources of knowledge

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Intranets and Extranets • Technology platforms that increase integration and expedite the flow of information • Intranets: – Internal networks based on Internet standards – Often are private access area in company’s website

• Extranets: – Company websites accessible only to authorized vendors and suppliers – Facilitate collaboration

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E-Business, E-Commerce, and EGovernment • E-business: – Use of digital technology and Internet to drive major business processes

• E-commerce: – Subset of e-business – Buying and selling goods and services through Internet

• E-government: – Using Internet technology to deliver information and services to citizens, employees, and businesses

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Interactive Session – Organizations: Japan Embraces E-governance Tools for Tokyo 2020 • Class discussion – Describe the identity verification system and describe the inputs, business processes, and the outputs of the system.

– Discuss how these IT applications strengthen the relationship between citizens and their government.

– What are the implementation challenges of these systems?

How can they be addressed?

– What people, organization, and technology factors contributed to development of these IT applications?

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What is Collaboration?

• Growing importance of collaboration: – Changing nature of work – Growth of professional work – Changing organization of the firm – Changing scope of the firm – Emphasis on innovation – Changing culture of work and business

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What is Social Business?

• Use of social networking platforms to engage employees, customers, suppliers • Conversations to strengthen bonds • Requires information transparency

• Seen as way to drive operational efficiency, spur innovation, accelerate decision making

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Business Benefits of Collaboration and Social Business • Investment in collaboration technology can return large rewards, especially in sales and marketing, research and development.

• Productivity: sharing knowledge and resolving problems • Quality: faster resolution of quality issues • Innovation: more ideas for products and services • Customer service: complaints handled more rapidly

• Financial performance: generated by improvements in factors above Copyright © 2020 Pearson Education Ltd.

Figure 2.10 Requirements for Collaboration

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Tools and Technologies for Collaboration and Teamwork • Email and instant messaging (IM)

• Wikis • Virtual worlds • Collaboration and social business environments – Virtual meeting systems (telepresence) – Cloud collaboration services ▪ Google Drive, Dropbox

– Microsoft SharePoint and IBM Notes – Enterprise social networking tools Copyright © 2020 Pearson Education Ltd.

Interactive Session – Videoconferencing: Something for Everyone • Class discussion – Compare the capabilities of the videoconferencing tools described in this case. How do they promote collaboration and innovation?

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

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

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Evaluating and Selecting Collaboration Tools 1. What are your firm’s collaboration challenges?

2. What kinds of solutions are available?

3. Analyze available products’ cost and benefits.

4. Evaluate security risks.

5. Consult users for implementation and training issues.

6. Select candidate tools and evaluate vendors.

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Figure 2.11 The Time/Space Collaboration and Social Tool Matrix

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Systems for Knowledge Management • Structured vs. tacit knowledge • Systems for knowledge management – Enterprise Content Management (ECM) Systems – Locating and sharing expertise

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Figure 2.12 Enterprise Content Management System

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The Information Systems Department • Programmers

• Systems analysts – Principle liaisons to rest of firm

• Information systems managers – Leaders of teams of programmers and analysts, project managers, physical facility managers, telecommunications managers, database specialists, managers of computer operations, and data entry staff

• Senior managers: CIO, CPO, CSO, CKO, CDO • End users Copyright © 2020 Pearson Education Ltd.

Information Systems Services • Computing services

• Telecommunications services • Data management services • Application software services

• Physical facilities management services • IT management services • IT standards services • IT educational services • IT research and development services Copyright © 2020 Pearson Education Ltd.

How Will MIS Help My Career?

• The Company: Comprehensive Supplemental Insurance USA • Position Description • Job Requirements

• Interview Questions

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 3 Achieving Competitive Advantage with Information Systems

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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?

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Video Cases • Case 1: GE Becomes a Digital Firm: The Emerging Industrial Internet • Case 2: National Basketball Association: Competing on Global Delivery with Akamai OS Streaming

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N26: A Bank Without Branches • Problem – Improving operational efficiency – Improve customer experience

• Solutions – Online customer-centric processes – Improved cash-based operations – Security systems

• Illustrates use of IT to differentiate services and improve customer experience Copyright © 2020 Pearson Education Ltd.

Porter’s Competitive Forces Model • Five competitive forces shape fate of firm – Traditional competitors – New market entrants – Substitute products and services – Customers – Suppliers

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Figure 3.1 Porter’s Competitive Forces Model

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Information System Strategies for Dealing with Competitive Forces (1 of 5) • Basic strategy: Align IT with business objectives – Identify business goals and strategies – Break strategic goals into concrete activities and processes – Identify metrics for measuring progress – Determine how IT can help achieve business goals – Measure actual performance

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Information System Strategies for Dealing with Competitive Forces (2 of 5) • Low-cost leadership – Use information systems to achieve the lowest operational costs and the lowest prices

– E.g. Walmart ▪ Inventory replenishment system sends orders to suppliers when purchase recorded at cash register ▪ Minimizes inventory at warehouses, operating costs ▪ Efficient customer response system

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Information System Strategies for Dealing with Competitive Forces (3 of 5) • Product differentiation – Use information systems to enable new products and services, or greatly change the customer convenience in using your existing products and services – E.g., Google's continuous innovations, Apple's i Phone – Use information systems to customize, personalize products to fit specifications of individual consumers ▪ E.g., Nike's NIKE iD program for customized sneakers

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Information System Strategies for Dealing with Competitive Forces (4 of 5) • Focus on market niche – Use information systems to enable specific market focus, and serve narrow target market better than competitors.

▪ Analyzes customer buying habits, preferences ▪ Advertising pitches to smaller and smaller target markets

– E.g., Hilton Hotel’s On Q System ▪ Analyzes data collected on guests to determine preferences and guest's profitability

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Information System Strategies for Dealing with Competitive Forces (5 of 5) • Strengthen customer and supplier intimacy.

– Strong linkages to customers and suppliers increase switching costs and loyalty – Toyota: uses IS to facilitate direct access from suppliers to production schedules ▪ Permits suppliers to decide how and when to ship supplies to plants, allowing more lead time in producing goods

– Amazon: keeps track of user preferences for purchases, and recommends titles purchased by others

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The Internet’s Impact on Competitive Advantage • Enables new products and services • Encourages substitute products • Lowers barrier to entry

• Changes balance of power of customers and suppliers • Transforms some industries • Creates new opportunities for creating new markets, building brands, and large customer bases • Smart products and the Internet of Things Copyright © 2020 Pearson Education Ltd.

The Business Value Chain Model • Highlights specific activities in a business where competitive strategies can best be applied and where information systems are likely to have a strategic impact.

– Primary activities – Support activities – Benchmarking – Best practices

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Figure 3.2 The Value Chain Model

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Interactive Session: Singapore as a Smart Nation • Class Discussion – What are the factors driving the Smart Nation initiative?

– What are the possible downsides of the Smart Nation projects?

– Describe the smart city initiatives of an urban center in your country or region.

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The Value Web • A firm’s value chain is linked to the value chains of its suppliers, distributors, and customers.

• Value web – Collection of independent firms that use information technology to coordinate their value chains to produce a product collectively – Value webs are flexible and adapt to changes in supply and demand

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Figure 3.3 The Value Web

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Synergies, Core Competencies, and Network-Based Strategies • Large corporations comprised of business units – Financial returns overall are tied to performance of business units

• Information systems improve performance of business units by promoting – Communication – Synergies – Core competencies

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Synergies • When output of some business units can be used as inputs to other units • When two firms can pool markets and expertise (e.g., recent bank mergers) • Lower costs and generate profits • Enabled by information systems that ties together disparate units so they act as whole

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Core Competency • Activities for which firm is world-class leader – E.g., world’s best miniature parts designer, best package delivery service, etc

• Relies on knowledge gained over years of experience as well as knowledge research

• Any information system that encourages the sharing of knowledge across business units enhances competency – E.g., Procter & Gamble uses intranet to help people working on similar problems share ideas and expertise.

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Network-Based Strategies • Network economics – Marginal costs of adding another participant are near zero, whereas marginal gain is much larger – E.g., larger number of participants in Internet, greater value to all participants

• Virtual company – Uses networks to link people, resources, and ally with other companies to create and distribute products without traditional organizational boundaries or physical locations

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Disruptive Technologies • Technologies with disruptive impact on industries and businesses, rendering existing products, services and business models obsolete – Personal computers – World Wide Web – Internet music services

• First movers versus fast followers – First movers of disruptive technologies may fail to see potential, allowing second movers to reap rewards (fast followers)

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The Internet and Globalization • Prior to the Internet, competing globally was only an option for huge firms able to afford factories, warehouses, and distribution centers abroad.

• The Internet drastically reduces costs of operating globally.

• Globalization benefits – Scale economies and resource cost reduction – Higher utilization rates, fixed capital costs, and lower cost per unit of production – Speeding time to market

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Figure 3.4 Apple i Phone’s Global Supply Chain

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Global Business and System Strategies • Domestic exporters • Multinationals • Franchisers

• Transnationals

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Global System Configuration • Centralized systems

• Duplicated systems • Decentralized systems • Networked systems

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Figure 3.5 Global Business Organization Systems Configurations

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What is Quality?

• Producer perspective – Conformance to specifications and absence of variation from specs

• Customer perspective – Physical quality (reliability), quality of service, psychological quality

• Total quality management (TQM) – Quality control is end in itself – All people, functions responsible for quality

• Six sigma – Measure of quality: 3.4 defects/million opportunities Copyright © 2020 Pearson Education Ltd.

How Information Systems Improve Quality • Reduce cycle time and simplify production • Benchmark • Use customer demands to improve products and services

• Improve design quality and precision – Computer-aided design (CAD) systems

• Improve production precision and tighten production tolerances

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What is Business Process Management (BPM)?

• Technology alone is often not enough to improve business • Organizational changes often necessary – Minor changes in work habits – Redesigning entire business processes

• Aims to continuously improve processes • Uses variety of tools and methodologies to – Understand existing processes – Design and optimize new processes

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Steps in BPM 1. Identify processes for change

2. Analyze existing processes 3. Design new process 4. Implement new process

5. Continuous measurement

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Figure 3.6 As-Is Business Process for Purchasing a Book from a Physical Bookstore

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Figure 3.7 Redesigned Process for Purchasing a Book Online

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Interactive Session – Organizations: Strategic Information Systems at Hong Kong Disneyland • Class discussion – Discuss the various strategies adopted by Hong Kong Disneyland to attract visitors.

– What problem did Disneyland face as it began to draw more visitors to the theme park? How was it overcome?

– How does Hong Kong Disneyland manage its suppliers?

– How does Hong Kong Disneyland determine which theme or character should be introduced in the park?

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Business Process Reengineering •

A radical form of fast change

•

Not continuous improvement, but elimination of old processes, replacement with new processes, in a brief time period

•

Can produce dramatic gains in productivity

•

Can produce more organizational resistance to change

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How Will MIS Help My Career?

•

The Company: A+ Superior Data Quality

•

Position Description

•

Job Requirements

•

Interview Questions

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 4 Ethical and Social Issues in Information Systems

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Learning Objectives 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, liability, and the quality of everyday life?

4.5 How will MIS help my career?

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Video Cases • Case 1: What Net Neutrality Means for You • Case 2: Facebook and Google Privacy: What Privacy?

• Case 3: United States v. Terrorism: Data Mining for Terrorists and Innocents • Instructional Video: Viktor Mayer Schönberger on the Right to Be Forgotten

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Are Cars Becoming Big Brother on Wheels? (1 of 2) • Problem – Vehicle and driver monitoring systems – Opportunities from new technology – Undeveloped legal environment

• Solutions – Increases safety – Increases efficiency – Creates need for new privacy protection laws and policies

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Are Cars Becoming Big Brother on Wheels? (2 of 2) • Illustrates an IT-created ethical dilemma • Privacy vs. other values • Lack of meaningful privacy laws

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What Ethical, Social, and Political Issues are Raised by Information Systems? (1 of 2) • Recent cases of failed ethical judgment in business – Volkswagen AG, Wells Fargo, General Motors, Takata Corporation – In many, information systems used to bury decisions from public scrutiny

• Ethics – Principles of right and wrong that individuals, acting as free moral agents, use to make choices to guide their behaviors

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What Ethical, Social, and Political Issues are Raised by Information Systems? (2 of 2) • Information systems raise new ethical questions because they create opportunities for: – Intense social change, threatening existing distributions of power, money, rights, and obligations – New kinds of crime

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A Model for Thinking About Ethical, Social, and Political Issues • Society as a calm pond • IT as rock dropped in pond, creating ripples of new situations not covered by old rules

• Social and political institutions cannot respond overnight to these ripples—it may take years to develop etiquette, expectations, laws – Requires understanding of ethics to make choices in legally gray areas

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Figure 4.1 The Relationship Between Ethical, Social, and Political Issues in an Information Society

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Five Moral Dimensions of the Information Age • Information rights and obligations • Property rights and obligations • Accountability and control

• System quality • Quality of life

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Key Technology Trends That Raise Ethical Issues • Computing power doubles every 18 months • Data storage costs rapidly decline • Data analysis advances

• Networking advances • Mobile device growth impact

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Advances in Data Analysis Techniques • Profiling – Combining data from multiple sources to create dossiers of detailed information on individuals

• Nonobvious relationship awareness (NORA) – Combining data from multiple sources to find obscure hidden connections that might help identify criminals or terrorists

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Figure 4.2 Nonobvious Relationship Awareness (NORA)

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Basic Concepts: Responsibility, Accountability, and Liability • Responsibility – Accepting the potential costs, duties, and obligations for decisions

• Accountability – Mechanisms for identifying responsible parties

• Liability – Permits individuals (and firms) to recover damages done to them

• Due process – Laws are well-known and understood, with an ability to appeal to higher authorities Copyright © 2020 Pearson Education Ltd.

Ethical Analysis • Five-step process for ethical analysis 1. Identify and clearly describe the facts.

2. Define the conflict or dilemma and identify the higherorder values involved.

3. Identify the stakeholders.

4. Identify the options that you can reasonably take.

5. Identify the potential consequences of your options.

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Candidate Ethical Principles (1 of 2) • 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.

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Candidate Ethical Principles (2 of 2) • Utilitarian Principle – Take the action that achieves the higher or greater value.

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

• Ethical “No Free Lunch” Rule – Assume that virtually all tangible and intangible objects are owned by someone unless there is a specific declaration otherwise.

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Professional Codes of Conduct • Promulgated by associations of professionals – American Medical Association (AMA) – American Bar Association (ABA) – Association for Computing Machinery (ACM)

• Promises by professions to regulate themselves in the general interest of society

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Real-World Ethical Dilemmas • One set of interests pitted against another

• Examples – Monitoring employees: right of company to maximize productivity of workers versus workers’ desire to use Internet for short personal tasks – Facebook monitors users and sells information to advertisers and app developers

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Information Rights: Privacy and Freedom in the Internet Age (1 of 3) • Privacy – Claim of individuals to be left alone, free from surveillance or interference from other individuals, organizations, or state; claim to be able to control information about yourself

• In the United States, privacy protected by: – First Amendment (freedom of speech and association) – Fourth Amendment (unreasonable search and seizure) – Additional federal statues (e.g., Privacy Act of 1974)

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Information Rights: Privacy and Freedom in the Internet Age (2 of 3) • Fair information practices – Set of principles governing the collection and use of information ▪ Basis of most U.S. and European privacy laws

– Used to drive changes in privacy legislation ▪ COPPA ▪ Gramm-Leach-Bliley Act ▪ HIPAA

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Information Rights: Privacy and Freedom in the Internet Age (3 of 3) • FTC FIP principles – Notice/awareness (core principle) – Choice/consent (core principle) – Access/participation – Security – Enforcement

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European Directive on Data Protection • Requires unambiguous explicit informed consent of customer • EU member nations cannot transfer personal data to countries without similar privacy protection

• Applies across all EU countries to any firms operating in EU or processing data on EU citizens or residents • Strengthens right to be forgotten • Privacy Shield : all countries processing EU data must conform to GDPR requirements • Heavy fines: 4% of global daily revenue Copyright © 2020 Pearson Education Ltd.

Internet Challenges to Privacy (1 of 2) • Cookies – Identify browser and track visits to site – Super cookies (Flash cookies)

• Web beacons (web bugs) – Tiny graphics embedded in emails and web pages – Monitor who is reading email message or visiting site

• Spyware – Surreptitiously installed on user’s computer – May transmit user’s keystrokes or display unwanted ads

• Google services and behavioral targeting Copyright © 2020 Pearson Education Ltd.

Internet Challenges to Privacy (2 of 2) • The United States allows businesses to gather transaction information and use this for other marketing purposes.

• Opt-out vs. opt-in model • Online industry promotes self-regulation over privacy legislation.

– Complex/ambiguous privacy statements – Opt-out models selected over opt-in – Online “seals” of privacy principles

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Figure 4.3 How Cookies Identify Web Visitors

1.

The Web server reads the user's Web browser and determines the operating system, browser name, version number, Internet address, and other information.

2.

The server transmits a tiny text file with user identification information called a cookie, which the user's browser receives and stores on the user's computer.

3.

When the user returns to the Web site, the server requests the contents of any cookie it deposited previously in the user's computer.

4.

The Web server reads the cookie, identifies the visitor, and calls up data on the user.

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Technical Solutions • Solutions include: – Email encryption – Anonymity tools – Anti-spyware tools

• Overall, technical solutions have failed to protect users from being tracked from one site to another – Browser features ▪ “Private” browsing ▪ “Do not track” options

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Property Rights: Intellectual Property • Intellectual property – Tangible and intangible products of the mind created by individuals or corporations

• Protected in four main ways: – Copyright – Patents – Trademarks – Trade secret

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Challenges to Intellectual Property Rights • Digital media different from physical media – Ease of replication – Ease of transmission (networks, Internet) – Ease of alteration – Compactness – Difficulties in establishing uniqueness

• Digital Millennium Copyright Act (DMCA)

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Computer-Related Liability Problems • If software fails, who is responsible?

• If seen as part of a machine that injures or harms, software producer and operator may be liable • If seen as similar to book, difficult to hold author/publisher responsible • If seen as a service, would this be similar to telephone systems not being liable for transmitted messages?

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Interactive Session – Technology: The Boeing 737 Max Crashes: What Happened and Why? • Class Discussion – What is the problem described in this case? Would you consider it an ethical dilemma? Why or why not?

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

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

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

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System Quality: Data Quality and System Errors • What is an acceptable, technologically feasible level of system quality?

– Flawless software is economically unfeasible

• Three principal sources of poor system performance – Software bugs, errors – Hardware or facility failures – Poor input data quality (most common source of business system failure)

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Quality of Life: Equity, Access, Boundaries (1 of 3) • Negative social consequences of systems • Big tech: Concentrating economic and political power • Rapidity of change

• Maintaining boundaries: family, work and leisure • Dependence and vulnerability

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Quality of Life: Equity, Access, Boundaries (2 of 3) • Computer crime and abuse – Computer crime – Computer abuse – Spam – CAN-SPAM Act of 2003

• Employment – Trickle-down technology – Reengineering job loss

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Quality of Life: Equity, Access, Boundaries (3 of 3) • Equity and access – The digital divide

• Health risks – Repetitive stress injury (RSI) – Carpal tunnel syndrome (CTS) – Computer vision syndrome (CVS) – Technostress

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Interactive Session – People: How Harmful Are Smartphones?

• Class discussion – Identify the problem described in this case study. In what sense is it an ethical dilemma?

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

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

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How Will MIS Help My Career?

• The Organization: Pinnacle Air Force Base

• Position Description • Job Requirements • Interview Questions

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 5 IT Infrastructure: Hardware and Software

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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 the major hardware trends?

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

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

5.5 How will MIS help my career?

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Video Cases • Case 1– Rockwell Automation Fuels the Oil and Gas Industry with the Internet of Things (IoT) • Case 2– E S P N.com: The Future of Sports Coverage in the Cloud • Case 3– Netflix: Building a Business in the Cloud

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Hermes UK: Success Delivered Through the Cloud • Problem – Outdated IT infrastructure – Highly competitive industry

• Solutions – Consumption-based cloud solution – Customer-centric data model

• Illustrates use of cloud computing to improve effectiveness and improve customer experience

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Infrastructure Components • IT infrastructure – Platform for supporting all information systems in the business

• Computer hardware • Computer software • Data management technology • Networking and telecommunications technology • Technology services

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Figure 5.1 IT Infrastructure Components

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Types of Computers • Personal computers and mobile devices

• Workstations • Servers • Mainframes

• Supercomputers • Grid computing

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Client/Server Computing • Form of distributed computing

• Splits processing between “clients” and “servers” • Two-tiered client/server architecture • Multi-tiered client/server architecture (N-tier) – Web servers – Application servers

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Figure 5.2 Client/Server Computing

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Figure 5.3 A Multitiered Client/Server Network (N-Tier)

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Storage, Input, and Output Technology • Primary secondary storage technologies – Magnetic disk ▪ SSDs – Optical disks – Magnetic tape – Storage networking: SANs

• Input devices – E.g. keyboard

• Output devices – E.g. monitor Copyright © 2020 Pearson Education Ltd.

Contemporary Hardware Trends (1 of 3) • The mobile digital platform – Smartphones – Tablet computers – eText readers

• Consumerization of IT and BYOD • Nanotechnology and quantum computing • Virtualization – Software-defined storage (SDS)

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Interactive Session – Technology: Open Source Innovation: The New Competitive Advantage • Class discussion – What is open source software? How is it different from proprietary software?

– What had motivated Baidu to open source its AI software? How did Baidu benefit from open sourcing?

– Why did Fujitsu adopt an open source strategy? How did Fujitsu benefit from it?

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Examples of Nanotubes

© forance/123RF Copyright © 2020 Pearson Education Ltd.

Contemporary Hardware Trends (2 of 3) • Cloud computing: – Computing resources obtained over the Internet ▪ Infrastructure as a service (IaaS) ▪ Software as a service (SaaS) ▪ Platform as a service (PaaS)

– Public vs. private clouds – Utility computing, on-demand computing – Hybrid cloud – Data storage security is in hands of provider

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Figure 5.4 Cloud Computing Platform

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Figure 5.5 Major Amazon Web Services

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Contemporary Hardware Trends (3 of 3) • Green computing – Green IT – Practices and technologies for minimizing impact on environment

• High-performance and power-saving processors – Multicore processors – Reduced power consumption

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Interactive Session – Organizations: Look to the Cloud • Class discussion – What business benefits do cloud computing services provide? What problems do they solve?

– What are the disadvantages of cloud computing?

– What kinds of businesses are most likely to benefit from using cloud computing? Why?

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Figure 5.6 The Major Types of Software

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Operating System Software • Software that controls computer activities

• GUIs • Multitouch • PC operating systems – Windows, Mac – UNIX – Linux (open source)

• Mobile operating systems – Chrome, Android, iOS

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Application Software and Desktop Productivity Tools (1 of 2) • Programming languages for business – C – C++ - newer, object-oriented version of C – Visual Basic: Visual programming language for MS Windows applications – Java: OS-independent object-oriented programming language ▪ Migrated to mobile applications, game machines, cable TV systems ▪ Java Virtual Machine

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Application Software and Desktop Productivity Tools (2 of 2) • Software packages and desktop productivity tools – Word processing software – Spreadsheet software – Data management software – Presentation graphics – Software suites – Web browsers

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HTML and HTML5 • Hypertext markup language (HTML): – Page description language for specifying how elements are placed on a web page and for creating links to other pages and objects

• HTML5 – Next evolution of HTML – Enables multimedia embedding without 3rd party plugins like Flash

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Web Services • Software components that exchange information with one another using universal web communication standards and languages • XML (eXtensible Markup Language) – Foundation of web services

• Service oriented architecture (SOA) – Collection of services used to build an organization’s software systems

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Figure 5.7 How Dollar Rent-A-Car Uses Web Services

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Software Trends • Open source software – Linux, Apache

• Cloud-based software and tools – SaaS (software as a service) ▪ Google Docs

– Mashups ▪ Zip Realty uses Google Maps and Zillow.com

– Apps ▪ Mobile apps

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Capacity Planning and Scalability • Capacity planning – Predicting when hardware system becomes saturated – Ensuring computing power for current and future needs – Factors include: ▪ Maximum number of users ▪ Impact of current, future software ▪ Performance measures

• Scalability – Ability of system to expand to serve large number of users without breaking down

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Total Cost of Ownership (TCO) model • Analyzing direct and indirect costs to determine the actual cost of owning a specific technology – Direct costs: hardware, software purchase costs – Indirect costs: ongoing administration costs, upgrades, maintenance, etc.

– Hidden costs: support staff, downtime, etc.

• TCO can be reduced through increased centralization, standardization of hardware and software resources.

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Using Technology Service Providers • Outsourcing – Using external provider to run computer center and networks – Web hosting service – Offshore software outsourcing – Service level agreements (SL As)

• Using cloud services – Appealing to businesses with smaller IT budgets – Pricing is per hour, per-use – Switching costs

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Managing Mobile Platforms • Mobile devices provide productivity gains

• Expenses of equipping employees with devices • Network configuration • Software

• Device security • Stolen or compromised devices • Mobile device management (MDM) software

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Managing Software Localization for Global Business • Software localization – Local language interfaces – Complex software interfaces

• Differences in local cultures • Differences in business processes

• These factors add to TCO of using technology service providers

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How Will MIS Help My Career?

• The Business: A1 Tech IT Consulting

• Position Description • Job Requirements • Interview Questions

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 6 Foundations of Business Intelligence: Databases and Information Management

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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 information policy, data administration, and data quality assurance essential for managing the firm’s data resources?

6.5 How will MIS help my career?

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Video Cases • Case 1: Dubuque Uses Cloud Computing and Sensors to Build a Smarter City • Case 2: Brooks Brothers Closes in on Omnichannel Retail • Case 3: Maruti Suzuki Business Intelligence and Enterprise Databases

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Astro: Leveraging Data for Customerdriven Service • Problem – Increasing local and international competition – Data fragmented across multiple systems and files

• Solutions – Astro Data Lake – Simple Storage Service – Elastic Compute Cloud

• Illustrates the importance of data management for better decision making and customer analysis

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What Is a Database?

• Database: – Collection of related files containing records on people, places, or things • Entity: – Generalized category representing person, place, thing – E.g., SUPPLIER, PART • Attributes: – Specific characteristics of each entity: ▪ SUPPLIER name, address ▪ PART description, unit price, supplier Copyright © 2020 Pearson Education Ltd.

Relational Databases • Organize data into two-dimensional tables (relations) with columns and rows • One table for each entity: – E.g., (CUSTOMER, SUPPLIER, PART, SALES) – Fields (columns) store data representing an attribute – Rows store data for separate records, or tuples • Key field: uniquely identifies each record • Primary key

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Figure 6.2 A Relational Database Table

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Figure 6.3 The PART Table

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Establishing Relationships (1 of 2) • Entity-relationship diagram – Used to clarify table relationships in a relational database • Relational database tables may have: – One-to-one relationship – One-to-many relationship – Many-to-many relationship ▪ Requires “join table” or intersection relation that links the two tables to join information

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Figure 6.4 A Simple EntityRelationship Diagram

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Establishing Relationships (2 of 2) • Normalization – Streamlining complex groups of data – Minimizes redundant data elements – Minimizes awkward many-to-many relationships – Increases stability and flexibility • Referential integrity rules – Ensure that relationships between coupled tables remain consistent

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Figure 6.5 Sample Order Report

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Figure 6.6 The Final Database Design with Sample Records

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Figure 6.7 Entity-Relationship Diagram for the Database with Four Tables

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Database Management Systems (DBMS) • Software for creating, storing, organizing, and accessing data from a database • Separates the logical and physical views of the data – Logical view: how end users view data – Physical view: how data are actually structured and organized • Examples: Microsoft Access, DB2, Oracle Database, Microsoft SQL Server, MySQL

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Figure 6.8 Human Resources Database with Multiple Views

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Operations of a Relational DBMS • Select: – Creates a subset of all records meeting stated criteria • Join: – Combines relational tables to present the server with more information than is available from individual tables • Project: – Creates a subset consisting of columns in a table – Permits user to create new tables containing only desired information

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Figure 6.9 The Three Basic Operations of a Relational DBMS

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Capabilities of Database Management Systems • Data definition capabilities: – Specify structure of content of database • Data dictionary: – Automated or manual file storing definitions of data elements and their characteristics • Querying and reporting: – Data manipulation language ▪ Structured query language (SQL) ▪ Microsoft Access query-building tools – Report generation, e.g., Crystal Reports Copyright © 2020 Pearson Education Ltd.

Figure 6.10 Access Data Dictionary Features

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Figure 6.11 Example of an SQL Query SELECT PART.Part_Number, PART.Part_Name, SUPPLIER.Supplier_Number, SUPPLIER.Supplier_Name FROM PART, SUPPLIER WHERE PART.Suplier_Number = SUPPLIER.Supplier_Number AND Part_Number = 137 OR Part_Number = 150;

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Figure 6.12 An Access Query

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Non-Relational Databases • “NoSQL”

• Handle large data sets of data that are not easily organized into tables, columns, and rows • Use more flexible data model – Don’t require extensive structuring • Can manage unstructured data, such as social media and graphics • E.g. Amazon’s Simple D B, MetLife’s Mongo D B

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Cloud Databases and Distributed Databases • Relational database engines provided by cloud computing services – Pricing based on usage – Appeal to small or medium-sized businesses

• Amazon Relational Database Service – Offers MySQL, Microsoft SQLServer, Oracle Database engines • Distributed databases – Stored in multiple physical locations – Google’s Spanner cloud service Copyright © 2020 Pearson Education Ltd.

The Challenge of Big Data • Massive quantities of unstructured and semi-structured data from Internet and more – 3Vs: Volume, variety, velocity – Petabytes and exabytes • Big datasets offer more patterns and insights than smaller datasets, e.g.

– Customer behavior – Weather patterns

• Requires new technologies and tools

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Interactive Session – The Paradise Papers and Big Data Journalism • Class Discussion – Why was it a challenge to place all the documents from the Paradise Papers in one database?

– Protecting the identity of a whistleblower or whistleblowers is of vital importance to journalists. Give at least one reason why this is so important.

– Explain why cooperation between data experts and journalists was vital to the efficient analysis of data.

– News outlets have been experiencing a severe crisis of profitability. What do you think are the causes of this crisis?

What role can big data analytics play in countering it?

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Blockchain • Distributed database of transactions • Operates on a network without central authority • Maintains a growing list of records called blocks

• Once recorded, blocks cannot be changed • Reduces cost of processing transactions and enhances security

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Figure 6.13 How Blockchain Works

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Business Intelligence Infrastructure • Array of tools for obtaining useful information from internal and external systems and big data – Data warehouses – Data marts – Hadoop – In-memory computing – Analytical platforms

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Data Warehouses • Data warehouse: – Database that stores current and historical data that may be of interest to decision makers – Consolidates and standardizes data from many systems, operational and transactional databases – Data can be accessed but not altered • Data mart: – Subset of data warehouses that is highly focused and isolated for a specific population of users

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Hadoop • Open-source software framework for big data

• Breaks data task into sub-problems and distributes the processing to many inexpensive computer processing nodes • Combines result into smaller data set that is easier to analyze • Key services – Hadoop Distributed File System (HDFS) – MapReduce

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In-Memory Computing • Relies on computer’s main memory (RAM) for data storage

• Eliminates bottlenecks in retrieving and reading data • Dramatically shortens query response times • Enabled by high-speed processors, multicore processing

• Lowers processing costs

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Analytic Platforms • Preconfigured hardware-software systems • Designed for query processing and analytics

• Use both relational and non-relational technology to analyze large data sets • Include in-memory systems, NoS QL DBMS

• E.g. IBM Pure Data System for Analytics – Integrated database, server, storage components • Data lakes

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Figure 6.14 Business Intelligence Technology Infrastructure

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Analytical Tools: Relationships, Patterns, Trends • Once data is gathered, tools are required for consolidating, analyzing, to use insights to improve decision making – Software for database querying and reporting – Multidimensional data analysis (OL AP) – Data mining

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Online Analytical Processing (OLAP) • Supports multidimensional data analysis, enabling users to view the same data in different ways using multiple dimensions – Each aspect of information—product, pricing, cost, region, or time period—represents a different dimension – E.g., comparing sales in East in June versus May and July • Enables users to obtain online answers to ad hoc questions such as these in a fairly rapid amount of time

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Figure 6.15 Multidimensional Data Model

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Data Mining • Finds hidden patterns and relationships in large databases and infers rules from them to predict future behavior • Types of information obtainable from data mining – Associations: occurrences linked to single event – Sequences: events linked over time – Classifications: patterns describing a group an item belongs to – Clustering: discovering as yet unclassified groupings – Forecasting: uses series of values to forecast future values

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Text Mining • Unstructured data (mostly text files) accounts for 80 percent of an organization’s useful information.

• Text mining allows businesses to extract key elements from, discover patterns in, and summarize large unstructured data sets.

• Sentiment analysis – Mines online text comments online or in email to measure customer sentiment

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Web Mining • Discovery and analysis of useful patterns and information from the web – E.g. to understand customer behavior, evaluate website, quantify success of marketing • Content mining – mines content of websites • Structure mining – mines website structural elements, such as links • Usage mining – mines user interaction data gathered by web servers

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Databases and the Web • Firms use the web to make information from their internal databases available to customers and partners.

• Middleware and other software make this possible – Web server – Application servers or CGI – Database server • Web interfaces provide familiarity to users and savings over redesigning legacy systems.

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Figure 6.16 Linking Internal Databases to the Web

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Establishing an Information Policy • Information policy – States organization’s rules for organizing, managing, storing, sharing information • Data administration – Responsible for specific policies and procedures through which data can be managed as a resource • Database administration – Database design and management group responsible for defining and organizing the structure and content of the database, and maintaining the database.

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Ensuring Data Quality • Poor data quality: major obstacle to successful customer relationship management • Data quality problems caused by: – Redundant and inconsistent data produced by multiple systems – Data input errors • Data quality audit • Data cleansing

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Interactive Session – Organizations: DEWA: Evolving Utilities for a Smart City • Class discussion – Identify the main challenge faced by DEWA in this case study.

– Explain how people-based, organizational, and technological factors were involved in this challenge.

– Why is accurate and consistent data particularly important for DEWA?

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How Will MI S Help My Career?

• The Business: Global Online Stats • Position Description • Job Requirements • Interview Questions

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 7 Telecommunications, the Internet, and Wireless Technology

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Learning Objectives 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?

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Video Cases • Case 1: Telepresence Moves out of the Boardroom and into the Field

• Case 2: Virtual Collaboration with IBM Sametime

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Tour de France Wins with Wireless Technology (1 of 2) • Problem – Vast topographically challenging location – Opportunities from new technology

• Solutions – Revise race tracking processes – Obtain external data – Tracking sensors – Mobile app – Cloud computing service – Data analytics – Social media Copyright © 2020 Pearson Education Ltd.

Tour de France Wins with Wireless Technology (2 of 2) • Wireless Race Tracking System • Demonstrates some of the powerful capabilities and opportunities provided by contemporary networking technology • Illustrates the ability of IT systems to enhance services to customers as well as participants

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Networking and Communication Trends • Convergence – Telephone networks and computer networks converging into single digital network using Internet standards

• Broadband – The majority of U.S. households now have broadband access

• Broadband wireless – Voice and data communications now exclusively use broadband cable and wireless platforms

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What Is a Computer Network?

• Two or more connected computers

• Major components in simple network – Client and server computers – Network interfaces (NICs) – Connection medium – Network operating system (NOS) – Hubs, switches, routers

• Software-defined networking (SDN) – Functions of switches and routers managed by central program

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Figure 7.1 Components of a Simple Computer Network

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Networks in Large Companies • Hundreds of local area networks (LANs) linked to firm-wide corporate network • Various powerful servers – Website, corporate intranet, extranet – Backend systems

• Mobile wireless LANs (Wi-Fi networks) • Videoconferencing system • Telephone network, wireless cell phones

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Figure 7.2 Corporate Network Infrastructure

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Key Digital Networking Technologies (1 of 3) • Client/server computing – Distributed computing model – Clients linked through network controlled by network server computer – Server sets rules of communication for network and provides every client with an address so others can find it on the network – Has largely replaced centralized mainframe computing – The Internet: largest implementation of client/server computing

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Key Digital Networking Technologies (2 of 3) • Packet switching – Method of slicing digital messages into parcels (packets), sending packets along different communication paths as they become available, and then reassembling packets at destination – Previous circuit-switched networks required assembly of complete point-to-point circuit – Packet switching more efficient use of network’s communications capacity

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Figure 7.3 Packet-Switched Networks and Packet Communications

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Key Digital Networking Technologies (3 of 3) • TCP/IP and connectivity – Protocols: rules that govern transmission of information between two points – Transmission Control Protocol/Internet Protocol (TCP /IP) ▪ Common worldwide standard that is basis for the Internet

– Department of Defense reference model for TCP /IP ▪ Four layers – Application layer – Transport layer – Internet layer

– Network interface layer Copyright © 2020 Pearson Education Ltd.

Figure 7.4 The Transmission Control Protocol/Internet Protocol (T C P/I P) Reference Model

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Types of Networks • Signals: Digital versus analog – Modem: translates digital signals into analog form (and vice versa)

• Types of networks – Local area networks (LANs) ▪ Ethernet ▪ Client/server vs. peer-to-peer

– Wide area networks (WANs) – Metropolitan area networks (MANs) – Campus area networks (CANs)

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Figure 7.5 Functions of the Modem

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Transmission Media and Transmission Speed • Physical transmission media – Twisted pair wire (CAT5) – Coaxial cable – Fiber optics cable – Wireless transmission media and devices ▪ Satellites ▪ Cellular systems

• Transmission speed – Bits per second (bps) – Hertz – Bandwidth Copyright © 2020 Pearson Education Ltd.

What Is the Internet?

• The Internet – World’s most extensive network – Internet service providers (ISPs) ▪ Provide connections ▪ Types of Internet connections – Dial-up: 56.6 Kbps – Digital subscriber line (DSL/FIOS): 385 Kbps –40 Mbps – Cable Internet connections: 1–50 Mbps – Satellite – T1/T3 lines: 1.54–45 Mbps

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Internet Addressing and Architecture • Each device on Internet assigned Internet Protocol (IP) address • 32-bit number, e.g. 207.46.250.119 • The Domain Name System (DNS) – Converts IP addresses to domain names – Hierarchical structure – Top-level domains

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Figure 7.6 The Domain Name System

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Internet Architecture and Governance • Network service providers – Own trunk lines (high-speed backbone networks)

• Regional telephone and cable T V companies – Provide regional and local access

• Professional organizations and government bodies establish Internet standards – IAB – ICANN – W3C

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Figure 7.7 Internet Network Architecture

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The Future Internet: I P v 6 and Internet 2 • I Pv 6 – New addressing scheme for IP numbers – Will provide more than a quadrillion new addresses – Not compatible with current IPv5 addressing

• Internet2 – Advanced networking consortium ▪ Universities, businesses, government agencies, other institutions

– Developed high-capacity 100 Gbps testing network – Testing leading-edge new technologies for Internet Copyright © 2020 Pearson Education Ltd.

Internet Services and Communication Tools (1 of 2) • Internet services – Email – Chatting and instant messaging – Newsgroups – Telnet – File Transfer Protocol (FTP) – World Wide Web

• Voice over IP (VoIP) – Digital voice communication using IP, packet switching

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Figure 7.8 Client/Server Computing on the Internet

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Internet Services and Communication Tools (2 of 2) • Unified communications – Communications systems that integrate voice, data, email, conferencing

• Virtual private network (VPN) – Secure, encrypted, private network run over Internet – PPTP – Tunneling

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Figure 7.9 How Voice over IP Works

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Interactive Session – Management: Singapore Shuts Down 2G Network • Class discussion – What do 2G, 3G, and 4G refer to? Explain one difference among them.

– What is meant by “wireless spectrum” and “spectrum crunch”? What measures were taken to alleviate the spectrum scarcity?

– The decision to shut down 2G was easy technically but hard in terms of implementation.” Do you agree with this statement? Why or why not?

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Figure 7.10 A Virtual Private Network Using the Internet

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The Web • Hypertext – Hypertext Markup Language (HTML) – Hypertext Transfer Protocol (HTTP): – Uniform resource locator example (URL): ▪ http://www.megacorp.com/content/features/082602.html

• Web servers ▪ Software for locating and managing web pages

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Searching for Information on the Web • Mobile search

• Semantic search • Social search • Visual search

• Intelligent agent shopping bots • Search engine marketing • Search engine optimization (SEO)

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Figure 7.11 Top Desktop/Laptop Web Search Engines Worldwide

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Figure 7.12 How Google Works

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Sharing Information on the Web • Blogs • RSS • Wikis

• Social networking

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The Future Web • More tools to make sense of trillions of pages on the Internet • Pervasive web • Internet of Things (IoT)

• Internet of People • App Internet • Increased cloud computing and Sa aS

• Ubiquitous mobile connectivity • Greater seamlessness of web as a whole Copyright © 2020 Pearson Education Ltd.

Interactive Session – Technology: Talking Cars Make for Better Road Safety • Class Discussion – What are the pros and cons of the V2X technology?

– What can be done to speed up the adoption of V2X technology among vehicle owners?

– What other applications can you think of for the ITS Connect?

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Cellular Systems (1 of 2) • Competing standards – CDMA : United States only – GSM : Rest of world, AT&T, T-Mobile

• Third-generation (3G) networks – 144 kbps – Suitable for email access, web browsing

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Cellular Systems (2 of 2) • Fourth-generation (4G) networks – Up to 100 Mbps – Suitable for email access, web browsing, Internet video – LTE and Wi Max

• 5G networks – Gigabit capacity – Currently under development and field testing

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Wireless Computer Networks and Internet Access (1 of 2) • Bluetooth (802.15) – Links up to 8 devices in a 10-m area using low-power, radiobased communication – Useful for personal networking (PANs) s

• Wi-Fi (802.11) – Set of standards: 802.11 – Used for wireless LAN and wireless Internet access – Use access points: device with radio receiver/transmitter for connecting wireless devices to a wired LAN

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Wireless Computer Networks and Internet Access (2 of 2) • Wi-Fi (802.11) continued – Hotspots: one or more access points in public place to provide maximum wireless coverage for a specific area – Weak security features

• WiMax (802.16) – Wireless access range of 31 miles – Require WiMax antennas

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Figure 7.13 A Bluetooth Network (P A N)

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Figure 7.14 An 802.11 Wireless L A N

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Radio Frequency Identification (RFID) • Use tiny tags with microchips containing data about an item and location • Tag antennas to transmit radio signals over short distances to special RFID readers • Common uses: – Automated toll-collection – Tracking goods in a supply chain

• Reduction in cost of tags making RFID viable for many firms

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Figure 7.15 How RFID Works

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Wireless Sensor Networks (WSNs) • Networks of hundreds or thousands of interconnected wireless devices • Used to monitor building security, detect hazardous substances in air, monitor environmental changes, traffic, or military activity

• Devices have built-in processing, storage, and radio frequency sensors and antennas • Require low-power, long-lasting batteries and ability to endure in the field without maintenance • Major sources of “Big Data” and fueling “Internet of Things” Copyright © 2020 Pearson Education Ltd.

Figure 7.16 A Wireless Sensor Network

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How Will MIS Help My Career?

• The Company: A1 Western Car Dealers

• Position Description: Automotive digital advisor • Job Requirements • Interview Questions

• Author Tips

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 8 Securing Information Systems

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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?

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Video Cases • Case 1: Stuxnet and Cyberwarfare • Case 2: Cyberespionage: The Chinese Threat • Instructional Video 1: Sony PlayStation Hacked; Data Stolen from 77 Million Users • Instructional Video 2: Meet the Hackers: Anonymous Statement on Hacking Sony

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The Electric Power Grid Becomes a Cyberwarfare Battleground (1 of 2) • Problem – Large complex infrastructure – Numerous access points – Uneven security

• Solutions – Malware detection – Social engineering education – Multifactor authentication

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The Electric Power Grid Becomes a Cyberwarfare Battleground (2 of 2) • Hackers took advantage of uneven security and controls and loose management structure to attack the U.S. power grid

• Demonstrates vulnerabilities in information technology systems • Illustrates some of the reasons organizations need to pay special attention to information system security

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Why Systems Are Vulnerable (1 of 2) • Security – Policies, procedures, and technical measures used to prevent unauthorized access, alteration, theft, or physical damage to information systems

• Controls – Methods, policies, and organizational procedures that ensure safety of organization’s assets; accuracy and reliability of its accounting records; and operational adherence to management standards

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Why Systems Are Vulnerable (2 of 2) • Accessibility of networks

• Hardware problems (breakdowns, configuration errors, damage from improper use or crime) • Software problems (programming errors, installation errors, unauthorized changes) • Disasters • Use of networks/computers outside of firm’s control

• Loss and theft of portable devices

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Figure 8.1 Contemporary Security Challenges and Vulnerabilities

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Internet Vulnerabilities • Network open to anyone

• Size of Internet means abuses can have wide impact • Use of fixed Internet addresses with cable / DSL modems creates fixed targets for hackers

• Unencrypted VOIP • Email, P2P, IM – Interception – Attachments with malicious software – Transmitting trade secrets

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Wireless Security Challenges • Radio frequency bands easy to scan

• SSIDs (service set identifiers) – Identify access points, broadcast multiple times, can be identified by sniffer programs

• War driving – Eavesdroppers drive by buildings and try to detect SSID and gain access to network and resources – Once access point is breached, intruder can gain access to networked drives and files

• Rogue access points

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Malicious Software: Viruses, Worms, Trojan Horses, and Spyware (1 of 2) • Malware (malicious software)

• Viruses • Worms • Worms and viruses spread by – Downloads and drive-by downloads – Email, IM attachments

• Mobile device malware

• Social network malware Copyright © 2020 Pearson Education Ltd.

Malicious Software: Viruses, Worms, Trojan Horses, and Spyware (2 of 2) • Trojan horse

• SQL injection attacks • Ransomware • Spyware – Key loggers – Other types ▪ Reset browser home page ▪ Redirect search requests ▪ Slow computer performance by taking up memory Copyright © 2020 Pearson Education Ltd.

Hackers and Computer Crime (1 of 3) • Hackers vs. crackers

• Activities include: – System intrusion – System damage – Cybervandalism ▪ Intentional disruption, defacement, destruction of website or corporate information system

• Spoofing and sniffing

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Hackers and Computer Crime (2 of 3) • Denial-of-service attacks (DoS)

• Distributed denial-of-service attacks (DDoS) • Botnets • Spam

• Computer crime – Computer may be target of crime – Computer may be instrument of crime

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Hackers and Computer Crime (3 of 3) • Identity theft – Phishing – Evil twins – Pharming

• Click fraud • Cyberterrorism • Cyberwarfare

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Internal Threats: Employees • Security threats often originate inside an organization

• Inside knowledge • Sloppy security procedures – User lack of knowledge

• Social engineering • Both end users and information systems specialists are sources of risk

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Software Vulnerability • Commercial software contains flaws that create security vulnerabilities – Bugs (program code defects) – Zero defects cannot be achieved – Flaws can open networks to intruders

• Zero-day vulnerabilities • Patches – Small pieces of software to repair flaws – Patch management

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What Is the Business Value of Security and Control?

• Failed computer systems can lead to significant or total loss of business function • Firms now are more vulnerable than ever – Confidential personal and financial data – Trade secrets, new products, strategies

• A security breach may cut into a firm’s market value almost immediately • Inadequate security and controls also bring forth issues of liability Copyright © 2020 Pearson Education Ltd.

Interactive Session – Technology: Meltdown and Spectre Haunt the World’s Computers • Class discussion – How dangerous are Spectre and Meltdown? Explain your answer.

– Compare the threats of Spectre and Meltdown to cloud computing centers, corporate data centers, and individual computer and smartphone users.

– How would you protect against Spectre and Meltdown if you were running a public cloud computing center, if you ran a corporate data center, and if you were an individual computer user?

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Legal and Regulatory Requirements for Electronic Records Management • HIPAA – Medical security and privacy rules and procedures

• Gramm-Leach-Bliley Act – Requires financial institutions to ensure the security and confidentiality of customer data

• Sarbanes-Oxley Act – Imposes responsibility on companies and their management to safeguard the accuracy and integrity of financial information that is used internally and released externally

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Electronic Evidence and Computer Forensics • Electronic evidence – Evidence for white collar crimes often in digital form – Proper control of data can save time and money when responding to legal discovery request

• Computer forensics – Scientific collection, examination, authentication, preservation, and analysis of data from computer storage media for use as evidence in court of law – Recovery of ambient data

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Information Systems Controls • May be automated or manual

• General controls – Govern design, security, and use of computer programs and security of data files in general throughout organization – Software controls, hardware controls, computer operations controls, data security controls, system development controls, administrative controls,

• Application controls – Controls unique to each computerized application – Input controls, processing controls, output controls

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Risk Assessment • Determines level of risk to firm if specific activity or process is not properly controlled – Types of threat – Probability of occurrence during year – Potential losses, value of threat – Expected annual loss

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Table 8.5 Online Order Processing Risk Assessment Exposure

Probability of Loss Range Occurrence (Average) ($)

Expected Annual Loss ($)

Power failure

30%

$5,000 − $200,000 ($102,500)

$30,750

Embezzlement

5%

$1,000 − $50,000 ($25,500)

$1,275

User error

98%

$200 − $40,000 ($20,100)

$19,698

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Security Policy • Ranks information risks, identifies security goals and mechanisms for achieving these goals • Drives other policies • Acceptable use policy (AUP) – Defines acceptable uses of firm’s information resources and computing equipment

• Identity management – Identifying valid users – Controlling access

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Figure 8.2 Access Rules for a Personnel System

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Disaster Recovery Planning and Business Continuity Planning • Disaster recovery planning – Devises plans for restoration of disrupted services

• Business continuity planning – Focuses on restoring business operations after disaster • Both types of plans needed to identify firm’s most critical systems – Business impact analysis to determine impact of an outage – Management must determine which systems restored first

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The Role of Auditing • Information systems audit – Examines firm’s overall security environment as well as controls governing individual information systems

• Security audits – Review technologies, procedures, documentation, training, and personnel – May even simulate disaster to test responses

• List and rank control weaknesses and the probability of occurrence • Assess financial and organizational impact of each threat

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Figure 8.3 Sample Auditor’s List of Control Weaknesses

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Tools and Technologies for Safeguarding Information Systems (1 of 3) • Identity management software – Automates keeping track of all users and privileges – Authenticates users, protecting identities, controlling access

• Authentication – Password systems – Tokens – Smart cards – Biometric authentication – Two-factor authentication Copyright © 2020 Pearson Education Ltd.

Tools and Technologies for Safeguarding Information Systems (2 of 3) • Firewall – Combination of hardware and software that prevents unauthorized users from accessing private networks – Packet filtering – Stateful inspection – Network address translation (NAT) – Application proxy filtering

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Figure 8.4 A Corporate Firewall

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Tools and Technologies for Safeguarding Information Systems (3 of 3) • Intrusion detection system – Monitors hot spots on corporate networks to detect and deter intruders

• Antivirus and antispyware software – Checks computers for presence of malware and can often eliminate it as well – Requires continual updating

• Unified threat management (UTM) systems Copyright © 2020 Pearson Education Ltd.

Securing Wireless Networks • WEP security – Static encryption keys are relatively easy to crack – Improved if used in conjunction with VPN

• WPA2 specification – Replaces WEP with stronger standards – Continually changing, longer encryption keys

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Encryption and Public Key Infrastructure (1 of 3) • Encryption – Transforming text or data into cipher text that cannot be read by unintended recipients – Two methods for encryption on networks ▪ Secure Sockets Layer (SSL) and successor Transport Layer Security (TLS) ▪ Secure Hypertext Transfer Protocol (S-HTTP)

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Encryption and Public Key Infrastructure (2 of 3) • Two methods of encryption of messages – Symmetric key encryption ▪ Sender and receiver use single, shared key

– Public key encryption ▪ Uses two, mathematically related keys: public key and private key ▪ Sender encrypts message with recipient’s public key ▪ Recipient decrypts with private key

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Figure 8.5 Public Key Encryption

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Encryption and Public Key Infrastructure (3 of 3) • Digital certificate – Data file used to establish the identity of users and electronic assets for protection of online transactions – Uses a trusted third party, certification authority (CA), to validate a user's identity – CA verifies user’s identity, stores information in CA server, which generates encrypted digital certificate containing owner ID information and copy of owner’s public key

• Public key infrastructure (PKI) – Use of public key cryptography working with certificate authority – Widely used in e-commerce Copyright © 2020 Pearson Education Ltd.

Figure 8.6 Digital Certificates

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Securing Transactions with Blockchain • Secure transaction database • Encryption used to verify users and transactions • Decentralized

• Records cannot be changed

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Ensuring System Availability • Online transaction processing requires 100% availability

• Fault-tolerant computer systems – Contain redundant hardware, software, and power supply components that create an environment that provides continuous, uninterrupted service

• Deep packet inspection • Security outsourcing – Managed security service providers (MSSPs)

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Security Issues for Cloud Computing and the Mobile Digital Platform (1 of 2) • Security in the cloud – Responsibility for security resides with company owning the data – Firms must ensure providers have adequate protection: ▪ Where data are stored ▪ Meeting corporate requirements, legal privacy laws ▪ Segregation of data from other clients ▪ Audits and security certifications

– Service level agreements (SLAs)

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Security Issues for Cloud Computing and the Mobile Digital Platform (2 of 2) • Securing mobile platforms – Security policies should include and cover any special requirements for mobile devices ▪ Guidelines for use of platforms and applications

– Mobile device management tools ▪ Authorization ▪ Inventory records ▪ Control updates ▪ Lock down/erase lost devices ▪ Encryption

– Software for segregating corporate data on devices Copyright © 2020 Pearson Education Ltd.

Ensuring Software Quality • Software metrics: Objective assessments of system in form of quantified measurements – Number of transactions – Online response time – Payroll checks printed per hour – Known bugs per hundred lines of code

• Early and regular testing • Walkthrough: Review of specification or design document by small group of qualified people • Debugging: Process by which errors are eliminated Copyright © 2020 Pearson Education Ltd.

Interactive Session – Organizations: Phishing for Money: Dangerous Emails • Class discussion – Explain the difference between spear phishing and bulk phishing. Which is most difficult to spot by victims, and why?

– What factors should a CEO duped by hackers take into consideration before deciding to contact the police?

– Do you think that not adding attachments to emails will help protect companies against phishing stacks?

– Give two pieces of advice to a company or individual on increasing protection against a phishing attack.

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How Will MIS Help My Career?

• The Company: No. 1 Value Supermarkets

• Position Description: Identity access and management support specialist, entry-level • Job Requirements

• Interview Questions • Author Tips

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 9 Achieving Operational Excellence and Customer Intimacy: Enterprise Applications

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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?

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Video Cases • Case 1: Maersk Develops a Global Shipping Management System • Instructional Video: GSMS Protects Patients by Serializing Every Bottle of Drugs

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Warehouse Management at Norauto: Conversational Commerce (1 of 2) • Problem – Volume and diversity of product range – Global operations – Complex supply chain – Manual processes • Solutions – Scalable replacement – Voice recognition software

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Warehouse Management at Norauto: Conversational Commerce (2 of 2) • Norauto used a scalable warehouse management system from Manhattan Associates and a voice recognition solution by Vocollect to reduce errors and enhance orderfulfilment accuracy.

• Demonstrates why companies need enterprise applications • Illustrates the ability of ERP systems to dramatically improve operational effectiveness and decision making on a global scale

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Enterprise Systems • Enterprise resource planning (ERP) systems

• Suite of integrated software modules and a common central database • Collects data from many divisions of firm for use in nearly all of firm’s internal business activities • Information entered in one process is immediately available for other processes

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Figure 9.1 How Enterprise Systems Work

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Enterprise Software • Built around thousands of predefined business processes that reflect best practices – Finance and accounting – Human resources – Manufacturing and production – Sales and marketing

• To implement, firms: – Select functions of system they wish to use – Map business processes to software processes ▪ Use software’s configuration tables for customizing

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Business Value of Enterprise Systems • Increase operational efficiency

• Provide firm-wide information to support decision making • Enable rapid responses to customer requests for information or products • Include analytical tools to evaluate overall organizational performance and improve decision-making

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The Supply Chain • Network of organizations and processes for: – Procuring materials – Transforming materials into products – Distributing the products

• Upstream supply chain • Downstream supply chain • Internal supply chain

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Figure 9.2 Nike’s Supply Chain

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Supply Chain Management • Inefficiencies cut into a company’s operating costs – Can waste up to 25 percent of operating expenses

• Just-in-time strategy – Components arrive as they are needed – Finished goods shipped after leaving assembly line

• Safety stock: buffer for lack of flexibility in supply chain • Bullwhip effect – Information about product demand gets distorted as it passes from one entity to next across supply chain

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Figure 9.3 The Bullwhip Effect

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Supply Chain Management Software • Supply chain planning systems – Model existing supply chain – Enable demand planning – Optimize sourcing, manufacturing plans – Establish inventory levels – Identify transportation modes

• Supply chain execution systems – Manage flow of products through distribution centers and warehouses

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Global Supply Chains and the Internet • Global supply chain issues – Greater geographical distances, time differences – Participants from different countries ▪ Different performance standards ▪ Different legal requirements

• Internet helps manage global complexities – Warehouse management – Transportation management – Logistics – Outsourcing Copyright © 2020 Pearson Education Ltd.

Demand-Driven Supply Chains: From Push to Pull Manufacturing and Efficient Customer Response • Push-based model (build-to-stock) – Earlier SCM systems – Schedules based on best guesses of demand

• Pull-based model (demand-driven) – Web-based – Customer orders trigger events in supply chain

• Internet enables move from sequential supply chains to concurrent supply chains – Complex networks of suppliers can adjust immediately Copyright © 2020 Pearson Education Ltd.

Figure 9.4 Push- Versus Pull-Based Supply Chain Models

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Figure 9.5 The Emerging InternetDriven Supply Chain

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Business Value of Supply Chain Management Systems • Match supply to demand • Reduce inventory levels • Improve delivery service

• Speed product time to market • Use assets more effectively – Total supply chain costs can be 75 percent of operating budget

• Increase sales Copyright © 2020 Pearson Education Ltd.

Interactive Session – Organizations: Soma Bay Prospers with E R P in the Cloud • Class discussion – Identify and describe the problem discussed in this case.

What management, organization, and technology factors contributed to the problem?

– Why was an ERP system required for a solution? How did having a cloud-based ERP system contribute to the solution?

– What were the business benefits of Soma Bay’s new enterprise system? How did it change decision making and the way the company operated?

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Customer Relationship Management • Knowing the customer

• In large businesses, too many customers and too many ways customers interact with firm • CRM systems – Capture and integrate customer data from all over the organization – Consolidate and analyze customer data – Distribute customer information to various systems and customer touch points across enterprise – Provide single enterprise view of customers

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Figure 9.6 Customer Relationship Management (CRM)

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Customer Relationship Management Software (1 of 2) • Packages range from niche tools to large-scale enterprise applications • More comprehensive packages have modules for: – Partner relationship management (PRM) ▪ Integrating lead generation, pricing, promotions, order configurations, and availability ▪ Tools to assess partners’ performances

– Employee relationship management (ERM) ▪ Setting objectives, employee performance management, performance-based compensation, employee training Copyright © 2020 Pearson Education Ltd.

Customer Relationship Management Software (2 of 2) • CRM packages typically include tools for: – Sales force automation (SFA) ▪ Sales prospect and contact information ▪ Sales quote generation capabilities

– Customer service ▪ Assigning and managing customer service requests ▪ Web-based self-service capabilities

– Marketing ▪ Capturing prospect and customer data, scheduling and tracking direct-marketing mailings or email ▪ Cross-selling Copyright © 2020 Pearson Education Ltd.

Figure 9.7 How CRM Systems Support Marketing Responses by Channel for January 2019 Promotional Campaign

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Figure 9.8 CRM Software Capabilities

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Figure 9.9 Customer Loyalty Management Process Map

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Operational and Analytical CRM • Operational CRM – Customer-facing applications – Sales force automation call center and customer service support – Marketing automation

• Analytical C RM – Based on data warehouses populated by operational CRM systems and customer touch points – Analyzes customer data (OLAP, data mining, etc.)

▪ Customer lifetime value (CLTV)

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Figure 9.10 Analytical CRM

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Interactive Session – People: CRM Helps Adidas Know Its Customers One Shoe Buyer at a Time • Class discussion – Analyze Adidas using the competitive forces and value chain model.

– What is Adidas’s business strategy? What is the role of customer relationship management in that strategy?

– How do information systems support Adidas’s strategy?

– How did using Salesforce.com make Adidas more competitive? How did it change the way the company ran its business?

– Give an example of two business decisions that were improved by using Salesforce.com.

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Business Value of Customer Relationship Management Systems • Business value of CRM systems – Increased customer satisfaction – Reduced direct-marketing costs – More effective marketing – Lower costs for customer acquisition/retention – Increased sales revenue

• Churn rate – Number of customers who stop using or purchasing products or services from a company – Indicator of growth or decline of firm’s customer base Copyright © 2020 Pearson Education Ltd.

Enterprise Application Challenges • Expensive to purchase and implement enterprise applications – Multi-million dollar projects in 2018 – Long development times

• Technology changes • Business process changes

• Organizational learning, changes • Switching costs, dependence on software vendors • Data standardization, management, cleansing

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Next-Generation Enterprise Applications (1 of 2) • Enterprise solutions/suites – Make applications more flexible, web-enabled, integrated with other systems

• SOA standards • Open-source applications

• On-demand solutions • Cloud-based versions • Functionality for mobile platform Copyright © 2020 Pearson Education Ltd.

Next-Generation Enterprise Applications (2 of 2) • Social CRM – Incorporating social networking technologies – Company social networks – Monitor social media activity; social media analytics – Manage social and web-based campaigns

• Business intelligence – Inclusion of BI with enterprise applications – Flexible reporting, ad hoc analysis, “what-if” scenarios, digital dashboards, data visualization

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How Will MIS Help My Career?

• The Company: XYZ Global Industrial Components

• Position Description: Manufacturing management trainee • Job Requirements • Interview Questions

• Author Tips

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 10 E-commerce: Digital Markets, Digital Goods

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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?

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Video Cases • Case 1: Walmart Takes on Amazon: A Battle of IT and Management Systems

• Case 2: Groupon: Deals Galore • Case 3: Etsy: A Marketplace and Community • Instructional Video 1: Walmart’s E-commerce Fulfillment Center Network • Instructional Video 2: Behind the Scenes of an Amazon Warehouse

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E-commerce Comes to the Dashboard: The Battle for the "Fourth Screen" • Problem – Opportunities presented by new technology

• Solutions – Dashboard display screens – Android Auto and Apple CarPlay – Android Automotive – Customer and auto databases

• Illustrates some major trends in e-commerce – E-commerce moves to the auto mobile platform – Sales of services – Advanced data mining and search technology Copyright © 2020 Pearson Education Ltd.

E-Commerce Today • E-commerce: Use of the Internet and web to transact business • Began in 1995 and grew exponentially; still stable even in a recession

• Companies that survived the dot-com bubble now thrive • The new e-commerce: social, mobile, local • Move from desktop to smartphone

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Figure 10.1 The Growth of E-Commerce

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Why E-commerce Is Different (1 of 2) • Ubiquity – Marketspace is virtual – Transaction costs reduced

• Global reach – Transactions cross cultural and national boundaries

• Universal standards – One set of technology standards: Internet standards

• Richness – Supports video, audio, and text messages

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Why E-commerce is Different (2 of 2) • Interactivity • Information density – Greater price and cost transparency – Enables price discrimination

• Personalization/customization – Technology permits modification of messages, goods

• Social technology – Promotes user content generation and social networking

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Key Concepts in E-commerce – Digital Markets and Digital Goods in a Global Marketplace • Internet and digital markets have changed the way companies conduct business • Information asymmetry reduced • Menu costs, search and transaction costs reduced • Dynamic pricing enabled • Switching costs • Delayed gratification • Disintermediation Copyright © 2020 Pearson Education Ltd.

Figure 10.2 The Benefits of Disintermediation to the Consumer

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Digital Goods • Goods that can be delivered over a digital network • Cost of producing first unit is almost entire cost of product • Costs of delivery over the Internet very low

• Marketing costs remain the same; pricing highly variable • Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.)

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Types of E-commerce • Three major types – Business-to-consumer (B2C) ▪ Example: Barnes and Noble.com

– Business-to-business (B2B) ▪ Example: ChemConnect

– Consumer-to-consumer (C2C) ▪ Example: eBay

• E-commerce can also be categorized by platform – Mobile commerce (m-commerce)

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E-commerce Business Models • Portal • E-tailer • Content provider

• Transaction broker • Market creator • Service provider

• Community provider

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Interactive Session – Technology: Small Business Loans From a FinTech App • Class discussion – What distinguishes the FinTech services described in this case from traditional banks? Explain your answer.

– How do the financial services described here use information technology to innovate?

– What are the advantages and disadvantages of small businesses obtaining loans from FinTech services?

– If you were a small business, what factors would you consider in deciding whether to use a FinTech service?

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E-commerce Revenue Models • Advertising • Sales • Subscription

• Free/Freemium • Transaction fee • Affiliate

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How Has E-commerce Transformed Marketing?

• Internet provides new ways to identify and communicate with customers • Long tail marketing

• Internet advertising formats • Behavioral targeting – Tracking online behavior of individuals

• Programmatic ad buying • Native advertising Copyright © 2020 Pearson Education Ltd.

Figure 10.3 Website Visitor Tracking

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Figure 10.4 Website Personalization

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Figure 10.5 How an Advertising Network Works

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Social E-commerce and Social Network Marketing (1 of 2) • Social e-commerce based on digital social graph • Features of social e-commerce driving its growth – Newsfeed – Timelines – Social sign-on – Collaborative shopping – Network notification – Social search (recommendations)

• Social media – Fastest growing media for branding and marketing Copyright © 2020 Pearson Education Ltd.

Social E-Commerce and Social Network Marketing (2 of 2) • Social network marketing – Seeks to leverage individuals’ influence over others – Targeting a social network of people sharing interests and advice – Facebook’s “Like” button – Social networks have huge audiences

• Social shopping sites

• Wisdom of crowds • Crowdsourcing Copyright © 2020 Pearson Education Ltd.

Interactive Session – People: Engaging "Socially" with Customers • Class discussion – Assess the people, organization, and technology issues for using social media technology to engage with customers.

– What are the advantages and disadvantages of using social media for advertising, brand building, market research, and customer service?

– Give an example of a business decision in this case study that was facilitated by using social media to interact with customers.

– 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?

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How Has E-commerce Affected Business-To Business Transactions?

• U.S. B2B trade in 2019 is $13.5 trillion – U.S. B2B e-commerce in 2018 is $6.3 trillion

• Internet and networking helps automate procurement

• Variety of Internet-enabled technologies used in B2B – Electronic data interchange (EDI) – Private industrial networks (private exchanges) – Net marketplaces – Exchanges

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Electronic Data Interchange (EDI) • Computer-to-computer exchange of standard transactions such as invoices, purchase orders • Major industries have EDI standards – Define structure and information fields of electronic documents

• More companies are moving toward web-enabled private networks – Allow them to link to a wider variety of firms than EDI allows – Enable sharing a wider range of information

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Figure 10.6: Electronic Data Interchange (EDI)

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New Ways of B2B Buying and Selling • Private industrial networks – Private exchanges – Large firm using a secure website to link to suppliers and partners

• Net marketplaces (e-hubs) – Single digital marketplace for many buyers and sellers – May focus on direct or indirect goods – May be vertical or horizontal marketplaces

• Exchanges – Independently owned third-party Net marketplaces for spot purchasing Copyright © 2020 Pearson Education Ltd.

Figure 10.7 A Private Industrial Network

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Figure 10.8 A Net Marketplace

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What Is the Role of M-commerce in Business, and What Are the Most Important M-commerce Applications?

• M-commerce in 2019 is 45 percent of all e-commerce • Fastest growing form of e-commerce – Growing at 30 percent or more per year

• Main areas of growth – Mass market retailing (Amazon, eBay, etc.)

– Sales of digital content (music, T V, etc.)

– In-app sales to mobile devices

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Figure 10.9 Mobile Retail Commerce Revenues

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Location-Based Services and Applications • Used by 74 percent of smartphone owners • Based on GPS map services • Geosocial services – Where friends are

• Geo advertising – What shops are nearby

• Geo information services – Price of house you are passing

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Other Mobile Commerce Services • Financial account management apps – Banks, credit card companies

• Mobile advertising market – Google and Facebook are largest markets – Ads embedded in games, videos, and mobile apps

• 65 percent of online retailers have m-commerce websites

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What Issues Must Be Addressed When Building an E-commerce Presence?

• Most important management challenges – Developing clear understanding of business objectives – Knowing how to choose the right technology to achieve those objectives

• Develop an e-commerce presence map – Four areas: websites, email, social media, offline media

• Develop a timeline: milestones – Breaking a project into discrete phases Copyright © 2020 Pearson Education Ltd.

Figure 10.10 E-commerce Presence Map

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How Will MIS Help My Career?

• The Company: SportsFantasy Empire • Position Description: Junior e-commerce data analyst • Job Requirements • Interview Questions • Author Tips

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 11 Improving Decision Making and Managing Artificial Intelligence

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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?

11.3 What is artificial intelligence (AI)? How does it differ from human intelligence?

11.4 What are the major types of AI techniques and how do they benefit organizations?

11.5 How will MIS help my career?

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Video Cases • Case 1: How IBM’s Watson Became a Jeopardy Champion

• Case 2: Business Intelligence Helps the Cincinnati Zoo Work Smarter • Instructional Video 1: IBM Watson Demo Oncology Diagnosis and Treatment

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Machine Learning Helps Akershus University Hospital Make Better Treatment Decisions • Problem – Unstructured data – Very large volume of data – Opportunities from new technology

• Solutions – IBM Watson Explorer – Machine learning – Natural language processing

• Illustrates how information systems improve decision making Copyright © 2020 Pearson Education Ltd.

Business Value of Improved Decision Making • Possible to measure value of improved decision making • Decisions made at all levels of the firm – Some are common, routine, and numerous – Although value of improving any single decision may be small, improving hundreds of thousands of “small” decisions adds up to large annual value for the business

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Table 11.1 Business Value of Enhanced Decision Making Example Decision Value

Decision Maker

# of Annual Decisions

Estimated Value to Firm

Annual

Allocate support to most valuable customers

Accounts manager

12

$100,000

$1,200,000

Predict call center daily demand

Call Center management

4

150,000

600,000

Decide parts inventory level daily

Inventory manager

365

5,000

1,825,000

Identify competitive bids from major suppliers

Senior management

1

2,000,000

2,000,000

Schedule production to fill orders

Manufacturin g manager

150

10,000

1,500,000

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Types of Decisions • Unstructured – Decision maker must provide judgment to solve problem – Novel, important, nonroutine – No well-understood or agreed-upon procedure for making them

• Structured – Repetitive and routine – Involve definite procedure for handling them so do not have to be treated as new

• Semi-structured – Only part of problem has clear-cut answer provided by accepted procedure Copyright © 2020 Pearson Education Ltd.

Figure 11.1 Information Requirements of Key Decision-Making Groups in a Firm

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The Decision-Making Process 1. Intelligence – Discovering, identifying, and understanding the problems occurring in the organization

2. Design – Identifying and exploring various solutions

3. Choice – Choosing among solution alternatives

4. Implementation – Making chosen alternative work and monitoring how well solution is working

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Figure 11.2 Stages in Decision Making

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High-Velocity Automated Decision Making • Humans eliminated • Decision-making process captured by computer algorithms • Predefined range of acceptable solutions

• Decisions made faster than managers can monitor and control • E.g., Trading programs at electronic stock exchanges

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Quality of Decisions and Decision Making • Accuracy • Comprehensiveness • Fairness

• Speed (efficiency) • Coherence • Due process

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What Is Business Intelligence?

• Infrastructure for managing data from business environment – Warehousing – Integrating – Reporting – Analyzing

• Hadoop, O LA P, analytics • Products defined by technology vendors and consulting firms

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The Business Intelligence Environment • Six elements in the BI environment 1. Data from business environment 2. Business intelligence infrastructure 3. Business analytics toolset 4. Managerial users and methods 5. Delivery platform ▪ MSS,DSS,ESS

6. User interface

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Figure 11.3 Business Intelligence and Analytics for Decision Support

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Business Intelligence and Analytics Capabilities • Production reports • Parameterized reports

• Dashboards/scorecards • Ad-hoc query/search/report creation • Drill-down

• Forecasts, scenarios, models – Linear forecasting, what-if scenario analysis, data analysis

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Table 11.3 Examples of Predefined Business Intelligence Production Reports Business Functional Area

Production Reports

Sales

Sales forecasts, sales team performance, cross selling, sales cycle times

Service/Call Center

Customer satisfaction, service cost, resolution rates, churn rates

Marketing

Campaign effectiveness, loyalty and attrition, market basket analysis

Procurement and Support

Direct and indirect spending, off-contract purchases, supplier performance

Supply Chain

Backlog, fulfillment status, order cycle time, bill of materials analysis

Financials

General ledger, accounts receivable and payable, cash flow, profitability

Human Resources

Employee productivity, compensation, workforce demographics, retention Copyright © 2020 Pearson Education Ltd.

Interactive Session – Technology: Siemens Makes Business Processes More Visible • Class discussion – Identify the problem in this case study. What people, organization, and technology factors contributed to the problem?

– Describe the capabilities of process mining software. Was this an effective solution? Explain your answer.

– How did process mining change decision making at Siemens?

– What people, organization, and technology issues need to be addressed when implementing process mining systems?

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Predictive Analytics • Uses statistical analytics, data mining, historical data; assumptions of future conditions • Extracts information from data to predict future trends and behavior patterns – Responses to direct marketing campaigns – Best potential customers for credit cards – At-risk customers – Customer response to price changes and new services

• Accuracies range from 65 to 90 percent

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Big Data Analytics • Predictive analytics can use the big data generated from social media, consumer transactions, sensor and machine output, etc.

• Combining with customer data • Big data analytics driving move toward “smart cities” – Utility management – Transportation operation – Healthcare delivery – Public safety

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Operational Intelligence and Analytics • Operational intelligence – Day-to-day monitoring of business decisions and activity

• Real-time monitoring • Schneider National truckload logistics services provider – Data developed from sensors in trucks, trains, industrial systems

• The Internet of Things (IoT ) providing huge streams of data from connected sensors and devices

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Location Analytics and GIS • Location analytics – Big data analytics that uses location data from mobile phones, sensors, and maps – E.g. Helping a utility company view customer costs as related to location

• G I S – Geographic information systems – Help decision makers visualize problems with mapping – Tie location data about resources to map

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Figure 11.4 Business Intelligence Users

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Interactive Session – Organizations: Predictive Maintenance in the Oil and Gas Industry • Class discussion – Why is predictive maintenance so important in the oil and gas industry? What problems does it solve?

– What is the role of the Internet of Things (IoT) and Big Data analytics in predictive maintenance?

– How did BP and Royal Dutch Shell’s predictive maintenance applications change business operations and decision making?

– Give an example of how predictive maintenance systems could be used in another industry.

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Support for Semi-Structured Decisions • Decision-support systems (DSS) – BI delivery platform for “super-users” who want to create own reports, use more sophisticated analytics and models – What-if analysis – Sensitivity analysis – Backward sensitivity analysis – Pivot tables: Spreadsheet function for multidimensional analysis – Intensive modeling techniques

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Figure 11.5 Sensitivity Analysis

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Figure 11.6 A Pivot Table That Examines Customer Regional Distribution and Advertising Source

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Decision Support for Senior Management (1 of 2) • Executive support systems • Balanced scorecard method – Measures four dimensions of firm performance ▪ Financial ▪ Business process ▪ Customer ▪ Learning and growth

– Key performance indicators (K PI ) used to measure each

dimension

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Figure 11.7 The Balanced Scorecard Framework

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Decision Support for Senior Management (2 of 2) • Business performance management (BPM) – Management methodology based on firm’s strategies – Translates strategies into operational targets – Uses set of KPIs to measure progress toward targets

• ESS combine internal data with external – Financial data, news, etc.

• Drill-down capabilities

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Artificial Intelligence Techniques • Artificial intelligence: Grand vision vs. narrow definition

• Evolution of AI – Big data databases – Reduction in the price of processors – Expansion in capacity of processors – Refinement and explosion of algorithms – Large investments in IT and AI

• Progress in image recognition and natural language – E.g.: Siri, Alexa, facial recognition

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What Are the Major Types of AI Techniques and How Do They Benefit Organizations? (1 of 5) • Expert systems – Capture human expertise in a limited domain of knowledge – Express expertise as a set of rules in a software system – Knowledge base – Inference engine

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Figure 11.8 Rules in an Expert System

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What Are the Major Types of AI Techniques and How Do They Benefit Organizations?(2 of 5) • Machine learning – Computers improving performance by using algorithms to learn patterns from data and examples

• Neural networks – Find patterns and relationships in very large amounts of data – Sensoring and processing nodes – “Deep Learning” neural networks

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Figure 11.9 How a Neural Network Works

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Figure 11.10 A Deep Learning Network

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What Are the Major Types of AI Techniques and How Do They Benefit Organizations?(3 of 5) • Genetic algorithms – Examine large number of solutions for a problem – Based on machine learning techniques inspired by evolutionary biology

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Figure 11.11 The Components of a Genetic Algorithm

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What Are the Major Types of AI Techniques and How Do They Benefit Organizations?(4 of 5) • Natural language processing – Software that can process voice or text commands using natural human language

• Computer vision systems – Emulate human visual system to view and extract information from real-world images

• Robotics – Design and use of movable machines that can substitute for humans Copyright © 2020 Pearson Education Ltd.

What Are the Major Types of AI Techniques and How Do They Benefit Organizations?(5 of 5) • Intelligent Agents – Software programs that imitate humans and perform tasks on command – The agent uses a limited built-in or learned knowledge base – Accomplish tasks or make decisions on the user’s behalf, e.g. chatbots finding cheap fares, routing calls in a call center

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How Will MISHelp My Career?

• The Business: RazzleDazzle Technology • Position Description • Job Requirements • Interview Questions

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Essentials of Management Information Systems Fourteenth Edition, Global Edition

Chapter 12 Making the Business Case for Information Systems and Managing Projects

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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 a new information system?

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?

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Video Cases • Case 1: NASA Project Management Challenges

• Case 2: IBM: Business Process Management in a SaaS Environment • Case 3: IBM Helps the City of Madrid with Real-Time BPM Software • Instructional Videos: • What is PaaS? What is Predix?

• BPM: Business Process Management Customer Story

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Angostura Builds A Mobile Sales System • Problem – Inefficient manual procedures – High order entry error rates

• Solutions – SAP ERP – SAP Netweaver – Gateway software

• Illustrates benefits of implementing a new system solution and automating manual processes

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Key Business Case Considerations • IT is an investment of corporate funds. Is it worth it?

• What is the rationale for investment?

• How will the system fit with firm’s strategic goals?

• How does the system provide value?

• What are the risks? Alternative solutions?

• How will the firm’s culture, processes, and systems need to change?

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Figure 12.1 Factors to Consider in Making the Business Case

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The Information Systems Plan • Overview of plan contents • Strategic business plan rational • Current systems

• New developments • Management strategy • Implementation of the plan

• Budget

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Selecting Projects • Determining project costs and benefits – Tangible benefits – Intangible benefits – Capital budgeting methods

• Information systems plan • Portfolio analysis • Scoring model

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Figure 12.2 A System Portfolio Analysis

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Scoring Model for Selecting Alternatives • Used to evaluate alternative system projects, especially when many criteria exist • Assigns weights to various features of system and calculates weighted totals

• Many qualitative judgments involved • Requires experts who understand the issues and the technology

• See Table 12.2 Example Scoring Model in text

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Building a Business Case • New information systems are built as solutions to problems • Four steps to building an information system – Define and understand the problem – Develop alternative solutions – Choose a solution – Implement the solution

• The first three steps are called systems analysis

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Determining Solution Costs and Benefits • Tangible benefits – Measurable monetary value – E.g. lower costs, higher sales

• Intangible benefits – Better customer service – Enhanced or faster decision making

• See Table 12.3 in text Costs and Benefits of Information Systems Copyright © 2020 Pearson Education Ltd.

Capital Budgeting for Information Systems • Capital budgeting models – Measure value of long-term capital investment projects – Rely on measures of the firm’s cash outflows and inflows

• Principal capital budgeting models evaluate IT projects – Payback method – Accounting rate of return on investment (ROI) – Net present value – Internal rate of return (IRR)

• Limitations of financial models • See Figure 12.3 in text Copyright © 2020 Pearson Education Ltd.

Figure 12.4 Developing an Information System Solution

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Evaluating and Choosing Solutions • Feasibility study: – Is solution feasible from financial, technical, and organizational standpoint?

• Systems proposal report – Describes, for each alternative solution ▪ Costs and benefits ▪ Advantages and disadvantages

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Implementing the Solution • Systems design • Completing implementation – Hardware selection and acquisition – Software development and programming – Testing – Training and documentation – Conversion – Production and maintenance

• Managing the change

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Traditional Systems Development Lifecycle • SLDC: Oldest method for building information systems • Phased approach with formal stages • Waterfall approach

• Formal division of labor • Used for building large, complex systems • Time consuming and expensive to use

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Figure 12.6 The Traditional Systems Development Life Cycle

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Prototyping • Preliminary model built rapidly and inexpensively • Four-step process – Identify the user’s basic requirements – Develop an initial prototype – Use the prototype – Revise and enhance the prototype

• Especially useful in designing a user interface

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Figure 12.7 The Prototyping Process

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End-User Development • End users create simple information systems with little or no assistance from specialists • Completed more rapidly than systems developed with conventional tools

• Often leads to higher level of user involvement and satisfaction with systems • Cannot handle large numbers of transactions

• Organizational risks

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Application Software Packages, Software Services, and Outsourcing • Request for Proposal (RFP) • Application software packages and cloud software packages – Generalized systems for universal functions with standard processes – Customization features

• Outsourcing – Domestic outsourcing – Offshore outsourcing

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Figure 12.8 Total Cost of Offshore Outsourcing

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Mobile Application Development • Mobile websites, web apps • Native apps • Different requirements for mobile devices than for PCs – Reduced size of screens – Touch screens – Saving resources: bandwidth, memory, processing, data entry

• Responsive web design

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Interactive Session – Technology: Systems Development is Different for Mobile Applications • Class discussion – What people, organization, and technology issues need to be addressed when building mobile applications?

– How does user requirement definition for mobile applications differ from that in traditional systems analysis?

– Describe how Great-West’s invoice approval process changed after the mobile application was deployed.

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Rapid Application Development • Need for agility, scalability, and fast-cycle techniques • Rapid application development (RAD) – Creating workable systems in a very short period of time

• Joint application design (JAD) – End users and information systems specialists working together on design

• Agile development

• DevOps

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Component-Based Development and Web Services • Component-based development – Groups of objects that provide software for common functions (e.g., online ordering) and can be combined to create large-scale business applications

• Web services – Reusable software components that use XML and open Internet standards (platform independent) – Enable applications to communicate with no custom programming required to share data and services

• Cloud-based solutions: online development Copyright © 2020 Pearson Education Ltd.

Project Management Objectives • Project management – Application of knowledge, skills, tools, and techniques to achieve targets within specified budget and time constraints

• Five major variables: – Scope – Time – Cost – Quality – Risk

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Managing Project Risk and SystemRelated Change • Implementation and change management – Implementation – User-designer communications gap

• Controlling risk factors – Formal planning and tools – Gantt chart, PERT chart – Project management software

• Overcoming user resistance – Ergonomics – Organizational impact analysis Copyright © 2020 Pearson Education Ltd.

Figure 12.10 A PERT Chart

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Interactive Session – Organizations: Arup Moves Project Management to the Cloud • Class discussion – What is the relationship between information technology, project management, and Arup’s business model and business strategy?

– How does Microsoft Project Online support Arup’s business strategy? How did it change the way the company works?

– What people, organization, and technology issues did Arup have to address when selecting Project Online as its global project portfolio management tool?

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How Will MIS Help My Career?

• The Business: XYZ Multimedia Entertainment • Position Description • Job Requirements

• Interview Questions

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