Introduction to Information Systems Supporting and Transforming Business, 3rd Canadian Edition Solut

Introduction to Information Systems Supporting and Transforming Business, 3rd Canadian Edition By Rainer, Cegielski, Splettstoesser-Hogeterp, Sanchez-Rodriguez

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 1:

Introduction to Information Systems

Chapter Outline 1.1 1.2 1.3 1.4

Why Should I Study Information Systems?

Overview of Computer-Based Information Systems How Does IT Impact Organizations?

Importance of Information Systems to Society

Learning Objectives 1. Begin the process of becoming an informed user of your organizations’ information systems.

2. Define the terms data, information, and knowledge, and give examples of each.

3. Define the terms information technology, information system, computer-based information system, and application.

4. Identify three ways in which you depend on information technology in your daily life.

5. Discuss three ways in which information technology can impact managers and three ways in which it can impact non-managerial workers.

6. List three positive and three negative societal effects of the increased use of information technology.

Teaching Tips and Strategies Most of today’s college students use information in ways that were not dreamed of just a few years ago. However, because most students have grown up with information technology, they normally do not think about the whys and wherefores that underlie it.

It is therefore important for students to step back and learn the basic terms that define the foundation of Management Information Systems (MIS). Unfortunately, some of them will find this task boring or even complain they already know it all.

Because most students use technology in their everyday lives, they often fail to see the importance of MIS and how it relates to them. In order to involve students in the class, it is vital to let them know what is in it for them. This step should be taken early in the course to engage the students from the beginning. You may want to find each student’s major and explain how MIS knowledge can enhance their course of study and their chosen career. Knowing each student’s major and career goals will help you tailor examples, classroom assignments, and discussions to the students’ individual interests. Point out the “What’s In It for Me” end-ofchapter section so that students know there are links to each major for each chapter.

Explaining how MIS has affected businesses as well as workers helps to get students interested in this class. It also helps them to appreciate the relevance of the history of how computers have evolved and how MIS and DSS applications have made managerial decision making easier and more reliable.

Chapter 1

Page 2

The importance of computer technology is underscored by examples of how companies save money by using e-mail as an alternative to the postal service. Students should be introduced to the concept that IT must be paired with business processes to harness its potential. IT is important to business leaders all over the world. In Canada, immigration lawyers use an online system to assess potential salaries for different types of job (http://www.canadavisa.com/canadasalary-wizard.html). Students should be encouraged to become familiar with this website. Salary statistics for IT related jobs in Canada can be obtained from http://www.itworldcanada.com/salarycalculator/. because salary information seems to attract students’ attention, especially if they realize that if they are more technology savvy, then they will likely make more money.

Review Questions Section 1.1 – Before you go on…

1. Rate yourself as an informed user.

You will receive all types of answers to this question. Significantly, some students are convinced they possess a higher level of technology knowledge than they actually do. Ask the students to be specific about their skills and why they think they are proficient in those skills.

2. Explain the benefits of being an informed user of information systems.

Informed users tend to get more value from whichever technologies they use. You will enjoy many benefits from being an informed user of IT. First, you will benefit more from your organization’s IT applications because you will understand what is “behind” those applications (see Figure 1.1). That is, what you see on your computer screen is brought to you by your MIS department operating “behind” your screen. Second, you will be in a position to enhance the quality of your organization’s IT applications with your input. Third, even as a new graduate, you will quickly be in a position to recommend — and perhaps help select — the IT applications that your organization will use. Fourth, being an informed user will enable you to keep abreast of both new information technologies and rapid developments in existing technologies. Remaining “on top of things” will help you to anticipate the impacts that “new and improved” technologies will have on your organization and to make recommendations on the adoption and use of these technologies. Finally, you will understand how IT can be used to improve your organization’s performance and teamwork as well as your own productivity.

In addition to the organizational productivity, the instructor should emphasize the personal use of information systems.

3. Discuss the various career opportunities offered in the IT field.

Career opportunities in IS are strong and are projected to remain strong over the next ten years. In fact, when Money Magazine’s Best Jobs in America (http://money.cnn.com/magazines/moneymag/bestjobs/2010) listed the “top jobs” in America

Chapter 1

Page 3

in 2010, 10 of the top 30 jobs related directly to information technology. The situation would be similar here in Canada. These jobs (with their ranks) are: Software architect (#1) Database administrator (#7) Information systems security administrator (#17) Software development director (#18) Information technology manager (#20) Telecommunications and networking manager (#21) Network operations manager (#24) Information technology business analyst (#26) Information technology consultant (#28) Software development engineer (#30) It would be worthwhile asking the students to explore this site which shows IT salaries in Canada: http://www.itworldcanada.com/salarycalculator/ Section 1.2 - Before you go on…

1. What is a computer-based information system?

A computer-based information system (CBIS) is an information system that uses computer technology to perform some or all of its intended tasks. Although not all information systems are computerized, today most are. For this reason the term “information system” is typically used synonymously with “computer-based information system.”

2. Describe the components of computer-based information systems. ● Hardware is a device such as the processor, monitor, keyboard, and printer. Together, these devices accept data and information, process them, and display them. ● Software is a program or collection of programs that enable the hardware to process data. ● A database is a collection of related files or tables containing data. ● A network is a connecting system (wireline or wireless) that permits different computers to share resources. ● Procedures are the set of instructions about how to combine the above components in order to process information and generate the desired output. ● People are those individuals who use the hardware and software, interface with it, or utilize its output.

3. What is an application program?

An application (or app) is a computer program designed to support a specific task or business process.

4. Explain how information systems provide support for knowledge workers.

Chapter 1

Page 4

Knowledge workers make decisions about situations that can significantly change the manner in which business is done. Information systems provide the databases, communications, and applications that allow these workers to store critical data used in analysis and tactical decision making.

5. As we move up the organization’s hierarchy from clerical workers to executives, how does the type of support provided by information systems change?

At the lower organizational levels, systems are used primarily to automate routine tasks. At higher levels, systems are used to analyze information for decision-making purposes.

Section 1.3 … Before you go on…

1. Why should employees in all functional areas become knowledgeable about IT? Regardless of the employee’s functional area of responsibility, information systems are important for several reasons: (1) IT facilitates the organizational activities and processes of today’s businesses. (2) Most professions students will enter after they graduate will require some knowledge of information technology. (3) Employees who can use information technology will enjoy an important advantage over their less-savvy peers in the workplace.

(4) Information systems will enable the students to perform their jobs more effectively and efficiently.

2. Describe how IT might change the manager’s job.

IT often provides managers with near real-time information. This positively and negatively impacts their jobs. Real time information enhances their decision making capability and reliability while at the same time providing them with less time to make decisions. A good resource for understanding various issues faced by Canadian IT managers is http://blogs.technet.com/b/cdnitmanagers/.

3. Discuss several ways in which IT impacts employees at work.

Many people have experienced a loss of identity because of computerization. They feel like “just another number” because computers reduce or eliminate the human element that was present in noncomputerized systems.

The Internet threatens to exert an even more isolating influence than computers and television.

Encouraging people to work and shop from their living rooms could produce some unfortunate psychological effects, such as depression and loneliness.

IT can adversely affect individuals’ health and safety. Two examples are increased job stress and physical problems such as carpal tunnel syndrome that result from long-term keyboard use.

Chapter 1

Page 5

Computers can create new employment opportunities for people with disabilities by integrating speech- and vision-recognition capabilities.

Section 1.4 … Before you go on…

1. What are some of the quality-of-life improvements made possible by IT? Has IT had any negative effects on our quality of life?

The workplace can be expanded from the traditional 9-to-5 job at a central location to 24 hours a day at any location. IT can provide employees with flexibility that can significantly improve the quality of leisure time, even if it doesn’t increase the total amount of leisure time.

At the same time, however, IT can also place employees on “constant call” where they are never truly away from the office, even when they are on vacation. This inability to truly disengage from work can lead to problems such as stress, fatigue, and depression.

2. Describe the robotic revolution, and consider its possible implications for humans.

“Cyberpooches,” nursebots, and other mechanical beings may be our companions before we know it. Around the world, quasi-autonomous devices have become increasingly common on factory floors, in hospital corridors, and in farm fields. In our homes, iRobot (www.irobot.com) produces the Roomba to vacuum our floors, the Scooba to wash our floors, the Dirt Dog to sweep our garages, the Verro to clean our pools, and the Looj to clean our gutters.

3. Explain how IT has improved healthcare practices.

Medical personnel use IT to make better and faster diagnoses and to monitor critically ill patients more accurately. IT also has streamlined the process of researching and developing new drugs. Expert systems now help doctors diagnose diseases, and machine vision is enhancing the work of radiologists. Surgeons use virtual reality to plan complex surgeries.

They have also used a surgical robot to perform long-distance surgery by controlling the robot’s movements. Finally, doctors discuss complex medical cases via videoconferencing.

New computer simulations recreate the sense of touch, allowing doctors-in-training to perform virtual procedures without risking harm to an actual patient.

Of the thousands of other applications related to healthcare, administrative systems are critically important. These systems range from detecting insurance fraud to creating nursing schedules to financial and marketing management.

The Internet contains vast amounts of useful medical information (see www.webmd.com, for example). In an interesting study, researchers at the Princess Alexandra Hospital in Brisbane, Australia, identified 26 difficult diagnostic cases published in the New England Journal of Medicine. They selected three to five search terms from each case and then conducted a Google search. The researchers selected and recorded the three diagnoses that Google ranked most prominently and that appeared to fit the symptoms and signs. They then compared these results with the correct diagnoses as published in the journal. They discovered that their

Chapter 1

Page 6

Google searches had found the correct diagnosis in 15 of the 26 cases, a success rate of 57 percent.

The researchers caution, however, against the dangers of self-diagnosis. They maintain that people should use the information gained from Google and medical Web sites such as WebMD (www.webmd.com) only to participate in their healthcare by asking questions of their physician. Canada Health Infoway (https://www.infoway-inforoute.ca/) is a major initiative for transforming health care in Canada through health information technology.

IT’s About Business Questions IT’s About Business 1.1 E-Meals 1. Provide two examples of how Jane uses information technology to provide her service.

Jane utilizes her Web site to promote her products and to convince customers to sign up for her service.

She also uses Twitter and Facebook to promote her products and to create a community of customers for newsletters. In addition, customers can use these technologies to manage their accounts to determine which particular plan they will join 2. Provide two additional examples of how Jane might use information technology to improve her service. Be specific.

Jane could expand the meal service to include meal planning for individuals and/or families with specialized diets due to medical conditions and/or religious limitations.

She could also sell specialized ingredients (spices, etc) online.

IT’s About Business 1.2 Build Your Own Multinational Company 1. Identify and evaluate the advantages and disadvantages of outsourcing work overseas.

The primary advantage is that labor is cheaper overseas. Outsourcing can also put you closer to international customers and enable you to incorporate unique skill sets. The disadvantages include loss of control, difficulties in coordinating your various operations, and poor quality.

2. Can anyone do what Randy and Nicola Wilburn are doing? Or, does their strategy require special qualifications or knowledge? Support your answer.

Students’ answers will vary, but they should include details about connectivity using resources that are available online.

Chapter 1

Page 7

3. Explain how global outsourcing can affect people who are starting their own business. Hint: Consider capital outlay, labor costs, IT infrastructure costs, etc.

Startup and operating costs are low. Little or no local inventory is required. At least initially, IT can be located at a hosting site. It is relatively easy to operate if you are planning a small or a single-person operation.

4. Would you like to be a digital nomad? Why or why not? Be specific.

Answers will depend on your students, but the question will lead to an interesting discussion if any of them already has a site where they outsource part or all of their distribution.

IT’s About Business 1.3 Electronic E-Discovery Software Replaces Lawyers 1. What are the advantages of e-discovery software? Provide specific examples.

It reduces the cost of having to search massive amounts of electronic documents to locate the necessary information. Some applications can extract relevant concepts, even in the absence of specific terms, and can deduce patterns of behavior that would have eluded lawyers examining millions of documents.

2. What are the disadvantages of e-discovery software? Provide specific examples.

One analyst estimates that the shift from manual document discovery to e-discovery will eliminate many jobs because one lawyer can now do the work that once required hundreds of lawyers. E-discovery could also encourage increased litigation by enabling lawyers to conduct in-depth searches much more quickly.

3. Based on this scenario, how do you think e-discovery software will affect the legal profession?

It will provide another tool for attorneys to use when collecting evidence in a case.

Discussion Questions 1. Describe a business that you would like to start. Discuss how you would use global outsourcing to accomplish your goals.

Answers will vary depending on each student’s background and major. The response related to global outsourcing will depend on the product verses service the business would be providing.

2. Your university wants to recruit high-quality high school students from your state. Provide examples of (1) the data that your recruiters would gather in this process, (2) the information

Chapter 1

Page 8

that your recruiters would process from these data, and (3) the types of knowledge that your recruiters would infer from this information.

• • • •

Senior testing scores (2) scores and percentile ranks of a student’s performance (3) potential for success in college classes (1) IELTS scores (2) scores and percentile ranks of a student’s performance (3) potential for success in college classes (1) Student Location (2) number of instate schools student is applying to (3) likelihood that student may want to stay close to home Alumni parents (2) amount of alumni involvement– (3) likelihood parents would want their children to attend same school as they did

3. Can the terms data, information, and knowledge have different meanings for different people?

Support your answer with examples.

Students may have different responses based on their personal experiences and possibly their majors.

4. Information technology makes it possible to “never be out of touch.” Discuss the pros and cons of always being available to your employers and clients (regardless of where you are or what you are doing.)

This discussion should touch on e-mail and Instant Messaging and their impact on a 24/7 business environment. If you are teaching an online class or if the students are familiar with the concept, discuss how being available has changed the way you are interacting with students. Applications such as FACEBOOK, GOOGLE+, and Twitter should also be considered in the overall discussion, given that businesses have embraced these technologies as marketing tools.

5. Robots have the positive impact of being able to relieve humans from working in dangerous conditions. What are some negative impacts of robots in the workplace?

Potentially reducing or eliminating some non-skilled, repetitive production line jobs.

6. Is it possible to endanger yourself by accessing too much medical information on the Web? Why or why not? Support your answer.

Discuss the reliability of the information sources and the dangers associated with selfdiagnosis. Also discuss problems related to non-tested “miracle cures” and possible negative interactions with medications a patient may be taking for other conditions.

7. Is the vast amount of medical information on the Web a good thing? Answer from the standpoint of a patient and from the standpoint of a physician.

Patient … Good: Provides the patient with information he or she can discuss with the doctor.

Also provides information and possibly options not mentioned by physician.

Chapter 1

Page 9

Bad: Provides some erroneous or false information that might be misinterpreted by the patient, possibly wasting the physician’s time or causing a misdiagnosis by the patient.

Physician … Good: Provides access to current trends that assist with diagnosis and treatments. Enables and encourages collaboration with other physicians. If patient records are available online, the physician can view the results of tests that were performed at other locations.

Bad: Security issues regarding patients’ records (e.g., PHIPA (Personal Health Information Protection Act)).

8. Describe other potential impacts of IT on societies as a whole.

Most of your students have grown up using technology and will not remember a time when it was not around. Open the discussion by asking how many students have FACEBOOK (FB) and/or GOOGLE+ profiles. Ask them how they kept up with their friends before FB. Then expand the discussion as to how they use FACEBOOK/GOOGLE+, how often they access their account, how many “friends” they have, whether they block any potential “friends,” and how often they post. If any students have hundreds of friends in FB, ask why they do and whether they consider it a problem. Ask how many of the students have smart phones. For those who do, how often do they use text messaging, and for what? Do they maintain an electronic calendar to remind them of events (including birthdays and doctor appts)? This question has a number of possibilities.

9. What are the major reasons why it is important for employees in all functional areas to become familiar with IT? Hopefully this course will provide an answer to the question. However, the basis of the answer is to help employees understand what is going on around them within the business and industry so they can make knowledge-based decisions on how to use technology to strategically support or enhance the business process.

10. Refer to the study at Princess Alexandra Hospital (in section on Improvements in Healthcare). How do you feel about Google searches finding the correct diagnosis in 57 percent of the cases? Are you impressed with these results? Why or why not? What are the implications of this study for self-diagnosis?

Ask whether the students consider 57 percent a good or a bad success rate. What are some of the implications of a false positive diagnosis? False negative?

Problem Solving Activates 1. Visit some Web sites that offer employment opportunities in IT. Prominent examples are : www.dice.com, www.hotjobs.com, www.monster.com, http://www.monster.ca/, www.collegerecruiter.com, www.careerbuilder.com, www.jobcentral.com, www.job.com,

Chapter 1

Page 10

www.career.com, www.simplyhired.com and www.trucareers.com. Compare the IT salaries offered to accountants, marketing personnel, financial personnel, operations personnel, and human resources personnel. For other information on IT salaries check Computerworld’s annual salary survey.

Students will provide comparisons about IT positions (suggest classifications – analyst, developers, IT support) and salary ranges using the sites listed.

2. Enter the Web site of UPS ( http://www.ups.com/content/ca/en/index.jsx). a. Find out what information is available to customers before they send a package.

The site provides a detailed interface, and it contains information about its multitude of services. b. Find out about the “package tracking” system.

Visit http://www.ups.com/content/us/en/resources/track/check/index.html?WT.svl=Footer to get information about the tracking system and its policies. c. Compute the cost of delivering a 10” x 20” x 15” box, weighing 40 pounds, from your hometown to Long Beach, California (or to Lansing, Michigan, if you live in or near Long Beach). Compare the fastest delivery against the least cost.

Cost can vary from ~ $200 for overnight to $42 for slowest option.

3. Surf the Internet for information about the Department of Homeland Security. Examine the available information, and comment on the role of information technologies in the department.

Students will discuss their findings after searching the Internet.

4. Access www.irobot.com, and investigate the company’s Education and Research Robots.

Surf the Web for other companies that manufacture robots, and compare their products with those of iRobot.

Students will discuss their findings after searching the site.

Team Assignments 1. a. Create an online group for studying IT or a part of it you are interested in. Each member of the group must have a Yahoo e-mail account (free). Go to Yahoo!: Groups (http://groups.yahoo.com) and at the bottom see a section titled “Create Your Own Group.”

Chapter 1

Page 11

Step 1: Click on “Start a Group Now.” Step 2: Select a category that best describes your group (use the Search Group Categories, or use Browse Group Categories tool). You must find a category.

Step 3: Describe the purposes of the group and give it a name.

Step 4: Set up an e-mail address for sending messages to all group members.

Step 5: Each member must join the group (select a “profile”); click on “Join this Group.”

Step 6: Go to Word Verification Section; follow the instructions.

Step 7: Finish by clicking “Continue.”

Step 8: Select a group moderator. Conduct a discussion online of at least two topics of interest to the group.

Step 9: Arrange for messages from the members to reach the moderator at least once a week.

Step 10: Find a similar group (use Yahoo!’s “Find a Group” and make a connection).

Write a report for your instructor. b. Now follow the same steps for Google Groups. c. Compare Yahoo Groups and Google Groups.

Students will come up their report based on comparing their experiences at the two sites.

2. Review the Wall Street Journal, Toronto Star, Globe and Mail , Canadian Business (http://www.canadianbusiness.com/) and local newspapers for the last three months to find stories about the use of Web-based technologies in organizations. Each group will prepare a report describing five applications. The reports should emphasize the role of the Web and its benefit to the organizations. Focus on issues described in this chapter, such as productivity, competitive strategies, and globalization. Present and discuss your work.

Students will come up their report based on their selected article.

Closing Case L’Oreal Retools Its Information Systems The Problem Headquartered in France, the L’Oreal Group (www.loreal.com) is the world’s largest cosmetics and beauty company. Concentrating on hair color, skin care, sun protection, make-up, perfumes, and hair care, the company is active in dermatology and pharmaceuticals. The company’s philosophy is that everyone aspires to beauty, and its core mission is to help people around the world realize that aspiration.

L’Oreal employs more than 67,000 people in 130 countries, and it supports 23 global brands. The firm’s products are manufactured in more than 40 factories located around the world. The company has a tremendous challenge to produce high-quality, consistent products globally. It must ensure that all of its products are created with uniform production processes and quality control. By 2010 L’Oreal had come to realize that its current enterprise resource planning (ERP) system, based on software manufactured by SAP, could not support its goal of global product uniformity without consolidating its many different information systems located around

Chapter 1

Page 12

the world. For example, L’Oreal had multiple versions of SAP running in different regions and countries. As a result, the company used to take between two and five years to upgrade to the latest version of SAP. L’Oreal also wanted to improve productivity, safety, and quality by standardizing the best-practice business processes throughout the firm.

The Solution To accomplish its mission, L’Oreal re-engineered its entire manufacturing process to work more efficiently while still supporting the quality and integrity of its brands. The company integrated its SAP ERP system with Apriso’s (www.apriso.com) FlexNet for operations management.

FlexNet is a unified set of manufacturing software applications that coordinate a company’s manufacturing operations within a plant, between plants, and across an entire supply chain. The integration of SAP and FlexNet resulted in a global, central IT system called the Integrated Solution for Industrial Systems (ISIS). ISIS consists of all the transactional applications, financial controls, and purchasing transactions integrated into the manufacturing operations on the plant floor. FlexNet and ISIS support all factory processes – including production, quality assurance, and purchasing – while promoting L’Oreal’s best practices.

ISIS runs in L’Oreal’s central data center in Montpellier, France, where the master data for the business are stored. FlexNet runs on servers located in individual factories so that each factory can continue operations in case a problem arises in the central data center.

The Results In its re-engineering process, L’Oreal implemented a single, global instance of SAP and FlexNet, so the last upgrade took only one weekend. By upgrading so quickly, the firm was able to update its systems without disrupting its factories.

The new software implementation also allows L’Oreal to bring factories online much more quickly. In the past, when L’Oreal acquired a factory, it took years to bring it online. In contrast, the new software enabled L’Oreal to integrate an Yves St. Laurent factory that it had acquired, along with its quality assurance, safety, and efficiency practices, in two months.

Every one of L’Oreal’s manufacturing facilities handles thousands of different recipes for L’Oreal cosmetic products. Every ingredient must be tested for quality, and every worker must follow each recipe exactly. This demanding level of complexity can lead to human error, which can threaten quality, slow the workflow, and create waste. The new software guides the operators through each recipe and automatically records the weight of each ingredient to ensure that the quantities are exactly correct. Once raw materials are tested for quality, they are given a label that the worker must scan before adding them to the recipe. This step ensures that all materials are tested. The labels also give forklift drivers directions as to which materials need to be taken to the packaging station. They also provide information on shelf life. Shop workers confirm that the new system is easy to use and has reduced confusion and stress.

By deploying a single, global instance of SAP and FlexNet, L’Oreal has increased its overall capacity, decreased its discrepancies in actual-versus-planned production, and reduced its wasted materials. As a result, the company is able to maintain lower, better-managed inventories at significant cost savings.

Questions Describe several reasons why L’Oreal needed to reengineer its information systems.

Chapter 1

Page 13

The company needed to follow uniform production processes and quality control to achieve quality and consistency in its global production.

Describe the benefits of L’Oreal’s new information systems. Explain how the benefits you describe are related to L’Oreal’s strategic goals, using specific examples to support your arguments.

The benefits of the new information systems are: increased overall production capacity, decreased variance in its production planning and reduced waste.

Glossary application (or app) : a computer program designed to support a specific task or business process. business intelligence (BI) systems: provide computer-based support for complex, nonroutine decisions, primarily for middle managers and knowledge workers. computer-based information system (CBIS): an information system that uses computer technology to perform some or all of its intended tasks.

Dashboards: a special form of IS that support all managers of the organization, by providing rapid access to timely information and direct access to structured information in the form of reports.

Database: a collection of related files or tables containing data. data items: An elementary description of things, events, activities, and transactions that are recorded, classified, and stored but are not organized to convey any specific meaning. database : a collection of related files or tables containing data. electronic commerce (e-commerce): a type of interorganizational information system that enables organizations to conduct transactions, called business-to-business (B2B) electronic commerce, and customers to conduct transactions with businesses, called business-to-consumer (B2C) electronic commerce. enterprise resource planning (ERP) systems: information systems that correct a lack of communication among the functional area ISs by tightly integrating the functional area ISs via a common database.

Ergonomics: the science of adapting machines and work environments to people, focuses on creating an environment that is safe, well lit, and comfortable. expert systems: attempt to duplicate the work of human experts by applying reasoning capabilities, knowledge, and expertise within a specific domain. functional area information systems: IS that support a particular functional area within the organization.

Hardware: a device such as a processor, monitor, keyboard, or printer. Together, these devices accept data and information, process them, and display them.

Information: Data that have been organized so that they have meaning and value to the recipient. information system (IS): Collects, processes, stores, analyzes, and disseminates information for a specific purpose.

Chapter 1

Page 14

information technology (IT): relates to any computer-based tool that people use to work with information and support the information and information-processing needs of an organization. information technology components: hardware, software, databases, and networks. information technology infrastructure: IT components plus IT services. information technology platform: formed by the IT components of hardware, software, networks (wireline and wireless), and databases information technology services: IT personnel use IT components to perform these IT services: develop information systems, oversee security and risk, and manage data. informed user: A person knowledgeable about information systems and information technology. interorganizational information systems (IOSs): Information systems that connect two or more organizations.

Knowledge: Data and/or information that have been organized and processed to convey understanding, experience, accumulated learning, and expertise as they apply to a current problem or activity. knowledge workers: professional employees such as financial and marketing analysts, engineers, lawyers, and accountants, who are experts in a particular subject area and create information and knowledge, which they integrate into the business.

Network: a connecting system (wireline or wireless) that permits different computers to share resources.

Procedures: the set of instructions about how to combine the above components in order to process information and generate the desired output.

Software: a program or collection of programs that enable the hardware to process data. supply chain: the flow of materials, information, money, and services from suppliers of raw materials through factories and warehouses to the end customers. transaction processing system (TPS): supports the monitoring, collection, storage, and processing of data from the organization’s basic business transactions, each of which generates data.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 2: Organizational Strategy, Competitive Advantage, and Information Systems Chapter Outline 2.1 2.2 2.3 2.4 2.5

Business Processes Business process reengineering and business process management Business Pressures, Organizational Responses, and Information Technology Support Competitive Advantage and Strategic Information Systems Business – Information Technology Alignment

Learning Objectives 1.

2.

3.

4.

5.

6.

7.

Understand the concept of business processes, and provide examples of business processes in the functional areas of an organization.

Differentiate between the terms business process reengineering and business process management.

List and provide examples of the three types of business pressures, and describe one IT response to each.

Identify the five competitive forces described by Porter, and explain how the Web impacts each one.

Describe the strategies that organizations typically adopt to counter the five competitive forces and achieve competitive advantage.

Define business – information technology alignment, and describe the characteristics of effective alignment.

Define the term IT governance and explain why information systems need to be effectively managed and planned.

Teaching Tips and Strategies In this chapter, the student is introduced to the basic concepts of information systems in the organization and we explore how businesses use information systems in every facet of their operations.

The role of information systems in helping a company to obtain and maintain a competitive edge is explained. Examples of failed IS efforts are given. It is very important for students to make the connection between information systems and a company’s success. Mentioning that companies have failed when they do not keep state of the art information systems is a point that helps to get the student’s attention.

One way to exemplify this is to illustrate how universal Information Technology is in companies today. Students will work with companies that utilize a variety of technologies at various levels of the organization. Instructors might want to open the lecture with a class discussion about the universal use of information technologies in many aspects of American life. Some examples are:

Chapter 2: ▪ ▪ ▪

Page 2

ATM machines and banks in general.

Grocery store checkout line cash registers with bar code scanners and the ability to use bank cards and credit cards for purchases.

Educational institutions rely on IT. The registrar’s office, financial aid office and the library are just a few examples.

You might want to explain to students that your University/College uses information technology in different ways. Use examples of how the office that handles registration/grades is on a different network, because this helps limit the number of users that can modify grades or view students’ records. A discussion could be introduced regarding computer labs and how and when they are used.

By utilizing a network, the school saves money and has the ability to control what information or programs students and faculty members can access. One method companies have used to manage information through the use of IT is to limit access. For example in most organizations, each user has a pass code and linked to that pass code is a level of security clearance which limits what information the employee can access. That access is based on a user’s need which ensures that they can accomplish the work that they need to complete, yet cannot access other parts of the system.

Many tasks performed by an employee are the same every week (such as payroll) and that process can be automated including time sheets etc. Mentioning payroll often gets students interested in information systems since it has a universal interest for all employees, whether they are an MIS major or not.

In today’s interconnected world, we have access to so much data that it is often overwhelming for managers to know where the best data resides, and how to access it.

With the advent of sophisticated computer systems, managers can now view a worker’s Internet use by the click of a button. Managers can see what products are selling and what products are not. This information can be used to better help management run the day-to-day operations of a business. For example: A hotel manager finds that he is almost sold out of rooms for the month of May. It might behoove him/her to raise the prices of the vacant rooms left to increase revenue for the hotel. This strategy can also be implemented when the manager notices vacancies are running at a higher rate than normal.

This chapter is important in that it sets the foundation for the importance of information systems.

Students should begin to realize that this is important for them to understand and use in their careers. Once students start to understand that information technologies not only change the way business is done in organizations, but also help organizations to share information and make better-educated decisions that help their companies thrive in a competitive environment, they can apply this knowledge to their specific major.

The phrase “information technology systems in an organization” is composed of three distinct parts: (1) an organization and its structure, (2) the data and information in an organization, and (3) information technology hardware software and connectivity in an organization. What is less

Chapter 2:

Page 3

clear about information technology is how business executives can ensure that their organizations benefit from new opportunities afforded by information technology and avoid its well-known, often-repeated pitfalls. Some of the pitfalls or some of the problems companies have had as a result of utilizing IT are: ▪ ▪ ▪ ▪ ▪

botched development projects escalating costs with no apparent benefits organization disruption support problems technical glitches.

Managing information technology is not an easy task. The information systems function has implementation problems in many organizations. In many documented cases, the promised benefits of information technology have not occurred.

It is important for students to understand that there is a great need for management to understand what is involved with IT because of the interdependence that exists between business and technology. IT is now being used in all aspects of business. There are very few transactions in business that are not in one way or another directly affected by IT. It is also important to emphasize that technology has slowly evolved into open systems. This means that industries now expect information technology solutions to be seamlessly interconnected and upgradeable.

This chapter helps students to realize that when looking at adapting or changing technology in an organization it is not as easy as just installing new hardware or a software program. They must consider and analyze future needs and make sure that the programs/technologies they are implementing will not only work today, but be able to integrate with new technologies in the future.

Review Questions Section 2.1 … Before You Go On…..

1. What is a business process?

A business process is an ongoing collection of related activities that create a product or a service of value to the organization, its business partners, and/or its customers. A process has inputs and outputs, and its activities can be measured. Many processes cross functional areas in an organization. For example, product development involves research, design, engineering, manufacturing, marketing, and distribution.

2. Describe several business processes carried out at your university.

These include Accounts receivable (tuition), registration, payroll, human resources, etc…

3. Define a cross-functional business process, and provide several examples of such processes.

Chapter 2:

Page 4

This is a process in which no single functional area is responsible for its completion; multiple functional areas collaborate to perform the function. The cross-functional processes identified in the chapter are product development, procurement, and fulfillment. Other examples are production, human relations management, material planning, and inventory and warehouse management.

Section 2.2 … Before You Go On…..

1. What is business process reengineering? What are its advantages and disadvantages?

A strategy for improving the efficiency and effectiveness of an organization’s business processes. The key to BPR is for enterprises to examine their business processes from a “clean sheet” perspective and then determine how they can best reconstruct those processes to improve their business functions. For a glimpse of BPR jobs, visit the site: http://ca.indeed.com/Business-Process-Reengineering-Consultant-jobs. Major advantages of of BPR are improvedefficiency and effectiveness of an organization’s business processes.

The disadvantages are that BPR initiatives are often radical, comprehensive and difficult ti implement.

2. What is business process management? What are its advantages?

BPM is a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes. BPM initially helps companies improve profitability by decreasing costs and increasing revenues.

Later on, it provides improved organizational flexibility.

Section 2.3 Before you go on…

1. What are the characteristics of the modern business environment?

It is a combination of social, legal, economic, physical, and political factors in which businesses conduct their operations 2. Discuss some of the pressures that characterize the modern global business environment.

Market pressures are generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers.

3. Identify some of the organizational responses to these pressures. Are any of these responses specific to a particular pressure? If so, which ones?

Organizations are responding to the various pressures by implementing IT such as strategic systems, customer focus, make-to-order and mass customization, and e-business.

Section 2.4 Before you go on…

Chapter 2:

Page 5

1. What are strategic information systems?

Any information system which helps an organization gain a competitive advantage or reduce a competitive disadvantage is a strategic information system.

2. According to Porter, what are the five forces that could endanger a firm’s position in its industry or marketplaces?

• • • • •

The threat of entry of new competitors.

The bargaining power of suppliers The bargaining power of customers The threat of substitute products or services The rivalry among existing firms in the industry

3. Describe Porter’s value chain model. Differentiate between Porter’s competitive forces model and his value chain model.

Porter’s competitive forces model is focused on analyzing the company’s external environment and how competitive the industry is. The value chain model is focused on the internal operations of the company and is a model to allow the firm to analyze its own processes.

4. What strategies can companies use to gain competitive advantage?

• • • •

Cost leadership Differentiation Innovation Operational effectiveness

Section 2.5 … Before You Go On… 1. What is business – IT alignment?

Business-IT alignment is the tight integration of the IT function with the strategy, mission, and goals of the organization. That is, the IT function directly supports the business objectives of the organization 2. Give examples of business – IT alignment at your university, regarding student systems. (Hint: What are the “business” goals of your university with regard to student registration, fee payment, grade posting, etc.?)

Responses will depend on the amount of IT support provided at your school. Hopefully that support is high and link to the overall business strategy of the institution.

Chapter 2:

3.

Page 6

What is IT governance and why is it important?

IT governance is a structure of relationships and processes which add value while directing and controlling the enterprise. It helps balance risk versus return over IT and its processes.

It is important because IT governance helps organizations effectively manage their IT operations as well as align them with their business strategies.

IT’s About Business Questions IT’s About Business 2.1 Boosting Store Power 1. Would you buy a membership in Shopcaster if you were a store owner? Why or Why not?

What type of product do you think would benefit most from the software?

Yes, if the membership charge is not very high. This website provides a good platform to show the members’ latest and greatest products online without having to spend a lot of money on website development themselves. Products which are competitively priced, latest and best would benefit from this website.

2. Would you invest in Shopcaster? Why or Why not?

The revenue model is attractive and already tested. Since there is a lot of growth potential in Canada and the US, it is an attractive investment opportunity.

IT’s About Business 2.2 Sleek Audio 1. Which of Friedman’s flatteners apply to Sleek Audio’s decision to bring its manufacturing back to the United States? Support your answer.

The company changed from an offshoring model to a model using outsourcing, supply chaining, 2. Identify some potential negative implications of Sleek Audio’s increasing reliance on robots in its manufacturing processes.

Negative implications could include: • Technical issues that could bring production line down.

• Time constraints – It could take longer to make process or production changes.

IT’s About Business 2.3 The Internet Facilitates Generosity 1. Discuss why people will give away their time and knowledge for free.

Chapter 2:

Page 7

Sociologists contend that contributing to such communities helps people gain self-esteem by donating their time and experiences to people in need. People will most readily share information, followed by time, and then physical goods. Visit the site: http://www.amazon.ca/The-Innovators-Dilemma-RevolutionaryBusiness/dp/0062060244/ref=pd_sim_b_5 to read the reviews of this book. Do you think the reviews will help you make the purchase decision?

2. Describe the various ways in which the Internet can facilitate generosity.

People use the Internet to give away something that has little marginal cost in exchange for the opportunity to meet people from all over the world. The article lists the following sites as examples..

•

• •

• •

•

GiftFlow (www.giftflow.org): GiftFlow is a virtual community where you can obtain things you need for free and find people who need the “stuff” you have to give away.

GiftFlow connects community organizations, businesses, governments, and neighbors in a network of reciprocity, where they can share resources, meet one another’s needs, and coordinate their efforts to build a better world.

OurGoods (www.ourgoods.org): OurGoods enables creative people to help one another produce independent projects. More work is accomplished in networks of shared respect and shared resources than in competitive isolation.

KoodoNation (http://www.koodonation.com/): KoodoNation is an online “microvolunteering” Web site that connects busy people with non-profits through microvolunteering Thredup (www.thredup.com): Thredup is a Web site where parents trade children’s clothing and toys.

Collaborative Consumption (www.collaborativeconsumption.com): This Web site is an online hub for discussions about the growing business of sharing, resale, reuse, and barter (with many links to Web sites engaged in these practices).

Kiva (www.kiva.org): Kiva is a nonprofit enterprise that provides a link between lenders in developed countries and entrepreneurs in developing countries. Users pledge interestfree loans rather than tax-deductible donations. Kiva directs 100 percent of the loans to borrowers.

DonorsChoose (www.donorschoose.org): DonorsChoose is an education-oriented Web site that functions entirely within the United States. Users make donations rather than loans. The Web site addresses the huge problem of underfunded public schools.

IT’s About Business 2.4 Unhaggle and Shopify: Strategically Meeting Customer Needs 1. Consider the cases of Unhaggle and Shopify. What does it mean that the business strategy and information technology go hand-in-hand? (That is, neither comes before the other.)

Both Unhaggle and Shopify simplify business processes of retailers and individuals respectively by using IT strategically.

Chapter 2:

Page 8

2. Provide specific examples of problems that could occur at Unhaggle and Shopify if the companies did not manage their IT systems properly (i.e., if they had ineffective IT governance).

Unhaggle would not have been able to provide its customers multiple quotes from car dealers in their area. In case of Shopify, there could be a problem in online inventory management (mismatch in prices, stock available) if it’s IT governance were poor.

Discussion Questions 1. Consider the student registration business process at your university: • Describe the steps necessary for you to register for your classes each semester.

• Describe how information technology is used in each step of the process (or is not used).

The responses to this question will be different depending on your school’s processes.

2. Why is it so difficult for an organization to actually implement business process reengineering?

There are various internal and external factors that make it difficult to do BPR. These include technical limitations, cost factors, management support, legal and political issues, etc.

3. Explain why IT is both a business pressure and an enabler of response activities that counter business pressures.

Rapid changes in information technology and capabilities force business to adapt or go out of business. On the other hand, IT assists companies in their efforts to stay up on the latest strategies to provide the best customer service, to provide better quality products, new and different delivery methods..

4. What does a flat world mean to you in your choice of a major? In your choice of a career?

Will you have to be a “lifelong learner”? Why or why not?

It means that you need to think about who across the world you might be competing against.

You not only will have to think about those in your immediate vicinity, but due to the far reaching impact of the new global, Web-based platform which will continue to grow, you will be competing with anyone who has access to a cell phone or a computer.

You clearly will be a lifelong learner since there will be new devices, new applications and new ways in which they are used. Anyone who stops learning will be left behind very quickly..

5. What might the impact of a flat world be on your standard of living?

Chapter 2:

Page 9

Resources that were previously very expensive or unattainable will become increasingly available. In addition, technological innovations could enable students to access vast amounts of information and to communicate with people around the world. From a different perspective, however, offshoring to low-wage countries, coupled with an increasing reliance on labor-saving technologies, could have negative effects on wages/benefits and the availability of jobs. Moreover, students likely will have to become lifelong learners in order to remain productive (and employed).

6. Is IT a strategic weapon or a survival tool? Discuss.

It is both. Used to establish a competitive advantage in an industry, IT helps an organization implement its strategic goals and increase its performance and productivity. As a survival tool, it is used to fend off various threats such as new entrants, suppliers and customers bargaining power, substitute products or services, and rivalries among existing firms in the industry.

7. Why might it be difficult to justify a strategic information system?

SISs are often very complex and very expensive to develop and outcomes may take years to observe and measure.

8. Describe the five forces in Porter’s competitive forces model, and explain how the Internet has affected each one.

•

•

•

• •

The threat of entry of new competitors.

For most firms, the Web increases the threat that new competitors will enter the market because it sharply reduces traditional barriers to entry, such as the need for a sales force or a physical storefront.

The bargaining power of suppliers The Internet’s impact on suppliers is mixed. On the one hand, it enables buyers to find alternative suppliers and to compare prices more easily, thereby reducing the supplier’s bargaining power. On the other hand, as companies use the Internet to integrate their supply chains, participating suppliers prosper by locking in customers.

The bargaining power of customers Customers’ power has increased tremendously with the availability of information on the Internet. Much the same as suppliers above, they have a much more information about sources of goods and services and pricing to help them when they are making purchasing decisions. For example, college students have greater power because they can purchase textbooks from sources other than their college bookstore.

The threat of substitute products or services Any industry which is primarily based on digitized information is at risk, and must take the threat of Internet delivered products and services seriously.

The rivalry among existing firms in the industry

Chapter 2:

Page 10

The Internet makes competition more intense. Keeping anything secret is impossible once it is available on the Internet. Companies can see their competitors’ systems and match their features to remain competitive.

9. Describe Porter’s value chain model. What is the relationship between the competitive forces model and the value chain model?

The competitive forces model is useful for designing general competitive strategies.

Organizations use the value chain model to identify specific activities where they can use competitive strategies for greatest impact. The value chain model also identifies points where an organization can use IT to achieve a competitive advantage.

10. Discuss the idea that an information system by itself can rarely provide a sustainable competitive advantage.

Information technology is a tool. It is management’s responsibility to use it to the best advantage in order to sustain a competitive advantage.

11. Explain why large organizations need IT governance Large organizations need IT governance so that they can effectively manage their IT operations with the purpose of aligning them with their business strategies.

12. Should all organizations have IT governance? Why or why not Yes, but it is more critical for large organizations. .

Problem Solving Activities 1. Surf the Internet for information about the Department of Homeland Security. Examine the available information, and comment on the role of information technologies in the department.

Obviously the best starting point for this exercise is the DHS Web site. Students also might search for articles on the use of technology by DHS. There probably is a substantial literature on this topic, especially having just observed the tenth anniversary of 9/11. In Canada, National Defense and the Canadian Forces (http://www.forces.gc.ca/site/home-accueileng.asp) will have similar responsibilities.

2. Experience customization by designing your own shoes at www.nike.com, your car at www.jaguar.com, your CD at www.easternrecording.com, your business card at www.iprint.com, and your diamond ring at www.bluenile.com. Summarize your experiences.

Before starting this activity, you might consider asking the students if any have already used any of these sites and discuss their experiences.

Chapter 2:

Page 11

3. Access www.go4customer.com. What does this company do and where is it located? Who are its customers? Which of Friedman’s flatteners does this company fit? Provide examples of how a U.S. company would use its services.

The company operates call centers located in India. They do everything from market surveys and debt collections to inbound call center operations. Using Friedman’s model, they would be a global company handling outsourced services. A U.S. company could use them for a number of things, including operating their customer call center, telephone marketing, and market surveys.

4. Visit the Canadian Walmart site located at www.walmart.ca. Is there any significant difference between the US and Canadian sites?

5. Apply Porter’s value chain model to Costco (www.costco.com). What is Costco’s competitive strategy? Who are Costco’s major competitors? Describe Costco’s business model. Describe the tasks that Costco must accomplish for each primary value chain activity. How would Costco’s information systems contribute to Costco’s competitive strategy, given the nature of its business?

Costco’s business model is to sell premium merchandize at a lower price to members (captive group of shoppers). Sam’s club is their biggest competitor. They need to procure the right merchandise mix targeting their members by building a strong understanding of their base of members. They need to have an efficient supply chain and then be able to track the success of their promotions and marketing efforts. Visit www.costco.ca to become familiar with the Canadian version of this business. Who is a major competitor of Costco in Canada?

6. Apply Porter’s value chain model to Dell (www.dell.com). What is Dell’s competitive strategy? Who are Dell’s major competitors? Describe Dell’s business model. Describe the tasks that Dell must accomplish for each primary value chain activity. How would Dell’s information systems contribute to Costco’s competitive strategy, given the nature of its business.

Dells strategy is to offer high end computers with premium features and components at a lower price and allow for customers to customize their systems using a web based interface.

Dell must support a highly efficient supply chain system and reduce their inventory costs.

They need to track new components and offer them to their customers and then track the quality of their components as they are introduced into their systems.

7. The market for optical copiers is shrinking rapidly. It is expected that by 2010 as much as 90 percent of all duplicated documents will be done on computer printers. Can a company such as Xerox Corporation survive?

Chapter 2:

Page 12

a. Read about the problems and solutions of Xerox from 2000-2010 at www.fortune.com, www.findarticles.com, and www.google.com. b. Identify all the business pressures on Xerox. c. Find some of Xerox’s response strategies (see www.xerox.com, www.yahoo.com, and www.google.com). d. Identify the role of IT as a contributor to the business technology pressures (for example, obsolescence). e. Identify the role of IT as a facilitator of Xerox’s critical response activities.

Xerox needs to identify new business models and new ways to introduce their technology into products that can support their customers.

Team Assignments 1. (a) Create an online group for studying IT or a part of it you are interested in. Each member of the group must have a Yahoo e-mail account (free). Go to Yahoo: Groups (http://ca.groups.yahoo.com) and at the bottom see a section titled “Find a Yahoo! Group.”

Step 1: Click on “Start your group today.”

Step 2: Select a category that best describes your group (use the Search Group Categories, or use Browse Group Categories tool). You must find a category.

Step 3: Describe the purposes of the group and give it a name.

Step 4: Set up an e-mail address for sending messages to all group members.

Step 5: Each member must join the group (select a “profile”); click on “Join this Group.”

Step 6: Go to Word Verification Section; follow the instructions.

Step 7: finish by clicking “Continue.”

Step 8: Select a group moderator. Conduct a discussion online of at least two topics of interest to the group.

Step 9: Arrange for messages from the members to reach the moderator at least once a week.

Step 10: Find a similar group (use Yahoo’s “find a group” and make a connection). Write a report for your instructor. (b) Now follow the same steps for Google Groups. (c) Compare Yahoo Groups and Google Groups.

2. Divide the class into teams. Each team will select a country government and visit its official Web site (for example, try the United States, Australia, New Zealand, Singapore, Norway, Canada, the United Kingdom, the Netherlands, Denmark, Germany, and France). For example, the official Web portal for the U.S. government is www.firstgov.gov. Review and compare the services offered by each country. How does the United States stack up? Are you surprised at the number of services offered by countries through Web sites? Which country offers the most services? The least?

Closing Case Can Lululemon Sustain Competitive Advantage?

Chapter 2:

Page 13

The Problem Lululemon Athletica inc. (www.lululemon.com), founded in Vancouver in 1998, has a reputation for top quality clothes that consumers pay top prices for. From a single store, the company has grown to sales over $1 billion, with over 10 percent of those sales from its Internet store. The company continues to innovate with new fabrics and new designs in women’s and men’s athletic clothing. This success has encouraged copycats and competition from the likes of Nike and the Gap.

These competing companies have launched yoga lines of clothing (albeit at lower prices), and have created yoga environments, including free yoga classes, in their stores. Free yoga classes were started by Lululemon, which strives to attract customers who want to take care of their bodies, and wear high-quality, attractive clothing while doing so. Lululemon’s edge was the design of new fabrics that would not slip or slide or crumple while doing the yoga exercises.

However, as synthetic fabrics have increased in availability, other companies have been able to design good yoga wear.

Lululemon has continued to grow, with most recent results of sales growth in the 8 or 9 percent range in the last part of 2012, versus 18 percent the year before. These growth figures are significantly less than the previous growth rates of the company, which have exceeded 30 percent or even 50 percent—amazing results when many retailers are struggling to do well.

Do these figures mean that Lululemon will continue to lose ground to more and more competition?

Chapter 2:

Page 14

The Solution Lululemon uses people and technology to keep its customers happy and keep costs down. The company implemented Vocollect’s Voice technology to improve communication and speed up processing at its distribution centres. This means that the voice technology will be implemented for picking (taking products from the shelves and readying shipments), for organizing shipments to stores, and for moving products within the distribution centres. By implementing technology that saves time, the company improves employee productivity and lowers costs.

Lululemon also implemented FlexPLM (PLM stands for “product life cycle management”), which is used to manage the creation, production, and distribution of products. This type of software allows the company to manage the different stages of the product life cycle, setting targets for work, tracking what has been done, and following up tasks that are not on target. This means that customer marketing can be more effectively planned and tie in with the actual availability of products.

Since Lululemon has relatively short product life cycles, this helps the company implement new products quickly. Lululemon has basic products (such as black yoga apparel) that it stocks all the time, but it has special products that come in with smaller cycles, lasting from two to 12 weeks.

The products in the cycle are not repeated, so the company creates a perception of unusual products and scarcity, with the intention of having customers buy something that they like when they see it, because it will not be in the store again if they come back many weeks later. Business analysts who analyze corporate performance believe that this is one of Lululemon’s weaknesses, yet the company continues to use short product cycles and does not have “sales” of merchandise, instead selling products at full price.

Chapter 2:

Page 15

The company limits the money that it spends on information technology; for example, it does not have customer relationship systems nor does it spend time on intensive data analytics. Instead, the Chief Executive, Christine Day, walks around stores, listening to customers for some of her time, and the company has implemented practices that encourage employees to treat customers well, while listening to customer complaints. Clothing that customers have difficulty putting on (such as tops that are too tight in the arms) are not re-ordered.

Thus, Lululemon is creating a brand environment, a culture of high quality, uniqueness, and customer service, enhanced with information technology that supports efficient distribution.

The Results Lululemon continues to outperform other rivals in the clothing industry. For the fourth quarter of 2012, net revenue was 31 percent higher than the previous fourth quarter (at $485.5 million, making it the second year in a row that the company was a billion-dollar company, with sales of $1.4 billion in 2012 and $1.0 billion in 2011. Clearly the company is doing something right.

Questions

1. What type of competitive strategies is Lululemon employing?

It is employing Innovation Strategy.

2. Describe the business pressures that Lululemon is facing and how it is dealing with them.

Chapter 2:

Page 16

Competition has gone up with rival companies offering similar products and creating value added services such as free yoga classes in their stores. The company is investing in IT to lower the costs and to increase customer satisfaction.

Glossary business environment: the combination of social, legal, economic, physical, and political factors in which businesses conduct their operations. business – information technology alignment: the tight integration of the IT function with the strategy, mission, and goals of the organization. business process: a collection of related activities that produce a product or a service of value to the organization, its business partners, and/or its customers. business process management (BPM): a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes. business process reengineering (BPR): a radical redesign of a business process that improves its efficiency and effectiveness, often by beginning with a “clean sheet” (from scratch). competitive advantage: An advantage over competitors in some measure such as cost, quality, or speed; leads to control of a market and to larger-than-average profits. competitive forces model: A business framework devised by Michael Porter, that analyzes competitiveness by recognizing five major forces that could endanger a company’s position. cross-functional business process: a process in which no single functional area is responsible for its completion; multiple functional areas collaborate to perform the function. digital divide: the gap between those who have access to information and communications technology and those who do not. entry barrier: Product or service feature that customers expect from organizations in a certain industry; an organization trying to enter this market must provide this product or service at a minimum to be able to compete.

Globalization: the integration and interdependence of economic, social, cultural, and ecological facets of life, enabled by rapid advances in information technology. individual social responsibility: See organizational social responsibility make-to-order: The strategy of producing customized products and services. mass customization: A production process in which items are produced in large quantities but are customized to fit the desires of each customer. organizational social responsibility (also individual social responsibility): Efforts by organizations to solve various social problems.

Chapter 2: primary activities:

Page 17

Those business activities related to the production and distribution of the firm’s products and services, thus creating value. strategic information systems (SISs): Systems that help an organization gain a competitive advantage by supporting its strategic goals and/or increasing performance and productivity. support activities: Business activities that do not add value directly to a firm’s product or service under consideration but support the primary activities that do add value. value chain model: Model that shows the primary activities that sequentially add value to the profit margin; also shows the support activities. value system: Includes the producers, suppliers, distributors, and buyers, all with their value chains.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 3:

Data and Knowledge Management

Chapter Outline 3.1 3.2 3.3 3.4 3.5

Managing Data The Database Approach Database Management Systems Data Warehousing Knowledge Management

Learning Objectives 1. Identify three common challenges in managing data, and describe one way organizations can address each challenge using data governance.

2. Name six problems that can be minimized by using the database approach.

3. Demonstrate how to interpret relationships depicted in an entity-relationship diagram.

4. Discuss at least one main advantage and one main disadvantage of relational databases.

5. Identify the six basic characteristics of data warehouses, and explain the advantages of data warehouses and marts to organizations.

6. Demonstrate the use of a multidimensional model to store and analyze data.

7. List two main advantages of using knowledge management, and describe the steps in the knowledge management system cycle.

Teaching Tips and Strategies For students to truly appreciate the importance of data mining and data warehousing, they must first understand the amount of information that companies collect. To help them achieve this understanding, it is helpful to provide an example of how much data about them are being collected when they purchase an item online or when they engage in e-commerce activities online.

You can start by asking the class to recall the last time they purchased something online. Then, demonstrate to students the amount of data that Internet-based companies collect during a single online transaction. Use the purchase of this text on Amazon as an example. Search for the book by author. Amazon will access its database to find books that match the criteria. Explain to the class, using a fictitious name as an example, the information that Amazon collects: Information that Amazon.com collects during a typical purchase • Name of purchaser • Email address • Type of credit card (Visa, MasterCard) • Address of purchaser • Past buying history if any • Type of book purchased and author (This information can be used later to tailor advertising efforts to inform users that the author has released a new book or

Chapter 3:

• •

Page 2

another author has released a book that people who bought this book also purchased.)

Address of purchaser Telephone number of purchaser

Then, discuss how Amazon.com can use that information to modify its advertising and to contact customers who have not made recent purchases. This demonstration illustrates to students how much information is being collected about them when they are online. The most important point, however, is how companies can turn that data into information.

We live in the information age. Companies and students have more data at their fingertips than ever before. However, data are useless unless they help individuals find what they need. This issue becomes very clear when we try to conduct research on the Internet. The problem is usually that we find too much information and we then have to modify our search criteria to narrow it down. We need a way to transform all of these data into information we can use without reading through hundreds of articles. This challenge is no different from the information overload that managers experience in real-time every day.

Students are in the same situation. How do they distinguish between meaningful and useless data? This chapter will provide students with some guidelines to help them make these decisions.

As the types and volume of data within organizations increase, management needs to adopt policies and procedures for managing the data across the organization. These policies and procedures are subject to laws and regulations, which vary by industry. This is the focus of data governance. Organizations need to follow unambiguous rules for creating, collecting, handling, and protecting their information – both from inside and outside the firm. Encourage students to explore what regulations exist for their industry of work or interest. For example, healthcare data are governed by HIPAA, and financial data are governed by Sarbanes-Oxley.

Review Questions Section 3.1 … Before you go on 1. Identify and explain the major difficulties involved in managing data.

• • • •

Organizations accumulate huge quantities of data that they must keep for a long time.

Data are scattered in multiple locations throughout the organization.

External data must be included to support decision making.

Data security, quality, and integrity are essential but are also difficult to ensure.

2. Define data governance.

Data governance is an approach to managing information across an entire organization. It involves a formal set of business processes and policies that are designed to ensure that data are handled in a certain, well-defined fashion. That is, the organization follows unambiguous

Chapter 3:

Page 3

rules for creating, collecting, handling, and protecting its information. The objective is to make information available, transparent, and useful for the people authorized to access it, from the moment it enters an organization until it becomes outdated and is deleted.

3. Compare and contrast master data and transactional data, and provide an example of each one.

Master data are a set of core data — such as customer, product, employee, vendor, and geographic location — that span all of the enterprise’s information systems. It is important to distinguish between master data and transaction data. Transaction data, which are generated and captured by operational systems, describe the activities, or transactions, of the business. In contrast, master data involve multiple transactions and are used to categorize, aggregate, and evaluate the transaction data.

Section 3.2 … Before you go on…

1. What is a data model?

A data model is a diagram that represents entities in the database and their relationships to one another.

2. What is a primary key? A secondary key?

A primary key is the field in a record that uniquely identifies that record so that it can be retrieved, updated, and sorted. A secondary key is any other field that has some identifying information but typically does not identify the specific record.

3. What is an entity? An attribute? Provide an example of each in a sales department database.

An entity is a person, a place, a thing, or an event about which information is maintained. An attribute is a characteristic or property of an entity. Customer could be an entity with first name, last name, email address etc. as attributes.

Section 3… Before you go on…

1. Identify three advantages and three disadvantages of relational databases.

Relational databases provide great flexibility in inserting, updating and deleting data. Some disadvantages are: a good database design needs knowledge; the database could slow down if it has a lot of data spread in many tables; joining several tables could further complicate the design.

2. Identify three benefits of data dictionaries and provide a business example that highlights those benefits.

Chapter 3:

Page 4

Data dictionaries (1) provide names and standard definitions for all attributes, (2) reduce the chances that the same attribute will be used in different applications but with a different name, and (3) enable programmers to develop programs more quickly because they do not have to create new data names. Consider creating a sales database which stores data for individuals such as customers, salespersons etc.

3. Provide an example of how structured query language works and relate it to the accounting department in a company.

SQL enables people to perform complicated searches by using relatively simple statements or key words such as SELECT (the attribute), FROM (table to be used) and WHERE (specify conditions). For example, SELECT * FROM Employees WHRE DeptName = ‘Accounting’; Section 3.4 … Before you go on…

1. Provide three characteristics of a data warehouse.

Organized by business dimension or subject. Data are organized by subject (for example, by customer, vendor, product, price level, and region). This arrangement is different from transactional systems, where data are organized by business process, such as order entry, inventory control, and accounts receivable.

Use online analytical processing. Typically, organizational databases are oriented toward handling transactions. That is, databases use online transaction processing (OLTP), where business transactions are processed online as soon as they occur. The objectives are speed and efficiency, which are critical to a successful Internet-based business operation. In contrast, data warehouses and data marts, which are designed to support decision makers rather than OLTP, use online analytical processing. Online analytical processing (OLAP) involves the analysis of accumulated data by end users.

Integrated. Data are collected from multiple systems and are integrated around subjects. For example, customer data can be extracted from internal (and external) systems and integrated around a customer identifier to create a comprehensive view of the customer.

2. Identify three differences between data warehouse and data marts.

A data mart is less expensive and smaller than a data warehouse. Also, the former takes less amount of time for its implementation.

A data warehouse is a repository of historical data that are organized by subject to support decision makers in the organization.

Chapter 3:

Page 5

A data mart is a low-cost, scaled-down version of a data warehouse that is designed for endusers’ needs in a small organization, a strategic business unit (SBU), or a department in a large organization. Data marts can be implemented more quickly than data warehouses, often in less than 90 days. Further, they support local rather than central control by conferring power on the using group. Typically, groups that need a single or a few BI applications require only a data mart, rather than a data warehouse Data warehouses and data marts are read-only, and the extra processing is eliminated because data already in the data warehouse are not updated.

3. Identify four components of a data warehouse environment.

Source systems, data integration technology and processes, different BI tools and different data storage architecture.

4. What are three possible architectures for data warehouses and data marts in an organization?

• •

•

Central enterprise data warehouse (without data marts) Independent data marts Hub and spoke

Section 3.5 … Before you go on…

1. What is knowledge management?

Knowledge management is a process that helps organizations identify, select, organize, disseminate, transfer, and apply information and expertise that are a part of the organization’s memory and that typically reside within the organization in an unstructured manner.

2. Compare and contrast tacit knowledge and explicit knowledge, and provide examples of each type.

Explicit knowledge is the more objective, rational, and technical type of knowledge. It is knowledge that has been codified in a form that can be distributed to others or transformed into a process or strategy. Tacit knowledge is the cumulative store of the experiences, insights, expertise, know-how, trade secrets, skill sets, understanding, and learning that an organization possesses. Tacit knowledge is highly personal and unstructured and is hard to formalize.

3. Identify and describe the six steps in the knowledge management system cycle.

The knowledge management system cycle involves six steps that are performed iteratively as knowledge is dynamically refined over time. The steps are: 1. create knowledge 2. capture knowledge

Chapter 3: 3.

4.

5.

6.

Page 6

refine knowledge store knowledge manage knowledge disseminate knowledge

IT’s About Business Questions IT’s About Business 3.1 Ace Hardware Standardizes Master Data Questions 1.

Which of the difficulties about managing data can be applied to ACE Hardware Corporation? Support your answer.

The company needed its ability to effectively manage its master data consisting of product names and description, manufacturer names, brands and item attributes.

2. Why was it important to standardize data for Ace Hardware? How does this concept tie in with data governance?

Standardization was necessary to improve search effectiveness and accuracy. Both concepts deal with process efficiency and effectiveness.

3. Why is it important to have a structured process in deciding which data to store in a database?

This is necessary to ensure that the database is relevant and normalized.

IT’s About Business 3.2 DBMS at China Sports Lottery Technology Development 1. Discuss why the characteristics of the database approach fit the case of CSLT. Hint: Address in your discussion the benefits of database management systems.

The database approach helps the user aggregate the data and respond quickly to changes or new information. These features were critical in the case of CSLT. 2. What are three technical issues that need to be considered when selecting a new database management system? Use facts from this story to support your answer. (a)Availability of data summarization and analysis tools (b) Ability to handle growing data size (c) Ability to generate useful business reports and integrate with other software applications.

Chapter 3:

Page 7

3. Why is it important for a relational database to be normalized? Discuss your answer in relation to CSLT. Without normalization, the database would be unwieldy and inaccurate as multiple versions of the same data might occur in the database. Non-normalized database would have difficulty in aggregating the data and responding to new information.

4. Explain the usefulness of a data dictionary in the case of CSLT. Use an example to support your answer.

A data dictionary in the case of CSLT would be useful to define the data elements, their attributes and relationships with other elements. For example, lottery transactions could have data elements such as the lottery numbers chosen by the client, date of purchase etc. and their relationships with the winning lottery.

IT’s About Business 3.3 The Data Warehouse at the Isle of Capri Casinos 1. Why was it necessary for The Isle of Capri Casinos to develop a data warehouse?

The Isle of Capri faced a marketing challenge because it serves a diverse and geographically dispersed clientele. The company needed to segment customers while at the same time maintaining and building an overall brand image. Historically, the firm managed its customer relationship management efforts with a piecemeal direct mail program located in the casino management system that was housed at each property. However, this approach did not provide company employees with a complete view of the customer. For example, the company had occasional difficulties recognizing regular customers at one property who were well known at another property.

2. Describe the variety of benefits that The Isle realized from its data warehouse.

The Isle of Capri decided to implement a data warehouse that would provide a “single view of the business” as well as a “single view of the customer.” The goal was for the data warehouse to boost both direct mail and e-mail marketing campaigns.

3. Can you think of any additional ways in which The Isle can take advantage of its data warehouse? Provide specific examples.

Use computer demographics to identify new or underserved markets. Partner and share data with similar or complementary businesses in developing marketing strategies such as “package” deals.

IT’s About Business 3.4 Knowledge Management at Mazda North America Questions

Chapter 3:

Page 8

1. What are the issues that made Mazda North America adopt a new knowledge management system? Use the facts from the case to support your answer.

It was becoming increasingly difficult for Mazda to do their job in a timely manner because their inability to find answers for technical problems such as an engine not starting or how to replace a thermostat etc in an efficient manner.

2. What managerial factors need to be considered when implementing a knowledge management system? (Hint: Think in terms of organizational characteristics, size, industry, management style, and organizational culture.)

Organizational characteristics and size: Large corporation spanning Canada, the US, Mexico.

Industry – automobile (Customer satisfaction and service very critical) Management style and culture- As a global company of a Japan-based motor corporation- diverse and challenging.

All these factors point to the necessity of having a multi-lingual and flexible KM system.

3. Provide examples of tacit knowledge in the case of Mazda.

For example, how does the perception of customer satisfaction vary across different countries?

4. Explain the role that knowledge management systems could play in regard to managing tacit knowledge. Use the case of Mazda to explain your answer.

KM systems could analyze structured customers surveys as well as unstructured customer feedback and complaints to assess the level of customer satisfaction in a country.

Discussion Questions 1. Explain the difficulties involved in managing data.

Because the amount of data in organizations is so large and is stored in different systems, databases, formats and languages, keeping them secure and maintaining their integrity are difficult.

2. What are the problems associated with poor-quality data?

They include customer relationship problems, sales problems, poor decisions based on flawed data, etc.

3. What is master data management? What does it have to do with high-quality data?

Master data management is a process that provides companies with the ability to store, maintain, exchange, and synchronize a consistent, accurate, and timely “single version of the

Chapter 3:

Page 9

truth” for the company’s core master data. It ensures that there is one “source of truth” for the data that are being accessed.

4. Explain why master data management is so important in companies that have multiple data sources.

The format and meaning of the data can be different in different data sources. These disparate formats need to be reconciled for master data management.

5. Describe the advantages of relational databases.

The major advantage of relational databases is their great flexibility. Other advantages are ease of design, maintenance, and query and reporting capability.”

6.

Discuss the benefits of data warehousing to end users.

By storing the historical, non-volatile enterprise data, data warehouses help end users identify future trends and patterns.

7. What is the relationship between a company’s databases and its data warehouse?

Data warehouse is an enterprise level database storing historical, non-volatile, multidimensional integrated data.

8.

Distinguish between data warehouses and data marts.

Data marts are department-wide whereas data warehouses are enterprise level.

9. Explain why it is important to capture and manage knowledge.

Knowledge is information that is contextual, relevant, and actionable. The goal of knowledge management is to be aware of individual and collective knowledge so that the organization makes the most effective use of the knowledge. By capturing and managing knowledge, an organization makes the expertise of its human capital widely accessible.

10. Compare and contrast tacit knowledge and explicit knowledge.

Explicit knowledge is the more objective, rational, and technical type of knowledge. It is knowledge that has been codified in a form that can be distributed to others or transformed into a process or strategy. Tacit knowledge is the cumulative store of the organization’s experiences, insights, expertise, know-how, trade secrets, skill sets, understanding, and learning. Tacit knowledge is highly personal and unstructured and is hard to formalize.

Problem-Solving Activities Each student will have different ideas of what to include in the following:

Chapter 3:

Page 10

1. Access various employment Web sites (e.g., www.monster.com and www.dice.com) and find several job descriptions for a database administrator. Are the job descriptions similar? What are the salaries offered in these positions?

Students will prepare a report of salaries for types of database administrator positions based on the roles and responsibilities and the technologies involved.

2. Access the Web sites of several real estate companies. Find the sites that take you through a step-by-step process for buying a home, that provide virtual reality tours of homes in your price range and location, that provide mortgage and interest rate calculators, and that offer financing for your home. Do the sites require that you register to access their services? Can you request that an e-mail be sent to you when properties in which you might be interested become available?

Visit various local agent Web sites, and explore their features. Sign up for email on real estate searches and news.

3. It is possible to find many Web sites that provide demographic information. Access several of these sites and see what they offer. Do the sites differ in the types of demographic information they offer? How? Do the sites require a fee for the information they offer?

Would demographic information be useful to you if you wanted to start a new business? If so, how and why?

Buydemographics.com, www.nielsen.com, and www.geolytics.com are a few sites. Have students compare theses sites and choose one they would use if they were to start a business.

Business planning and identifying potential customers would be a way to use this information.

4. The Internet contains many Web sites that provide information on financial aid resources for students. Access several of these sites. Do you have to register to access the information?

Can you apply for financial aid on the sites, or do you have to request paper applications that you must complete and return?

Several sites are available. Most sites require registration and can help students identify sources of financial aid.

5. Draw an entity-relationship diagram for a small retail store. You wish to keep track of the product name, description, unit price, and number of items of that product sold to each customer. You also wish to record customer name, mailing address, and billing address. You must track each transaction (sale), date, product purchased, unit price, number of units, tax, and total amount of the sale.

Students will come up entities for Product number, (name, description, unit price, tax rate), Customer (number, name, mailing address, and billing address) and Order (customer number,

Chapter 3:

Page 11

product number, number of units, tax, and total amount). The relationship between Customer to Order is one-to-many, and the Order to Product is many-to-many.

6. Draw the entity-relationship diagram for this patient appointment system. The business rules of this system are the following: A doctor can be scheduled for many appointments, but may not have any appointments scheduled at all. Each appointment is scheduled with exactly one doctor. A patient can schedule one or more appointments. One appointment is scheduled with exactly one patient.

An appointment must generate exactly one bill, and a bill is generated by only one appointment. One payment is applied to exactly one bill, and one bill can be paid off over time by several payments. A bill can be outstanding, meaning that it has not been paid at all.

One patient can make many payments, but a single payment is made by only one patient.

Some patients are insured by an insurance company. If they are insured, they can carry insurance with only one insurance company. An insurance company can have many patients carry their policies. For patients who carry insurance, the insurance company will make payments, with each single insurance payment made by exactly one insurance company.

Students will come up entities for Patient, (name, mailing address, contact info, insurance, etc), Calendar information (date, available times, etc), Bill (charge number, charges, service, etc), Doctor (code, name), Insurance (company, address, etc), and so on. The relationships between Patient to Calendar and Insurance to Patient are one-to-many.

Web Activities 7. Access the Web sites of IBM (www.ibm.com), Sybase (www.sybase.com), and Oracle (www.oracle.com) and trace the capabilities of their latest products, including Web connections.

Students will compare the features of these database products.

8. Enter the Web site of the Gartner Group (www.gartner.com). Examine their research studies pertaining to data management and data warehousing. Prepare a report on the state of the art.

Suggest some free reports that are available to the students.

9. Calculate your personal digital footprint at http://www.emc.com/digital_universe.

Students will come up with their own answers from the Web site.

10. Access http://academicprograms.teradata.com/tun/ and sign in under the student registration option. Choose one of the topics related to databases and data warehouses that are available on the website and prepare a short presentation for your class.

Chapter 3:

Page 12

Students will come up with their own answers from the Web site.

Team Assignments 1. Each team will select an online database to explore, such as AOL Music (http://music.aol.com), iGo (www.igo.com), or the Internet Movie Database (www.imdb.com). Explore these Web sites to see what information they provide for you. List the entities and the attributes that the Web sites must track in their databases. Diagram the relationship between the entities you have identified.

Students need to identify the major entities in each system – Customer, Product, and their relationships and attributes.

2. In groups, create a data model for a pet store to include: • Customer data • Product data • Employee data • Financial data • Vendor data • Sales data • Inventory data • Building data • Other data (specify) Create attributes (four or more) for each entity. Create relationships between the entities, name the relationships, and create an entity-relationship diagram for the pet store.

Answers will vary by student. Encourage students to come up with attributes that are important for the pet store system.

Closing Case Coca-Cola Thrives with Enterprise Data The Problem The Coca-Cola Company is one of the most widely known companies in the world, operating in more than 200 countries, with 3,500 different products and over 16 brands valued at more than $1 billion. A big part of the reason for Coca-Cola’s success lies in advertising and big data analytics. One example was the 2012 Super Bowl. Watched by more than 111 million people, the football classic is one of the sports world’s most sought-after advertising events, and Coca-Cola was part of it. Advertisers can spend millions creating and airing just one Super Bowl commercial, and they want to make sure they’re getting their money’s worth. In order to assess the reaction to the ad, Coca-Cola collected and analyzed data from multiple sources. For example, it collected data from several survey organizations and new unstructured data from social media to gauge viewers’ responses to the commercial. In addition, data from different business partners, including retail customers’ transaction scan data, sales and shipment data,

Chapter 3:

Page 13

merchandising data, and loyalty card data, were also collected and needed to be analyzed to assess the impact of such an important adverting campaign.

The Solution In order to respond to its ever-growing data management needs, Coca-Cola decided to implement an enterprise-wide data warehouse solution from Teradata. It did this partly for the ability to manage the ever-growing unstructured data sets that come from popular social networking websites and that must be organized so that the information can be quickly stored, recovered, and analyzed.

The Results The new data management solution can quickly generate a single view of all retail information and convert mountains of data into usable information. This allows The Coca-Cola Company to respond to market changes, such as in consumer preferences or competitor prices, as they happen.

With these added business analytics capabilities of the new data warehouse, retailers of CocaCola products have become more efficient and effective in their stores. It’s also helped drive sales and improve the experience for shoppers and consumers. In the end, as one company manager stated, the goal is to ensure that Coca-Cola provides “the right products in the right stores at the right time to meet shoppers’ daily and seasonal consumption needs.”

Questions 1. Discuss the importance of data governance in the supply chain between Coca-Cola and its business partners such as retail stores.

Data governance is very important for Coca-cola because it operates in more than 200countries, with 350 different products and over 16 brands. Given the diversity and amount of data that is spread, the importance of data governance cannot be overemphasized.

2. Discuss three components of a data warehouse environment in the case of The Coca-Cola Company.

Source systems: Data from advertisements and other multiple sources Data integration technology and processes: Integration of data from business partners, Merchandising data and loyalty card data Different BI tools and different data storage architecture: Big data analytics 3. How does the term “Big Data” relate to knowledge management?

KM requires retrieval, storage and analysis of data from different and diverse sources. Such data is generally very large in size, hence the term Big Data.

Chapter 3:

Page 14

Chapter Glossary attribute

Each characteristic or quality describing a particular entity.

best practices

The most effective and efficient ways to do things.

bit

A binary digit; that is, a 0 or a 1.

byte

A group of eight bits that represents a single character.

clickstream data

Data collected about user behavior and browsing patterns by monitoring users’ activities when they visit a Web site.

database

A group of logically related files that stores data and the associations among them.

database management system (DBMS) The software program (or group of programs) that provides access to a database. data dictionary

Collection of definitions of data elements, data characteristics that use the data elements, and the individuals, business functions, applications, and reports that use this data element.

data file

a collection of logically related records

data governance

An approach to managing information across an entire organization.

data mart

A low-cost, scaled-down version of a data warehouse designed for the end-user needs in a small organization or a strategic business unit (SBU) or a department in a large organization.

data model

Definition of the way data in a DBMS are conceptually structured.

data warehouse

A repository of historical data that are organized by subject to support decision makers in the organization.

entity

A person, place, thing, or event about which information is maintained in a record.

entity classes

A grouping of entities of a given type.

entity-relationship (ER) diagram Document that shows data entities and attributes and relationships among them.

Chapter 3:

Page 15

entity-relationship (ER) modeling The process of designing a database by organizing data entities to be used and identifying the relationships among them. explicit knowledge

The more objective, rational, and technical types of knowledge.

field

A grouping of logically related characters into a word, a small group of words, or a complete number.

file

A grouping of logically related records.

identifier

An attribute that identifies an entity instance.

instance

A particular entity within an entity class.

intellectual capital (intellectual assets)

Other terms for knowledge.

knowledge management (KM) A process that helps organizations identify, select, organize, disseminate, transfer, and apply information and expertise that are part of the organization’s memory and that typically reside within the organization in an unstructured manner. knowledge management systems (KMSs) Information technologies used to systematize, enhance, and expedite intra- and interfirm knowledge management. master data

A set of core data, such as customer, product, employee, vendor, geographic location, and so on that span the enterprise information systems.

master data management A process that provides companies with the ability to store, maintain, exchange, and synchronize a consistent, accurate, and timely “single version of the truth” for the company’s core master data. metadata

Data about data.

normalization

A method for analyzing and reducing a relational database to its most streamlined form for minimum redundancy, maximum data integrity, and best processing performance.

primary key

The identifier field or attribute that uniquely identities a record.

query by example (QBE) Database language that enables the user to fill out a grid (form) to construct a sample or description of the data wanted. record

A grouping of logically related fields.

Chapter 3:

Page 16

relational database model Data model based on the simple concept of tables in order to capitalize on characteristics of rows and columns of data. secondary keys

An identifier field or attribute that has some identifying information, but typically does not identify the file with complete accuracy.

structured query language (SQL) Popular relational database language that enables users to perform complicated searches with relatively simple instructions. table

A grouping of logically related records.

tacit knowledge

The cumulative store of subjective or experiential learning; it is highly personal and hard to formalize.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 4: Networks Chapter Outline 4.1 What Is a Computer Network?

4.2 Network Fundamentals 4.3 The Internet and the World Wide Web 4.4 Network Applications Learning Objectives 1. Define the term computer network, and compare and contrast the two major types of networks.

2. Describe the differences among the three types of wireline communications media, and discuss the main advantages and disadvantages of each type.

3. Differentiate between the Internet and the World Wide Web, and describe the most common methods for accessing the Internet.

4. Identify six major categories of network applications, provide an example of each one, and explain how that application supports business functions.

Teaching Tips and Strategies This chapter will help students to understand the importance of telecommunications to the business process. You could start the class off by discussing how they connect their laptop, table, and/or smartphone to your campus network. If possible (and your campus still has them), discuss how the computers in the computer lab they use are connected to the LAN, which is connected to the campus network, etc.

After the students have developed a thorough understanding of LANs, move the discussion toward their experiences using the Internet (this gets them involved). Most students have access to a high-speed connection where they live. Identify students whose ISP is their cable provider, and ask them if their Internet connections ever slow down. The point is to show them that when too many users are accessing the Internet/network, the systems slow down due to lack of bandwidth.

Next, explain the importance of LANs in offices, retail operations, warehouses, etc. Students seem to relate to LANs because most of them have some experience using them.

Consider relating the creation of the Interstate highway system (i.e., Eisenhower Interstate System) in the 1950s with the creation of the network that evolved into what we know now as the Internet. (Hint: Both systems were created to support the military in the event of an attack on the U.S.) The United States now has a global economy and owes much of that success to telecommunications and networks.

Companies that have offices in America and Japan can now know each other’s sales or daily operations in real time. The advent of email has changed the way employees interact in a

Chapter 4:

Page 2

business. Two decades ago, employees communicated primarily in the region in which they worked. The ‘corporate office’ would send faxes or memos via the postal service, but many employees didn’t even know this information existed. In addition, this process was costly and time consuming.

Today, companies are networked, and they communicate via email. The corporate office can communicate with field offices from all over the world. The number of employees in many Human Resource departments has been reduced, and much of the HR information has been placed either online or on a shared network. For instance, many employees can now check their 401(k) and make contributions or changes to it totally online. Some companies have put their human resource manual online, thereby saving a great deal of money in printing costs.

As telecommunication and network technologies continue to advance, the business models within many corporations are improving. Companies have been able to reduce telephone staff because they now have customers’ accounts online. Customers can go to these Internet sites 24/7 and make changes to their accounts, and they can view their account information online.

This capability not only increases customer satisfaction — customers no longer have to wait on hold or have to have someone else tell them what their account balance is — but it also reduces costs for these businesses.

Review Questions Section 4.1… Before you go on…

1. Identify three primary business reasons for using networks.

Networks are used to share devices and data, and to provide connectivity between computers.

2. What is the difference between LANs and WANs? When businesses have to transmit and receive data beyond the confines of the local area network (LAN), they must use a wide area network (WAN). A WAN connects multiple LANs, and it is supported by common carriers such as telephone companies and Internet service providers.

3. Describe an enterprise network.

Organizations connect multiple LANs, and they may have multiple WANs, which are interconnected to form an enterprise network.

Section 4.2 … Before you go on…

1. Compare and contrast the three wireline communications channels.

Twisted-pair wire is the most prevalent form, inexpensive, but slow and subject to interference.

Chapter 4:

Page 3

Coaxial cable is less susceptible to electrical interference, and it can carry more data. It is more expensive than twisted-pair wire and more difficult to work with because it is inflexible.

Fiber-optic cables are expensive, but they are much faster than either of the others. They are also more fragile, and they have a problem maintaining signal strength over a long distance.

2. Describe the various technologies that enable users to send high-volume data over any network.

ISDN is an older, international telephone standard that allows users to transmit voice, image, video, and data simultaneously.

DSL provides high-speed digital data transmission from homes and businesses over existing telephone lines. Special modems are required to handle the digital transmission over analog lines.

ATM permits almost unlimited bandwidth. It currently requires fiber-optic cable and therefore is more expensive.

SONET is an interface standard for transporting digital signals over fiber-optic lines to integrate transmission from multiple vendors.

T-Carrier is a digital transmission system that defines circuits that operate at different rates.

3. Describe the Ethernet and TCP/IP protocols.

The Ethernet is a common LAN protocol that can transmit at speeds ranging from 10 gigabits to 100 gigabits per second. The distinguishing characteristic of the TCP/IP protocol is that each transmission is broken into packets, transmitted, and then reassembled at the other end.

4. Differentiate between client/server computing and peer-to-peer processing.

Client/server computing links two or more computers in an arrangement in which some machines, called servers, provide computing services for the user PCs, or clients.

Peer-to-peer processing is a scenario in which each computer acts as both a client and a server. Each computer can access all of the files contained on all of the other computers.

Section 4.3… Before you go on…

1. Describe the various ways that you can connect to the Internet.

There are several ways to access the Internet.

By way of your university or company LAN By opening an account with an ISP By way of Internet kiosks By cell phones, smart phones By tablet computers (e.g. ipad, ipod touch, etc)

2. Identify the parts of an Internet address.

Chapter 4:

Page 4

Each computer has an assigned IP address, which is composed of four sets of numbers.

Easier to remember, though, is the address consisting of the domain name. Each domain name consists of a top-level domain (e.g., “com”), , the ISP, and the particular machine on which the site resides.

3. What are the functions of browsers?

Browsers are software applications that serve as a means of universal access. They provide a graphical front end that enables users to point-and-click their way across the Web. 4. Describe the difference between the Internet and the World Wide Web. The Internet is a global network of computer networks, using a common communications protocol, TCP/IP. The World Wide Web is a system that stores, retrieves, formats, and displays information accessible through a browser.

Section 4.4 … Before you go on…

1. Discuss the network applications that you studied in this section and the tools and technologies that support each one.

The three applications are discovery, communications, and collaboration. Discovery tools are search engines, metasearch engines, sites with material in foreign languages, and portals.

Communication tools are email, call centers, chat rooms, and VoIP. Collaboration tools are workflow technologies, groupware, teleconferencing, and whiteboards.

2. Identify the business conditions that have made videoconferencing more important.

Increased costs related to air travel, food, and hotels as well as inconvenience/delays related to security in airports are reasons. Also included are increased pressures to be competitive and to make quality decisions.

3. Differentiate between e-learning and distance learning.

E-learning refers to learning supported by the Web. Distance learning refers to any learning situation in which the teachers and students do not meet face to face. E-learning can be used in conventional classroom situations. When e-learning is used in situations where students and teachers do not meet face to face, it is a type of distance learning.

4. Describe virtual universities. Identify three benefits and three disadvantages of elearning.

Virtual universities are online universities at which students take classes from their homes or from any off-site location, via the Internet. Some universities offer thousands of courses and

Chapter 4:

Page 5

dozens of degrees to students worldwide. Others offer limited courses and degrees but use innovative teaching methods and multimedia support in the traditional classroom.

Benefits: access, wide selection of courses, less expensive Disadvantages: Requires strong motivation and self control to succeed, lack of interaction with peers and instructors, difficult to learn hands on topics that need physical presence such as chemistry labs

5. What is telecommuting? Identify three benefits and three disadvantages of telecommuting.

Telecommuting is an arrangement whereby employees can work at home, at a customer’s premises, in special work places, or while traveling, using a computer linking to their place of employment. There are advantages and disadvantages to telecommuting. Flexibility and no commute are clearly advantages, whereas the lack of face-to-face interaction and limited access to other business resources may be disadvantages.

The last part of this question will depend on each student’s career and personal goals and abilities.

IT’s About Business Questions IT’s About Business 4.1 A WAN for mobile payments

1. Describe the characteristics of the PayByPhone telecommunications network (such as geographical reach and media channel used).

The network has a wide geographical reach (over 180 major international cities) assisting user in making payments for parking and other transactions.

2. What are the reasons that led PayByPhone to switch to an IPbased network?

The reasons are reduced costs, expanded capabilities and bulk long-distance rate.

3. Provide two examples of additional business applications thatPayByPhone could run on its network.

Parking payment and highway toll and bridge toll payment.

4. Discuss the pros and cons of PayByPhone setting up its own WAN compared with using a telecommunications service provider such as Allstream.

Pros: More control over its traffic and usage

Chapter 4:

Page 6

Cons: The core competency of PayByPhone is in application development. By trying to develop its own WAN, it may lose its business focus.

IT’s About Business 4.2 Browser Competition Heats Up 1. Given that all browsers are free, what features do the major browser companies focus on to gain competitive advantage?

They focus primarily on security and privacy features. Further, they are also designed, like Google’s Chrome, to favor other services or programs provided by the developer.

2. Which browser do you use? Why? Students will have different responses and opinions.

3. Should a company determine which browsers employees should use? Why or why not?

Students will have different responses and opinions. But generally a consistent usage policy will help a company in maintenance and service.

IT’s About Business 4.3 Informative Videos on the Fly 1. Describe the advantages of Qwiki over conventional search and metasearch engines for users.

Their search design is to pull information from Wikipedia and other sources and then create a multimedia video, including the information and graphics, in real time. In other words, Qwiki produces a search result in multimedia form. Research studies indicate that presenting information in a multimedia format increases recall rates. Qwiki’s goal is to turn information into an experience.

2. As a business, does Qwiki have a competitive advantage over conventional search and metasearch engines? Why or why not? Provide examples to support your answer.

The company envisions itself as the creator of a new media format, a platform that will eventually be used for generating multimedia content from whatever source the user directs it to, be it an online profile or a restaurant review.

IT’s About Business 4.4 Canadian Firm Develops Video Conferencing Software

1. Make a table comparing the characteristics of remote collaboration with video conferencing and on-site collaboration.

Chapter 4:

Page 7

On-site collaboration lowers the cost of collaboration as it makes the actual travel unnecessary. The detailed conversation and interactions during the collaboration are relatively easier to record in the on-site one than the remote site because everything is already in the digital format in the former case.

2. What type of decisions or problems is collaboration software more suited to?

Problems which do not require onsite presence of the collaborators are amenable to this mode.

3. Provide additional examples (within a company or different industries) where Onsight collaboration software might be used.

Some examples are: Collaboration between publishers and professors regarding book adoption Collaboration among student group members in some university projects IT’s About Business 4.5 Is Telecommuting for Everyone?

1. Is telecommuting a consequence of information technology? Justify your answer.

Students should consider information technology as an enabler rather than as a consequence.

2. What IT network-related issues would a company need to consider with telecommuting?

Connectivity and bandwidth are some network-related issues which must be considered before deciding on telecommuting.

3. What IT security issues would a company need to consider with telecommuting?

Data privacy/security and access to corporate intranet are some considerations.

4. What other challenges would telecommuting pose to the IT department in an organization?

Productivity and innovation could lower. Telecommuting also makes it difficult to pass along the corporate culture – the shared norms, values and expectations.

Discussion Questions 1. What are the implications of having fiber-optic cable to everyone’s home?

Fiber-optic cables transmit information at very high speeds and with greater security than other media. However, the cost of universal connections could be very high.

Chapter 4:

Page 8

2. Draw a chart of your university’s campuses and faculties and indicate where it would use LANs and WANs. Students will provide different answers.

3. Discuss the pros and cons of P2P networks.

There are three types of P2P networks. The first accesses unused CPU power among networked computers. The second is a real-time, person-to-person collaboration application that uses buddy lists to establish a connection. The third is advanced search and file sharing such as BitTorrent. This new file sharing application allows users to access many audio or video files in a way that is different from the older Napster style sharing. It divides large files into tiny pieces and requires users to upload a file as they are downloading so that it is a more fair way of operating.

4. Should the Internet be regulated? If so, by whom?

There are individuals who would argue that the Internet should be regulated. There are some reasons, such as protecting children from predators who stalk them over the Internet. It is reasonable to want the Internet to be monitored, but regulation is another story. If the Internet is to be regulated, it would be extremely difficult to decide who should do it.

5. Discuss the pros and cons of delivering this book over the Internet.

Setting up an account and allowing students to access this text over the Internet is an option that some would find attractive because the cost is much less than the cost to deliver the book in hard copy form. However, it is not a convenient option for everyone. Many students still like to have a textbook to read rather than reading on the monitor and at the end of a semester they cannot resell the book. .

6. Explain how the Internet works. Assume you are talking with someone who has no knowledge of information technology (in other words, keep it very simple).

In order to use the Internet you must have a device such as a computer, or a cell phone, PDA, or smartphone with browser software. You then must have a connection, typically an Internet service provider (ISP), which is your entryway into the Internet. You type in any address that you would like to visit on this interconnected information highway made up of thousands of pathways of connections.

7. How are the network applications of communication and collaboration related? Do communication tools also support collaboration? Give examples.

Collaboration is dependent upon communication. The method of communicating and what tools are available dictate what type of collaboration tools can be used and how fast they will carry the data needed for audio, visual, and data transmissions. Video conferencing, for example, depends on high-speed lines to provide a good display. Students may provide

Chapter 4:

Page 9

examples of whiteboard use, and audio conferencing as well as groupware are dependent on WAN connectivity.

8. Search Google for recent news about telecommuting in Canada. Identify obstacles to telecommuting and report on why firms don’t use telecommuting more often. Are these factors the same for every province in Canada? Are they the same for every country?

These factors are likely to be the same for every province in Canada. These reasons could differ across countries.

Problem-Solving Activities 1. Calculate how much bandwidth you consume when using the Internet every day. How many emails do you send daily and what is the size of each? (Your e-mail program may have e-mail file size information.) How many music and video clips do you download (or upload) daily and what is the size of each? If you view YouTube often, surf the Web to find out the size of a typical YouTube file. Add up the number of e-mail, audio, and video files you transmit or receive on a typical day. When you have calculated your daily Internet usage, determine if you are a “normal” Internet user or a “power” Internet user. What impact does network neutrality have on you as a “normal” user? As a “power” user?

Depending on the individual students, these responses will vary greatly.

2. Access several P2P applications, such as SETI@home. Describe the purpose of each and which ones you would like to join.

Have students either do a GOOGLE search on “P2P applications” or go to “peer-to-peer” in WIKIPEDIA. The latter includes a partial list of P2P applications.

3. Access www.ipv6.org and learn about more advantages of IPv6.

Have the students write a short report or presentation.

4. Access www.icann.org and learn more about this important organization.

Have the students write a short report or presentation.

5. You want to set up your own Web site using your name for the domain name (for example, KellyRainer).

• Explain the process for registering a domain.

• Which top-level domain will you use and why?

Have the students write a short report or presentation.

Chapter 4:

Page 10

6. Access www.icann.org and obtain the name of an agency or company that can register a domain for the TLD that you selected. What is the name of that agency or company?

Have the students write a short report or presentation.

7. Access the Web site for that agency or company to learn the process that you must use. How much will it initially cost to register your domain name? How much will it cost to maintain that name in the future?

Have the students research and present their findings.

8. You plan to take a two-week vacation in Australia this year. Using the Internet, find information that will help you plan the trip. Such information includes, but is not limited to, the following: a. Geographical location and weather conditions at the time of your trip. b. Major tourist attractions and recreational facilities. c. Travel arrangements (airlines, approximate fares). d. Car rental; local tours. e. Alternatives for accommodation (within a moderate budget) and food. f. Estimated cost of the vacation (travel, lodging, food, recreation, shopping, etc). g. Country regulations regarding the entrance of your dog which you would like to take with you. h. Shopping. i. Passport information (either to obtain one or to renew one). j. Information on the country’s language and culture. k. What else do you think you should research before going to Australia?

Students will research the Australian vacation details and provide answers to the items listed above. They will also think of some additional aspects of this vacation location.

9. From your own experience or from the vendor’s information, list the major capabilities of Lotus Notes/Domino. Do the same for Microsoft Exchange. Compare and contrast the products. Explain how the products can be used to support knowledge workers and managers.

Students will research both pieces of groupware and compare them in a short report.

10. Visit Web sites of companies that manufacture telepresence products for the Internet.

Prepare a report. Differentiate between telepresence products and videoconferencing products.

Telepresence enables people in different locations to collaborate face-to-face as if they were in the same room. Increased features of telepresence over teleconferencing include support for face to face meeting in many rooms at once —up to 48 locations in one meeting — and recording high-quality video, etc.

Chapter 4:

Page 11

11. Access Google videos (or YouTube) and search for “Cisco Magic.” This video shows Cisco’s next generation telepresence system. Compare and contrast it with current telepresence systems.

Students will locate conferencing product descriptions and organize into a report.

12. Access the Web site of your university. Does the Web site provide high-quality information (right amount, clear, accurate, etc.)? Do you think a high-school student who is thinking of attending your university would feel the same way?

Opinions for this will vary, but they should be interesting.

13. Imagine that you wanted to set up a website for your own start-up business. Compare and contrast Google Sites ( www.google.com/sites ) and Intuit Websites (www. intuitwebsites.ca). Which site would you use to create your own website? Explain your choice.

Students should visit both sites and make a list of the features that each site offers. Based on their findings, they should give mention their choice.

14. Access the website of Music Canada, formerly the Canadian Recording Industry Association ( www. musiccanada.com ). Discuss what you find there regarding copyright infringement (that is, downloading music files through P2P networks for example). How do you feel about Music Canada’s efforts to stop music downloads? Debate this issue from your point of view and from Music Canada’s point of view. .

Encourage the students to visit the Music Canada Web site. Although piracy constitutes a major burden on the industry and needs to be fought vigorously by players such as the Music Canada, legitimate sharing of music should not be put in the same category. Why is sharing music (the right to listen to music) among friends any different from sharing a textbook or sporting equipment? Consider the issue of ownership. Only one individual can actually own the text or the equipment, whereas “sharing” music extends ownership to all concerned.

Encourage discussion among students on what the limits are to each of the above.

15. Research the companies involved in Internet telephony (voice-over IP). Compare their offerings as to price, necessary technologies, ease of installation, etc. Which company is the most attractive to you? Which company might be the most attractive for a large company?

Selections will vary by region. Students should find different alternatives and use a set of evaluation criteria to compare them. Help the class to come up with common evaluation criteria.

16. Access two alternative search engines other than Google on the web and search for the same terms on all of them. Compare the results on breadth (number of results found) and precision (results are what you were looking for).

Chapter 4:

Page 12

Suggest students to evaluate the results of common search strings.

17. Second Life (www.secondlife.com) is a three-dimensional, online world built and owned by its residents. Residents of Second Life are avatars who have been created by real world people. Access Second Life, learn about it, and create your own avatar to explore this world.

Learn about the thousands of people who are making “real world” money from operations in Second Life.

Students should list some models to doing business in this online world. How would they engage the community to support their business model?

18. Access the Boeing Supplier Portal information page at www.boeingsuppliers.com/ . Describe some of the many services offered there for Boeing’s suppliers. What type of portal would you classify it into? What are the benefits for both Boeing and its suppliers of having this portal?

Students should visit the site and give their opinions based on their findings.

Team Assignments 1. Assign each group member to a collaboration product (e.g., Jive, Google Docs, SharePoint, or Quickr). Have each member visit the Web site of the product and obtain information about it. As a group, prepare a comparative table of the major similarities and differences among the products.

Comparison of features and capabilities of each to be prepared by the students.

4. Each team will choose one of the following: YourStreet, Topix, or Google Earth. Compare and contrast these products as to features and ease-of-use. Present each product to the class. Each group will collaborate on writing a report on its product using Google Docs.

Students should be encouraged to describe their experience with using the Google docs system. Did they have to establish some procedures to complement the system to use it effectively? If so, what were they?

Closing Case

E-Learning for Nurses The Problem Any magazine with nearly 2.6 million subscribers, 390,000 monthly visits to its website, and 110,000 Facebook fans must be doing something right. But Scrubs, a magazine for U.S. nurses, was overdue to move parts of its operations from print to digital.

Chapter 4:

Page 13

Scrubs had been providing nurses an opportunity to take continuing education credits by mail.

Traditionally, nurses would buy the magazine and fill out the print copy and mail it in. This approach had several challenges for readers. On the one hand, the continuing education material would use several pages of the magazine that could be used to display some other featured material. On the other hand, the mailed-in form with the answers could get lost in the mail and it would take several weeks for the nurse to find out. In addition to that, the magazine needed the ability to process the mailed-in forms and payments.

The Solution As part of its modernization efforts, The Scrubs Media Group, which publishes Scrubs magazine, launched an on-line service called The Scrubs Learning Network. It uses CoursePark.com, the cloud-based on-line e-learning platform from Bluedrop. Bluedrop is a Canadian firm that specializes in designing, developing, and delivering training content on-line.

The Scrubs Learning Network, hosted on CoursePark.com, provides nurses with the accredited nursing continuing education courses they require to meet their annual licensing requirements from the professional bodies in each U.S. state. The network contains more than 200 hours of continuing education courses on topics such as leadership, regulatory issues, and critical patient care. The courses are recognized in all U.S. states. This on-line learning offers nurses a costeffective way to increasing their professional competence. Nurses can purchase an annual, unlimited continuing education subscription.

The Scrubs Learning Network also provides users with a lifelong learning portfolio tool for certificate management, the ability to rate and comment on courses, and discussion boards for peer-to-peer collaboration. Members of The Scrubs Learning Network also have access to scrubsmag.com, where they can comment on articles and enter giveaways.

The Results The Scrubs Learning Network ensures that nurses have access to the latest medical industry news as well as a wide number of accredited continuing education courses. It is one more example of how bringing technology and information together can facilitate professional development by helping professionals keep current in their field and connected with colleagues.

Questions 1. What are some of the basic network infrastructure technology required to be able to provide elearning to employees?

It requires cloud-based learning platform (applications with learning resources), web hosting over the network.

2. Discuss how e-learning could make use of the three main network applications (discovery, communications, and collaboration). Give specific examples of how these network applications could be used in e-learning.

Chapter 4:

Page 14

Discovery: Finding about courses/solutions Communications: With instructors/peers through email, chat and voice mail.

Collaboration: Working together for group projects 3. Can all types of courses and subjects in business education be fit for delivery on-line? What types of courses are more suitable to e-learning? Justify your answer.

Courses that need face to face meeting such as chemistry and medical labs are not suitable for online delivery.

Glossary affinity portal:

A Web site that offers a single point of entry to an entire community of affiliated interests analog signals: Continuous waves that transmit information by altering the amplitude and frequency of the waves asynchronous transfer mode (ATM): Data transmission technology that uses packet switching and allows for almost unlimited bandwidth on demand backbone networks: High speed central networks to which multiple smaller networks (such as LANs and smaller WANs) connect bandwidth: The transmission capacity of a network, stated in bits per second broadband: A transmission speed ranging from approximately one megabit per second up to several terabits per second broadcast media (also called wireless media): Communications channels that use electromagnetic media (the “airwaves”) to transmit data browsers: Software applications through which users primarily access the Web cable media (also called wireline media): Communications channels that use physical wires or cables to transmit data and information chat room: A virtual meeting place where groups of regulars come to “gab” electronically clients: Computers, such as users’ personal computers, that use any of the services provided by servers client/server computing: Form of distributed processing in which some machines (servers) perform computing functions for end-user PCs (clients) coaxial cable: Insulated copper wire; used to carry high-speed data traffic and television signals collaboration: Mutual efforts by two or more individuals who perform activities in order to accomplish certain tasks commercial (public) portal: A Web site that offers fairly routine content for diverse audiences; offers customization only at the user interface communications channels: Pathway for communicating data from one location to another computer network: A system that connects computes and other devices via communications media so that data and information can be transmitted among them.

Chapter 4: corporate portal:

Page 15

A Web site that provides a single point of access to critical business information located inside and outside of an organization digital signals: A discrete pulse, either on or off, that conveys information in a binary form digital subscriber lines (DSL): A high-speed, digital data-transmission technology using existing analog telephone lines distance learning (DL): Learning situations in which teachers and students do not meet face-toface distributed processing: Network architecture that divides processing work between two or more computers, linked together in a network domain names: The name assigned to an Internet site, consisting of multiple parts, separated by dots, which are translated from right to left domain name system (DNS) : The system administered by the Internet Corporation for Assigned Names (ICANN) that assigns names to each site on the Internet e-learning: Learning supported by the Web; can be done inside traditional classrooms or in virtual classrooms enterprise network: A network encompassing an organization composed of interconnected multiple LANs and WANs Ethernet: A common local area network protocol Extranet: A network that connects parts of the intranets of different organizations fiber-optic cables: A communications medium consisting of thousands of very thin filaments of glass fibers, surrounded by cladding, that transmit information via light pulses generated by lasers file server (also called network server): A computer that contains various software and data files for a local area network, and contains the network operating system hypertext transport protocol (HTTP): The communications standard used to transfer pages across the WWW portion of the Internet; defines how messages are formulated and transmitted industrywide portal: A Web-based gateway to information and knowledge for an entire industry The Internet (“the Net”): The massive network that connects computer networks of businesses, organizations, government agencies, and schools around the world, quickly, seamlessly, and inexpensively Internet2: A new, faster telecommunications network that deploys advanced network applications such as remote medical diagnosis, digital libraries, distance education, online simulation, and virtual laboratories Internet Protocol (IP): A set of rules responsible for disassembling, delivering, and reassembling packets over the Internet Internet Protocol (IP) address: An assigned address that uniquely identifies a computer on the Internet Internet service provider (ISPs): Companies that provide Internet connections for a fee Internet telephony (voice-over Internet Protocol or VoIP): The use of the Internet as the transmission medium for telephone calls Intranet: A private network that uses Internet software and TCP/IP protocols

Chapter 4:

Page 16

local area network (LAN): A network that connects communications devices in a limited geographical region (for example, a building), so that every user device on the network can communicate with every other device metasearch engine: A computer program that searches several engines at once and integrates the findings of the various search engines to answer queries posted by users mobile portal: A Web site that is accessible from mobile devices modem: Device that converts signals from analog to digital and vice versa network access points (NAPs): Computers that act as exchange points for Internet traffic and determine how traffic is routed network server (see file server) packet switching: The transmission technology that breaks up blocks of text into packets peer-to-peer (P2P) processing: A type of client/server distributed processing that allows two or more computers to pool their resources, making each computer both a client and a server portal: A Web-based personalized gateway to information and knowledge that provides information from disparate information systems and the Internet, using advanced search and indexing techniques protocol: The set of rules and procedures governing transmission across a network router: A communications processor that routes messages from a LAN to the Internet, across several connected LANs, or across a wide area network such as the Internet. search engine: A computer program that searches for specific information by key words and reports the results servers: A computer that provides access to various network services, such as printing, data, and communications synchronous optical network (SONET): An interface standard for transporting digital signals over fiber-optic lines; allows the integration of transmissions from multiple vendors t-carrier system: A digital transmission system that defines circuits that operate at different rates, all of which are multiples of the basic 64 Kbps used to transport a single voice call telecommuting: A work arrangement whereby employees work at home, at the customer’s premises, in special workplaces, or while traveling, usually using a computer linked to their place of employment teleconferencing: The use of electronic communication that allows two or more people at different locations to have a simultaneous conference transmission control protocol/Internet protocol (TCP/IP): A file transfer protocol that can send large files of information across sometimes unreliable networks with assurance that the data will arrive uncorrupted twisted-pair wire: A communications medium consisting of strands of copper wire twisted together in pairs unified communications: Hardware and software platform that simplifies and integrates all forms of communications – voice, e-mail, instant messaging, location, and videoconferencing – across an organization.

Chapter 4:

Page 17

uniform resource locator (URL): The set of letters that identifies the address of a specific resource on the Web videoconference: A virtual meeting in which participants in one location can see and hear participants at other locations and can share data and graphics by electronic means virtual collaboration: The use of digital technologies that enable organizations or individuals to collaboratively plan, design, develop, manage, and research products, services, and innovative information systems and electronic commerce applications virtual group (team): A work group whose members are in different locations and who meet electronically virtual universities: Online universities from which students take classes from home or an offsite location, via the Internet voice over Internet Protocol (VoIP; also Internet telephony) Web site: Collectively, all of the Web pages of a particular company or individual wide area networks (WANs): A network, generally provided by common carriers, that covers a wide geographic area wireless media (see broadcast media) wireline media (see cable media) work group: Two or more individuals who act together to perform some task, on either a permanent or temporary basis workflow: The movement of information as it flows through the sequence of steps that make up an organization’s work procedures World Wide Web (the Web, WWW, or W3): A system of universally accepted standards for storing, retrieving, formatting, and displaying information via a client/server architecture; it uses the transport functions of the Internet

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 5: E-Business and E-Commerce Chapter Outline 5.1 5.2 5.3 5.4 5.5

Overview of E-Business and E-Commerce Business-to-Consumer (B2C) Electronic Commerce Business-to-Business (B2B) Electronic Commerce Electronic Payments Ethical and Legal Issues in E-Business

Learning Objectives 1.

Describe the six common types of electronic commerce; provide specific personal examples of how you have used or could use B2C, C2C, G2C, and mobile commerce; and offer a specific example of B2B and G2B. Discuss the five online services of business-to-consumer electronic commerce, provide a specific example of each service, and state how you have used or would use each service.

Describe the three business models for business-to-business electronic commerce, and provide a specific example of each model.

Describe the four types of electronic payments, provide a specific example of each one, and explain whether you would use each type.

Illustrate the ethical and legal issues relating to electronic commerce with two specific examples of each issue, and describe how you would respond or react to the four examples you have provided.

2.

3.

4.

5.

Teaching Tips and Strategies Most students will remember that Amazon.com was the first online book retailer. Students might remember that eBay was the first auction company. To initiate a discussion, you might ask students if they have heard of companies such as Etoys.com (online toy store) or Pets.com (online pet store).

Ask students to explain what the Web sites have in common. The answers will vary, but the point is that both of the companies mentioned no longer operate as an e-business. Ask the students to speculate as to the reasons for these companies’ failures. Some of the reasons are: •

The business models were all wrong.

Some of the businesses were never going to make money from Day 1. For instance: Did anyone estimate how much it was going to cost to mail a 50-lb. bag of dog food from Pets.com? Or the more obvious question: Is the customer willing to pay the postage?

•

Individuals tend to overestimate the demand for a new technology.

Chapter 5:

Page 2

When e-commerce became prominent during the mid-1990s, consumers and companies alike thought that this new phenomenon was going to change business forever. With the launch of Etoys.com, many analysts predicted the demise of Toys ‘R Us as we know it.

Brick-and-mortar companies were in serious trouble; no longer would people go to stores and buy items, because they could save time by shopping it online. The brick-andmortar stores immediately launched a counterattack by creating their own online stores.

Racing to acquire a piece of the brick-and-mortar firms’ market share, internet companies without strong business plans rushed to the Internet to try to get the first mover advantage. Brick-and-mortar companies were forced to spend billions of dollars on these ventures only to find that operating an Internet company involves substantial expenses, such as warehouse costs, distribution costs, advertising costs, and logistics.

Some experts contend that it costs more to run an Internet Web site than it does a brickand-mortar retail operation. In addition, some consumers would never want to buy items online or are incapable of buying items online.

Most of the dire predictions of the demise of the brick-and-mortar companies never came true. Toys ‘R Us is still here (and they created an alliance with Amazon.com to distribute their toys; they are no longer in the Internet retail business); and Walmart is still the leading department store, with Target/Kohl’s a close second. Meanwhile, Etoys.com and many other dotcoms are distant memories. So, what went wrong? Are the Internet entrepreneurs, stockholders, and venture capitalists idiots? Maybe it’s how we as humans overrate technology (Casey, 2001).

•

Brick-and-mortar stores will no longer exist because of the costs savings involved with being a 100% online store (less overhead, no physical store, etc.).

This type of thinking is reversing itself. The trend now is for brick-and-mortar stores to add an online component. When we look at the failure of bestbuy.com, the literature tells us that the most significant reason for their failure was warehouse cost. Safeway/Kroger in certain cities offers online grocery services for a fee. Unlike Webvan, which invested millions of dollars in warehouses, Safeway/Kroger utilized their physical store location to distribute groceries to customers who wished to order online. This type of strategy may improve the likelihood of online profitability.

To wrap up this chapter you might discuss, “What will the future of e-commerce be?” This tends to get students excited. Some possible suggestions for where e-commerce is heading are in this chapter: online job ads, market research, online payments, and ethical aspects of e-commerce.

According to Boston Consulting Group (2001) the reason for e-commerce failures, 1999-2000, were:

Reason Poor revenue, cost, and profit model No competitive advantage

Number of companies* 59 55

Chapter 5: Lack of benefit to consumers Problems in organization and execution Ineffective warehouse management And fulfillment Firm’s Web site conflicted with existing Business partners *Note: for some companies, failure was attributed to more than one reason

Page 3 34 15 8 6 Source: Boston Consulting Group 2001

This table illustrates that a major reason for dotcom failures was poor business models. Many ecommerce companies were launched with the mentality, “If we build it, they will come and make us rich.”

Do all of these reasons mean that e-commerce cannot be successful? That is not what the data indicate. E-commerce has changed the way companies do business and the way we as consumers interact with companies. Business models are evolving to make e-commerce more profitable. Customers benefit by being able to access a vast number of products and services, around the clock. The major benefit to society is the ability to easily and conveniently deliver information, services, and products to people in cities, rural areas, and developing countries.

Despite all these benefits, EC has some limitations, both technological and non-technological, that have impeded its growth and acceptance. Technological limitations include the lack of universally accepted security standards and expensive accessibility. Non-technological limitations include the perceptions that EC is insecure, has unresolved legal issues, and lacks a critical mass of sellers and buyers. As time passes, these limitations, especially the technological ones, will lessen or be overcome.

Typical e-commerce business models are based on marketing – a commission for getting the word out. Others are based on exchanges or auctions, and still others are based on membership fees for some type of service.

The trend currently is for companies that have brick-and-mortar operations to extend to the Internet and to use the competitive advantages these companies have created to forge ahead with e-Commerce. A clicks-and-mortar strategy is perceived to work better, because customers can enjoy the advantages of both channels.

Introduce the students to social networking sites such as facebook.com, linkedin.com, and classmates.com. What is the business model of each site? Why are these sites able to survive and attract so much attention? They make money from the visits and traffic, and they provide premium services for paying customers. Introduce the Crest Whitestrips marketing promotion – would that be possible without a Facebook site? Viral marketing – or word of mouth - is a strategy many companies use to get out their message.

Review Questions Section 5.1 Before you go on…

Chapter 5:

1.

Page 4

Define e-commerce, and distinguish it from e-business.

Electronic commerce (EC) describes the buying and selling of products, services, and information via computer networks, primarily the Internet. The term electronic business attempts to expand the definition of EC to include servicing customers, collaborating with business partners, and conducting electronic transactions within an organization.

This book uses the term electronic commerce in its broadest scope, as basically equivalent to e-business.

2.

Differentiate among B2C, B2B, C2C, and B2E electronic commerce.

Business-to-consumer EC involves companies selling directly to consumers over the Internet. A company that has been specifically created to do business on the Internet may engage in business-to-consumer sales, or an existing company may open its own online business. Business-to-business EC occurs when two or more businesses make transactions electronically. Consumer-to-consumer EC occurs when consumers transact business over sites such as eBay.com that enable them to sell goods or services directly to other consumers or to other auction sites. Finally, business-to-employee EC occurs when an organization uses EC internally to provide information and services to its employees such as training, discounted insurance, travel packages, and tickets to events.

3.

Define e-government.

E-government is the use of Internet technology in general and e-commerce in particular to deliver information and public services to citizens, public employees, business partners, and suppliers. It is also an efficient way to do business within the government.

4.

Describe the key characteristics of forward and reverse auctions.

A forward auction is used by sellers as a selling channel to many potential buyers. The buyers competitively bid on the item until the auction closes with the highest bidder winning. In reverse auctions, the buyer, usually an organization, seeks to buy a product or service, and suppliers submit bids. Generally, the lowest bid wins.

5.

Identify some benefits and limitations of e-commerce.

Benefits o It makes national and international markets more accessible o It lowers the costs of processing, distributing, and retrieving information o Customers are able to access products and services around the clock o The major benefit to society is the ability to easily and conveniently deliver information, services, and products to people in cities, rural areas, and developing countries Limitations o Lack of universally accepted security standards

Chapter 5:

Page 5 o o o o o

Insufficient bandwidth Expensive accessibility Unresolved legal issues Perception of being insecure Lacking in critical mass of sellers and buyers

Section 5.2… Before you go on…

1.

Describe electronic storefronts and malls.

Electronic storefronts provide consumer and businesses access to electronic retailing, usually by way of an online electronic catalog. Referred to as solo storefronts, these businesses maintain their own Internet name and Web site and may be extensions of physical stores. An electronic mall, also know as a cybermall, is a collection of individual shops under one Internet address. The basic idea of an electronic mall is the same as that of a regular shopping mall—to provide a one-stop shopping place that offers many products and services.

2.

Discuss various types of online services; for example, cyberbanking, securities trading, job searches, and travel services.

Students will describe the features of various online services, including the benefits of convenience, fast response, security, confidence, easy and effective search, accurate and up-to-date information, and transaction tracking.

3.

Discuss online advertising, its methods, and its benefits.

Online advertising is an attempt to disseminate information by way of the Internet in order to influence a buyer-seller transaction. Online advertising can be customized to make it media-rich, dynamic, and interactive. Online ads can efficiently use the convergence of text, audio, graphics, and animation, and they can be interactive and targeted to specific interest groups and/or individuals. Among the benefits of online advertising is that ads can be updated any time at minimal cost. In addition, online ads can reach a very large number of potential buyers all over the world. Further, online ads are sometimes cheaper than print, radio, and television ads. Finally, the use of the Internet itself is growing very rapidly, and more viewers are moving to the Internet at the expense of TV. Thus, the audience for online advertising is steadily increasing.

4.

Identify the major issues relating to e-tailing.

• •

Channel conflict – Regular distributors may be alienated when a company decides to sell directly online. Companies need to recognize this problem and possibly find a way to restructure distributor relationships.

Conflicts within clicks-and-mortar organizations – conflict between the existing organization and the ‘clicks’ side, resulting in disagreements on pricing, resource allocation, and logistics services.

Chapter 5: • • •

5.

Page 6 Order fulfillment and logistics –Filling very small orders to many customers and correctly handling returns are difficult tasks.

Viability and risk of online e-tailers – It is very easy to enter into e-tailing, but difficult to stay afloat due to heavy competition and problems associated with order fulfillment and demand forecasting.

Appropriate revenue models – basing e-tailing success on advertising revenues has not proved to be viable.

What are spamming, permission marketing, and viral marketing?

Spamming is the indiscriminate distribution of electronic ads without the receiver’s permission. Spamming can be done via email or pop-up/pop-under ads. Spam often contains objectionable content as well as advertising. Most computer users are inundated by spam and try to reduce the flow by blocking and filtering software. By contrast, in permission marketing, senders ask recipients’ permission to receive online advertising and email. Users can select in and easily select out. Viral marketing refers to online “word-of-mouth” marketing. It relies on people to forward messages to friends, suggesting that they “check this out.”

Section 5.3 … Before you go on…

1.

Briefly differentiate between the sell-side marketplace and the buy-side marketplace.

The sell-side marketplace is a B2B model in which organizations sell to other organizations from their own private e-marketplace and/or from a third-party site.

Electronic catalogs and forward auctions are used extensively. This marketplace is similar to B2C, except the customer is another organization rather than an individual.

The buy-side marketplace is a B2B model in which organizations buy needed products or services from other organizations electronically. This marketplace often uses a reverse auction environment.

2.

Briefly differentiate among vertical exchanges, horizontal exchanges, and functional exchanges.

Exchanges are e-marketplaces in which there are many sellers and many buyers; entry is open to all. Exchanges are frequently owned and operated by third parties or by a consortium of the major businesses in the industry. Participants in exchanges can reduce cycle trading time and costs, and they can find new markets and trading partners around the globe through the exchange.

▪ ▪ ▪

Vertical exchanges connect buyers and sellers in a given industry.

Horizontal exchanges connect buyers and sellers across many industries and are used mainly for MRO materials.

Functional exchanges help businesses when needed services such as temporary help or extra office space are traded on an “as–needed” basis.

Chapter 5:

Page 7

Section 5.4 … Before you go on…

1.

List the various electronic payment mechanisms. Which of these mechanisms are most often used for B2B payments?

The following instruments are acceptable means of electronic payment: electronic credit cards, electronic checks, purchasing cards, electronic cash (stored-value money cards, smart cards, and person-to-person payments), and electronic bill presentation and payment. In B2B, electronic checks are most commonly used for payments.

2.

What are micropayments?

Micropayments are small payments of a few dollars or less. Examples are coffee shop purchases and train or subway fares. Smart cards are ideal for making micropayments.

Section 5.5 … Before you go on…

1.

List and explain some ethical issues in EC. Many of the ethical issues related to IT apply also to EC. Four key issues are privacy, the human element, Web tracking, and disintermediation.

Privacy. Central issues are protecting the buyer’s identity and monitoring employee use of the Internet.

The human element. The implementation of EC broaches the issue of who is to control the selling process. Commissioned salespeople are accustomed to being in control of the flow of certain categories of information. EC sales can lead to dissatisfaction among sales personnel as customers bypass the salesperson and commissions become more distributed throughout the company.

Web tracking. Programs and “cookie” files raise myriad privacy concerns. These programs and files can be stored on your PC, organized by Web site, and then accessed every time you revisit that site.

Disintermediation. The use of EC may result in the elimination of some of a company’s employees as well as traditional intermediaries such as brokers and agents. This result is called disintermediation: “eliminating the intermediary.” The manner in which intermediaries, especially employees, are treated may raise ethical issues, such as how to handle their displacement.

2.

Discuss the major legal issues of EC. •

Fraud on the Internet is a major concern, involving deception on the part of buyers and/or sellers.

Chapter 5: •

•

• • •

Page 8 Among the major legal issues of EC are taxes and other fees. Federal, state, and local authorities are scrambling to obtain a share of the revenue created electronically. The problem is particularly complex for interstate and international commerce. For example, some people claim that the state in which a server is located deserves to receive some sales tax from an EC transaction. Other people contend that the state in which the seller is located deserves the entire sales tax.

In addition to sales tax, there is a question about where (and, in some cases, whether) electronic sellers should pay business license taxes, income taxes, franchise fees, gross-receipts taxes, excise taxes, privilege taxes, and utility taxes. Moreover, how should tax collection be controlled?

Domain name. Domain names cause problems when several companies that have similar names compete over a domain name that is not a registered trademark.

Copyright. Intellectual property in EC, in its various forms, is protected by copyright laws and cannot be used freely.

Other legal issues. Several other issues are emerging as challenges to the existing system.

• What are the rules for electronic contracting, and whose jurisdiction prevails when buyers, broker, and sellers are located in different states and/or countries?

• When are electronic documents admissible as evidence in the courts of law? What is the alternative if they are not?

• Liability of errors, malfunction of software, and theft and fraudulent use of data may be difficult to prove. How is such liability determined?

• What types of actions constitute misrepresentation? Where and when should you take legal action against misrepresentation?

• The use of multiple networks and trading partners makes the documentation of responsibility difficult. How is this problem overcome?

3.

IT’s About Business Questions IT’s About Business 5.1 Vending Goes Online 1. Provide two examples of how the technology added to the vending machines gives Treat America a competitive advantage.

-

-

Consequently, the company installed a small device on the top of each machine that communicates with headquarters via a cellular connection. The device reports the amount of money in the machine at any given minute, the amount of product inventory remaining, whether the machine had been moved, or whether the door had been opened past business hours.

Customers used less gas because they could check inventory online without having to drive to the machine to check quantities and then return to restock

Chapter 5:

Page 9

2. Is this competitive advantage sustainable for any length of time? Why or why not? Support your answer.

It would depend on others entering the market. Questions that should be asked include whether the communications devices are proprietary or can easily be acquired by competitors.

IT’s About Business 5.2 Luxury Goods Turn to E-Commerce 1. Provide two specific examples of luxury shoppers’ requirements that a Web site could not provide.

-

Shoppers want a guiding hand to replace the in-store salesperson.

Shoppers need a signal as to which fashions are in style.

2. What features are provided by online luxury retailers that overcome the problems you mentioned in Question #1?

-

-

An interactive shopping fashion magazine publishes 52 weeks of editorial content each year in addition to its designer clothes sales operations.

Burberry offered select pieces from its runway presentations for a limited time on its Web site just hours after its Fashion Week show.

These companies have changed how the fashion industry works, allowing smaller brands that, unlike the better-known brands, do not have large retail outlets to sell older merchandise at a discount.

These companies have democratized fashion, giving consumers everywhere access to the most exclusive brands at insider prices that shoppers could formerly get only in New York City.

IT’s About Business 5.3 Hong Kong’s Jockey Club in a Race 1. What competitive advantages does the Hong Kong Jockey Club already have in their competition with online betting Web sites?

The club, a nonprofit organization, enjoys a government-granted monopoly on horse racing and lotteries. In turn, it is Hong Kong’s single-largest taxpayer, accounting for approximately 8 percent of the government’s total revenue 2. Use specific examples to describe other measures that the Hong Kong Jockey Club might take to compete with online betting Web sites.

-

Use the club’s solid reputation as Hong Kong’s only track operator to help build its online business because many gamblers may not trust unregulated Web sites.

Work with other race courses to pool bets, thereby allowing the track to offer better odds.

Chapter 5:

Page 10

IT’s About Business 5.4 - A New Electronic Exchange for the City of Kingston 1. What type of B2B e-commerce exchange website is Biddingo?

This is a Buy Side exchange.

2. Visit the Biddingo website (www.biddingo.com) and view some of the goods and services being tendered by the City of Kingston or any other city in Canada. What types of goods and services are tendered through Biddingo.com?

Students should follow the instructions and prepare a report.

3. Are there any goods or services that might not be suitable to be tendered on Biddingo? Why or why not?

Students should follow the instructions and prepare a report.

4. What reasons would lead the City of Kingston to set up its own buy-side marketplace instead of using Biddingo?

There could several possible answers here but the most likely reasons could be: cost consideration and issue of privacy.

IT’s About Business 5.5 Stripe, an On-line Payment System for Small Businesses 1. Would Stripe be able to maintain its current competitive advantage based on ease of payment and costs? Why or why not?

The answer should emphasize the novelty and sophistication of Stripe’s online payment system.

2. Would Stripe be a good payment system to pay for small purchases? Why or why not?

As a hint, discuss the payment of an on-line newspaper article that would cost 20 cents.

No because the transaction could be much higher than the actual payment being made.

3. What are the main differences between person-to-person payment systems such as Stripe and PayPal and the use of credit cards?

Stripe offers ease of navigation, well designed GUI and simplified processes to customers which are not present in other payment systems.

Chapter 5:

Page 11

IT’s About Business 5.6 Domain Name Slamming 1. What are the differences between cybersquatting and domain name slamming?

Cybersquatting is registering a domain name without having the intention of setting up a business. Domain slamming is a fraudulent attempt to trick domain owners into switching from their existing registrar to theirs, under the pretense that the customer is simply renewing their subscription to their current registrar.

2. Why would it be so difficult to detect domain slamming cases?

The domain owners get the impression that they are simply renewing their subscription to their current registrar.

3. How could a company protect itself against this kind of scam?

Domain locking protects against this kind of scam.

Discussion Questions 1. Discuss the major limitations of e-commerce. Which of these limitations are likely to disappear? Why? Many technical limitations will disappear with the universal acceptance of standards for software features, quality, and security. Bandwidth increases through the new Internet initiative will eliminate much of the current strain that is placed upon networks by multimedia EC applications. The use of asynchronous transfer mode (ATM) as an architecture for the new high-bandwidth environment will give a needed boost to Internet response time. Internet access will become more ubiquitous as service providers are consolidated and monthly fees are reduced. Discuss the anticipated implementation of Internet Protocol (IP) version six (IPv6) under TCP/IP and its potential to eliminate the current shortage of IP addresses.

Non-technical limitations include unresolved legal issues. Many buyers are unwilling to switch from “on-ground” stores to online, and there is a general lack of trust in Internet security. Many sellers and buyers are waiting for EC to stabilize before they participate in electronic transactions, and many product areas lack a sufficient number of sellers and buyers for profitable EC operations.

As experience accumulates and technology improves, the ratio of EC benefits to cost will increase, resulting in an even greater rate of EC adoption. Effective jurisprudence to address the myriad legal issues will likely improve as more cases are tried and law schools design curricula specific to EC.

Chapter 5:

Page 12

2. Discuss the reasons for having multiple EC business models.

There are multiple EC business models because there are many ways to generate revenues via electronic commerce.

3. Distinguish between business-to-business forward auctions and buyers’ bids for RFQs. Business-to-business auctions take place when several companies engage in bartering by selling their products or services to an exchange member. Instead of receiving cash, they receive trade dollars (credits). The transaction is much like a credit card transaction in that both involve the use of a plastic card and an authorization number requested by the seller for transactions over a specified amount. Other members of the trade exchange can then use the trade dollars earned. The trade dollar system simplifies the old cumbersome barter system that was limited to the exchange of products and services between two parties.

Buyer’s bids for RFQs involve the bidders entering prices and the highest bidder wining the available inventory at his or her price. Typically, the detailed list of all the product specifications, warranties, and so forth is included, and purchases are made using a credit card. Ebay.com is perhaps among the best examples of buyers’ bidding RFQs via the Web. Hundreds of thousands of different items are offered in several types of auctions.

4. Discuss the benefits to sellers and buyers of a B2B exchange.

Participants in B2B exchanges can reduce cycle trading time and costs as well as finding new markets and trading partners around the globe through the exchange.

5. What are the major benefits of G2C electronic commerce?

One of the major benefits of G2C EC is giving the people a chance to see what the government does everyday and to give feedback. For instance, any individual from any state can now contact his or her senators and representative with a couple mouse clicks.

6. Discuss the various ways to pay online in B2C. Which one(s) would you prefer and why?

B2C payments include electronic credit cards and electronic cash (stored value money cards, smart cards, person to person payments). Answers to the second part of the question will vary.

7. Why is order fulfillment in B2C considered difficult?

It is difficult to quickly find the products to be shipped, pack the products, deliver products purchased online to the customer quickly, collect payment, and handle returned goods.

8. Discuss the reasons for EC failures.

Chapter 5: • • • • • • • •

Page 13 incorrect revenue model lack of strategy and contingency funding inability to attract enough customers lack of funding channel conflict with distributors too much online competition in standard products poor order-fulfillment infrastructure lack of qualified management

9. Should BMW or Honda sell cars online? Hint: Take a look at the discussion of channel conflict in this chapter.

Channel conflict can be an issue with online sales for clicks-and-mortar organizations.

However, to forego online sales entirely just because it poses a challenge may not be a wise decision.

10. In some cases, individuals engage in cybersquatting so that they can sell the domain names to companies expensively. In other cases, companies engage in cybersquatting by registering domain names that are very similar to their competitors’ domain names in order to generate traffic from people who misspell Web addresses. Discuss each practice in terms of its ethical nature and legality. Is there a difference between the two practices? Support your answer.

Cybersquatting refers to the practice of registering or using domain names for the purpose of profiting from the goodwill or the trademark that belongs to someone else. The AntiCybersquatting Consumer Protection Act (1999) permits trademark owners in the United States to sue for damages in such cases.

Some practices that could be considered cybersquatting are not illegal, although they may well be unethical. Perhaps the most common of these practices is “domain tasting.” Domain tasting lets registrars profit from the complex money trail of pay-per-click advertising. The practice can be traced back to the policies of the organization responsible for regulating Web names, the Internet Corporation for Assigned Names and Numbers (ICANN) (www.icann.org). In 2000, ICANN established the “create grace period,” a five-day period when a company or person can claim a domain name and then return it for a full refund of the $6 registry fee. ICANN implemented this policy to allow someone who mistyped a domain to return it without cost.

Domain tasters exploit this policy by claiming Internet domains for five days at no cost.

These domain names frequently resemble those of prominent companies and organizations.

The tasters then jam these domains full of advertisements that come from Google and Yahoo!. Because this process involves zero risk and 100 percent profit margins, domain tasters register millions of domain names every day – some of them over and over again.

Experts estimate that registrants ultimately purchase less than 2 percent of the sites they sample. In the vast majority of cases, they use the domain names for only a few days to generate quick profits.

Chapter 5:

Page 14

Problem-Solving Activities 1. Suppose that you are interested in buying a brand new car. You can fi nd information about cars at numerous websites from car manufacturers. Access five of these sites and write a report analyzing the different types of on-line advertising methods they use on their main website.

Student responses will vary about their individual experiences online.

2. Compare the various electronic payment methods. Specifically, collect information from the vendors cited in the chapter and find more with google.com. Pay attention to security level, speed, cost, and convenience.

Student responses will vary depending on which vendor sites they visit.

3. Conduct a study on selling diamonds and gems online. Access such sites as www.bluenile.com, www.diamond.com, www.thaigem.com, www.tiffany.com, and www.jewelryexchange.com. a. What features are used in these sites to educate buyers about gemstones?

Several sites have “education” links with comprehensive information about how to evaluate and select gems. b. How do these sites attract buyers?

A very powerful way to find these sites is by simply keying in “diamonds” to Yahoo and Google, several of the sites appear at the top of the list. c. How do these sites increase trust for online purchasing?

These sites have enhanced security features, making visitors to the site more comfortable with the prospect of doing business with them. d. What customer service features do these sites provide?

In addition to financing and insurance, some of the sites provide options to design your own jewelry and tell your marriage proposal stories.

4. Access Canadian payment association www.cdnpay.ca. What is its role? What is their vision for the year 2020?

Their vision for 2020: Promote Electronic Payments; Drive Efficiencies in Payments; Modernize the CPA Regulatory Framework & Rules; Enhance Exchange, Clearing and Settlement Systems; and

Chapter 5:

Page 15

Expand Value-added Services.

It provides safe and efficient clearing and settlement systems to meet the payment needs of Canadians.

5. Access www.tsn.com. Identify at least five different ways it generates revenue.

Students should list items such as selling links to advertisers and memberships to sports fans.

6. Access www.queendom.com. Examine its offerings, and try some of them. What type of electronic commerce is this? How does this Web site generate revenue?

This B2C site generates its revenue from sponsor advertising and subscriptions. Professionals in various areas, such as Human Resources, can subscribe and set up testing and results tracking for groups of employees.

7. Access www.ediets.com. Prepare a list of all the services the company provides. Identify its revenue model.

This site provides many services including recipes, meal plans and meal delivery, and support plans.

8. Access www.theknot.com. Identify its revenue sources.

Revenues are generated by business partner advertising on this Web site, which provides suggestions and advice for wedding planning.

9. Access www.mint.com. Identify its revenue model. What are the risks of giving this Web site your credit and debit card numbers, as well as your bank account number?

This revenue model includes marketing and revenues from partner advertising. They sell any type of financial product as well as provide references to financial planners, investment brokers, and setting up financial plans.

Account numbers would be risky to give out, even though it has the TRUSTe Seal. Account numbers can be easily stolen, which is just too risky.

10.Research the case of www.nissan.com . Is Uzi Nissan cybersquatting? Why or why not?

Support your answer. How is Nissan (the car company) reacting to the www. nissan.com website?

The students should the reports at http://www.digest.com/

Chapter 5:

Page 16

Web Activities Students will visit various sites and respond per directions with their experiences.

1. Access the Stock Market Game Worldwide (www.smgww.org). You will be bankrolled with $100,000 in a trading account every month. Play the game and relate your experiences with regard to information technology.

Each result will be unique 2. Enter www.alibaba.com. Identify the site’s capabilities. Look at the site’s private trading room. Write a report. How can such a site help a person who is making a purchase?

This is an extensive B2B site with many different products. Using this intermediary for contact and purchase is a safeguard in the same way as eBay and PayPal. 3. Enter www.dineoncampus.com. Explore the site. Why is the site so successful? Could you start a competing one? Why or why not?

This site is successful because it provides users with a consolidated view of area restaurants around campuses that accept online payments for deliveries and payments.

4. Enter www.dell.com, go to “desktops,” and configure a system. Register to “my cart” (no obligation). What calculators are used there? What are the advantages of this process as compared with buying a computer in a physical store? What are the disadvantages?

Each student will have a customized result and should submit findings.

5. Enter www.checkfree.com and www.digitaldriver.com, and find their services. Prepare a report.

Both sites are online payment processors, clearing-houses for check processing. Students will expand and add their own observations.

6. Access various travel sites such as www.travelocity.com, www.orbitz.com, www.expedia.com, and www.kayak.com, Compare these Web sites for ease of use and usefulness. Note differences among the sites. If you ask each site for the itinerary, which one gives you the best information and the best deals?

Each Web site offers something unique, and these offers can vary as promotions are launched.

Travelocity and Orbitz offer similar interface and services.

7. Access www.outofservice.com and answer the musical taste and personality survey. When you have finished, click on Results and see what your musical tastes say about your personality.

How accurate are the findings about you?

Chapter 5:

Page 17

Students should take the survey, report on their score, and discuss with other students how accurately the survey assessed their real personalities.

Team Assignments 1. Assign each team to one industry vertical. An industry vertical is a group of industries in the “same” business, such as financial services, insurance, healthcare, manufacturing, retain, telecommunications, pharmaceuticals and chemicals, and so on. Each team will find five realworld applications of the major business-to-business models listed in the chapter. (Try success stories of vendors and EC-related magazines.) Examine the problems they solve or the opportunities they exploit.

2. Have teams investigate how B2B payments are made in global trade. Consider instruments such as electronic letters of credit and e-checks. Visit www.tradecard.com and examine their services to small and medium size enterprises (SMEs). Also, investigate what Visa and MasterCard are offering. Finally, check Citicorp and some German and Japanese banks.

Closing Case eBay Finds a Way into China The Problem By 2010 the number of Chinese Internet users had grown to 457 million. In 2005, e-commerce in China amounted to $2 billion; by 2010, that number had increased to $76 billion. The Chinese market is simply too vast for any company to ignore. eBay is just one of many foreign e-commerce companies seeking to expand into China.

For example, Groupon (www.groupon.com) announced the launch of a Chinese version of its group buying service, teaming up with Tencent Holdings (www.tencent.com), an instant messaging operator that is China’s largest Internet company. Russia’s Digital Sky Technologies invested $500 million in 360buy (www.360buy.com), a Chinese online retailer.

In 2003, eBay paid $150 million to purchase EachNet, at that time China’s top ecommerce Web site. eBay later invested an additional $100 million in the operation, but a combination of management mistakes – for example, not giving enough power to local executives – and intense competition from local competitor Taobao (www.taobao.com) crippled the business. By 2006, eBay gave up and folded eBay EachNet into a joint venture with Tom Online (www.tom.com). Taobao, which, unlike eBay, does not charge commissions, has maintained its lead.

The Solution Although eBay is no longer trying to challenge Taobao, the company does have a plan for China.

The plan is to link Chinese entrepreneurs and exporters to eBay consumers located elsewhere.

Their strategy centers on sellers such as Tang Fengyan. In 2007, Tang started her own dress business. She found eBay an ideal medium for selling her $50 cocktail and rockabilly swing dresses. In 2010 alone, her sales totaled $700,000. Although eBay has minimal presence inside

Chapter 5:

Page 18

China, Tang does not mind, because she is looking to attract global customers. To reach them, eBay makes the most sense for her. eBay searched for segments of the Chinese electronic commerce market that were not dominated by Taobao’s boss, Jack Ma, and his Alibaba Group (www.alibaba.com). Taobao is dominant in China but has little consumer reach outside the country. Alibaba, a site connecting small and midsize importers and exporters worldwide, does not cater much to consumers. eBay saw an opening and quickly moved in. The company now has 150 service agents catering to Chinese sellers. In 2010, eBay launched a service, together with China Post and the U.S. Postal Service, to provide a way for foreign buyers to track their China purchases and also to allow sellers on the mainland to offer free shipping.

The Results Thanks to its new business model and exporters like Tang Fengyan, eBay now operates a successful business in China. Transactions from China and Hong Kong on eBay and its PayPal unit amounted to $4 billion in 2010, making China eBay’s fifth-largest market behind the United States, Germany, Britain, and South Korea.

Despite this success, eBay continues to be concerned with Alibaba. In 2010, Alibaba launched a service called AliExpress that makes it easier for Chinese-based companies to sell to consumers outside China.

Questions 1. Research the reasons (besides the one listed in the case) why eBay was unsuccessful when it purchased EachNet. Based on their research, students will come up with various reasons for eBay’s success issues with EachNet. 2. eBay has gained a competitive advantage by providing a service for Chinese exporters. Is this a sustainable competitive advantage? Why or why not? Support your answer.

Students will have different opinions based on what they find in Question #1.

3. What type of e-commerce business model is Alibaba?

It is a B2B model.

4. Discuss different types of payment methods other than PayPal that could be used by eBay’s competition Alibaba.

Six most commonly used ways are TT, Letter of Credit, DA/DP, Western Union, PayPal and Escrow.

5. What ethical and legal issues could be faced by exporters using eBay? Give a detailed example of each one.

Chapter 5:

Page 19

Students will have different opinions based on what they find in Question #1.

Glossary auction

A competitive process in which either a seller solicits consecutive bids from buyers or a buyer solicits bids from sellers, and prices are determined dynamically by competitive bidding. banners Electronic billboards, which typically contain a short text or graphical message to promote a product or a vendor. brick-and-mortar organizations Organizations in which the product, the process, and the delivery agent are all physical. business-to-business electronic commerce (B2B) Electronic commerce in which both the sellers and the buyers are business organizations. business-to-consumer electronic commerce (B2C) Electronic commerce in which the sellers are organizations and the buyers are individuals; also known as etailing. business-to-employee electronic commerce (B2E) An organization using electronic commerce internally to provide information and services to its employees. business model The method by which a company generates revenue to sustain itself. buy-side marketplace B2B model in which organizations buy needed products or services from other organizations electronically, often through a reverse auction. channel conflict The alienation of existing distributors when a company decides to sell to customers directly online. clicks-and-mortar organizations Organizations that do business in both the physical and digital dimensions. consumer-to-consumer electronic commerce (C2C) Electronic commerce in which both the buyer and the seller are individuals (not businesses). cyberbanking Various banking activities conducted electronically from home, a business, or on the road instead of at a physical bank location. cybersquatting Registering domain names in the hope of selling them later at a higher price. digital wallet (e-wallet) A software component in which a user stores secured personal and credit card information for one-click reuse. disintermediation Elimination of intermediaries in electronic commerce. e-government The use of electronic commerce to deliver information and public services to citizens, business partners, and suppliers of government entities, and those working in the public sector. e-procurement Purchasing by using electronic support. e-wallets (see digital wallets) electronic business (e-business) A broader definition of electronic commerce, including buying and selling of goods and services, and also servicing customers, collaborating with business partners, conducting e-learning, and conducting electronic transactions within an organization.

Chapter 5:

Page 20

electronic commerce (e-commerce) The process of buying, selling, transferring, or exchanging products, services, or information via computer networks, including the Internet. electronic mall A collection of individual shops under one Internet address. electronic marketplace A virtual market space on the Web where many buyers and many sellers conduct electronic business activities. electronic payment systems Computer-based systems that allow customers to pay for goods and services electronically, rather than writing a check or using cash. electronic retailing (e-tailing) The direct sale of products and services through storefronts or electronic malls, usually designed around an electronic catalog format and/or auctions. electronic storefront The Web site of a single company, with its own Internet address, at which orders can be placed. exchange (see public exchange) forward auctions An auction that sellers use as a selling channel to many potential buyers; the highest bidder wins the items. group purchasing The aggregation of purchasing orders from many buyers so that a volume discount can be obtained. mobile commerce (m-commerce) Electronic commerce conducted in a wireless environment. multichanneling A process in which a company integrates its online and offline channels. permission marketing Method of marketing that asks consumers to give their permission to voluntarily accept online advertising and e-mail. person-to-person payments A form of electronic cash that enables the transfer of funds between two individuals, or between a individual and a business, without the use of a credit card. pop-up ad An advertisement that is automatically launched by some trigger and appears in front of the active window. pop-under ad An advertisement that is automatically launched by some trigger and appears underneath the active window. public exchanges (or exchanges) Electronic marketplace in which there are many sellers and many buyers, and entry is open to all; it is frequently owned and operated by a third party. reverse auction An auction in which one buyer, usually an organization, seeks to buy a product or a service, and suppliers submit bids; the lowest bidder wins. sell-side marketplaceB2B model in which organizations sell to other organizations from their own private e-marketplace and/or from a third-party site. smart cards A card that contains a microprocessor (chip) that enables the card to store a considerable amount of information (including stored funds) and to conduct processing. spamming Indiscriminate distribution of e-mail without the receiver’s permission. stored-value money card A form of electronic cash on which a fixed amount of prepaid money is stored; the amount is reduced each time the card is used. viral marketing Online word-of-mouth marketing. virtual bank A banking institution dedicated solely to Internet transactions.

Chapter 5:

Page 21

virtual organizations Organizations in which the product, the process, and the delivery agent are all digital; also called pure-play organizations.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 6: Wireless, Mobile Computing and Mobile Commerce Chapter Outline 6.1 6.2 6.3 6.4 6.5

Wireless Technologies Wireless Computer Networks and Internet Access Mobile Computing and Mobile Commerce Pervasive Computing Wireless Security

Learning Objectives 1. Describe the four main types of wireless transmission media, and identify at least one advantage and one disadvantage of each type.

2. Discuss the basic purposes of short-range, medium-range, and long-range networks, and explain how businesses can use at least one technology employed by each type of network.

3. Discuss the five major m-commerce applications, and provide a specific example of how each application can benefit a business.

4. Define pervasive computing, describe two technologies that underlie this technology, and provide at least one example of how a business can utilize each one.

5. Identify the four major threats to wireless networks, and explain, with examples, how each one can damage a business.

Teaching Tips and Strategies Wireless communications has become so ubiquitous, most students seldom think about it or its implications, so most students will not need to be told, “What’s in it for me?” Most of them have a personal computer with some form of Internet connection. Given the growth of smartphones, a number the students will also have used some mobile computing applications other than simple cell phone usage.

The first thing they need to understand is the difference between wireless and mobile communications. Wireless means exactly what it says: without wires. In contrast, mobile refers to something that changes its location over time. Wireless networks can be either mobile (e.g.

Internet over cell phones) or fixed (e.g. Wi-Fi).

I suggest starting the class by having students brainstorm to identify information and services that already are available and other apps they would like to have available through mobile computing. Focus especially on location-based commerce to really pique their interest. Then, have students consider the implications for the businesses that would have to provide the information and services. In other words, how will businesses have to transform themselves to satisfy consumer demands for mobile computing applications? This topic segues logically into a discussion of the benefits and drawbacks of mobile computing.

Chapter 6:

Page 2

Next, discuss privacy issues associated with mobile computing, especially RFID and Auto-ID. Most students feel that the government and employers have no right to monitor their movements and location. This leads to a great discussion. I sometimes break the class into different groups and assign them different perspectives. One point of view is the employer’s. I ask the students, if you were an employer of mobile workers (such as service technicians), would you want to pay for an employee to run personal errands while on the job? The other perspective is the employee’s. Isn’t it all right to use company time and equipment to stop at the dry cleaners while on the job? When having this discussion, try to remain impartial, at least at first. Your adopting an impartial position helps students complete their thoughts on the benefits and drawbacks of mobile computing and related privacy concerns.

Review Questions Section 6.1 … Before you go on…

1. Describe the most common types of wireless devices.

• • •

Pagers – one way wireless devices PDA – personal digital assistant, a small handheld wireless device.

GPS – global position system, a satellite-based tracking system that enables people to determine the location of a GPS device’s location.

Smartphone – Internet-enabled cell phones that can support mobile applications.

2. Describe the various types of transmission media.

Microwave, satellite, and infrared are line-of-sight methods, whereas radio signals travel through the air and can pass through walls.

Section 6.2 … Before you go on…

1. What is Bluetooth? What is a WLAN? • •

Bluetooth is a device used to create small wireless radio-based personal networks for up to 8 devices within 10 meters using low-power, radio-based communication.

Wireless local area networks are local area networks without the cables used to transmit and receive data via radio waves.

2. Describe Wi-Fi, cellular service, and WiMAX. Wireless Fidelity - known as Wi-Fi. • 802.11a transmits up to 54 Mbps within 10-30 meters • 802.11b transmits up to 11 Mbps within 30-50 • 802.11g transmits up to 54 Mbps and is compatible with 802.11b Major benefits are low cost and the ability to provide simple Internet access.

Chapter 6:

Page 3

Cellular services - communicate with radio antenna placed within adjacent areas called cells.

This technology uses digital signals and can transmit voice and data up to 384 Kbps when device is used while walking, 128 Kbps while in a car, and up to 2Mbps when device is in a fixed location.

WiMax - Stands for Worldwide Interoperability for Microwave Access. WiMax has a range of up to 31 miles compared to 300 feet for Wi-Fi and 30 feet for Bluetooth. It has a transfer rate of up to 75 Mbps.

Section 6.3 … Before you go on…

1. What are the major drivers of mobile computing?

• • • • •

Widespread availability of mobile devices No need for a PC The “cell phone culture” Declining prices Improved bandwidth

2. Describe mobile portals and voice portals.

Mobile portals - A customer interaction channel that aggregates content and services for mobile users. Services include news, sports, e-mail, entertainment, travel information, restaurant and event information, games, TV and movie listings, community services, and stock trading.

Voice Portals – A Web site with an audio interface. Voice portals are not Web sites in the normal sense because they can also be accessed through a standard or a cell phone. A certain phone number connects you to a Web site, where you can request information verbally. The system finds the information, translates it into a computer-generated voice reply, and tells you what you want to know. An example is 511, the travel information line developed by Tellme.com.

3. Describe wireless financial services.

The services provide a convenient way for customers to transact business regardless of the time or their location. These services include banking, wireless payments and micropayments, wireless wallets, bill-payment services, brokerage services, and money.

4. List some of the major intrabusiness wireless applications.

•

There are applications that help owners of rental vehicles, commercial transport, and heavy equipment fleets. These apps can be used to determine the location of the vehicles and control messages that are sent to and from the vehicles.

Chapter 6: • •

Page 4

Insurance companies use wireless digital cameras to take pictures at accident scenes and transmit them to processing centers.

Mystery customers who file reports after evaluating locations of a national restaurant franchise use hand-held devices to file reports.

Section 6.4 … Before you go on…

1. Define pervasive computing, RFID, and wireless sensor networks.

Pervasive computing is invisible “everywhere computing” that is embedded in the objects around us, including the floor, lights, cars, the washing machine, cell phones, our clothes, etc.

RFID is the technology that enables manufacturers to attach tags with antennae and computer chips on goods and then track their movement through radio signals. This technology was developed to replace barcodes.

Wireless sensor networks are networks of interconnected, battery-powered, wireless sensors called motes that are placed into the physical environment. The motes collect data from many points over an extended space. Each mote contains processing, storage, and radio frequency sensors and antennae. This technology enables more accurate information to be gathered.

2. Provide two specific business uses of RFID technology.

• •

Retail companies use RFID to track inventory and shipments.

Tolls roads use RFID to collect fees without the need for toll booth personnel.

Section 6.5 … Before you go on…

1. Describe the four major threats to the security of wireless networks.

The four threats are rogue access points, war driving, eaves dropping and RF jamming.

2. Which of these threats is the most dangerous for a business? Which is the most dangerous for an individual? Support your answers.

The most dangerous threats for a business are war driving and RF jamming. For individuals, rogue access points are the most serious threat, particularly at public hotspots. Eavesdropping is threatening for both business and individual networks.

IT’s About Business Questions IT’s About Business 6.1 Tacos, Trucks, and Tweets?

Chapter 6:

Page 5

1. Provide specific examples of the advantages that mobile communications provided to Mark.

Mark was able to let his customers know via Twitter and via his Web site where his truck was or will be. He was able to tack his other vehicles and reroute them if he felt necessary.

2. Which technology, Twitter or mobile communications, enables the other? Support your answer.

Mobile communications enable mobile technologies such as Twitter. This is because most users use their smart (mobile) phones to send the messages via Twitter.

IT’s About Business 6.2 WiMAX Helps the People of Northern Thailand 1. Provide specific examples of other advantages that WiMAX can deliver to the villagers.

• • • • •

Educational programs that were not available to the villagers previously.

Electronic textbooks The ability of the villagers to collaborate with one another has helped create a sense of unity in the region.

Access to information that was not easily available to them previously The network was easy to set up and relatively inexpensive.

2. Provide specific examples of the advantages of WiMAX compared to wireline communications.

Compared to wireline, WiMAX provides wider coverage at a lower cost. WiMAX coverage can reach a 31-mile radius. In order to cover the same area, physical wireline must be must be laid out to each establishment.

IT’s About Business 6.3 Location-Based Services at Shopping Malls 1. Are the advantages of the mall apps discussed in this case enough to entice you to go to a mall? Why or why not? Support your answer.

The responses you will receive will differ based on your students shopping habits. Regardless of whether they respond yes or no, however, students should provide concrete reasons why they think the mall apps described in the case are enough (or not enough) to persuade them to shop at the mall.

2. Identify two specific benefits that you would add to mall apps to make them functional enough to attract shoppers to the mall.

Chapter 6:

Page 6

The responses you will receive will differ based on your students’ shopping habits. Some ideas are to provide apps-only discount coupons to use in stores or the food center, and to enhance the scavenger hunt-style game with daily special rewards to the first ten customers who spot certain things in the mall during their shopping trip.

IT’s About Business 6.4 Your Car Becomes a Smartphone 1. Explain why OnStar, Sync, and Blue Link are telemetry applications.

Telemetry is the wireless transmission and receipt of data gathered from remote sensors.

Telemetry has numerous mobile computing applications. Car manufacturers use telemetry applications for remote vehicle diagnosis and preventive maintenance.

2. Provide specific examples of the disadvantages of OnStar, Sync, and Blue Link.

Students will have different opinions, but some will involve tracking, the vehicles transmitting erroneous information, etc.

IT’s About Business 6.5 Protecting an Open Wireless Network at Brigham Young University – Hawaii 1. What are the advantages of the Avenda system to the users?

Avenda automatically provides authorization privileges after a user is authenticated. That is, once a user is identified, the system provides access only to those systems necessary for that user to do his or her job, a process called least privilege.

2. Are there privacy issues associated with the Avenda system for users? If so, provide specific examples.

IT team now controls and differentiates access to the wireless network, so they can determine what users are doing on the network. The team is also able to collect user information and details about network usage. However, students are required to sign the university honor code of conduct, and their activities on the network can be monitored to ensure they don’t violate the rules, causing harm to the users and the university.

Discussion Questions 1. Discuss how m-commerce can expand the reach of e-business.

In the traditional computing environment, users must have physical access to a computer in order to utilize its applications. The need to be linked by wires to computing resources limited the usefulness of this technology to people who must be mobile while on the job. Mcommerce is a natural extension of e-business, but it is conducted in a wireless environment.

Chapter 6:

Page 7

M-commerce serves the needs of an increasingly mobile work force and consumer population..

2. Discuss how mobile computing can solve some of the problems of the digital divide.

Wireless devices are becoming cheaper, and individuals can take those devices to locations where they can connect to the Internet, often for free. Consequently, users who do not have access to a computer at home can use these devices to connect to the Internet and gain the benefits that otherwise would not be available to them.

3. List three to four major advantages of wireless commerce to consumers, and explain what benefits they provide to consumers.

•

• • •

Access to expertise: For example, medical service providers in remote locations could communicate real-time with specialists in other places to provide specialized consultations. Consumers would benefit due to better access to specialized expertise without the inconvenience or expense of traveling to a different location for the consultation.

Access to information: For example, mobile portals provide consumers access to a personalized set of content and services regardless of location. This enables the consumer to always have specified information available regardless of location.

Customized advertising: For example, location-based advertising can deliver information and coupons to inform consumers about shops, malls, and restaurants close to their current location.

Access to services: For example, wireless banking enables consumers to carry out various financial transactions from any location, further eliminating the need to go to a bank or an ATM machine to carry out needed banking business.

4. Discuss the ways in which Wi-Fi is being used to support mobile computing and mcommerce. Describe the ways in which Wi-Fi is affecting the use of cellular phones for mcommerce.

Wi-Fi is the technical standard underlying most of today’s wireless local area networks (WLANs). A mobile computing device can connect to the Internet easily from public access points called hotspots. Mobile computing and m-commerce applications can be delivered easily and at adequate communication speeds in this environment. Wi-Fi is reducing the need for wide-area wireless networks based on cellular technology.

5. You can use location-based tools to help you find your car or the closest gas station.

However, some people see location-based tools as an invasion of privacy. Discuss the pros and cons of location-based tools.

The benefits of location-based tools include the ability to request and receive information that is tailored to your exact location. The concerns about this capability arise from the fact that other people can obtain information about your exact location and movements and use that information in harmful ways..

Chapter 6:

Page 8

6. Discuss the benefits of telemetry in health care for the elderly.

The alerting devices that people can wear around their neck are valuable for seniors who need emergency assistance after a fall or when they are experiencing some other medical problem.

7. Discuss how wireless devices can help people with disabilities.

Sensors that help people with disabilities communicate with their computer and other household devices significantly enhance these individuals’ ability to interface with their environment and perform basic activities.

8. Some experts say that Wi-Fi is winning the battle with 3G cellular service. Others disagree.

Discuss both sides of the argument, and support each one.

Students will discuss this in terms of speed, distance and cost and why one of these services is preferred over the other.

9. Which of the applications of pervasive computing do you think are likely to gain the greatest market acceptance over the next few years? Why? Although the students’ answers will vary, it is likely that applications that add convenience without violating privacy will be the ones to gain market acceptance. For example, an application that provides information about a product for diagnostic and repair purposes would be useful because the consumer could arrange for the product to be repaired before it fails.

Problem-Solving Activities 1. Investigate commercial applications of voice portals. Visit several vendors (e.g., www.microsoft.com/en-us/tellme/, www.cisco.com). What capabilities and applications do these vendors offer?

Students will research voice portals and report their findings.

2. Using a search engine, try to determine whether there are any commercial Wi-Fi hotspots in your area. (Hint: Access http://v4.jiwire.com/search-hotspot-locations.htm.) Also check www.wifinder.com.

Students will discuss use of handhelds, laptops, etc. after locating WI-Fi spots in their area.

3. Examine how new data capture devices such as RFID tags help organizations accurately identify and segment their customers for activities such as targeted marketing. Browse the Web and develop five potential new applications for RFID technology, not listed in this

Chapter 6:

Page 9

chapter. What issues would arise if a country’s laws mandated that such devices be embedded in everyone’s body as a national identification system?

Students should enjoy researching this topic and describe these wearable devices.

4. Investigate commercial uses of GPS. Start with www.northwestontariomaps.ca; then go to http://www.neigps.com/. Can some of the consumer-oriented products be used in industry?

Prepare a report on your findings.

Students will investigate and list products that can cross over between the end consumer and industry markets.

5. Access www.bluetooth.com. Examine the types of products being enhanced with Bluetooth technology. Present two of these products to the class and explain how they are enhanced by Bluetooth technology.

Various categories of products are listed in the web site. Students will investigate and prepare a report on two of these products. Students also examine any drawbacks to having Bluetooth used in the product.

6. Explore www.nokia.com. Prepare a summary of the types of mobile services and applications Nokia currently supports and plans to support in the future.

Students will investigate and prepare a report.

7. Enter www.ibm.com. Search for wireless e-business. Research the resulting stories to determine the types of wireless capabilities and applications IBM’s software and hardware supports. Describe some of the ways these applications have helped specific businesses and industries.

Students are to look into the published case studies in the ibm.com web site under “SOLUTIONS” and find some examples of cases that they can share with the class.

8. Research the status of 3G and 4G cellular service by visiting www.itu.int, www.4g.co.uk, and www.3gnewsroom.com. Prepare a report on the status of 3G and 4G based on your findings.

Students will investigate and prepare a report.

9. Enter www.onstar.com. What types of fleet services does OnStar provide? Are these any different from the services OnStar provides to individual car owners?

Students will investigate and prepare a report.

Chapter 6:

Page 10

10. Access www.itu.int/osg/spu/publications/internetofthings/InternetofThings_summary.pdf.

Read about the Internet of Things. What is it? What types of technologies are necessary to support it? Why is it important?

Internet of Things refers to the concept of embedding communications technology in common devices like refrigerators and ovens in order to extend the reach of Internet to many remote areas that do not have an existing Internet access infrastructure The technologies required for creating this type of network include, but are not limited to, RFID, sensor networks, nanotechnology, distributed computing networks, and telecommunication technology.

Team Assignments 1. Each team should examine a major vendor of mobile devices (Apple, BlackBerry, Samsung, Nokia, Kyocera, Motorola, and so on). Each team will research the capabilities and prices of the devices offered by each company and then make a class presentation, the objective of which is to convince the rest of the class why one should buy that company’s products.

Students will research the capabilities and prepare a report. Focus on features supported by the models, what bandwidth is needed to support the features and the quality of network service and cost that is required by each.

2. Each team should explore the commercial applications of m-commerce in one of the following areas: fi nancial services, including banking, stocks, and insurance; marketing and advertising; manufacturing; travel and transportation; human resources management; public services; and health care. Each team will present a report to the class based on their fi ndings. (Start at www.wirelessresearch.eu.)

There are a lot of options, particularly in the financial industry, that students can choose.

Students will research the capabilities and prepare a report.

3. For one of the following areas—homes, cars, appliances, or other consumer goods like clothing—and investigate how embedded microprocessors are currently being used and will be used in the future to support consumer-centric services. Each team will present a report to the class based on their findings.

Students will research the capabilities and prepare a report.

Closing Case MOBILE READING WITH KOBO The Business Problem In the early 2000s, sales of books at Indigo were declining, and the publishing industry was reeling due to the many changes brought by the Internet. Books could be purchased on-line all

Chapter 6:

Page 11

around the world, and were increasingly available in e-book form. Indigo Books & Music Inc. believed that the future lay in e-books, so it increasingly conducted research and provided books in electronic format. The Shortcovers app was used for this purpose. In 2009, Shortcovers became a separate company called Kobo, now well known in Canada and around the world.

In July 2010, Kobo launched a physical e-reader at Indigo stores. (The original reader was not wireless, while current versions are). At the time there were many readers (over 100), and Kobo gained market share by becoming a low-cost leader. Such intense price competition caused many e-reader producers to leave the market, leaving fewer readers available. The most popular readers are the Kindle and Kindle Fire sold by Amazon (with about 55 percent of the reader market share as of mid-2012), the Nook by Barnes and Noble (with about 14 percent), and the Apple iPad (with about 12 percent).

Amazon, Barnes and Noble, and Apple have a large user base that buys their books and apps.

How is Kobo, a company based in Toronto, going to compete in the world marketplace and succeed?

The It and Business Solution

We can observe several strategies that Kobo has implemented. The first is rapid and frequent hardware innovation, staying at the low end of the price scale. The Kobo reader hardware has been frequently upgraded and has evolved. From the first black and grey pearl display Kobo in July 2010, numerous versions have been sold. As of April 2013 there were five versions of the Kobo reader available: the Aura, arc, glo, mini, and touch, ranging in price from $79.99 to $199.99 (the colour version). The Kindle had three versions, ranging in price from US$119 to

Chapter 6:

Page 12

US$399. The Barnes and Noble Nook had two versions, the reader selling at $199 and a tablet selling at $269. Finally, the iPad mini sold for $329 while the regular iPad sold for $499.

A second strategy is the open-standards policy adopted by the company. Rather than using a private book format like Amazon, Kobo’s books are sold in epub format, a standard and the most common format used for e-books. As of September 2012, tablet Kobo readers were able to run over 600,000 apps, enabling the company to compete with other Internet appliances (e-readers, smart phones, and tablets).

Kobo also encourages community among its readers. Using social media, readers can find out how many others are reading a particular book, comment about the book, and check out what others are thinking.

But the biggest difference between the Kobo and many other e-readers is that the Kobo is in bookstores, so people who love books can buy their readers in the same place that they go to touch and feel their favourite books. In Canada, Kobo e-readers are sold at Chapters/Indigo. In the United States, they were sold at Borders, which went bankrupt in 2011. The next year, Kobo replaced this connection with an agreement with the American Booksellers Association to sell its hardware. In the United Kingdom, W. H. Smith sells Kobos, while in Italy it is Mondadori, in Hong Kong it is Swinden, and in Japan it is Rakuten, which bought Kobo from Indigo Books & Music in 2012.

The Results At of the end of 2012, Kobo had over 12 million active readers in over 170 countries. Half of this volume was obtained during 2012 alone. Kobo customers can read Kobo books from other

Chapter 6:

Page 13

platforms, including BlackBerry, Apple, and Android, which could explain why the company reported an over 500 percent increase in e-gifting (payment of e-books for the use of others) for he December 2012 holiday season.

Questions 1. Explain why it is important for a company like Kobo to continue to innovate its hardware.

How has wireless technology contributed to the pace of innovation?

There are two reasons: to stay at the low end of the price scale; and to adopt the open standards policy. Wireless technology has significantly increased the pace of innovation.

2. Why is Kobo’s position on standards (i.e., the use of the epub format) relevant to its success?

Why does Kobo provide apps for multiple platforms (i.e., BlackBerry, Apple, and Android)?

This is because of Kobo’s adoption of open-standards policy.

Glossary Bluetooth

Chip technology that enables short-range connection (data and voice) between wireless devices.

Cellular Telephones (also called cell phones) Phones that provide two-way radio communications over a cellular network of base stations with seamless handoffs.

Global Positioning System (GPS) A wireless system that uses satellites to enable users to determine their position anywhere on earth.

Hotspot

A small geographical perimeter within which a wireless access point provides service to a number of users.

Infrared

A type of wireless transmission that uses red light not commonly visible to human eyes.

Location-Based Commerce (l-commerce) Mobile commerce transactions targeted to individuals in specific locations, at specific times.

Mesh Network

A network composed of motes in the physical environment that “wake up” at intervals to transmit data to their nearest neighbor mote.

Chapter 6:

Page 14

Microwave Transmission A wireless system that uses microwaves for high-volume, longdistance, point-to-point communication.

Mobile Commerce (m-commerce) Electronic commerce transactions that are conducted with a mobile device.

Mobile Computing A real-time connection between a mobile device and other computing environments, such as the Internet or an intranet.

Mobile Portal

A portal that aggregates and provides content and services for mobile users.

Mobile Wallet

A technology that allows users to make purchases with a single click from their mobile devices.

Near-field communications (NFC) The smallest of the short-range wireless networks that is designed to be embedded in mobile devices such as cell phones and credit cards.

Personal Area Network A computer network used for communication among computer devices close to one person.

Pervasive Computing (also called ubiquitous computing) A computer environment where virtually every object has processing power with wireless or wired connections to a global network.

Propagation Delay

Any delay in communications due to signal transmission time through a physical medium.

Radio-frequency identification (RFID) technology A wireless technology that allows manufacturers to attach tags with antennas and computer chips on goods and then track their movement through radio signals.

Radio Transmission Uses radio-wave frequencies to send data directly between transmitters and receivers.

Satellite Radio (also called digital radio) A wireless system that offers uninterrupted, near CD-quality music that is beamed to your radio from satellites.

Satellite Transmission A wireless transmission system that uses satellites for broadcast communications.

Telemetry

The wireless transmission and receipt of data gathered from remote sensors.

Ubiquitous Computing (see Pervasive Computing)

Chapter 6:

Page 15

Ultra-wideband (UWB) A high-bandwidth wireless technology with transmission speeds in excess of 100 Mbps that can be used for applications such as streaming multimedia from, say, a personal computer to a television.

Voice Portal

A Web site with an audio interface.

Wireless

Telecommunications in which electromagnetic waves carry the signal between communicating devices.

wireless 911

911 emergency calls made with wireless devices.

Wireless Access Point An antenna connecting a mobile device to a wired local area network.

Wireless Fidelity (Wi-Fi) A set of standards for wireless local area networks based on the IEEE 802.11 standard.

Wireless Local Area Network (WLAN) A computer network in a limited geographical area that uses wireless transmission for communication.

Wireless Sensor Networks (WSN) Networks of interconnected, battery-powered, wireless sensors placed in the physical environment.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 7:

Web 2.0 and Social Networks

Chapter Outline 7.1 Web 2.0 Underlying Technologies 7.2 Web 2.0 Applications 7.3 Categories of Web 2.0 Sites Learning Objectives 1. Describe the differences between Web 1.0 and Web 2.0, and explain the benefits of three information technologies used by Web 2.0.

2. Identify five prominent Web 2.0 applications, and provide at least one example of how each one can be utilized in a business setting.

3. Discuss the three categories of Web 2.0 sites, and provide at least one example of how each one can improve business efficiency and profitability.

Teaching tips and Strategies Even thought most of our students have been using the Internet since elementary school, they do not recognize how the Internet and Web-based applications have evolved.

Each term, I find more of my students using social networking sites, such as Facebook and LinkedIn. However, some may not understand all the implications of their use of these sites means for them and for the companies that use or monitor the sites. As part of this discussion, I also cover some of the personal security issues the students should be aware of when using a social network site.

One project that I have started to assign is having students join LinkedIn and create a profile. I also have created a LinkedIn group that I have them join to get credit. This exercise has become so successful that all the departments in the School of Business have also created LinkedIn groups. The benefits include another place to post announcements for the students and a place where graduates can network with current students (potential source of job leads, etc.).

Review Questions Section 7.1 … Before You Go On...

1. Differentiate between Web 1.0 and Web 2.0.

Web 1.0 was the first generation of the Web. The key developments of Web 1.0 were the creation of Web sites and the commercialization of the Web. Users typically have minimal interaction with Web 1.0 sites. Rather, they passively receive information from those sites.

According to Tim O’Reilly, a noted blogger, Web 2.0 is a loose collection of information technologies and applications, plus the Web sites that use them. These Web sites enrich the

Chapter 7:

Page 2

user experience by encouraging user participation, social interaction, and collaboration.

Unlike Web 1.0 sites, Web 2.0 sites are not so much online places to visit as Web locations that facilitate information sharing, user-centered design, and collaboration.

2. Explain how AJAX, tagging, and RSS have made the Web more interactive and informative.

AJAX is a Web-development technique that enables portions of Web pages to reload with fresh data instead of requiring the entire Web page to reload. This process speeds up response time and increases user satisfaction.

A tag is a keyword or term that describes a piece of information — for example, a blog, a picture, an article, or a video clip. Users typically choose tags that are meaningful to them.

Tagging allows users to place information in multiple, overlapping associations rather than in rigid categories. For example, a photo of a car might be tagged with “Corvette,” “sports car,” and “Chevrolet.” Tagging is the basis of folksonomies, which are user-generated classifications that use tags to categorize and retrieve Web pages, photos, videos, and other Web content.

Really simple syndication (RSS) allows you to receive the information you want (customized information), when you want it, without having to surf thousands of Web sites.

RSS allows anyone to syndicate (publish) his or her blog, or any other content, to anyone who has an interest in subscribing. When changes to the content are made, subscribers receive a notification of the changes and an idea of what the new content contains.

Subscribers can then click on a link that will take them to the full text of the new content.

Section 7.2 … Before You Go On….

1. Differentiate between blogs and wikis.

A weblog (blog for short) is a personal Web site, open to the public, in which the site creator expresses his or her feelings or opinions via a series of chronological entries. Bloggers— people who create and maintain blogs—write stories, convey news, and provide links to other articles and Web sites that are of interest to them.

A wiki is a Web site on which anyone can post material and make changes to already posted material. Wikis have an “edit” link on each page that allows anyone to add, change, or delete material, fostering easy collaboration. Wikis harness the collective intelligence of Internet users, meaning that wikis take advantage of the combined input of many individuals.

2. What is netcasting?

Netcasting, which includes podcasting and videocasting, is the distribution of digital media, primarily audio files (podcasting) and video files (videocasting), via syndication feeds for playback on digital media players and personal computers. Interestingly, the term podcasting, derived from combining the terms “broadcasting” and “iPod,” is a misnomer, because netcasts (or podcasts) can be played on a variety of devices in addition to iPods.

Chapter 7:

Page 3

3. Discuss the business benefits of crowdsourcing.

Crowdsourcing involves taking a job traditionally performed by an employee or a consultant and outsourcing it to an undefined group of people in the form of an open call.

The benefits of crowdsourcing to companies include finding large numbers of workers to complete projects quickly, attracting niche expertise, saving money, and making better use of in-house resources. For the workers, crowdsourcing provides unprecedented flexibility to work almost anywhere at any time.

Section 7.3 … Before You Go On….

1. What are social networks, and how are organizations using them?

Social networking Web sites allow users to upload their content to the Web in the form of text (for example, blogs), voice (for example, podcasts), images, and videos (for example, videocasts). These sites provide an easy, interactive tool for communicating and collaborating with other people on the Web. They help users find like-minded people online, either to pursue an interest or a goal or just to establish a sense of community among people who may never meet in the real world.

Organizations are finding many useful ways to employ social networks to pursue strategic objectives. For example, many employees have organized work groups using publicly available social networking sites because their companies don’t offer similar tools. In response, many firms are meeting this demand by implementing internal social network platforms that are secure and are tailored to company needs. These networks typically replace the traditional employee directory. Social network listings are easy to update and expand, and employees are encouraged to add their own photos, interests, and expertise.

2. What are aggregators, and what is their greatest value to Web 2.0 users?

Aggregators are Web sites that provide collections of content from the Web. Their greatest value to Web 2.0 users is their ability to aggregate information from a number of different sites into a useable format.

3. Describe mashups, and discuss their business value.

Mashup means to “mix and match” content from other parts of the Web. A mashup is a Web site that takes different content from a number of other Web sites and mixes them together to create a new kind of content. The launch of Google Maps is credited with providing the start for mashups. A user can take a map from Google, add his or her data, and then display a map mashup on his or her Web site that plots crime scenes, cars for sale, or virtually any other subject.

IT’s about Business Questions

Chapter 7:

Page 4

IT’s About Business 7.1 RSS Survival 1. Will RSS technology survive in the future? Why or why not?

RSS technology would not be extinct in the future. More likely, it will evolve into a tool for oneto-one marketing.

2. How could you turn RSS technology into a viable e-commerce business model?

It could be used as a personalized, one-to-one mode of communication.

3. Provide specific examples of how RSS technology could be used by a grocery store chain, a hospital, and your university.

Students will have different ideas and opinions here but all of them should emphasize aggregation of data and effortless communication.

IT’s About Business 7.2 Share Your Life in Pictures 1. Explain how and why a startup can survive if it becomes “wildly popular” before it evolves into a real, profit-making business.

Students will have different opinion as to “why” some sites become popular ad other do not.

It usually involves what is “in” and popular with their friends at that point in time.

2. What are some potential disadvantages to photo-sharing Web sites such as Instagram and Color?

There is the potential for someone to sell or use the pictures that you post in a manner that you did not intend. Depending on the content of the pictures you post, someone (including an employer) could use them against you.

IT’s About Business 7.3 Online Games Are Big Business 1. From Zynga’s perspective, discuss the advantages and disadvantages of the company’s close relationship with Facebook.

Their success depends on their continued good relations with Facebook because that is where almost all of their games are played. Zynga insists that it helps Facebook (and vice-versa) because Zynga’s games increase the time that users spend on Facebook Zynga stopped sending spam-like notifications to a player’s friends every time the player performed an action in an online game. This action hurt Zynga’s revenue.

Chapter 7:

Page 5

2. What kinds of actions could Zynga take to minimize its dependence on Facebook? Be specific, and provide examples.

Student will have various ideas, but some may suggest that Zynga develop games that do not depend on Facebook. Options include a non-Facebook-based site that could be accessed via a Web browser or a smart phone app.

IT’s About Business 7.4 Location, Location, Location 1. What are some possible disadvantages of being a member of Foursquare? Would you join Foursquare? Why or why not?

Foursquare is based on using GPS-enabled mobile technology (tracking) to broadcast a user’s location. This can bring a number of benefits and privacy concerns.

Students will have different opinions on joining Foursquare.

2. Analyze the differences between social networking and social location networking, using specific examples.

Social networking (Facebook, Twitter) does not necessarily involve location-based technology. Social location networking (Facebook Places, Foursquare) is based on GPSlocating or tracking technology based on where the user is.

Discussion Questions 1. How would you describe Web 2.0 to someone who has not taken a course in information systems?

In the first generation of the Web, communications were one way, as users passively received information from Web sites. Web 2.0 provides two-way communications using many options such as blogs, chat rooms, wikis, workflow technologies, and groupware.

2. If you were the CEO of a company, would you pay attention to blogs about your company?

Why or why not? If yes, would you consider some blogs to be more important or more reliable than others? If so, which ones? How would you find blogs relating to your company?

Blogs present an opportunity for organizations to obtain customer feedback and to monitor the tone of the feedback. It is crucial, particularly if the feedback is negative, that the company respond when necessary. The blogs that are visited more often and have a larger following are more important than others. Users need to search on product names and company names to find the blogs of interest.

Chapter 7:

Page 6

3. Do you have a page on a social networking Web site? If yes, why? If no, what is keeping you from creating one? Is there any content that you definitely would not post on such a page?

Students will have wide and varied responses to this question. These responses should initiate a very interesting class discussion.

4. How can an organization best employ Web 2.0 technologies and applications to benefit their business processes?

First, ask students to define Web 2.0 technologies and applications. Then, ask them how they might use any or all of those technologies to support the business processes of a generic company.

5. What factors might cause an individual, an employee, or a company to be cautious in the use of social networks?

There are a wide variety of responses to this question. Students will have their own reasons, but their responses may include concerns regarding their personal security (i.e. personal information becoming public) and harassment by others.

6. What risks does a company expose itself to if it leverages feeds? How might the company mitigate these risks?

If a company uses feeds, then it should develop policies that limit whose feeds they use, and it should indicate its source of information.

7. What sorts of restrictions or guidelines should firms place on the use of social networks by employees? Are these Web 2.0 sites a threat to security? Can they tarnish a firm’s reputation? If so, how? Can they enhance a firm’s reputation? If so, how?

Many organizations have policies prohibiting employees from discussing customers and business practices beyond the workplace. These rules could also be applied to social networks. Web 2.0 provides tools and opportunities for employees to reveal sensitive information easily, whether intentionally or not, that could pose threats to security. These threats could also damage the firm’s reputation. For example, after a long day at work, an employee at a restaurant could update her Facebook status by complaining about a customer who left a small tip. If other people read this complaint, it could damage the restaurant’s reputation of friendly service. This type of damage is very difficult to reverse because the company normally does not know who read the comment. In response, many organizations set up a social network page as a way to directly communicate with customers. They use social networks as an outlet to clarify, apologize, or compensate customers.

Problem Solving Activities

Chapter 7:

Page 7

1. Enter www.programmableweb.com, and study the various services that the Web site offers.

Learn how to create mashups, and then propose a mashup of your own. Present your mashup to the class.

Students should report their ideas. Some ideas may be worthy of follow-up.

2. Go to Amazon’s Mechanical Turk Web site (www.mturk.com). View the available HITs. Are there any HITs that you would be interested in to make some extra money? Why or why not?

Students will click “Find HITs now” on the link to search the list of available HITs. On the result page, they should click “view a HIT in this group” of their choice, read about what to do, then decide if they would be interested in working on any of those HITs.

3. Access ChatRoulette (www.chatroulette.com). What is interesting about this social networking site?

ChatRoulette is a one-on-one video chat room. The catch is you do not know whom you will be connected to (be chatting with) until you enter the site.

4. Using a search engine, look up the following: • Most popular or most visited blogs. Pick two, and follow some of the posts. Why do you think these blogs are popular?

• Best blogs (try www.bloggerschoiceawards.com/). Pick two, and consider why they might be the “best blogs.”

Students will come up with different ideas for this exercise.

5. Research how to be a successful blogger. What does it take to be a successful blogger?

What time commitment might be needed? How frequently do successful bloggers post?

The students should first define what kinds of blog there are describing (i.e. news, etc.) This will have an impact on how the students answer the other parts of this question.

6. Design a mashup for your university. Include the purpose of the mashup, sources of data, and intended audience.

Students will come up with different ideas for this exercise.

Team Assignments 1. Each team will visit a major social networking site. Discover features that distinguish each site. Present the pros, cons, and distinguishing features of each site to the class.

Students will come up with different responses for this exercise. Those responses will depend on the site(s) they visit and their personal opinions of those sites.

Chapter 7:

Page 8

2. Each team should pick a subject that needs aggregation. Set up the plans for an aggregator Web site to accomplish this goal. Present the aggregators to the class.

Students will come up with different responses for this exercise.

3. Enter www.podcasting-tools.com. Explain how to record a podcast. Each team will create a podcast on some idea in the course and make it available on your class Web site.

Students will come up with different responses for this exercise.

4. Each team will independently take on the following problem: You are an external consulting company with experience in corporate Web 2.0 implementation. Create a PowerPoint presentation that sells Web 2.0 to the following company while addressing the following concerns: • The company is a credit card and payment-processing firm that has 100 employees.

Many of the employees are not very literate on the Internet, and most have not heard of Web 2.0. It is believed that they will be resistance by employees to any proposed changes.

• The company CIO would like to implement Web 2.0 technologies and applications to enhance employee life and perhaps venture into new ways of marketing the company’s services.

Each team will conduct its research independently and present the results to the class.

Closing Case Marketing with Facebook The Problem Almost 100 years ago, John Wanamaker coined the advertiser’s dilemma: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Until the advent of the Web, it was difficult to argue that these percentages, or even an advertiser’s ability to track these percentages, had improved much. However, the Web has advanced to the point that most large sites can serve ads based on a user’s browsing history. For example, Google (www.google.com) has developed its brand of targeted advertising so effectively that the company reported some $28 billion in revenues in 2010.

Marketers have long hoped to turn the Web into the perfect advertising medium. Pop-ups on AOL, banners on Yahoo!, and search ads on Google were steps along that path. Facebook, however, is pioneering targeted advertising.

The Solution Facebook (www.facebook.com) has developed a powerful kind of targeted advertising that is more personal, or more “social,” than any previous type. For example, if you recently became

Chapter 7:

Page 9

engaged and you updated your Facebook status to reflect that fact, you might start seeing ads from local jewelers. Those jewelers have likely used Facebook’s automated ad system to target recently engaged couples living in the area.

Consider David Belden, founder of Residential Solar 101 (www.residentialsolar101.com), a San Francisco-based reseller of solar panels. Belden knows exactly who his customer is: male, around 55 years old, and with an environmental conscience that is often demonstrated in the ownership of a hybrid car. Such details are exactly what Facebook can provide for Belden.

However, ads on Facebook’s Web site (say for Belden’s Residential Solar 101) are located on the far right of the page and are clicked on by less than one-tenth of 1 percent of the site’s users. In contrast, Google ads, which are triggered by searches for specific topics, can draw clicks from up to 10 percent of all searchers. However, they are also far more expensive than Facebook ads.

Facebook’s extremely low click-through rates limit the effectiveness of the site’s targeted ads, which would matter much more if Facebook were only selling clicks. However, Facebook ads can evolve into conversations among friends, colleagues, and family members, and advertisers want to be involved in these conversations.

The entire premise for Facebook’s model of advertising is that advertisements are more valuable when they are reinforced by your friends’ behaviors. If enough of your friends like or comment on an ad, that ad can move into your main news feed, along with the names of your friends and all the conversations about the ad. The advertiser pays nothing for this movement.

Facebook’s promise to advertisers is not to get consumers to buy their products – or even to get them to visit the advertiser’s Web site. Instead, Facebook wants to subtly place the advertiser’s brand in the user’s consciousness and provoke a purchase at a later time. More immediately, Facebook wants you to “like” the brand itself. When you do this, it serves as a type of opt-in, allowing the advertiser to insert future messages into your feed.

The Results Nielsen (www.nielsen.com), the marketing research firm, notes that if users discover that their friends “like” an ad or have commented on it positively or negatively, they are up to 30 percent more likely to recall the ad’s message. Consider Nike’s (www.nike.com) three-minute commercial at the FIFA World Cup in the summer of 2010. Hundreds of millions of people saw the commercial on television. However, before the commercial even appeared on television, Nike launched it on Facebook.

The commercial started as a video on Facebook and then was passed from friend to friend, often with comments and recommendations. Facebook users played and commented on the commercial more than 9 million times. This activity helped Nike double its number of Facebook fans from 1.6 million to 3.1 million over a single weekend. Nike officials said that placing the ad on Facebook cost “a few million dollars.” However, passing around the ad did not cost Nike anything. David Grasso, Nike’s chief marketing officer, noted that Facebook was the equivalent for Nike to what TV was for marketers in the 1960s. Facebook is now an integral part of Nike’s marketing strategy.

Ford, 7-Eleven, and McDonald’s have unveiled products on their Facebook pages, in some cases using their fan groups to help design those items in advance. Starbucks offers coupons and free pastries to its 14 million fans. Other brands use Facebook to pursue what they describe as their products’ “service mission.” For example, Special K’s page provides nutritional tips, and

Chapter 7:

Page 10

Nature Valley’s page discusses national parks and nature photography. Coca-Cola, which has more than 12 million Facebook fans, also relies and focuses on Facebook.

And the bottom line for Facebook? The company reported revenue of $1.86 billion in 2010 and was valued at $82.9 billion in January, 2011.

Even though Facebook’s bottom line looks good, the company’s success is creating competition. Google is adding a feature to its Web searches that enables users to recommend useful search results to friends. This process could lead Google to rank Web sites based on what users and their friends find useful rather than using only Google’s PageRank algorithm. Google’s social search effort is called “+1” or “plus one.” “Plus one” comes after Google botched an attempt to create a viable social-networking service, called Google Buzz. Google and Facebook increasingly appear to be on a collision course for online advertising dollars.

Questions 1. Describe the advantages enjoyed by advertisers who place ads on Facebook.

Advertisers are able to target ads based on the personal traits of Facebook users (location, where they went to school, friends, etc.).

2. Discuss disadvantages that users may encounter when advertisers target them on Facebook.

What some advertisers may consider as a trait of their target audience may not match what a user might consider to be important. In some cases, a Facebook user may see an ad from an advertiser that the user has negative feelings towards.

3. Who should be responsible for the use of social networks in a business? The marketing department or the IT department? Justify your answer.

Both departments should collaborate and come up with a feasible plan of action.

4. Could the use of social networks confer a company a competitive advantage over the long run? Justify your answer.

Possibly yes. The students should answer this question based on Porter’s five forces model.

5. What aspects of a company’s IT infrastructure does one need to consider when building a social network website or linking to an existing social network website?

Hardware, software, and networks need to considered together.

CHAPTER GLOSSARY Aggregator

Web sites that provide collections of content from the Web.

AJAX

a Web development technique that allows portions of Web pages to reload with fresh data rather than requiring the entire Web page to reload.

Chapter 7:

Page 11

Blog (Weblog)

a personal Web site, open to the public, in which the site creator expresses his or her feelings or opinions with a series of chronological entries.

Blogosphere

the term for the millions of blogs on the Web.

Crowdsourcing

the process of taking a job traditionally performed by an employee or consultant and outsourcing it to an undefined group of people in the form of an open call.

Mashup

Web site that takes different content from a number of other Web sites and mixes them together to create a new kind of content.

Netcasting

the distribution of digital media via syndication feeds for playback on digital media players and personal computers.

Podcasting

the distribution of digital audio media via syndication feeds for playback on digital media players and personal computers.

Printing-on-demand customized printing done in small batches Really simple syndication (RSS) a technology that allows users to receive the information they want, when they want it, without having to surf thousands of Web sites.

Social networking sites Web sites that allow users to upload their content to the Web in the form of text, voice, images, and videos.

Tag

a keyword or term that describes a piece of information.

Videocasting

the distribution of digital video media via syndication feeds for playback on digital media players and personal computers.

Web 2.0

a loose collection of information technologies and applications, plus the Web sites that use them.

Web 2.0 media

any Web site that provides user-generated media content, and promotes tagging, rating, commenting, and other interactions among users and their media contributions.

Weblog (see blog) Wiki

a Web site on which anyone can post material and make changes to other material.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 8: Organization Information Systems Chapter Outline 8.1 8.2 8.3

Transaction Processing Systems Functional Area Information Systems Enterprise Resource Planning Systems

Learning Objectives 1. Explain the purposes of transaction processing systems, and provide at least one example of how businesses use these systems.

2. Define functional area information systems, and provide an example of the support they provide for each functional area of the organization.

3. Explain the purpose of enterprise resource planning systems, and identify four advantages and four drawbacks to implementing an ERP system.

4. Discuss the three major types of reports generated by the functional area information systems and enterprise resource planning systems, and provide an example of each type.

Teaching Tips and Strategies The focus of this chapter is organizational information systems. You might start this chapter by discussing why ISs can become quite complicated from both a technical and a managerial perspective. Significant performance and uptime requirements impose technical challenges, while coordination and usability for a large, diverse group of users pose managerial challenges.

Now, with the advent of e-commerce, online e-tailers are in the costly business of sending one or two items to millions of households. To illustrate how this changes the supply chain, you can use the following example. Let’s pretend for a moment that we work for eToys, and we get a thousand orders for Barbie in one day. Break the class up into groups, and ask them what will be involved in delivering those Barbies. The students will usually answer that someone will have to pick the dolls in the warehouse, create an address label for each customer, and then box and ship the order.

With the advancement of technology, companies now have more tools than ever before to successfully deploy information systems that can integrate their operations and reduce processing time. How do companies better manage their processes?

• By integrating their systems so that all departments can communicate with one another (including outside vendors).

• By being able to track relevant data in real-time from business processes dispersed across the organization. This will help management to make crucial decisions regarding resources.

Review Questions

Chapter 8:

Page 2

Section 8.1 - Before You Go On… 1. Define TPS. TPS stands for transaction processing system. Transaction processing involves the capture, storage, and monitoring of data generated from all business transactions. These data are input to the organization’s database. TPSs must handle high volumes of data, avoid errors, and provide a highly secure and stable environment.

2. List the key objectives of a TPS. Objectives of a TPS are: • Handle large volumes of data • Avoid errors • Handle large variations in volume (peak times) • Avoid downtime • Never lose results • Maintain privacy and security Section 8.2 - Before You Go On… 1. What is a functional area information system? List its major characteristics.

A functional area information system is one in which the functionality supports one particular area or department such as HR systems, accounting systems, marketing systems, and production systems. These systems were designed to increase internal effectiveness and efficiency. They typically developed independently of one another, resulting in “information silos.”.

2. How do information systems benefit the finance and accounting functional area?

Accounting and finance involves managing how money flows into, within, and out of organizations. This mission is very broad because money is involved in all functions of an organization. Planning activities involve analyzing operational data to help forecast and project business activities as well as the budgeting to support these activities. These data identify the amount of money that is needed to finance the firm’s operations. They also specify how that money can be raised from the financial markets and at what cost. These calculations involve many transactions and data points. Information systems are essential to achieve a level of automation in these activities.

3. Explain how POM personnel use information systems to perform their jobs more effectively and efficiently.

The production and operations management (POM) function in an organization is responsible for the processes that transform inputs into useful outputs and for the operation of the business. Because of the breadth and variety of POM functions, the chapter discusses only

Chapter 8:

Page 3

four: in-house logistics and materials management, planning production and operation, computer-integrated manufacturing (CIM), and product life cycle management (PLM). The POM function is also responsible for managing the organization’s supply chain..

4. What are the most important HRIS applications?

The most important HRIS functions are personnel administration (including workforce planning, employee recruitment, assignment tracking, personnel planning and development, and performance management and reviews), time accounting, payroll, compensation, benefits accounting, and regulatory requirements.

Section 8.3 - Before You Go On… 1. Define ERP and describe its functionalities.

Enterprise resource planning (ERP) was created to control all major business processes with a single software architecture in real time. ERP integrates all department and functional information flows across a company onto a single computer system that can serve all of the enterprise’s needs.

2. What are ERP II systems?

ERP II systems are interorganizational ERP systems that provide Web-enabled links between a company’s key business systems (such as inventory and production) and its customers, suppliers, distributors, and others. These links integrate internal-facing ERP applications with the external-focused applications of supply chain management and customer relationship management. Figure 10.3 illustrates the organization and functions of an ERP II system 3. Differentiate between core ERP modules and extended ERP modules.

ERP II systems include a variety of modules, which are divided into core ERP modules (financial management, operations management, and human resource management) and extended ERP modules (customer relationship management, supply chain management, business intelligence, and e-business). As the name suggests, the core models must be included in all ERP systems. In contrast, the extended modules are optional. Table 10.2 describes each of these modules.

4. List some drawbacks of ERP software.

ERP systems can be extremely complex, expensive, and time-consuming to implement.

Also, companies may need to change existing business process to fit the predefined business process of the software. In addition, companies must purchase the entire software package even if they only want to use a few of the modules.

Section 8.4 Before You Go On…

Chapter 8:

Page 4

1. Compare and contrast the three major types of reports.

•

• •

Routine reports are produced at scheduled intervals. They range from hourly quality control reports to daily reports on absenteeism rates. Although routine reports are extremely valuable to an organization, managers frequently need special information that is not included in these reports.

Out-of-the routine reports are called ad-hoc (on-demand) reports. They are created based on what users need, when they need it.

Exception reports include only information that falls outside certain threshold standards.

To implement management by exception, management first creates performance standards. The company then sets up systems to monitor performance (via the incoming data about business transactions such as expenditures), compare actual performance to the standards, and identify exceptions to the standards.

2. Compare and contrast the three types of on-demand reports.

• • •

Drill-down reports display a greater level of detail. For example, a manager might examine sales by region and decide to “drill down to more detail” to look at sales by store and then by salesperson.

Key-indicator reports summarize the performance of critical activities. For example, a chief financial officer might want to monitor cash flow and cash on hand.

Comparative reports compare, for example, the performances of different business units or of a single unit during different time periods.

IT’s About Business Questions IT’s About Business 8.1 Pizza Pizza’s Customer App

1. What are the advantages and disadvantages of customer entry of pizza orders?

Advantages: Fun experience to customers, lower transaction costs to franchise owners, lower chance of error for order entry.

Disadvantages: Customers must have iPhones and they need to feel comfortable using these devices.

2. What are some of the features that you would want on a pizza app? How would these features result in costs or benefits for Pizza Pizza?

Higher integration of the pizza app with customer data is a desirable feature. The benefits are expected to outweigh costs for Pizza Pizza.

IT’s About Business 8.2

Chapter 8:

Page 5

SAP at Airgas 1. What actions can a company such as Airgas take to help ensure the successful implementation of ERP software such as SAP? • •

Airgas chose approximately 300 subject-matter “experts” from the various functional areas to identify which new functionalities were required in the SAP system.

The “experts” worked side-by-side with a 120-member, full-time project team composed of Deloitte consultants and Airgas executives. Other companies can follow similar approaches.

2. What benefits could a company such as Airgas expect to receive from its deployment of SAP? The SAP deployment is expected to generate between $75 and $125 million in additional operating income each year, thanks to increased sales, better price management, and leaner operating costs. Airgas expects to find additional benefits as the project moves forward.

Companies which successfully deploy SAP can expect to receive similar financial benefits.

Discussion Questions 1. Consider the-chapter opening case. What are the advantages that Fieldf/x provides for the owners of professional baseball teams? What are the advantages that Fieldf/x provides for professional baseball players? Are there disadvantages for the players? Support your answers.

Fieldf/x is a motion-capture, or optical tracking system, that is designed to rid sports of the biases of the human eye and quantify the formerly unquantifiable art of being in the right place at the right time. Sportvision claimed that Fieldf/x is accurate to within one foot.

The system collects player movement data and produces valuable information such as a fielder’s reaction time, his path to the ball, the baserunner’s speed, and the arc of a fly ball.

The system generates more than 2.5 million records per game, or 2 terabytes of data. When Fiedlf/x is installed at all major league baseball parks, it will create a digital catalog of virtually every movement of every fielder at every Major League Baseball game.

Fieldf/x will generate new baseball metrics, such as degree-of-difficulty fielding ratings.

Fieldf/x will also make coaching more precise. For example, coaches will be able to better position their fielders, depending on the hitter and the pitch being thrown (e.g., fast ball versus slow curve ball). Finally, the system will enhance the process by which clubs evaluate — and pay — their players.

Students will have their own opinions on advantages/disadvantages to players.

2. Why is it logical to organize IT applications by functional areas?

Chapter 8:

Page 6

Data are collected and flow through an organization based on the functions of the various departments. IT systems that mirror those functions in departments support a smooth operation.

3. Describe the role of a TPS in a service organization.

Customer orders/requests are entered into the TPS and are then available for the department which will handle the order. Data is passed to other systems such as CRM, DSS, knowledge management and e-commerce as needed.

4. Describe the relationship between TPS and FAIS. FAIS provides information primarily to lower- and middle-level managers in the various functional areas. Managers use this information to help plan, organize, and control operations. The information is provided in a variety of reports. Of course the reports need to be based on data, and that is the role of the TPS to generate the data from the business operations.

5. Discuss how IT facilitates the budgeting process.

The budget allows management to distribute resources in the way that best supports the organization’s mission and goals. Budgeting software supports budget preparation and control and facilitates communication, review and approval among participants in the budget process. These packages can reduce the time involved in the budget process. Further, they can automatically monitor exceptions for patterns and trends as well.

6. How can the Internet support investment decisions?

The internet is a massive repository of company and financial information. There are several web sites that provide financial information and these can be used by an investor to make investment decisions.

7. Describe the benefits of integrated accounting software packages.

Integrated accounting packages allow the automation of several business processes – expense management, investment management, control and auditing, managing multiple currencies, and virtual close. By integrating accounting with financial management, many vendors have allowed this automation to be supported.

8. Discuss the role that IT plays in support of auditing.

One major reason that organizations go out of business is their inability to forecast and/or secure a sufficient cash flow. Underestimating expenses, overspending, engaging in fraud, and mismanaging financial statements can lead to disaster. Consequently, it is essential that organizations effectively control their finances and financial statements. We discuss several forms of financial control next. Auditing has two basic purposes: (1) to monitor how the

Chapter 8:

Page 7

organization’s monies are being spent, and (2) to assess the organization’s financial health.

Internal auditing is performed by the organization’s accounting/finance personnel. These employees also prepare for periodic external audits by outside CPA firms.

9. Investigate the role of the Web in human resources management.

Many HRIS applications are delivered via an HR portal. Key HR functions are: recruitment, HR maintenance and development, and HR planning and management.

Recruitment involves finding potential employees, evaluating them, and deciding which ones to hire. Companies are trying to find appropriate candidates on the Web, usually with the help of specialized search engines. Companies also advertise hundreds of thousands of jobs on the Web. Online recruiting can reach more candidates, which may bring in better applicants. In addition, the costs of online recruitment are usually lower than traditional recruiting methods such as advertising in newspapers or in trade journals. After employees are recruited, they become part of the corporate human resources pool, which means they must be evaluated, maintained, and developed. IT provides support for these activities. IT also plays an important role in training and retraining. Some of the most innovative developments are taking place in the areas of intelligent, computer-aided instruction and the application of multimedia support for instructional activities. For example, much corporate training is delivered over the company’s intranet or via the Web. IT can also provide support for payroll and employees’ records, benefits administration as well. This is known as ERM – Employee resource management.

10. What is the relationship between information silos and enterprise resource planning?

ERP allows for integration of business operations and can break silos by sharing data from different parts of the business and integrating business processes.

Problem-Solving Activities 1. Finding a job on the Internet is challenging as there are almost too many places to look.

Visit the following sites: www.careerbuilder.com, www.craigslist.org, www.linkedin.com, www.careermag.com, and www.monster.ca. What does each of these sites provide you as a job seeker?

Students prepare a list of capabilities for each of the sites. Building profiles, searching for jobs, responding to job ads, evaluate the job market, etc.

2. Enter www.sas.com and access revenue optimization there. Explain how the software helps in optimizing prices.

SAS is a statistical data analysis package and allows for advance mining of data to help in business planning.

3. Enter www.eleapsoftware.com and review the product that helps with online training (training systems). What are the most attractive features of this product?

Chapter 8:

Page 8

While different features may appeal to different students, tracking progress and completion and multi format delivery of the content are very attractive capabilities.

4. Enter www.microsoft.com/en-us/dynamics/erp-try-sl-demos.aspx. View three of the demos in different functional areas of your choice. Prepare a report on each product’s capabilities.

Student answers will vary based on the demo they view.

Students will follow the directions for these activities and submit a thoughtful report on each 5.

Examine the capabilities of the following financial software package: Financial Analyzer (from Oracle). Look for similar packages and prepare a report comparing the capabilities of the software packages.

Students will develop a report on their findings

6.

Surf the Net to find free accounting software (try http://download.cnet.com, www.rkom.com , www.tucows.com, www.passtheshareware.com , and www.freewareguide.com ).Download the software and try it. Compare the ease of use and usefulness of each software package.

Encourage students to download software, but remind them of the security issues.

7.

Examine the capabilities of the following financial software packages: Financial Analyzer (from www.oracle.com ), and Financial Management (from www.sas.com ).

Prepare a report comparing the capabilities of the software packages..

Students will develop a report on their findings

8.

Find Sage 50 Accounting 2013 (formerly Simply Accounting) from Sage Software ( http://na. sage .com/Accounting ).Why is this product recommended for small businesses?

Students will develop a report on their findings

9.

Enter www.halogensoftware.com and www.successfactors.com. Examine their software products and compare them.

Students will develop a report on their findings

10.

Enter www.asuresoftware.com/products/asureforce and find the support it provides to human resources management activities. View the demos and prepare a report on the capabilities of the products.

Chapter 8:

Page 9

Students will develop a report on their findings Team Assignments Groups will follow directions on these activities and submit a thoughtful report on each 1. Divide the class into groups. Each group member will represent a major functional area: accounting/fi nance, sales/marketing, production/operations management, or human resources. Each group will fi nd and describe several examples of processes that require the integration of functional information systems in a company of their choice. Each group also will show the interfaces to the other functional areas..

Students will follow the directions for the group project. Note that students might have to search the Internet to locate information systems used in their functional area in order to better describe the interfaces to other related areas.

2. Each group is to investigate an HRM software vendor (Oracle, Peoplesoft (now owned by Oracle), SAP, Lawson Software, and others). The group should prepare a list of all HRM functionalities supported by the software. Then each of the groups makes a presentation to convince the class that its vendor is the best.

To help students prepare for the presentation, set up a scenario involving a company looking to adopt HRM software. Suggest that each project team is working for a consulting/software company. Stage the presentation as if they were presenting their software to the company’s executives as a part of the bidding process for the project.

3. Each group in the class will be assigned to a major ERP/SCM vendor such as SAP, Oracle, Lawson Software, and others. Members of the groups will investigate topics such as: (a) Web connections, (b) use of business intelligence tools, (c) relationship to CRM and to EC, and (d) major capabilities by the specific vendor. Each group will prepare a presentation for the class, trying to convince the class why the group’s software is best for a local company known to the students (for example, a supermarket chain).

To help students prepare for the presentation, set up a scenario where the city has funding to promote local business development. Each project team is working for a local company.

Stage the presentation as if they were presenting the selected technology (i.e., topic) to the city’s Board of Commerce as a part of the city grant/funding application process.

Closing Case Difficulties in Managing Enterprise Resource Planning Systems Companies initially installed ERP systems to make sense of their complicated operations. In doing so, they were able to operate better and faster than their competition, at least until the

Chapter 8:

Page 10

competition caught up. In many of these companies, the ERP systems are still essential.

However, they no longer provide a competitive advantage. Further, they are not helping to bring in new revenue, and managing them is absorbing an increasing share of the company’s IT budget. However, companies are not getting rid of ERP systems, because they still need them to manage their supply chain, financial, and employee data. Nevertheless, ERP systems are causing problems for many organizations.

The First Problem: Lack of Flexibility Kennametal (www.kennametal.com), a $2 billion manufacturer of construction tools, has spent $10 million on SAP maintenance contracts during since 1998. Throughout this entire period, however, the company has been unable take advantage of any upgrades in the SAP software. The reason is that, over the years, Kennametal made more than 6,000 customizations to its SAP system. Consequently, the company could not implement any new technology that SAP built in to its software. The firm’s SAP implementation was simply too customized. The time and effort needed to install and test the upgrades outweighed any benefits. In late 2009, Kennametal inquired about the costs of hiring consultants to assist with an SAP reimplementation. The company was shocked by the estimates, which ranged from $15 million to $54 million. Kennametal’s CIO charged that not only SAP, but all the major ERP packages are “old and inflexible, and the vendors cannot build flexibility into their packages.”

A Potential Solution Even if Kennametal could afford to pay up to $54 million for consultants to help the company upgrade to the latest version of its SAP software, the CIO does not want to spend this amount of money. Instead, he plans to turn Kennametal’s old ERP strategy upside down by installing as generic a version of SAP as possible. He and Kennametal’s CEO are willing to change the company’s internal business processes to match the way SAP works, rather than modifying the SAP software to match Kennametal’s business processes.

Kennametal will also perform the implementation itself. The company hired IBM to consult about requirements definitions and to identify business processes that must be reworked to conform to SAP’s procedures. In fact, Kennametal planned to implement at least 90 percent of the SAP software unmodified.

Haworth (www.haworth.com), a $1.7 billion office furniture manufacturer, is another company that decided to make no customer changes to the core SAP code. The company uses tools from iRise (www.irise.com) to visually plant its SAP rollouts in its major offices on four continents. The iRise tools will simulate how the finished SAP system will look to employees, to get them accustomed to changes before the actual rollout. The company also uses a sales compensation application from Vertex (www.vertex.com) because SAP does not support the complicated, multi-tiered compensation model that Haworth uses to pay its salespeople.

The Result Implementing the core code of an ERP system without any significant modifications minimized both the costs of the system and the time devoted to the system for Kennametal and

Chapter 8:

Page 11

Haworth. However, there is a tradeoff. Both companies had to spend time and money reworking their business processes to meet the procedures established by their ERP systems.

The Second Problem: High Maintenance Fees Dana Holding (www.dana.com) is an $8.1 billion auto parts supplier. Dana’s CIO discovered that 90 percent of the fees the company paid to maintain its ERP system were pure profit for the ERP vendor. When the auto market hit tough times, Dana wanted its ERP vendor to work with the company to reduce maintenance fees, but the vendor objected. To persuade Dana that its maintenance fees were justifiable, the vendor analyzed Dana’s use of its support. The analysis concluded that Dana made 21,000 requests to the vendor over a nine-month period. Dana countered that 98 percent of the requests did not involve human interaction, but were automated look-ups on the vendor’s knowledge base.

Dana’s Solution Dana stopped making maintenance payments to its ERP vendor. The risks to any company that decides to stop paying maintenance fees include being hit with penalties assessed by the vendor for breaking a contract and being left without technical support in an emergency. Dana’s lawyers studied the contracts with the vendor and felt comfortable that the firm would not be violating any terms by terminating the payments. Then, Dana’s IT team explored ways to obtain support for their ERP system through other avenues. They found many alternatives, including online user forums, books, and consultants.

The Results One result of the move away from provider support is that Dana’s IT group has to be more knowledgeable about the company’s ERP system so they can fix whatever goes wrong.

However, Dana’s CIO notes that there have been no technology disasters with its ERP system, because the system is mature and reliable. In addition, eliminating maintenance saves money, because Dana is no longer paying for a service of questionable value.

Questions 1. Describe what it means for an ERP system to be inflexible.

Every organization has special or proprietary processes that are unique to that organization.

ERP systems that are inflexible may not be able to accommodate maintenance/updates/upgrades that are provided by an outside developer.

2. Describe the pros and cons of tailoring your organization’s business processes to align with the procedures in an ERP system.

One advantage is that the system will require few if any modifications, thereby making longterm maintenance easier. This is important when the systems need to be upgraded due to changes in government (local, state, federal) ordinances or tax codes. If it is an industry-

Chapter 8:

Page 12

specific application, then the system’s developer should have included processes that are best practice for the industry.

Disadvantages include the costs of annual or periodic systems maintenance provided by the developer. Another problem might involve having to modify the base system to accommodate any new proprietary software or additional processes that are not accommodated in the base system.

Glossary ad-hoc (on-demand) reports Nonroutine reports that often contain special information that is not included in routine reports. batch processing

TPS that processes data in batches at fixed periodic intervals.

comparative reports Reports that compare performances of different business units or time periods. computer-integrated manufacturing (CIM) An information system that integrates various automated factory systems. drill-down reports

Reports that show a greater level of detail than is included in routine reports.

enterprise application integration (EAI) system A system that integrates existing systems by providing layers of software that connect applications together. enterprise resource planning (ERP) system Information system that takes a business process view of the overall organization to integrate the planning, management, and use of all of an organization’s resources, employing a common software platform and database.

ERP II systems

Interorganizational ERP systems that provide that provide Web-enabled links between key business systems (such as inventory and production) of a company and its customers, suppliers, distributors, and others.

exception reports

Reports that include only information that exceeds certain threshold standards.

functional area information systems (FAISs) A system that provides information to managers (usually mid-level) in the functional areas, in order to support managerial tasks of planning, organizing, and controlling operations. key-indicator reports

Reports that summarize the performance of critical activities.

Chapter 8:

Page 13

online transaction processing (OLTP) TPS that processes data after transactions occur, frequently in real time. routine reports

Reports produced at scheduled intervals.

trans-border data flow transaction

The flow of corporate data across nations’ borders.

Any business event that generates data worth capturing and storing in a database.

transaction processing systems (TPSs) Information system that supports routine, core business transactions.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 9: Customer Relationship Management and Supply Chain Management Chapter Overview 9.1 9.2 9.3 9.4 9.5 9.6 9.7

Defining Customer Relationship Management Operational Customer Relationship Management Systems Analytical Customer Relationship Management Systems Other Types of Customer Relationship Management Systems Supply Chains Supply Chain Management Information Technology Support for Supply Chain Management

Learning Objectives 1. Define customer relationship management and collaborative CRM, and identify the primary functions of both processes.

2. Describe the two major components of operational CRM systems, list three applications used in each component, and provide at least one example of how businesses use each application.

3. Define analytical CRM systems, and describe four purposes for which businesses use these systems.

4. Define mobile CRM systems, on-demand CRM systems, and open-source CRM systems, and identify one main advantage and one main drawback of each one.

5. Define the term supply chain, and describe the three components and the three flows of a supply chain.

6. Identify two major challenges in setting accurate inventory levels throughout the supply chain, and describe three popular strategies to solve supply chain problems.

7. Define the terms electronic data interchange (EDI), extranet, and portal, and explain how each of these applications helps support supply chain management.

Teaching Tips and Strategies This chapter covers Customer Resource Management (CRM) and Supply-Chain Management, topics that should be at least indirectly familiar to most students as consumers or customers in their real lives, even though they may not know of the formal terms and system names.

CUSTOMER RESOURCE MANAGEMENT The CRM section of the chapter presents how it is used to build long-term customer relationships. It first defines the CRM concept and then turns our attention to the two major aspects of CRM, operational CRM and analytical CRM. The chapter concludes with a look at additional types of CRM, which include mobile CRM, on-demand CRM, and open-source CRM. Most students will not be familiar with these types of systems, so focus on concepts of data needed for supporting effective customer service. Students will be familiar with the how Internet transactions are used to order their textbooks or other items. As operations become more and

Chapter 9:

Page 2

more streamlined and firms move away from personalized customer service through humans, computers or CRM are/is replacing the void created.

CRM is critical to the success of modern businesses as customers are supremely important to all organizations. Regardless of the particular job students perform after they graduate, they will more than likely have either a direct or an indirect impact on the firm’s customers where they work. Therefore, it is important that all students possess a working knowledge of CRM. SUPPLY CHAIN MANAGEMENT Present your students the example of a company such as Proctor & Gamble (P&G). Discuss how they are a consumer products company but sell all of their products through retailers. They package items such as Crest and sell truckloads to different retailers. The retailers then distribute the items to their stores.

With the advent of Ecommerce, online etailers are in the costly business of sending one or two items to millions of different households. To illustrate the point of how this changes the supply chain use the eToy as an example. Ask the students to consider eToys and processing orders for Barbie dolls.

Use the example eToys getting a thousand orders for Barbies in one day. Ask the class (or groups of students in the class) what they think would be involved in delivering those Barbies.

The students will usually answer that someone will have to go pick the Barbies in the warehouse, create an address label for each customer and then box up the order and ship it.

Next, remind students that it is even more intricate than that. For example: • The payment process will need to be run (hopefully that system is automated).

• After the workers pick 1,000 Barbies (and in this example we are assuming that all the Barbies ordered are the same) and labels/invoices are printed automatically, Barbie is boxed up, then the package is weighed and postage affixed.

• Finally the coordination with UPS or FedEx to pick up the package.

The above scenario assumes that eToys has 1,000 Barbies in stock. What if they only had 500?

Now they have to deal with a backorder problem. Ask students “If 1,000 Barbies were available to you right now with invoices/labels, how long would it take to box those Barbies up and mail them?” The answers again vary, but students start to realize that the fulfillment process/supply chain is not as easy as it would seem. So, is it any wonder that eToys couldn’t fulfill all their orders? What happens in the above example, when we get another 500 orders the next day for Barbie? What if Mattel suddenly doesn’t ship more Barbies to us on time? It changes everything. This is one of the reasons that companies like Circuit City have created relationships with Amazon.com to handle their online store and the delivery process.

By going over this example (or one like it) helps students to see how important the supply chain is in the business environment. The example demonstrates how one company’s supply chain can disturb another company’s supply chain. Students tend to walk away from this chapter with a better understanding of how much companies rely on each other to do business.

Chapter 9:

Page 3

Many companies have lost business or gone out of business due to supply chain issues. The supply chain is one of the most important variables in a company’s success or failure. Auto dealers have been aware of this type of problem for decades. An example is a car dealer who had five green Camrys on his lot. The customers wanted blue, turquoise and red. So, those customers went to a competing dealer and bought their car that day instead of ordering it from the dealer I knew. The dealer had the right car, but not the right color car. In this instance, because he did not have the desired color, it cost him three sales. We might not think that is a very big deal, but a $20,000 car * 3 = $60,000 in lost sales! Mismanagement of a supply chain can cost companies ten times that number. The dealer realized he shouldn’t have ordered so many of the same color of the same model.

With the advancement of technology, companies now have more tools then ever before to successfully manage their supply chain. How do companies manage their supply chains better?

▪ By integrating their systems so that all of the departments can talk to each other (including outside vendors).

▪ By being able to track inventory and sales in real-time. This will help management to make crucial decisions regarding resources Review Questions Section 9.1 - Before You Go On… 1. What is the definition of customer relationship management?

Customer relationship management (CRM) is an organizational strategy that is customerfocused and customer-driven. That is, organizations concentrate on satisfying customers by assessing their requirements for products and services, and then providing high-quality, responsive service. CRM is not a process or a technology per-se; rather, it is a way of thinking and acting in a customer-centric fashion.

2. Why is CRM so important to any organization?

CRM builds sustainable long-term customer relationships that create value for the company as well as for the customer. That is, CRM helps companies acquire new customers, retain existing profitable customers, and grow the relationships with existing customers. The customers are the core of a successful enterprise, and the success of the enterprise depends on effectively managing relationships with them, which CRM allows them to perform.

3. Define and give examples of customer touch points.

Customer touch points include telephone calls, email, chat sessions, promotions, and the company web site. Anywhere a customer comes in contact with the organization is a touch point.

Chapter 9:

Page 4

Section 9.2 … Before You Go On….

1. Differentiate between customer-facing applications and customer-touching applications.

Customer-facing CRM applications are those applications where an organization’s sales, field service, and customer interaction center representatives interact directly with customers.

These applications include customer service and support, sales force automation, marketing, and campaign management.

Customers interact directly with customer-touching CRM applications or electronic CRM (e-CRM) applications. Customer-touching applications replace technologies or applications that allow the customer to directly interact with a company representative as is the case with customer-facing applications. Using these applications, customers typically are able to help themselves.

2. Provide examples of cross selling, up selling, and bundling (other than the examples in the text) Cross selling is the practice of marketing additional related products to customers based on a previous purchase.

Up selling is a sales strategy in which the business person will provide to customers the opportunity to purchase higher-value related products or services as opposed to or along with the consumer’s initial product or service selection.

Bundling is a form of cross selling in which a business sells a group of products or services together at a price that is lower than the combined individual prices of the products.

STUDENTS WILL SUGGEST EXAMPLES OF EACH OF THE ABOVE. Section 9.3 - Before You Go On… 1. What is the relationship between operational CRM and analytical CRM? Operational CRM is the component of CRM that supports the front-office business processes. These processes are those that directly interact with customers; that is, sales, marketing, and service. Whereas operational CRM supports front-office business processes, analytical CRM systems analyze customer behavior and perceptions in order to provide actionable business intelligence.

2. What are some of the functions of analytical CRM systems?

Analytical CRM systems typically provide information on customer requests and transactions, as well as on customer responses to an organization’s marketing, sales, and service initiatives. These systems also create statistical models of customer behavior and the

Chapter 9:

Page 5

value of customer relationships over time, as well as forecasts of customer acquisition, retention, and loss. Some functions might include: • • • •

Designing and executing targeted marketing campaigns; Increasing customer acquisition, cross selling, and up-selling; Providing input into decisions relating to products and services; Providing financial forecasting and customer profitability analysis.

Section 9.4 Before You Go On….

1. Define on-demand CRM. An on-demand CRM system is a CRM system that is hosted by an external vendor in the vendor’s data center. This arrangement spares the organization the costs associated with purchasing the system. In addition, because the vendor creates and maintains the system, the organization’s employees need to know only how to access and utilize it. The concept of ondemand is also known as utility computing or software-as-a-service.

2. Define mobile CRM. A mobile CRM system is an interactive CRM system that enables an organization to conduct communications related to sales, marketing, and customer service activities through a mobile medium for the purpose of building and maintaining relationships with its customers.

3. Define open-source CRM. Open-source CRM systems are CRM systems whose source code is available to developers and users. They do not provide more or fewer features or functions than other CRM software, and they may be implemented either on-premise or on-demand.

Section 9.5 … Before you go on…

1. What is a supply chain?

Supply Chain refers to the flow of materials, information, payments and services; from raw material suppliers, through factories and warehouses to the end customers. It includes the organizations and processes involved. Supply chain management is the planning, organizing, and coordinating of all the supply chain’s activities.

2. Describe the three segments of a supply chain.

The supply chain consists of three parts: (1) Upstream supply chain, where sourcing or procurement from external suppliers occurs; (2) Internal supply chain, where packaging, assembly or manufacturing takes place; and (3) Downstream supply chains, where distribution or dispersal takes place, frequently be external distributors.

Chapter 9:

Page 6

3. Describe the flows in a supply chain.

There are typically three flows in the supply chain: materials, information, and financial.

Material flows are the physical products, raw materials, supplies, and so forth that flow along the chain. Material flows also include reverse flows (or reverse logistics) – returned products, recycled products, and disposal of materials or products. Information flows consist of data that are related to demand, shipments, orders, returns, and schedules, as well as changes in any of these data. Finally, financial flows involve money transfers, payments, credit card information and authorization, payment schedules, e-payments, and credit-related data.

Section 9.6 … Before You Go On… 1. Differentiate between the push model and the pull model.

In the push model (also known as make-to-stock), the production process begins with a forecast, which is simply an educated guess as to customer demand. The forecast must predict which products customers will want as well as the quantity of each product. The company then produces the amount of products in the forecast, typically by using mass production, and sells, or “pushes,” those products to consumers. Unfortunately, these forecasts are often incorrect. To avoid these inaccuracies, companies can use the pull model.

In the pull model – also known as make-to-order – the production process begins with a customer order. Therefore, companies make only what customers want, a process closely aligned with mass customization. A prominent example of a company that uses the pull model is Dell Computer. Dell’s production process begins with a customer order.

2. Describe various problems that can occur along the supply chain.

The problems along the supply chain stem primarily from two sources: (1) uncertainties, and (2) the need to coordinate several activities, internal units, and business partners. A major source of supply chain uncertainties is the demand forecast. Demand for a product can be influenced by numerous factors such as competition, prices, weather conditions, technological developments, economic conditions, and customers’ general confidence.

Another uncertainty is delivery times, which depend on factors ranging from production machine failures to road construction and traffic jams. In addition, quality problems in materials and parts can create production delays, which also lead to supply chain problems.

3. Discuss possible solutions to problems along the supply chain.

Various solutions can be used to address supply chain problems. Vertical integration is a business strategy in which a company buys its upstream suppliers to ensure that its essential supplies are available as soon as they are needed. Building up inventories is another way of solving supply chain problems. Another common way to solve supply chain problems, and especially to improve demand forecasts, is sharing information along the supply chain.

Information sharing can be facilitated by electronic data interchange and extranets, topics we discuss in the next section. One of the most notable examples of information sharing occurs between large manufacturers and retailers. For example, Wal-Mart provides Procter &

Chapter 9:

Page 7

Gamble with access to daily sales information from every store for every item P&G makes for Wal-Mart. This access enables P&G to manage the inventory replenishment for WalMart’s stores. By monitoring inventory levels, P&G knows when inventories fall below the threshold for each product at any Wal-Mart store. These data trigger an immediate shipment.

Section 9.7 … Before you go on…

1. Define EDI, and list its major benefits and limitations.

EDI is the communication standard that enables business partners to exchange routine documents using agreed-upon formats. Its major benefits are: • It minimizes data entry errors • The length of the message can be shorted • Messages are secured • It reduces cycle time • Increases productivity • Enhances customer service • Minimizes paper usage and storage Major limitations are: • It requires a significant initial investment • Ongoing costs are high due to the use of private VANs • The traditional system is inflexible • Often requires a long startup period • Business process may have to be restructured to fit EDI requirements • Multiple standards exist.

2. Define an extranet, and explain its infrastructure.

An extranet is a series of interconnected intranets for which business partners have given access to certain parts to each other to enable collaborative operations. They use an Internet based communication channel called a virtual private network (VPN).

3. List and briefly define the major types of extranets.

There are three major types of extranets.

• A Company and Its Dealers, Customers, or Suppliers. This type of extranet is centered around a single company. An example is the FedEx extranet that allows customers to track the status of a delivery.

• An Industry’s Extranet. Just as a single company can set up an extranet. The major players in an industry can team up to create an extranet that will benefit all of them. For example, ANXeBusiness (www.anx.com) enables companies to collaborate effectively through a network that provides a secure global medium for B2B information exchange.

• Joint Ventures and Other Business Partnerships. In this type of extranet, the partners in a joint venture use the extranet as a vehicle for communications and collaboration. An

Chapter 9:

Page 8

example is Bank of America’s extranet for commercial loans. The partners involved in making these loans include a lender, a loan broker, an escrow company, and a title company. The extranet connects lenders, loan applicants, and the loan organizer, Bank of America. A similar case is Lending Tree (www.lendingtree.com), a company that provides mortgage quotes for your home and also sells mortgages online. Lending Tree uses an extranet for its business partners (for example, the lenders).

4. Differentiate between procurement portals and distribution portals.

There are two basic types of corporate portals: procurement (sourcing) portals for a company’s suppliers (upstream in the supply chain), and distribution portals for a company’s customers (downstream in the supply chain). Procurement portals automate the business processes involved in purchasing or procuring products between a single buyer and multiple suppliers. For example, Boeing has deployed a procurement portal called the Boeing Supplier Portal through which it conducts business with its suppliers. Distribution portals automate the business processes involved in selling or distributing products from a single supplier to multiple buyers.

“IT’s About Business” Questions IT’s About Business 9.1 An Instantaneous CRM Effort 1. Provide two examples of specific actions a company could take to utilize social media in its CRM efforts.

Students may have different opinions based on their use of social media, however possible examples might include distribution of discount coupons to their Facebook followers or announcing “unadvertised” specials.

2. Should all organizations include a social media component in their CRM strategy? Why or why not? Support your answer.

Students will have different responses based on their personal use of social media.

IT’s About Business 9.2 Chinatrust Philippines CRM Effort 1. To what extent is technology important in a call centre?

This case clearly illustrates the importance of CRM in integrating the interaction between commercial banks and their customers through call centres. Students should be able to identify major benefits of CRM in this context.

Chapter 9:

Page 9

2. Why is historical transaction data so important in CRM? Historical data is the basis of all future engagement and relationship buildings. Such data helps decision makers understand the life time value of customers, their preference and their transaction patterns.

3. Why is the integration between communication technology and the CRM so important for effective CRM? Communication technology makes it possible to collect data pertaining to customers and their transactions which serve as inputs to the CRM. IT’s About Business 9.3 Refining the Call Center 1. Explain how the analytical CRM and operational CRM systems are related in the case of ELoyalty. Explain how the two are interconnected.

Analytical CRM analyzes customer data such as personality types (in ELoyalty) whereas operational CRM is focused towards improving customers’ experiencing of day-to-day transactions. It should be evident that they are complementary to each other.

2. Review the six categories of customers. Which kind of customer are you? Do you think it would be advantageous to you if you could speak with a customer service representative who had a similar personality? Why or why not?

The six personality types identified by ELoyalty software are: • Emotions-driven (30 percent of the population): These customers forge relationships with agents before getting into the problem.

• Thoughts-driven (25 percent of the population): These customers want facts and analysis and do not waste time on pleasantries.

• Reactions-driven (20 percent of the population): These customers either love something or hate it. “This product is so cool,” they might say.

• Opinions-driven (10 percent of the population): These customers’ language is full of imperatives, and their minds are made up.

• Reflections-driven (10 percent of the population): These customers are introverts who live in their own worlds, prefer silence to banter, and often skip personal pronouns in their speech.

• Actions-driven (5 percent of the population): These customers want movement and progress. Think Donald Trump.

Students’ answers will vary, and will be based on their personal experiences.

3. Should companies inform customers about the use of ELoyalty software in their call centers?

Why or why not? Support your answer.

Chapter 9:

Page 10

Students will have different opinions based on their personal experiences.

Discussion Questions 1. How do customer relationship management systems help organizations achieve customer intimacy?

With this customer intimacy, businesses can use information about each customer (for example, previous purchases, needs, and wants) to create offers that customers are more likely to accept. That is, the CRM approach is designed to achieve customer intimacy. This CRM approach is enabled by information technology.

2. What is the relationship between data consolidation and CRM systems?

Data consolidation and the 360-degree view of the customer enable the organization’s functional areas to readily share information about customers. This sharing of customer information leads to collaborative CRM. 3. Discuss the relationship between CRM and customer privacy.

CRM collects and uses a lot of data. Without adequate safeguards, this strategy may not have worked. If the data is not secured then security problems can result.

4. Distinguish between operational CRM systems and analytical CRM systems.

Operational CRM is the component of CRM that supports the front-office business processes. These processes are those that directly interact with customers; that is, sales, marketing, and service. Whereas operational CRM supports front-office business processes, analytical CRM systems analyze customer behavior and perceptions in order to provide actionable business intelligence.

5. Differentiate between customer-facing CRM applications and customer-touching CRM applications.

The two major components of operational CRM are customer-facing applications and customer-touching applications. Customer-facing CRM applications are the areas where customers directly interact with the enterprise. These areas include customer service and support, sales force automation, marketing, and campaign management.

Customer-touching applications (also called electronic CRM applications) include those technologies with which customers interact and typically help themselves. These applications include search and comparison capabilities, technical and other information and

Chapter 9:

Page 11

services, customized products and services, personalized Web pages, FAQs, e-mail and automated response, and loyalty programs.

6. Explain why Web-based customer interaction centers are critical for successful CRM systems.

Organizations have implemented customer interaction centers (CIC) thru multiple communication channels such as the Web, telephone, fax, and face-to-face interactions to support the communication preferences of customers. The CIC manages several different types of customer interaction. Web based CIC are low cost and provide the greatest automation for these customer interactions. Hence they are critical for successful CRM. 7. Why are companies so interested in e-CRM applications?

The term electronic CRM (or e-CRM) appeared in the mid-1990s, when organizations began using the Internet, the Web, and other electronic touch points (e.g., e-mail, point-of-sale terminals) to manage customer relationships. Customers interact directly with these technologies and applications rather than interact with a company representative as is the case with customer-facing applications. Such applications are called customer-touching CRM applications or electronic CRM (e-CRM) applications. Using these applications, customers typically are able to help themselves.

8. Discuss why it is difficult to justify CRM applications.

Many CRM applications do not make the company any money. They are important because they improve the customer experience markedly. Hence, these intangible benefits are difficult to quantify and justify for executives.

9. You are the CIO of a small company with a rapidly growing customer base. Which CRM system would you use: on-premise CRM system, on-demand CRM system, or open-source CRM system? Remember that open-source CRM systems may be implemented either onpremise or on-demand. Discuss the pros and cons of each type of CRM system for your business.

I will use on demand CRM as its demands on infrastructure is smaller. An on demand, a CRM system is hosted by an external vendor in the vendor’s data center. For a small company this is a cheaper and leaner solution.

10. Refer to the example concerning the CRM efforts of Caterpillar. Where on the CRM continuum (low-end to high-end) does the company’s CRM strategy fit? Explain your answer.

Caterpillar uses its CRM tools to accomplish the following objectives: • Assist the organization in improving sales and account management by optimizing the information shared by multiple employees and by streamlining existing processes (for example, taking orders using mobile devices).

Chapter 9: • • • •

Page 12

Form individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; Identify the most profitable customers, and provide them the highest level of service.

Provide employees with the information and processes necessary to know their customers.

Understand and identify customer needs, and effectively build relationships among the company, its customer base, and its distribution partners.

Based on the above, it appears Caterpillar is at or near the high-end of the CRM continuum.

11. List and explain the important components of a supply chain.

A supply chain refers to the flow of materials, information, money, and services from raw material suppliers, through factories and warehouses, to the end customers. A supply chain involves three segments: upstream, where sourcing or procurement from external suppliers occurs; internal, where packaging, assembly, or manufacturing takes place; and downstream, where distribution takes place, frequently by external distributors.

12. Explain how a supply chain approach may be part of a company’s overall strategy.

The supply chain drives the business operations of the company. It has to be closely aligned with its overall strategy. As seen from the previous case studies, the overall business strategy is JIT or low cost. The mechanics of the supply chain needs to reflect the business strategy.

13. Explain the import role that information systems play in supporting a supply chain strategy.

Information systems are particularly important to ensure efficiency in the supply chain operations. By exchanging information coordination can be improved among the firms linked in the supply chain. This can solve a lot of potential problems in the supply chain.

For example, information sharing between Wal-Mart and P&G is done automatically. It is part of a vendor-managed inventory strategy. Vendor-managed inventory (VMI) occurs when a retailer does not manage the inventory for a particular product or group of products.

Instead, the supplier manages the entire inventory process. P&G has similar agreements with other major retailers. The benefit for P&G is accurate and timely information on consumer demand for its products. Thus, P&G can plan production more accurately, minimizing the bullwhip effect.

14. Would Rolls-Royce Motorcars (www.rolls-roycemotorcars.com) use a push model or a pull model in its supply chain? Support your answer.

Given the limited number of cars that they produce and each one customized to the car’s ultimate customer – they should use a pull model for its supply chain.

15. Why is planning so important in supply chain management?

Chapter 9:

Page 13

The planning of supply chain management is extremely important because supply and demand can change so fast. Moreover, supply chain problems can result in poor customer satisfaction, lost revenues and reduced profits. Therefore management plays a major role in the supply chain. In many organizations, the production/operations management staff may even lead the supply chain integration process because of their extensive knowledge of the manufacturing components of the organization.

PROBLEM-SOLVING ACTIVITIES 1. Access www.ups.com and www.fedex.com. Examine some of the IT-supported customer services and tools provided by the two companies. Compare and contrast the customer support provided on the two companies’ Web sites.

Student will research, prepare and present a report.

2. Enter www.anntaylor.com, www.hermes.com, and www.tiffany.com. Compare and contrast the customer service activities offered by these companies on their Web sites. Do you see marked similarities? Differences?

Student will research, prepare and present a report.

3. Access your university’s Web site. Investigate how your university provides for customer relationship management. Hint: First decide who your university’s customers are.

This may lead to an interesting discussion. First, some students may not realize that they are their university’s customers. However, depending on the area of university discussed, each may have different customer groups. Discuss areas such as the library, athletic department, bus line (if you school runs one for the students), registrar, financial, etc.

4. Access www.sugarcrm.com and take the interactive tour. Prepare a report on SugarCRM’s functionality to the class.

Student will prepare and present a report.

5. Access www.ups.com and www.fedex.com. Examine some of the IT-supported customer services and tools provided by the two companies. Write a report on how the two companies contribute to supply chain improvements.

Student will prepare and present a report.

6. Enter www.supply-chain.org, www.cio.com, www.findarticles.com, and www.google.com and search for recent information on supply chain management.

Student will prepare and present a report.

Chapter 9:

Page 14

7. GXS ( www.gxs.com ) is one of the largest providers of EDI services worldwide. Review what EDI products it provides and prepare a report. Would a small company be able to implement these solutions? Prepare a report with your analysis.

Student will prepare and present a report.

Web Activities 1. Access www.ups.com and www.fedex.com. Examine some of the IT-supported customer services and tools provided by the two companies. Compare and contrast the customer support provided on the two companies’ Web sites.

Student answers will vary. Have students make a list of the different CIC offered by these two sites as well.

2. Enter www.anntaylor.com, www.hermes.com, and www.tiffany.com. Compare and contrast the customer service activities offered by these companies on their Web sites. Do you see marked similarities? Differences?

Student answers will vary. Focus on the different CIC offered – email, live chat, 800 number, etc, on these sites. Point out how each site is engaging the customer long term – e.g. newsletters.

3. Access your university’s Web site. Investigate how your university provides for customer relationship management. Hint: First decide who your university’s customers are.

Student answers will vary. Generally the customers are current, prospective and past students.

4. Enter www.livechatinc.com and www.websitealive.com and view their demos. Write a report about how live chat works. Be sure to discuss all the available features Student answers will vary. Some organizations block chat sites, so that may pose problems with this activity.

5. Access www.infor.com and view the demo (registration required). Prepare a report on the demo to the class.

Student answers will vary. Beware that registration is required for this activity.

6. Access www.sugarcrm.com and take the interactive tour. Prepare a report on SugarCRM’s functionality to the class.

Sugar CRM is an open source CRM tool that allows the management of the interactions with customers in different domains – sales, support, reporting, administration, etc. SugarCRM can be deployed on-demand (on our servers) or on-site (inside your firewall). Customers

Chapter 9:

Page 15

receive both a license key to download the software and an On-Demand account when they become a customer of Sugar Enterprise and Sugar Professional. Regardless of deployment options, all Sugar information is accessible through a standard web browser. Moreover, it has an open programming interface so that other applications can be interfaced to this system.

7. Enter the Teradata Student Network (http://www.teradata.com/td/page/144826/index.html) and find the First American Corporation case (by Watson, Wixom, and Goodhue), which focuses on CRM implementation. Answer the questions at the end of the case Student answers will vary. Registration is required for this activity.

Team Assignments Students will follow directions on these activities and submit a thoughtful report on each.

1. Each group will be assigned to an open-source CRM vendor. Each group should examine the vendor, its products, and the capabilities of those products. Each group will make a presentation to the class detailing how its vendor product is superior to the other opensource CRM products. See SugarCRM (www.sugarcrm.com), Concursive (www.concursive.com), vtiger (www.vtiger.com), SplendidCRM Software (www.splendidcrm.com), Compiere (www.compiere.com), Hipergate (www.hipergate.com), and openCRX (www.opencrx.com).

Students will research, prepare and present a report.

2. Each group will be assigned to an on-demand CRM vendor. Each group should examine each vendor, its products, and the capabilities of those products. Each group will make a presentation to the class detailing how its vendor product is superior to the other opensource CRM products. See Salesforce (www.salesforce.com), Oracle (http://crmondemand.oracle.com), Aplicor (www.aplicor.com), NetSuite (www.netsuite.com), SalesNexus (www.salesnexus.com), SageCRM (www.sagecrm.com), Commence (www.commence.com), Saffront (www.saffront.com), and eSalesTrack (www.esalestrack.com).

Students will research, prepare and present a report.

3. Create groups to investigate the major CRM applications and their vendors.

• Sales force automation (Microsoft Dynamics, Oracle, FrontRange Solutions, RightNow Technologies, Maximizer Software) • Call centers (LivePerson, Cisco, Oracle) • Marketing automation (SalesNexus, Marketo, Chordiant, Infor, Consona, Pivotal, Oracle) • Customer service (Oracle, Amazon, Dell) Start with www.searchcrm.com and www.customerthink.com (to ask questions about CRM solutions). Each group will present arguments to convince the class members to use the product(s) the group investigated.

Chapter 9:

Page 16

Students will research, prepare and present a report.

4. Each group in the class will be assigned to a major supply chain management vendor, such as SAP, Oracle, i2, IBM, and so on. Each group will investigate topics such as: (a) the products; (b) major capabilities; (c) relationship to customer relationship management; and (d) customer success stories. Each group will prepare a presentation for the class, trying to convince the class why that group’s software product is best.

Students will research, prepare and present a report.

5. Have each team locate several organizations that use IOSs, including one with a global reach. Students should contact the companies to find what IOS technology support they use (for example, an EDI, extranet, etc.). Then find out what issues they faced in implementation.

Prepare a report.

Students will research, prepare and present a report.

Closing Case IT Helps Cannondale Manage Its Complex Supply Chain The Problem Cannondale (www.cannondale.com) is a pioneer in the engineering and manufacturing of high-end bicycles, apparel, footwear, and accessories for independent dealers and distributors in more than 66 countries. Cannondale designs, develops, and produces bicycles at its factory in Bedford, Pennsylvania, and it operates subsidiaries in Holland, Switzerland, Japan, and Australia. As a leading custom bicycle manufacturer with an extensive and impressive customer list – including Olympic athletes, professional racing teams, and Tour de France competitors – Cannondale realizes that meeting customer demands and expectations is critical to its success.

Cannondale produces more than 100 different bicycle models annually, 60 percent of which are newly introduced lines. Working in a cyclical business that is impacted by market and weather conditions, coupled with the international nature of its business, Cannondale is faced with highly complex and volatile consumer demand. In addition to constantly shifting demand and a rapidly changing product portfolio, Cannondale has a global supply chain that must integrate global manufacturing, assembly, and sales and distribution sites.

Cannondale manufactures both make-to-order and make-to-stock models. Consequently, the company needs to manage a range of product batch sizes, sometimes including one-of-a-kind orders. A typical bicycle requires a 150-day lead time with a 4-week manufacturing window, and some bicycles have more than 250 parts in their bills of materials (BOMs). (A bill of materials specifies the raw materials, assemblies, components, and parts needed to manufacture a final product, along with the quantities of each one.) Cannondale has to manage more than 1 million BOMs and more than 200,000 individual parts. Adding to Cannondale’s manufacturing complexity, some of these parts are supplied by specialty vendors who require long lead times and have only limited production capacity. This complexity significantly challenged

Chapter 9:

Page 17

Cannondale’s capacity to quickly deliver complex and custom products to meet its customers’ high expectations.

In order to mange parts availability and varying customer demands, Cannondale’s manufacturing operations need to be highly flexible. Therefore, the company needed a global system that allowed managers to access all plant inventory levels and supply schedules to better manage shifts in product and customer demand.

Cannondale had been using a legacy material requirements planning system (MRP II) that generated weekly reports. Because Cannondale’s manufacturing environment is so dynamic, however, by Tuesday afternoon Monday’s reports were so outdated that they were useless. The supply chain team had to substitute parts in order to meet demand, causing an ever-increasing parts flow problem. Cannondale’s primary objective was to find an IT solution that would improve the accuracy of the company’s parts flow, support the company’s need for flexibility, and operate within the confines of its existing business systems — all at an affordable cost.

The Solution Cannondale selected the Kinaxis RapidResponse (www.kinaxis.com) system for its integrated demand and supply planning and monitoring. RapidResponse provides users with necessary information in minutes, as opposed to eight hours with the previous system.

RapidResponse generates accurate and detailed supply chain information with an easy-to-use spreadsheet user interface, employing data supplied from the company’s existing MRP II systems.

RapidResponse has transformed Cannondale’s entire supply chain. Buyers, planners, master schedulers, sourcers (people who procure products), product managers, customer service personnel, and financial managers use the system for sales reporting, forecasting, monitoring daily inventory availability, and providing production schedule information to the MRP II and order-processing systems. Supply chain participants located around the world can now instantly simulate, share, and score what-if scenarios to evaluate and select the actions they need to take to respond to changing supply and demand conditions.

Company managers now receive up-to-date visibility of global operations. In addition, the management team uses RapidResponse daily to examine the company’s manufacturing backlog.

Having access to current information enables the team to compare old forecasts with new ones.

The Results Today, Cannondale responds to customer orders quickly, and it has significantly reduced its inventory, with its associated costs. In addition, the company has benefitted from higher inventory turns, reductions in safety stock, improvement in cycle times, reduced lead times, and more accurate promise dates. As a result, customer satisfaction has improved. All of these benefits have provided Cannondale with a competitive advantage in a highly competitive industry.

Questions 1. Describe Cannondale’s complex manufacturing environment, and identify some of the problems this environment created.

Chapter 9:

Page 18

Cannondale engineers and manufactures high-end bicycles, apparel, footwear, and accessories for independent dealers and distributors in more than 66 countries. They design, develop, and produce bicycles at their factory in Bedford, Pennsylvania. It also operates subsidiaries in Holland, Switzerland, Japan, and Australia.

The company manufactures both make-to-order and make-to-stock models. Due to this, the company has to manage a range of product batch sizes, sometimes including one-of-a-kind orders.

A typical bicycle requires a 150-day lead time with a 4-week manufacturing window, and some bicycles have more than 250 parts in their bills of materials (BOMs).

The company has to manage more than 1 million BOMs and more than 200,000 individual parts. Adding to their manufacturing complexity, some of these parts are supplied by specialty vendors who require long lead times and have only limited production capacity.

This complexity significantly challenged Cannondale’s capacity to quickly deliver complex and custom products to meet its customers’ high expectations.

To mange parts availability and varying customer demands, Cannondale’s manufacturing operations need to be highly flexible. Therefore, the company needed a global system that allowed its managers to access all plant inventory levels and supply schedules to better manage shifts in product and customer demand.

Because Cannondale’s manufacturing environment is so dynamic, by Tuesday afternoon Monday’s reports were so outdated that they were useless. The supply chain team had to substitute parts in order to meet demand, causing ever-increasing parts flow issues.

2. Describe the RapidResponse system’s impact on Cannondale’s global supply chain management.

RapidResponse has transformed Cannondale’s entire supply chain by allowing their buyers, planners, master schedulers, sourcers (people who procure products), product managers, customer service personnel, and financial managers to use the system for sales reporting, forecasting, monitoring daily inventory availability, and providing production schedule information to the MRP II and order-processing systems. Supply chain participants located around the world can now instantly simulate, share, and score what-if scenarios to evaluate and select the actions they need to take to respond to changing supply and demand conditions.

Company managers now receive up-to-date visibility of global operations. In addition, the management team uses RapidResponse daily to examine the company’s manufacturing backlog. Having access to current information enables the team to compare old forecasts with new ones.

Chapter 9:

Page 19

3. Draw a diagram of Cannondale’s supply chain, including the physical flow, information flow, and financial flow.

Students will draw diagrams with some variations.

4. Provide two examples describing other types of IT solutions to support the supply chain that Cannondale could use.

SAP, Oracle, JDA Associates, Ariba etc. are other popular SCM software solutions that could be used by Cannondale.

Chapter Glossary analytical CRM system: CRM systems that analyze customer behavior and perceptions in order to provide actionable business intelligence. bullwhip effect: Erratic shifts in orders up and down the supply chain.

Bundling:

A form of cross-selling where an enterprise sells a group of products or services together at a lower price than the combined individual price of the products.

campaign management applications: CRM applications that help organizations plan marketing campaigns so that the right messages are sent to the right people through the right channels. collaborative CRM system: A CRM system where communications between the organization and its customers are integrated across all aspects of marketing, sales, and customer support processes. cross selling: The practice of marketing additional related products to customers based on a previous purchase. customer-facing CRM applications: Areas where customers directly interact with the organization, including customer service and support, sales force automation, marketing, and campaign management. customer interaction center: A CRM operation where organizational representatives use multiple communication channels to interact with customers in functions such as inbound teleservice and outbound telesales. customer relationship management: A customer-focused and customer-driven organizational strategy that concentrates on satisfying customers by addressing their requirements for products and services, and then by providing high-quality, responsive service.

Chapter 9:

Page 20

customer-touching CRM applications (also called electronic CRM or e-CRM): Applications and technologies with which customers interact and typically help themselves. customer touch point: Any interaction between a customer and an organization. distribution portals: Corporate portals that automate the business processes involved in selling or distributing products from a single supplier to multiple buyers. electronic CRM (e-CRM) (see customer-touching CRM applications) electronic data interchange (EDI): A communication standard that enables the electronic transfer of routine documents between business partners. interorganizational information system (IOS): An information system that supports information flow among two or more organizations. just-in-time (JIT) inventory system: A system in which a supplier delivers the precise number of parts to be assembled into a finished product at precisely the right time. loyalty program: Programs that offer rewards to customer to influence future behavior. mobile CRM system: An interactive CRM system where communications related to sales, marketing, and customer service activities are conducted through a mobile medium for the purpose of building and maintaining customer relationships between an organization and its customers. on-demand CRM system: A CRM system that is hosted by an external vendor in the vendor’s data center. open-source CRM system: CRM software whose source code is available to developers and users. operational CRM system: The component of CRM that supports the front-office business processes which directly interact with customers; i.e., sales, marketing, and service. procurement portals: Corporate portals that automate the business processes involved in purchasing or procuring products between a single buyer and multiple suppliers. pull model:

A business model in which the production process begins with a customer order and companies make only what customers want, a process closely aligned with mass customization.

push model: A business model in which the production process begins with a forecast, which predicts the products that customers will want as well as the quantity of each

Chapter 9:

Page 21 product. The company then produces the amount of products in the forecast, typically by using mass production, and sells, or “pushes,” those products to consumers.

sales force automation: The component of an operational CRM system that automatically records all the aspects in a sales transaction process. supply chain: The coordinated movement of resources from organizations through conversion to the end consumer. supply chain management: An activity in which the leadership of an organization provide extensive oversight for the partnerships and processes that comprise the supply chain and leverage these relationships to provide an operational advantage. supply chain visibility: The ability for all organizations in a supply chain to access or view relevant data on purchased materials as these materials move through their suppliers’ production processes. up selling:

A sales strategy where the organizational representative will provide to customers the opportunity to purchase higher-value related products or services as opposed to or along with the consumer’s initial product or service selection.

vendor-managed inventory (VMI): An inventory strategy where the supplier monitors a vendor’s inventory for a product or group of products and replenishes products when needed. vertical integration: Strategy of integrating the upstream part of the supply chain with the internal part, typically by purchasing upstream suppliers, in order to ensure timely availability of supplies.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 10: Business Intelligence Chapter Outline 10.1 10.2 10.3 10.4 10.5

Managers and Decision Making What Is Business Intelligence?

Business Intelligence Applications for Data Analysis Business Intelligence Applications for Presenting Results Business Intelligence in Action: Corporate Performance Management

Learning Objectives 1. Identify the phases in the decision-making process, and use a decision-support framework to demonstrate how technology supports managerial decision-making.

2. Describe and provide examples of the three different ways that organizations use BI. 3. Specify the BI applications available to users for data analysis, and provide examples of how each one might be used to solve a business problem at your university.

4. Describe three BI applications that present the results of data analyses to users, and offer examples of how businesses and government agencies can use each of these technologies.

5. Describe corporate performance management, and provide an example of how your university could use CPM. Teaching Tips and Strategies The goal of this chapter is to convey the importance of information systems in helping individuals make informed decisions. Often students approach this chapter with indecision and insecurity. They see acronyms such as DSS, GDSS, ESS, and ES, and they are a bit intimidated or overwhelmed. Explaining how IT provides vital information to decision makers helps to relax students and get them interested.

Information overload is a problem that confronts managers in various types of companies all over the world. Managers may receive hundreds of e-mails but have difficulty deciding which ones should take precedence. Brand managers can accumulate reams of data analyzing consumers’ buying habits or brand preferences. How do they determine which data are important to their brand? This is the paradox of the information revolution. There is so much data, but turning that data into useable information is a challenge.

There is hope. Information technology has advanced to make the data more meaningful.

According to a Gartner report (www.gartner.com), most Fortune 1000 companies currently use data mining. In fact, data mining is now widespread in all areas of business – marketing, finance, management, operations, etc. . Even several consumer-facing Web sites in ecommerce allow users to search and drill down based on multiple criteria. Users performing a search can narrow the search down to the meet their needs – an example of data-driven decision making. By discussing these examples, students really get a feel for how important this chapter is and how they can leverage all the data out there to conduct their businesses more productively.

Chapter 10:

Page 2

Emphasize that managers now rely on IT systems such as DSS to make more informed decisions.

It is essential, however, that the right data are collected and analyzed. An example is Amazon.com and the amount of information that they are able to collect on a single individual.

What data does Amazon.com collect from users? At minimum, the following information: • • • • •

credit card information name, address, phone number, e-mail address type of books ordered, hence horror, business, etc. previous order history, including type of book bought total amount of money spent at Amazon.com

With the use of a DSS and data mining techniques, Amazon managers can input descriptors such as customers who have not purchased anything in the last six months. They can send an e-mail to those customers soliciting new business or give them a discount if they act within the next couple of days. Significantly, Amazon can do all of this with a couple of keystrokes. The manager could even see how well the campaign worked by comparing the number of coupons sent out with the number of coupons validated. If managers wanted to target their advertising even more directly, they could send coupons that are good only for the type of books that the recipients have bought in the past.

Students start to understand the importance of data and information and analysis after this lecture. Many of them will be using similar support systems to Amazon to determine how to run their business more effectively.

Demonstrate to students that AI is not only machine based. Give them the example of using Word for writing applications. When we spell a word incorrectly in Word, most of the time the program “knows” it. Ask, “How does Word know when you have spelled a word incorrectly? Is it magic?” Hardly. Rather, the programmers have input a database of commonly misspelled words with the different incorrect variations people tend to use. Once Word sees that the word is spelled incorrectly, it will put a red line under the word and offer alternatives. The only reason why Word knows the different spellings is that someone has programmed them in there. Many smart phone text applications also do this.

What type of system is Word utilizing? The answer is an expert system. An expert system is a technology that replaces an expert. In this case Word is replacing the English teacher/dictionary.

What happens when Word doesn’t recognize a word we commonly use a lot? Word will keep mistaking the spelling as an error. One way around this is to click on the “Add to dictionary” function (this is available when using spell-check). That way Word lthe word is added to Word’s database. Illustrate this point to the class to let them know that an expert system is great, but it is not really functional unless you can add to the database to keep meeting your needs. It is important to update databases to keep them functional for their intended tasks.

Students tend to understand the importance of AI and different expert systems. They realize that these systems are not only used in science fiction pictures such as Star Trek and Minority Report.

Chapter 10:

Page 3

A good example of an AI technology that is not catching on due to poor quality and difficulty of use is voice recognition. There are several types of voice recognition software on the market.

Unfortunately, they have some serious problems that need to be corrected before they can go mainstream. Some people had predicted that in the new millennium keyboards would be useless (along with the mouse). Instead, we were going to use computers by talking to them. No longer would we have to type notes.. Instead, a user would sit down in front of the computer and start talking away. This scenario has not come close to fruition.

Two reasons why voice recognition software did not take off in the 1990’s were (1) the processors in computers were not fast enough to perform natural language processing (2) and memory was prohibitively expensive. You need both of these elements to make voice recognition work well. As the 2000’s approached, the prices of memory and CPUs became very reasonable.

Manufacturers of voice recognition software started adding features at a rapid clip. Consumers flocked to buy the latest and greatest voice recognition software. Then, about a week after purchasing the software, the consumer would usually give up in disgust. What went wrong?

In the case of voice recognition technology we now have the capability (resources) to make the software work. The problem is our voices. All individuals speak differently, at different rates, and in different dialects. It is impossible for programmers to program the thousands of different ways we speak. Users of voice recognition software are forced to “train” the software by speaking into a microphone and repeating words over and over. Although this is an improvement, many of the training sessions confused the computer as well as the user. Even when the computer had been trained the software continued to misinterpret different words.

Users became frustrated and finally gave up.

Hopefully, using the above example will help students understand that computers, although an asset, are not always easy to program or use. It may be decades before we are using voice recognition software that is capable of overcoming these problems.

A classic example of support for all phases of the decision-making process is making a decision about purchasing a new automobile. If you were going to buy a new car, you might go through the following steps: • • •

Intelligence—Review automobile maintenance records to see if the prior owner had experienced chronic problems or needed multiple repairs. Seek information from dealers, consumer reports and friends about new automobiles.

Design—Establish objectives and criteria for evaluating automobiles. Assign weights to the various criteria to reflect their relative importance.

Choice—Generate summary statistics on the evaluation of each automobile.

Chronic problems with an existing automobile might create a situation in which you need to make a decision about purchasing a new car. During the design phase, you may select safety, price, and performance as three key criteria. You can then create a weighted features matrix to establish the importance of each of these factors, such as safety (25 points), price (25

Chapter 10:

Page 4

points), and performance (50 points). You could obtain information from dealers, owners, and magazines to help you make comparisons among alternatives. Finally, you could use summary statistics to provide overall scores for each alternative. These scores should provide a concrete basis for a reasonable choice on your part.

This example illustrates the systemic process of decision making long promoted by management scientists. Our challenge is to educate students about current high-level approaches to solving unstructured managerial problems. The fields of DSS, EIS, and AI — plus its spin-off discipline, intelligent systems — created this new realm of possibility.

Review Questions Section 10.1 … Before you go on…

1. Describe the decision-making process proposed by Simon.

Simon proposed a three-stage process consisting of: • Intelligence – in which managers examine a situation and identify and define the problem • Design – in which decision makers construct a model that simplifies the problem • Choice – in which a solution is selected.

2. You are registering for classes next semester. Apply the decision-making process to your decision about how many and which courses to take. Is your decision structured, semistructured, or unstructured?

Hopefully, students will respond, after some thought, that their process is either structured or semi-structured.

3. Consider your decision-making process when registering for classes next semester. Explain how information technology supports (or does not support) each phase of this process.

Possible responses include checking class offerings online, possibly using the course catalog to check course descriptions. They also might access a Web site like “Ratemyprofessor.com” if they do not know anything about the course’s instructor. They may also go online to determine which courses they need to graduate.

They may also talk to their friends about a class or instructor. They would probably not need technology to do this, unless they use Twitter or Facebook.

Section 10.2 … Before You Go On… 1. Define BI. Business intelligence (BI) is a broad category of applications, technologies, and processes for gathering, storing, accessing, and analyzing data to help business users make better

Chapter 10:

Page 5

decisions. BI applications enable decision makers to quickly ascertain the status of a business enterprise by examining key information.

2. Discuss the breadth of support provided by BI applications to organizational employees.

BI is used to fundamentally transform the ways in which a company competes in the marketplace. BI supports a new business model, and it enables the business strategy.

Because of the scope and importance of these changes, critical elements such as sponsorship, approval, and funding originate at the highest organizational levels. The impact on personnel and processes can be significant, and the benefits are organizationwide.

3. Identify and discuss the three basic targets of BI. • • •

The development of a single or a few related BI applications, The development of infrastructure to support enterprisewide BI, and Support for organizational transformation.

Section 10.3 … Before You Go On…..

1. Describe multidimensional analysis, and construct a data cube with information from IT’s About Business 12.2. (Hint: You must decide which three business dimensions you would like to analyze in your data cube.)

Online analytical processing (OLAP) (or multidimensional data analysis) is a set of capabilities for “slicing and dicing” data using dimensions and measures associated with the data.

Have students refer back to the example of a data cube presented in Chapter 5. Students will have to decide on the cube’s dimensions.

2. What are the two basic operations of data mining?

Data mining can perform two basic operations: (1) predicting trends and behaviors and (2) identifying previously unknown patterns.

3. What is the purpose of decision support systems?

Decision support systems (DSS) combine models and data in an attempt to analyze semistructured and some unstructured problems with extensive user involvement. Models are simplified representations, or abstractions, of reality. DSS enable business managers and analysts to access data interactively, to manipulate these data, and to conduct appropriate analyses.

Section 10.4 … Before You Go On…..

1. What is a dashboard? Why are dashboards so valuable to employees?

Chapter 10:

Page 6

Dashboards evolved from executive information systems, which were information systems designed specifically for the information needs of top executives. Today, however, all employees, business partners, and customers can use digital dashboards.

2. Explain the difference between geographic information systems and reality mining, and provide examples of how each of these technologies can be used by businesses and government agencies.

A geographic information system (GIS) is a computer-based system for capturing, integrating, manipulating, and displaying data using digitized maps. Its most distinguishing characteristic is that every record or digital object has an identified geographical location.

Reality mining allows analysts to extract information from the usage patterns of mobile phones and other wireless devices. Reality mining needs GIS and GPS data to work.

Students should provide examples. An example of a GIS is the online maps some cities provide citizens. These maps include information related to property ownership, flood plains, utility easements, etc. For reality mining, an example is providing real-time information on traffic congestion based on information collected via GPS from driver phones.

3. What is real-time BI, and why is this technology valuable to an organization’s managers and executives?

Real-time BI is designed to capture, store, and use real-time data. Real-time BI enables users to employ multidimensional analysis, data mining, and decision support systems to analyze data in real time. In addition, it helps organizations to make decisions and to interact with customers in new ways. It also influences how workers can be monitored and rewarded based on their performance.

Section 10.5 … Before you go on…

1. What is corporate performance management?

Corporate performance management (CPM) is involved with monitoring and managing an organization’s performance according to key performance indicators (KPIs) such as revenue, return on investment (ROI), overhead, and operational costs. For online businesses, CPM includes additional factors such as the number of page views, server load, network traffic, and transactions per second.

2. How do BI applications contribute to corporate performance management?

BI applications allow managers and analysts to analyze data to obtain valuable information and insights concerning the organization’s KPIs.

Chapter 10:

Page 7

“IT’s About Business” Questions IT’s About Business 10.1 Data Analytics Helps Kelley Blue Book Remain Competitive 1. Provide specific examples of other revenue-generating applications that Kelley could develop from its data-mining application.

Students will suggest various ideas. One possibility is the best tire make/model for a particular car model. Projected repair costs based on model and area of car damaged are another option.

2. Analyze this case in terms of the three phases of the decision-making model (intelligence, design, and choice).

In the intelligence phase managers examine a situation and identify and define the problem or opportunity. In this case, the managers determined they needed a new strategy due to a decline in sales. They also determined that they were an information company. They decided to use data analytics to utilize those data more effectively. The first step was to update the company’s data management infrastructure.

In the design phase, decision makers construct a model for the situation. In this case, Kelley determined they could utilize data analytics to improve their existing services.

The choice phase involves selecting a solution or course of action that seems best suited to resolve the problem. Among other things, they discovered that by using the software to integrate third-party data, they could refine the estimates of car values estimates located on their Web site more quickly and accurately than previously.

3. Provide additional examples of data mining analyses that Kelley Blue Book could perform.

Some data mining analyses could be: Finding the relationship between customers’ demographic data and their buying behavior; Linking cars and the vendors’ who sell their accessories etc.

4. Analyze the interrelationship between data management technology, business intelligence/data analytics, and strategy using the case of Kelley Blue Book. The students’ thought process should be driven in the following way: Data management technology->Manage Data->Business Intelligence/data analytics>Analyze data->Strategy ->Find out whether the data is helping the company achieve its goals.

Chapter 10:

Page 8

Discussion Questions 1. Your company is considering opening a new factory in China. List several typical activities involved in each phase of the decision (intelligence, design, and choice).

Each of the phases can be used to explain the approach of decision support systems (DSS).

• Intelligence Phase—the starting point where reality is examined and the problem is defined. o Determine if opening a factory in China is consistent with organizational objectives. o Conduct a search for relevant information about doing business in China. o Collect and classify data according to the problem definition o Develop a business problem statement • Design Phase—design and construct a model o Select a model according to the degree of abstraction required. o Validate the model by way of experiments and analysis. o Establish criteria for evaluating alternative solutions that are identified. (Attempt to forecast how a factory in China will resolve the business problem identified in the previous phase.) o Generate alternative solutions to the problem (how best to conduct business with a factory in China).

• Choice Phase—selecting a solution to test “on paper.” o Perform testing by experimenting with different “China business” scenarios. o Select the best solution and generate criteria to test it. (Is doing business in China economically feasible?)

• Implementation Phase—implement the solution that is most economically feasible.

2. Recall that data mining found that young men tend in the United States tend to buy beer and diapers at the same time when they shop at a convenience store. Now that you know this relationship exists, can you provide a rationale for it?

Students will have their own opinions. One possible explanation is that their wife sent them out to get diapers and while they were there they opted to also buy something to drink.

3. Chipotle is one of the fastest-growing restaurant companies in the United States. Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. One of the main decisions that Chipotle’s operations managers often need to make is about menu changes (e.g. dishes to add, remove or change) for Chipotle’s 1,400 restaurants. Describe how the intelligence phase of Simon’s decision making process would apply to this decision and explain the role that information systems would play in this phase of the decision making process. How can the use of BI assist the company in this endeavour?

Chapter 10:

Page 9

Students can come up with a variety of answers in this case.

4. Discuss the strategic benefits of BI systems.

These applications consolidate, analyze, and provide access to vast amounts of data to help users make better business decisions.

5. Will BI replace business analysts? (Hint: See W. McKnight, “Business Business Intelligence: Will Business Intelligence Replace the Business Analyst?” DMReview, February, 2005).

BI systems will never replace business analysts altogether. Rather, they will help analysts do a better job of analyzing all sorts of business data.

Problem-Solving Activities Students will research and submit reports per instructions.

1. The city of London (U.K.) has an entrance fee for automobiles and trucks in the central city district. About 1,000 digital cameras photograph the license plate of every vehicle passing by. Computers read the plate numbers and match them against records in a database of cars for which the fee has been paid for that day. If a match is not found, the car owner receives a citation by mail. Examine the issues pertaining to how this process is accomplished, the mistakes that can be made, and the consequences of those mistakes. Also examine how well the system is working by checking press reports. Finally, relate the process to business intelligence.

The system tracks cars that enter the city. It can be used for many planning functions, parking, events, public transportation, etc.

2. Using your favorite web search engine find the answers to the following questions: a. What technology components are required to implement business intelligence systems? b. Who are the potential users of BI? What would each type of user attempt to achieve? c. What are the people, organizational, and management requirements in order to implement a business intelligence system in a company?

Students will research and submit reports per instructions.

3. Enter www.fico.com and find products for fraud detection and risk analysis. Prepapre a report.

Students will research and submit reports per instructions.

4. Access www.ted.com/index.php/talks/view/id/92 to fi nd the video of Hans Rosling’s presentation. Comment on his data visualization techniques.

Chapter 10:

Page 10

Students will research and submit reports per instructions.

5. Enter www.visualmining.com . Explore the relationship between visualization and business intelligence. See how business intelligence is related to dashboards.

Students will research and submit reports per instructions.

6. Access http://businessintelligence.ittoolbox.com . Identify all types of business intelligence software. Join a discussion group about topics discussed in this chapter. Prepare a report.

Students will research and submit reports per instructions.

7. Visit the sites of some GIS vendors (such as www. mapinfo.com , www.esri.ca , or www.autodesk.com ). Download a demo. What are some of the most important capabilities and applications?

Students will research and submit reports per instructions.

Team Assignments Make team assignments and have student groups complete them per instructions.

1. Using data mining, it is possible not only to capture information that has been buried in distant courthouses but also to manipulate and index it. This process can benefit law enforcement but invade privacy. In 1996, Lexis-Nexis, the online information service, was accused of permitting access to sensitive information on individuals. The company argued that it was unfairly targeted because it provided only basic residential data for lawyers and law enforcement personnel. Should Lexis-Nexis be prohibited from allowing access to such information? Debate the issue.

Students should research and present their arguments.

2. Each group will use a search engine of their choice to find combined GIS/GPS applications as well as look at various vendor sites to fi nd success stories. (For GPS vendors, look at http://biz.yahoo.com (directory) and Google.)

Each group will make a presentation of five applications and their benefits.

3.

Each group will access a leading business intelligence vendor’s Web site (e.g., MicroStrategy, Oracle, Hyperion, Microsoft, SAS, SPSS, Cognos, Applix, Business Objects). Each group will present a report on the vendor they have selected, noting its BI capabilities.

Chapter 10:

Page 11

Closing Case Norfolk Southern The Business Problem Norfolk Southern is one of four large freight railroads in the United States. Each day, the company moves approximately 500 freight trains across 21,000 route miles in 22 eastern states, the District of Columbia, and Ontario, Canada. Norfolk Southern manages more than $26 billion in assets and employs more than 30,000 people.

For more than a century, the railroad industry was heavily regulated, and Norfolk Southern and its predecessor railroads made money by managing their costs. Managers focused on optimizing the use of railcars to get the maximum production out of their fixed assets. Then, in 1980, the industry was partially deregulated, which opened up opportunities for mergers and allowed companies to charge rates based on service and to enter into contracts with customers.

On-time delivery became an important factor in the industry.

Over time, Norfolk Southern responded to these industry changes by becoming a “scheduled railroad.” Put simply, the company would develop a fixed set of train schedules for cars to go between trains and yards. In this way, managers could predict when they could get a shipment to a customer.

Norfolk Southern had always used a variety of sophisticated systems to run its business.

Becoming a scheduled railroad, however, required new systems that would use statistical models to determine the best routes and connections to optimize railroad performance and then apply the models to create the plan that would actually run the railroad operations. These new systems were called TOP, short for Thoroughbred Operating Plan. The railroad deployed TOP in 1992.

Norfolk Southern realized that in addition to implementing TOP, it had to monitor and measure its performance against the TOP plan. Norfolk Southern’s numerous information systems generate millions of records about freight, railcars, train GPS information, train fuel levels, revenue information, crew management, and historical tracking records. Unfortunately, the company was not able to tap these data without jeopardizing the system’s performance.

The IT Solution In 1995, the company invested in a 1-terabyte data warehouse in which the data are easy to access (using a Web browser) and can be manipulated for decision support. The warehouse data are collected from source systems that run the company. After the data are moved from the source systems’ databases to the warehouse, users can access and use the data without the risk of impacting company operations.

In 2002, the data warehouse became a critical component of TOP. Norfolk Southern built a TOP dashboard application that pulls data from the data warehouse and then graphically depicts actual performance against the trip plan for both train performance and connection performance.

The application uses visualization technology so that field managers can more easily interpret the large volumes of data (e.g., there are 160,000 weekly connections across the network).

Norfolk Southern has an enterprise data warehouse, which means that after data are placed in the warehouse, they become available across the company, not just for a single application or a single department. Although the company uses train and connection performance data primarily for the TOP application, it has been able to leverage that data for many other purposes as well.

Chapter 10:

Page 12

For example, the marketing department has developed an application called accessNS, which was created for Norfolk Southern customers who want visibility into the company’s extensive transportation network. Customers want to know where their shipments are “right now.”

Sometimes they also want historical information: Where did my shipment come from? How long did it take to arrive? What were the problems along the route?

The accessNS app enables more than 14,500 users from 8,000 customer organizations to log in and access predefined and customer reports about their accounts at any time. Users can access current data, which is updated hourly, and they can also review data from the past three years.

The app also provides alerting and RSS feed capabilities. In fact, accessNS pushes 4,500 reports to users daily. The self-service nature of accessNS has allowed Norfolk Southern to provide customers the information they want while reducing the number of people needed for customer service. Without accessNS, it would take approximately 47 people to support the current level of customer reporting.

Departments across the company – from engineering and strategic planning to accounting and human resources – use the enterprise data warehouse. One especially creative internal application was developed by human resources. The department needed to determine where to locate its field offices in order to best meet the needs of Norfolk Southern’s 30,000+ employees.

By combining employee demographic data (e.g., zip codes) with geospatial data traditionally utilized by the engineering group, HR was able to visually map out the employee population density, making it much easier to optimize the location of service offices.

The Results The Norfolk Southern data warehouse has evolved into a 6-terabyte system that manages a voluminous amount of information on the company’s vast network of railroads and shipping services. Norfolk Southern uses the data warehouse to analyze trends, develop forecasting schedules, archive records, and facilitate customer self-service. The data warehouse provides information to more than 3,000 employees and 14,000 external customers and stakeholders. The number of missed connections has decreased by 60 percent since the application was implemented. Further, the amount of time it takes to unload a railcar, reload it, and attach it to another train has decreased by an entire day, which translates into millions of dollars in annual savings.

Norfolk Southern was the first railroad to offer self-service business intelligence, and this innovation served as an example that other railroads have followed. The company was also one of the first railroads to provide a large variety of historical data to external customers.

And the bottom line? Norfolk Southern reported revenues of approximately $8 billion in 2010 and made a profit of approximately $1 billion.

Questions 1. Provide one example applied to Norfolk Southern of the use of BI as “one or a few related BI applications” and another example of the use of BI as “the development of infrastructure to support enterprise-wide BI.”

Chapter 10:

Page 13

The use of BI as “one or a few related BI applications” could be a simple Microsoft Excel based variance (of arrival times etc.) analyzer. An enterprise-wide BI could be a more sophisticated system integrating CRM and SCM data as well.

2. Would all three types of uses of BI applications require the same data management technologies? Why or why not? Could all three types of BI usage be implemented without having to make changes to management styles and other organizational factors within the company? Why or why not?

The types of BI usage determines the scope and extent of BI initiatives. As such, they will have different DBMS needs and varied impact on organizational factors.

3. Describe other BI applications for data analysis that Norfolk Southern could develop using the data warehouse. (Hint: Remember that a railroad has to track trains, railcars, people, and cargo.)

Students can come up with different types of applications here.

4. Describe two BI applications for presenting results that Norfolk Southern could benefit from.

Students can come up with different answers here such as dashboard and other visualization technologies.

5. Provide two examples of how corporate performance management could be used at Norfolk Southern.

Students may suggest different answers here.

6. What is the importance of allowing external parties to access data in Norfolk Southern’s data warehouse? What are the risks and rewards of allowing such access?

It allows external parties to perform tasks, such as providing shipment-tracking information, that previously were handled by staff members.

The risks include those outside of NS misinterpreting data/reports and erroneous data being released, causing poor customer relations.

The rewards for NS include cost savings in being able to reduce customer service staff, and increased customer satisfaction because outside parties can track shipments themselves.

Students may suggest other items.

CHAPTER GLOSSARY

Chapter 10:

Page 14

business intelligence:A broad category of applications, technologies, and processes for gathering, storing, accessing, and analyzing data to help business users make better decisions. corporate performance management: The area of business intelligence involved with monitoring and managing an organization’s performance, according to key performance indicators (KPIs) such as revenue, return on investment (ROI), overhead, and operational costs.

Dashboard: A BI application that provides rapid access to timely information and direct access to management reports. data mining: The process of searching for valuable business information in a large database, data warehouse, or data mart. decision: A choice among two or more alternatives that individuals and groups make. decision support systems (DSS): Business intelligence systems that combine models and data. in an attempt to solve semistructured and some unstructured problems with extensive user involvement. geographic information system: A computer-based system for capturing, integrating, manipulating, and displaying data using digitized maps. independent data mart: A data mart that is independent of other data marts and warehouses. management: A process by which organizational goals are achieved through the use of resources. model (in decision making): A simplified representation, or abstraction, of reality. online analytical processing (OLAP) (or multidimensional data analysis): A set of capabilities for “slicing and dicing” data using dimensions and measures associated with the data. productivity: The ratio between the inputs to a process and the outputs from that process. reality mining: Allows analysts to extract information from the usage patterns of mobile phones and other wireless devices

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 11: Acquiring Information Systems and Applications Chapter Outline 11.1 11.2 11.3 11.4 11.5

Planning for and Justifying IT Applications Strategies for Acquiring IT Applications The Traditional Systems Development Life Cycle Alternative Methods and Tools for Systems Development Vendor and Software Selection

Learning Objectives 1. Define an IT strategic plan, identify the three objectives it must meet, and describe the four common approaches to cost-benefit analysis.

2. Discuss the four business decisions that companies must make when they acquire new applications.

3. Identify the six processes involved in the systems development life cycle, and explain the primary tasks and importance of each process.

4. Describe four alternative development methods and four tools that augment development methods, and identify at least one advantage and one disadvantage of each method and tool.

5. Analyze the process of vendor and software selection.

Teaching Tools and Tips This chapter discusses the process whereby an organization develops a new information system.

I would suggest spending time discussing the opportunities and pitfalls of systems development.

Among the key points is to ensure that students gain an appreciation for the human relations side of the process. Remind students that people are an extremely important component of any information system. Once a development project is underway, many people from different disciplines are involved in the effort. Emphasize that project management and communications skills are extremely important for this process to be successful.

It is important that students understand that when companies are planning new information systems, sometimes the concerned parties hit a stone wall regarding development and implementation processes. Managers from different areas may have different (and often hidden) agendas for the new system. Some times these hidden agendas may not become apparent until it is too late.

Spend some time describing how companies struggle to bring order to the system development life cycle (SDLC) process. In some cases companies actually allow their users to develop their own applications. Explain that these islands of information and private databases maintained by users must be integrated into a well-designed, enterprisewide information strategy. This is especially true in cases where IS failed to determine the applications that users should and should not develop, as well as the tools they should and should not use.

Chapter 11:

Page 2

Companies usually embark on a systematic development of information systems when they find out they are losing competitive advantage because they have an inefficient business process or no IS at all. In such cases, top management frequently initiates an impetus for change and throws their unwavering support behind the effort. Consequently, the project gets off to a great start.

Unfortunately, this same sense of urgency causes project managers to take inappropriate shortcuts. It is imperative for top management to inform their employees that the project plan is the blueprint for successful development.

A successful approach to systems development is to rely on modular methodology and to exercise sound technical judgment. The key to successful project completion, however, is human relations and communications techniques. Therefore, it is prudent to mix the study of information systems development with sociological and psychological topics!

Review Questions Section 11.1 … Before you go on…

1. What are some problems associated with assessing the costs of IT? One problem is the allocation of fixed costs among different IT projects. Another difficulty is that system costs continue after the system is installed. It is important to calculate the Total Cost of Ownership – a formula for calculating the cost of acquiring, operating, and controlling an IT system.

2. What difficulties accompany the intangible benefits from IT? By definition, intangible benefits are very difficult to place an accurate monetary value on. It is important not to ignore these benefits, however, because they are real and are valuable to the organization. Therefore, they must be approximated. Overestimating the value of intangible benefits will cause organizations to initiate projects that do not produce the expected benefits. Conversely, underestimating their value can result in valuable projects being rejected.

3. Describe the NPV, ROI, breakeven analysis, and business case approaches.

The NPV method compares the present value of a project’s cash inflows with the present value of its cash outflows, discounted at the organization’s cost of capital. An NPV that is $0 or greater suggests the project is acceptable. The ROI method computes a rate of return that is generated by the project based on the project’s net income divided by the average assets invested in the project. Breakeven analysis provides an estimated date when the money spent on the systems development process is recouped from the benefits earned in the business it is used in.

Chapter 11:

Page 3

A business case is a written document that is used by managers to garner funding for one or more specific applications or projects. Its major emphasis is the justification for a specific required investment. The business case helps to clarify how the organization can best use its resources to accomplish the IT strategy.

Section 11.2 … Before you go on…

1. Describe the four fundamental business decisions that organizations must make when acquiring information systems. a) How much computer code does the company want to write? a. A company can choose to use a totally pre-written application (to write no computer code); to customize a pre-written application (to write some computer code); or to custom-write an entire application (write all new computer code). b) How will the company pay for the application? a. For pre-written and customized pre-written applications, the payment options are to buy or to lease. For complete custom applications, the company may use internal funding. c) Where will the application run? a. The company may choose to run the application on the company’s own platform or on someone else’s platform (e.g., Software-as-a-Service vendor or an application service provider). d) Where will the application originate?

Pre-written applications can be open source or proprietary software (i.e., from a software vendor). These applications may be further customized in-house or outsourced.

Completely customized applications can be either written in-house or outsourced.

2. Discuss each of the seven development methods in this section with regard to the four business decisions that organizations must make.

Development Methods

Purchase a pre-written application Customize a pre-written

Amount Of Code Written None

Funding/ Operating Payment Platform Owner Buy or Company’s Lease platform

Some

Buy or

Company’s

Program Source Code Opensource or Proprietary Open-

Chapter 11:

Page 4

application

Lease

Lease the applications

None

Lease

Application service providers and softwareas-a-service vendors Use open-source software Outsourcing

None

Lease

Some

Custom development

Most

Internal funding Internal funding Internal funding

None

platform

source or Proprietary Company’s or OpenVendor’s source or platform Proprietary Vendor’s Openplatform source or Proprietary Company’s Openplatform source Company’s Outsource platform Company’s In-house or platform outsource

Section 11.3 … Before you go on…

1. Describe the feasibility study.

The feasibility study involves defining the business problem or new opportunity, investigating options available for the best solution, making a recommendation and estimating the probability of success.

2. What is the difference between systems analysis and systems design?

Systems analysis is the detailed study and documentation of the “as is” situation and the requirements for the new system. Systems design is the development of a technical specification that details the system inputs, outputs and interfaces as well as the hardware, software, databases, telecommunications, personnel and procedures needed to provide a solution for the requirements developed in the analysis stage. Systems design also provides a blueprint for integrating these various components.

3. Describe structured programming.

• • •

Structured programming techniques are used to establish a uniform approach to programming that successive iterations of staff can understand. Each module has only one function.

Each module has only one entrance and one exit.

GO TO statements are not allowed.

4. What are the four conversion methods?

Parallel - running old and new systems concurrently for a period of time.

Chapter 11:

Page 5

Direct – moving the new system into production at the same time the old system is being made inaccessible.

Pilot – introducing the new system in one part of the organization, determining that it is stable, and then rolling it out to other areas.

Phased – introducing select components of the new system in stages. When the organization determines that these components are stable, it rolls out other components.

Section 11.4 … Before you go on…

1. Describe the tools that augment the traditional SDLC. Prototyping involves building a model of the system based on user feedback. It is an iterative approach that helps users visualize what the new system will look like.

Joint application development (JAD) involves a meeting attended by all of the end users meeting and the IS project team to develop requirements and reach a consensus. It can save a lot of time, but it is intense, and it will work well only if all departments are represented.

CASE tools are specialized tools that automate many of the tasks in the SDLC. Long-term maintenance on systems developed with CASE tools can be less expensive; however, initial development can cost more.

Rapid application development is a systems development method that can combine JAD, prototyping, and ICASE tools to rapidly produce a high-quality system. In the first RAD stage, developers use JAD sessions to collect system requirements. This strategy ensures that users are intensively involved early on. The development process in RAD is iterative, similar to prototyping. That is, requirements, designs, and the system itself are developed and then undergo a series, or sequence, of improvements. RAD uses ICASE tools to quickly structure requirements and develop prototypes. As the prototypes are developed and refined, users review them in additional JAD sessions. RAD produces the functional components of a final system, rather than prototypes.

2. Describe the alternate methods that can be used for systems development, other than the SDLC. The two methods are end-user development and object-oriented development.

End-user development is very popular today because of the availability and familiarity with small databases such as Access and spreadsheet applications.

As long as these databases are relatively small and the users document what they have done, end-user development can work well. If not, the IS department is usually called on to rewrite and rework.

Chapter 11:

Page 6

Object-oriented development is based on a different view of computer systems. OO systems are based on the aspects of the real world that must be modeled to perform a task. Consequently, these systems can be used to perform related tasks that involve the same real-world entities.

Section 11.5 … Before you go on…

1. List the major steps of selection of a vendor and a software package. a. b. c. d. e. f.

Identify potential vendors Determine the evaluation criteria Evaluate vendors and packages Select a vendor and a package Negotiate a contract Establish a service-level agreement

2. Describe a request for proposal (RFP).

A request for proposal (RFP) is a document that a company sends to potential vendors inviting them to submit a proposal that describes their software package and explains how it would meet the company’s needs.

3. Explain why SLAs play an important role in systems development.

Service-level agreements are formal contracts that specify the division of work and responsibilities between vendors and the company. These divisions are based on a set of agreed-upon milestones, quality checks, and what-if situations – all of which need to be specified in the SLA. They describe how quality checks will be made and what is to be done in case disputes and quality standards are specified “IT’s About Business” Questions IT’s About Business 11.1 ShopMyClothes: High Fashion Sales 1. Would acquiring a new information system for a small organization be a longer or shorter process than acquiring one for a large organization? Why or why not? Support your answer.

It some ways it may take longer due to the possible lack of understanding of the process, the systems, and the expectations of the acquiring organization. However, these factors can also speed up the process under some circumstances.

2. How does the selection of an underlying technology platform (such as Microsoft .net) affect programming choices?

Chapter 11:

Page 7

3. The technology platform could impact the overall development and maintenance costs of the website.

IT’s About Business 11.2 A Disastrous Development Project: Hidden Costs 1. Debate the potential lawsuit from the point of view of eHealth and CGI. Students could discuss this lawsuit emphasizing different aspects of the contract.

2. Discuss the advantages and disadvantages of a long-term outsourcing contract for the development of software.

Advantages: Long-term contracts are attractive to contractors because of the potential for making significant profit. Therefore, they have motivation to do the job well. The two parties will also have to understand each other well.

Disadvantages: Long-term outsourcing contracts could be risky because of the uncertainty associated with timeframe and different work cultures.

IT’s About Business 11.3 Presto Card Scope Creep and Cost Escalation 1. How can organizations like Metrolinx manage “scope creep” (the increase of a project’s scope, or functions, after it has started)? Do you think that the “open fare” system should have gone out to competitive bid? Why or why not?

Scope creep can be avoided by having a thorough and proper understand of system requirements taking into account both short term and long term view of the future. It is also important to have a reasonable assessment of future demands and technology evolution. Given that the “open fare” system constituted a significant portion of the overall project cost, it should have gone out to competitive bid.

2. What actions should Metrolinx have taken to manage the Presto card implementation, rather than allowing Accenture to do so?

The project should have been managed by Metrolinx itself.

Chapter 11:

Page 8

Discussion Questions 1. Discuss the advantages of a lease option over a buy option.

Leasing has the advantages of lower upfront costs and more flexibility to change and adapt the applications used over time as needs change.

2. Why is it important for all business managers to understand the issues of IT resource acquisition?

Because information systems are so critical to competitive advantage, a system’s timely and careful development is a very high priority. Systems acquisition and development is a team effort that should involve the entire organization.

3. Why is it important for everyone in business organizations to have a basic understanding of the systems development process?

End users possess the business knowledge the IS staff needs to develop all of the components of the system’s design. For this reason, user input is critical to the acquisition and/or design of a successful IS. 4. Should prototyping be used on every systems development project? Why or why not?

The SDLC provides the basic structure of the development process. Prototyping can be used within that structure to experiment with new technology or clarify requirements. It should not replace the traditional SDLC for highly complex systems.

5. Discuss the various types of feasibility studies. Why are all of them needed?

Technical, economic, behavioral, and organizational feasibilities are different facets of the analysis.

Technical – determines if the current hardware and software platform is appropriate as well as whether the system should be developed in house or purchased from a vendor.

Economic – determines if the project has an acceptable financial risk and whether the organization can afford it.

Behavioral – determines if the corporate culture is open to the change.

Organizational – determines whether the organization has any external issues that would preclude the project from being successful and whether the project meshes with the company’s strategic plan.

Chapter 11:

Page 9

6. Discuss the issue of assessing intangible benefits and the proposed solutions.

Intangible benefits are often very hard to quantify. IS staff responsible for the cost benefit analysis should collaborate with users of the system to place a value on the benefit, even if their analysis is less than scientific. Very often, it is the quantifying of the intangible benefit that will make the biggest impact on the decision to move ahead with a new system.

7.

Discuss the reasons why end-user-developed information systems can be of poor quality.

What can be done to improve this situation?

Putting development tools in the hands of end-users can result in some very innovative work.

One of the biggest problems, however, is that in many cases the end users do not know the most efficient way to design a system. Therefore, when working with a small amount of data, it may seem like everything is okay, but as soon as they try to function in a full-blown production environment, the application grinds to a halt or stops completely.

One way that this problem can be avoided is through education. If, for example, the users know how to design a relational database, then, they have a better chance of developing an efficient application. Another way would be to have the applications run through a quality assurance process with IS to ensure that they are not only developing software that can be used, but also documenting their work.

Problem-Solving Activities Students will research as directed and prepare a thoughtful report on their findings.

1. Access www.ecommerce-guide.com. Find the product review area. Read reviews of three software payment solutions. Assess the payment solutions as possible components.

Students will visit the Web sites and look for reviews on three software payment solutions of their choice. Note that some product information was submitted by the company representatives and may not provide the “true” review of the product.

2. Use an Internet search engine to obtain information on CASE and ICASE tools. Select several vendors and compare and contrast their offerings.

A list of CASE tool vendors can be found at this Web site http://www.unl.csi.cuny.edu/faqs/software-enginering/vendor.html. Students may choose a few vendors and compare and contrast their features.

3. Access www.ning.com, www.coghead.com. Observe how the site provides components for you to use to build applications. Build a small application.

Ning is an educational network site that helps people integrate social media into education.

Students will visit www.ning.com and learn how to use it to build an application. There are

Chapter 11:

Page 10

resources available in many different formats (e.g., printed information, blog, interactive demo, etc.) to help users get started.

Web Activities Results of the various on-line activities should be organized into report format and submitted after research activities are completed.

1. Enter www.ibm.com/software. Find its WebSphere product. Read recent customers’ success stories. What makes this software so popular?

Students will develop and submit or present a report on their findings.

2. Enter the Web sites of the GartnerGroup (www.gartnergroup.com), the Yankee Group (www.yankeegroup.com) and CIO (www.cio.com). Search for recent material about ASPs and outsourcing, and prepare a report on your findings.

Students will develop and submit or present a report on their findings.

3. StoreFront (www.storefront.net) is a vendor of e-business software. At its site, the company provides demonstrations illustrating the types of storefronts that it can create for shoppers.

The site also provides demonstrations of how the company’s software is used to create a store. a. Run the StoreFront demonstration to see how this is done.

Students may need to register with the Web site in order to view the demo. b. What features does StoreFront provide?

Features of the StoreFront e-commerce software include various software tools for store building, product management, order processing, marketing and promotions, shopper features, and store management. c. Does StoreFront support smaller or larger stores?

The software provides services for smaller stores with additional add-on modules for larger stores. d. What other products does StoreFront offer for creating online stores? What types of stores do these products support?

In addition to software solutions, StoreFront offers services that help customers build e-commerce stores including design, custom development, marketing, setup and implementation, training, hosting, payment processing, and support. Click the View Client Gallery link to see examples of client applications.

Team Assignments

Chapter 11:

Page 11

1. Assessing the functionality of an application is part of the planning process (Step 1) Select three to five Web sites that cater to the same type of buyer (for instance several Web sites that offer CDs or computer hardware), and divide the sites among the teams. Each team will assess the functionality of its assigned Web site by preparing an analysis of the different sorts of functions provided by the sites. In addition, the team should compare the strong and weak points of each site from the buyer’s perspective.

Students will follow the directions for the group project. Note that students will have to search the Internet to locate information, and some Web sites might require them to register and provide contact information.

2. Divide the class into groups, with each group visiting a local company (include your university). At each firm, study the systems acquisition process. Find out the methodology or methodologies used by each organization and the type of application each methodology applies. Prepare a report and present it to the class.

Students will research and develop report on their findings.

3. As a group, design an information system for a startup business of your choice. Describe your chosen IT resource acquisition strategy, and justify your choices of hardware, software, telecommunications support, and other aspects of a proposed system.

Students will follow the directions for the group project. The project outcome may include a written report (e.g., a project proposal), a class presentation, or both. To help students prepare for the presentation, set up a scenario where the city has some funding to help a local startup business. Each project team is working for a local company. Stage the presentation as though the groups are presenting the selected company’s information system to the city’s Board of Commerce as a part of the city grant/funding application process.

Closing Case A Tale of Two Software Upgrades The Problem Two airlines — WestJet (www.westjet.com) and JetBlue (www.jetblue.com) — had been using a reservation system designed for start-up airlines with reasonably simple reservation requirements. As the two carriers expanded, they needed greater processing power to deal with increasing numbers of customers. They also wanted additional functions, such as the ability to link their prices and seat inventories to other airlines with whom they wished to cooperate.

The Solution

Chapter 11:

Page 12

WestJet and JetBlue independently selected a system offered by Sabre Holdings (www.sabre.com), a provider of airline reservation systems (SabreSonic; www.sabreairlinesolutions.com). Sabre provides technology to 300 airlines, and it owns Travelocity (www.travelocity.com) and other online travel agencies. JetBlue reported that the new system cost about $40 million, including $25 million in capital spending and $15 million in one-time operating expenses. WestJet did not disclose how much its system cost.

In addition to selling seats and collecting passenger payments, the Sabre system controls much of the passenger experience: shopping on the airline’s Web site; interacting with reservation agents; using airport kiosks; selecting seats; checking bags; boarding at the gate; and rebooking and obtaining refunds for cancellations. To perform these functions, the Sabre system has to integrate with the airline’s other information systems.

Two Different Results WestJet, with 88 planes, switched to Sabre after it had shifted to a lighter winter schedule and canceled some flights. One imposing challenge was the overnight transition of 840,000 files – transactions of customers who already had purchased tickets – from WestJet’s old reservations system to the Sabre system. The process did not go well because the migration required WestJet agents to go through complex steps to process the data.

Despite months of planning, when WestJet made its conversion, its Web site crashed repeatedly, and its call center was overwhelmed. Making matters worse, WestJet did not reduce the number of passengers on the flights operating after the transition to the new system, nor did it inform customers of its upgrade plans until the day of the switch.

WestJet’s customer loyalty scores dropped as a result of long waits and booking difficulties.

The airline sent apology letters, offered flight credits to some customers, and bolstered its call center with temporary staffers located in India. Two months after the conversion, the airline installed a “virtual hold” in its call centers so callers would be promised a response within a certain time. A virtual hold offers callers the option for a call back rather than waiting on hold.

The bottom line for WestJet? After several months, the airline was able to fulfill its plans to cooperate with U.S. and international airlines on some of its routes.

In contrast, JetBlue, with 151 aircraft, decided to make its switch on a Friday night, because Saturday traffic tends to be low. The airline trimmed its schedule that weekend and sold abnormally low numbers of seats on the remaining flights. JetBlue also developed a backup Web site that it used twice for a few hours during the transition.

JetBlue also contracted for 500 outside reservations agents. After the transition, in which 900,000 passenger records were moved to Sabre, JetBlue routed basic calls to the temporary workers, freeing up its own call staff to manage more complex tasks. The extra agents stayed in place for two months.

JetBlue still experienced some problems. Call wait times increased, and not all of its airport kiosks and ticket printers became operational right away. Despite these problems, however, JetBlue contends that migrating to Sabre was an important factor in the airline’s decision to cooperate on some routes in and out of Boston and New York with American Airlines.

Questions 1. Explain why WestJet and JetBlue decided to upgrade their reservation systems.

Chapter 11:

Page 13

Both airlines decided to upgrade their information systems in order to stay competitive.

Sabre dominated the airline ticket reservation system and became the industry standard.

Without the new system, WestJet and JetBlue reservation systems would be incompatible with those used by other airlines, which would prevent the two companies from collaborating with partner airlines in the United States.

2. Compare and contrast the software upgrade processes of WestJet and JetBlue.

While both airlines developed migration plans for moving to the new system, each had different kinds and levels of issues during and after the migration took place.

Westjet…

• Was the smaller of the two airlines.

• 840,000 transactions of customers who had purchased tickets • Migration required WestJet agents to go through complex steps to process the data.

• Web site crashed, and call center was overwhelmed. No back up plan.

• Did not reduce the number of flights/seats during transition.

• No prior contact with customers informing them of the conversion.

• It took a few months after the system migration to fulfill their plans to cooperate with U.S. and international airlines on some of its routes.

• Customer loyalty scores dropped as a result of long waits and booking difficulties.

• The airline sent apology letters, offered flight credits to some customers, and bolstered its call center with temporary staffers located in India.

Jet Blue • Had almost twice as many aircraft.

• 900,000 passenger records.

• Decided to make its switch on a Friday night, because Saturday traffic tends to be low.

• Trimmed its schedule the weekend of the system migration and sold abnormally low numbers of seats on the remaining flights.

• Contracted for 500 outside (additional) reservation agents to assist during and after the migration.

• Routed basic calls to the temporary workers, freeing up its own call staff to manage more complex tasks.

• Extra agents stayed in place for two months.

• Call wait times increased.

• Not all of its airport kiosks and ticket printers became operational right away.

• Had a back up Web site ready in case of problems; it was used a few times during migration.

Chapter 11:

Page 14

Glossary agile development A software development methodology that delivers functionality in rapid iterations, measured in weeks, requiring frequent communication, development, testing, and delivery. application service provider (ASP) An agent or vendor who assembles the software needed by enterprises and packages it with outsourced development, operations, maintenance, and other services. component-based development A software development methodology that uses standard components to build applications. computer-aided software engineering (CASE) Development approach that uses specialized tools to automate many of the tasks in the SDLC; upper CASE tools automate the early stages of the SDLC, and lower CASE tools automate the later stages. direct conversion Implementation process in which the old system is cut off and the new system is turned on at a certain point in time. end-user development An approach in which the organization’s end users develop their own applications with little or no formal assistance from the IT department. feasibility study Investigation that gauges the probability of success of a proposed project and provides a rough assessment of the project’s feasibility. implementation The process of converting from an old computer system to a new one. integrated CASE (ICASE) tools CASE tools that provide links between upper CASE and lower CASE tools.

IT steering committee A committee, consisting of a group of managers and staff representing various organizational units, that establishes IT priorities and ensures that the MIS function is meeting the needs of the enterprise.

IT strategic plan A set of long-range goals that describe the IT infrastructure and major IT initiatives needed to achieve the goals of the organization. joint application design (JAD) A group-based tool for collecting user requirements and creating system designs. object-oriented development A systems development methodology that begins with aspects of the real world that must be modelled to perform a task. outsourcing Use of outside contractors or external organizations to acquire IT services.

Chapter 11:

Page 15

phased conversion Implementation process that introduces components of the new system in stages, until the entire new system is operational. pilot conversion Implementation process that introduces the new system in one part of the organization on a trial basis; when the new system is working properly, it is introduced in other parts of the organization. programmers IS professionals who modify existing computer programs or write new computer programs to satisfy user requirements. programming The translation of a system’s design specifications into computer code. prototype A small-scale working model of an entire system or a model that contains only the components of the new system that are of most interest to the users. prototyping Approach that defines an initial list of user requirements, builds a prototype system, and then improves the system in several iterations based on users’ feedback. rapid application development (RAD) A development method that uses special tools and an iterative approach to rapidly produce a high-quality system. request for proposal (RFP) Document that is sent to potential vendors inviting them to submit a proposal describing their software package and how it would meet the company’s needs. scope creep The addition of functions to an information system after the project has begun. service-level agreements (SLAs) Formal agreements regarding the division of work between a company and its vendors. software-as-a-service (SaaS) A method of delivering software in which a vendor hosts the applications and provides them as a service to customers over a network, typically the Internet. systems analysis The examination of the business problem that the organization plans to solve with an information system. systems analysts IS professionals who specialize in analyzing and designing information systems. systems design A description of how the new system will provide a solution to the business problem. systems development life cycle (SDLC) Traditional structured framework, used for large IT projects, that consists of sequential processes by which information systems are developed. systems stakeholders All people who are affected by changes in information systems.

CHAPTER 12 IT Ethics and Privacy Chapter Outline 12.1 12.2

Ethical Issues Privacy

Learning Objectives 1.

2.

Define ethics, list and describe the three fundamental tenets of ethics, and describe the four categories of ethical issues related to information technology.

Identify three places that store personal data, and, for each one, discuss at least one potential threat to the privacy of the data stored there.

Teaching Tips and Strategies The topics discussed in this chapter and the next chapter (Chapter 4: Information Security) may be two of the most important chapters for your students. Business ethics and individual and personal privacy have become important issues in today’s global business environment.

One of the considerations is security versus personal privacy in the sense that technology will enable future employers to monitor their employees’ movements in the workplace. Your initial discussion could begin with the implications of this scenario.

Bill Gates and Bill Clinton were both charged with crimes based partially on evidence contained in e-mails. (Clinton was charged with lying under oath, and Gates with violating the consent decree his company signed with the Justice Department.) More current examples of e-mail trails left by influential people include Martha Stewart and her attempt to cover up her activity after she ordered her broker to sell her shares of Imclone stock, and the trail left by President Bush’s long-time adviser and confidant, Karl Rove, in the ongoing investigation of who identified Valerie Plame, the CIA operative married to former Ambassador Joseph Wilson IV, after Wilson had traveled to Niger to investigate whether Iraq tried to obtain uranium from that country. Both of these individuals have had to deal with criticism and investigations based on various contacts and, particularly, e-mails that revealed their communications.

If people hold prominent positions, how is it that their e-mails are available for others to use against them? Does or should e-mail last forever?

I strongly suggest you keep this discussion focused away from anything that might resemble a current political topic.

Clinton and Gates were indicted based on evidence contained in their e-mails. The point is: If the President of the United States cannot get rid of damaging e-mails, it is almost impossible for anyone else to do so. If one of the world’s richest men cannot control who can access his emails, then how can the rest of us expect that our e-mails will never be used against us? This can lead to some very heated discussions.

Chapter 12:

Page 2

(I am not suggesting that either Clinton or Gates tried to get rid of their e-mails in any illegal manner. Martha Stewart did alter her e-mail, but she then realized that it was fruitless, so she changed it back.)

A scenario that you might use is to write the following on the board: “Is e-mail forever?”

Provide an example where Student 1 sends Student 2 an e-mail. How many copies of that e-mail are circulating on the Internet? Most students will respond, “Two.” This answer is not true.

Illustrate on the board how the e-mails had to go through different servers, etc. This illustration will usually cause the students’ ears to perk up.

Then, create a more complex scenario: Student 1 has sent an e-mail to Student 2, and we have hired someone to destroy Student 2’s computer and wipe out all of the server information that contained that e-mail. Next we burn Student 1’s computer to get rid of the e-mail. Could that email still exist? Most students will respond, “No way. Both computers have been destroyed, and the servers have been cleared.” Then ask, “How do we know whether Student 2 forwarded the email to someone else?” Would all of our efforts have eliminated the e-mail? Then ask, What if Student 2 had copied the e-mail onto a disk and mailed it somewhere? Students start to see the complications and understand that e-mail really is forever. Perhaps Student 2 simply thought a joke you sent her was funny and decided to e-mail it to some friends. Although her intentions were entirely innocent, the e-mail nevertheless is spreading, and there is no way we can stop it.

Another scenario is: If we worked for the same company and sent each other dirty jokes or pornographic pictures at work three years ago (violating company policy), but we were never caught, we might think there was no harm done. But, suppose someone with whom we used to be friendly but have since fallen out with goes to management with copies of these communications. Could we still be fired? Most students will get angry and state, “No way! That was three years ago.” In fact, the correct response is, “Exactly, but the courts have sided with employers regarding this issue. It doesn’t matter if it was five years ago; it was still a violation of company policy.” At this point, students are starting to understand that today’s environment is very different from ten years ago, when workers in break rooms told dirty jokes and, unless someone was offended at that moment, the chances of getting in trouble were miniscule. Today, if employees are using e-mail, employers have the ability to go back to the day the e-mail was sent and pull it up. In fact, many programs have been developed over the last couple of years that can monitor everything we do on a computer, down to individual keystrokes.

These examples are not intended to scare the students, but rather to get them to realize that employers can and will monitor them at work. A review of the different software applications that can help employers monitor non-work-related use of the Internet is appropriate at this step.

The book provides examples of employees who have been fired from major companies for using the Internet for personal use.

The discussion can end with the following pieces of advice. First, never use a company computer for anything except business-related work. This strategy by itself will eliminate 95% of this problem. Second, do not send an e-mail that you wouldn’t want your parents to read.

This will take care of all the problems of figuring out which e-mails are okay to send and which aren’t. Third, limit giving your work e-mail address to friends and relatives. This will help to keep down the number of e-mails you receive at work, and it will also help to avoid having e-

Chapter 12:

Page 3

mail messages sent to you that violate company policy. Finally, when using your computer, pretend that someone is hiding behind the screen and watching everything you do. This will help you avoid disciplinary problems due to improper computer use.

A long-held view of ethics and IT can be shared. Historically, IS professionals have not been bound by law to adhere to any ethical and professional standards. Those of us who engage in the design, development, implementation, and maintenance of ISs are generally recognized as members of an emerging profession, the IT profession. Many organizations are depending on us as specialists, and they pay us large sums of money for our services. As more and more businesses have come to depend on IT, we are hearing more about incidents where IT projects are abandoned because we “professionals” have miscalculated time and money resources, or because we simply lacked the expertise to develop good systems. Virtually all other professions, including law, medicine, and accounting, have established a legal code of professional standards.

What professional rules bind IT “professionals”? Currently, there are none. Several professional organizations have issued their own codes of ethics, but none is enforceable under the law. It may take years for the IT profession to adopt a standard code of ethics. It may take even longer for certification and other measures to be mandated by law. Until these measures are in place, it is incumbent upon all of us in the profession to think ethically about the many issues discussed in this chapter so that we can exercise our best judgment at all times on all IT projects.

Review Questions Section 12.1 … Before You Go On 1. What does a code of ethics contain?

A code of ethics is a collection of principles intended as a guide for members of an organization or a profession.

2. Describe the fundamental tenets of ethics.

Fundamental tenets of ethics include responsibility, accountability, and liability.

Responsibility means that you accept the consequences of your decisions and actions.

Accountability refers to determining who is responsible for actions that were taken.

Liability is a legal concept that gives individuals the right to recover the damages done to them by other individuals, organizations, or systems.

Section 12.2 … Before you go on…

1. Describe the issue of privacy as it is affected by IT. The issue of privacy as it is affected by IT addresses the issues of data collection, data accuracy, and data confidentiality. The proliferation of personal computers, powerful software, large databases, and the Internet have created an entirely new dimension of accessing and using personal data.

Chapter 12:

Page 4

2. Discuss how privacy issues can impact transborder data flows.

As the number of online users has increased globally, governments throughout the world have enacted a large number of inconsistent privacy and security laws. This highly complex global legal framework is creating regulatory problems for companies. Approximately 50 countries have some form of data-protection laws. Many of these laws conflict with those of other countries, or they require specific security measures. Other countries have no privacy laws at all.

The absence of consistent or uniform standards for privacy and security obstructs the flow of information among countries, which is called transborder data flows. The European Union (EU), for one, has taken steps to overcome this problem. In 1998 the European Community Commission (ECC) issued guidelines to all its member countries regarding the rights of individuals to access information about themselves. The EU data-protection laws are stricter than U.S. laws and therefore could create problems for multinational corporations, which could face lawsuits for privacy violation.

The transfer of data in and out of a nation without the knowledge of either the authorities or the individuals involved raises a number of privacy issues. Whose laws have jurisdiction when records are stored in a different country for reprocessing or retransmission purposes?

For example, if data are transmitted by a Polish company through a U.S. satellite to a British corporation, which country’s privacy laws control the data, and when? Questions like these will become more complicated and frequent as time goes on. Governments must make an effort to develop laws and standards to cope with rapidly changing information technologies in order to solve some of these privacy issues.

IT’s About Business Questions IT’s About Business 12.1 The Nightmare of Cyber-Harassment 1. What should the restaurant owner have done when she found out about the negative review?

Support your answer.

The owner should have apologized and offered a free meal to Elayna. The could have a been a perfect opportunity to turn a negative experience into a positive one.

2. What actions could Elayna Katz have taken during the process of being cyber-harassed?

Students could come up with different suggestions in this cace.

IT’s About Business 12.2 Big Brother Is Watching You 1. Apply the general framework for ethical decision making to the practices of photo tagging and geotagging.

Chapter 12:

Page 5

One of the most troubling privacy problems is a practice advocated by Google and Facebook called photo tagging. The two companies are using facial-recognition software in their popular online photo-editing and sharing services, Google Picasa and Facebook Photo Albums. Both companies encourage users to assign names to people in photos, referred to as tagging. Facial-recognition software then indexes facial features. Once an individual in a photo is tagged, the software searches for similar facial features in untagged photos. This process allows the user to quickly group photos in which the tagged person appears.

Significantly, the individual in the photo is not aware that he or she is being tagged.

2. Discuss and provide examples of the benefits and the drawbacks of photo tagging and geotagging.

These sensors routinely geotag photos and videos, embedding images with the longitude and latitude of the location shown in the image. You could be inadvertently supplying criminals with useful intelligence by posting personal images on social networks or photo-sharing Web sites. These actions would show the criminals exactly where you live.

3. Are users responsible for their loss of privacy if they do not know that their photos can be tagged and that they can be located with GPS sensors?

Once you are tagged in a photo, that photo could be used to search for matches across the entire Internet, or in private databases, including databases fed by surveillance cameras. The technology could be used by a car dealer who takes a picture of you when you step on the car lot. The dealer could then quickly profile you on the Web, to gain an edge in making a sale.

Even worse, a stranger in a restaurant could photograph you with a smartphone, and then go online to profile you. One privacy attorney says that losing the right to anonymity would have a chilling effect on where you go, whom you meet, and how you live your life.

IT’s About Business 12.3 Your Privacy on Facebook 1. Why does Facebook change its privacy policies in response to government or user pressures?

Facebook changes its privacy policies based on what it considers public or private information of users.

2. Research the functions of Facebook Graph Search and discuss whether it affects privacy.

Students will complete the research and discuss their findings.

3. Research the functions of Facebook Home software and discuss whether it affects privacy.

Students will complete the research and discuss their findings.

4. Discuss the trade-offs between conveniently sharing information and protecting privacy.

Chapter 12:

Page 6

The benefit of FB sharing user related information with their business partners benefits the relationship and potentially increases FB’s revenue model.

A negative is the loss of trust of the users of FB that their information will not be released to others and they do not have control over how it is used.

Students may come up with others based on their personal perceptions of social media sites.

Discussion Questions 1. In January 2013, a student at Dawson College in Montreal was expelled after finding a security flaw in the college’s information systems and reporting it to the information technology department. It seems that the student was expelled after checking whether the security flaw was still present, which means that he hacked into the college’s systems. What do you think: should the student be expelled? What is the line between “checking whether a security flaw is still present” and hacking?

Students should read this website and discuss their opinions: http://news.nationalpost.com/2013/01/20/youth-expelled-from-montreal-college-after-findingsloppy-coding-that-compromised-security-of-250000-students-personal-data/ 2. Frank Abagnale, the criminal played by Leonardo DiCaprio in the motion picture Catch Me If You Can, ended up in prison. However, when he left prison, he went to work as a consultant to many companies on matter of fraud. a. Why do so many companies not report computer crimes?

Companies often underreport such crimes to protect their reputation with their customer base. Banks especially want their customers to feel that their money is safe. They don’t want anyone to know they their systems were compromised. b. Why do these companies hire the perpetrators (if caught) as consultants? Is this a good idea?

In some cases, they hire the individual who broke into their system, because that person knows the weak spots in the security. Whether it is a good idea depends on the situation.

Students can offer some opinions on the pros and cons. c. You are the CEO of a company. Discuss the ethical implications of hiring Frank Abagnale as a consultant to your company.

Students can offer their opinions on the pros and cons. They might contend that rewarding a person for their past criminal behavior is not an ethical precedent that a company should set in its hiring policies. This practice could send the wrong message to customers about the quality and background of the company’s employees.

Chapter 12:

Page 7

Problem Solving Activities 1. An information security manager routinely monitored the Web surfing among her company’s employees. She discovered that many employees were visiting the “sinful six” Web sites.

(Note: The sinful six are Web sites with material related to pornography, gambling, hate, illegal activities, tastelessness, and violence). She then prepared a list of the employees and their surfing histories and gave the list to management. Some managers punished their employees. Some employees, in turn, objected to the monitoring, claiming that they should have a right to privacy. a. Is monitoring of Web surfing by managers ethical? (It is legal.) Support your answer.

Yes, monitoring of Web surfing is legal and, moreover, it is an important duty of the network security person. Unethical use of the system can be detected only by this type of scrutiny. If this is not done on a professional basis, then the company is open to legal action should someone be harmed as a result of an employee’s use of the system.

Moreover, this type of Web surfing could introduce malware into the company’s network. b. Is employee Web surfing on the “sinful six” ethical? Support your answer Personal use of the company’s Internet system, while not illegal, is normally stipulated in the company policies as unauthorized. Employees are supposed to be working, not wasting company resources. Even during their lunch hour or after hours, they are still “stealing” resources, e.g., disk space, bandwidth, etc.

Visiting pornographic sites, gambling sites, etc., could also lead to other actions that could jeopardize the company because the tracking of IP addresses would lead an investigation back to the company equipment that was being used at the time. c. Is the security manager’s submission of the list of abusers to management ethical? Why or why not?

Although it is not unethical to turn this information over to management, a better way to handle the situation might be to first send a communication to all employees reiterating what is acceptable and unacceptable in terms of Internet usage and putting all employees on notice that all future infractions will be made known to management. If some employees continue to violate the company policy, then management would be informed of their actions. d. Is punishing the abuses ethical? Why or why not? If yes, then what types of punishment are acceptable?

Chapter 12:

Page 8

Punishment is just as ethical for an infraction of the Internet use policy as it would be for any abuse of company policy., . Employers need to act in good faith. Management needs to circulate a policy among employees with a clear description of what the consequences will be if an employee commits an offense. Monitoring by upper management to ensure consistent handling by the managers would make the future handling fair and consistent. Once the policy and consequences are clear, the security manager should notify the immediate manager and copy upper management with details of problem situations. Warnings, suspension, and ultimate termination may be appropriate punishment for violating any company policies, not just those involving improper Internet usage. e. What should the company do in order to rectify the situation?

The company should institute a policy for personal Internet use and review it with their employees. The policy should provide some flexibility, such as allowing employees two or three 15-minute intervals of personal surfing during the day, with the understanding that employees cannot visit objectionable Web sites. This approach allows employees to take a break from their work and perform some personal surfing, while confining their activity to small blocks of time.

2. Access the Computer Ethics Institute’s Web site at www.cpsr.org/issues/ethics/cei. The site offers the “Ten Commandments of Computer Ethics.” Study these 10 rules, and decide if any others should be added.

Students should provide a thorough discussion of the above.

3. Access the Association for Computing Machinery’s code of ethics for its members (see www.acm.org/about/code-of-ethics). Discuss the major points of this code. Is this code complete? Why or why not? Support your answer.

Students should provide a thorough discussion of the above.

4. Access www.eightmaps.com. Is the use of data on this Web site illegal? Unethical? Support your answer.

To display the personal address of individuals if that information is not publicly available in another place is an important and a highly controversial issue. Donations for political causes need to be posted so that the general public is aware of who is behind which initiative.

5. The Electronic Frontier Foundation (www.eff.org) has a mission of protecting rights and promoting freedom in the “electronic frontier.” Review the organization’s suggestions about how to protect your online privacy, and summarize what you can do to protect yourself.

Again, the students should provide a thorough discussion of the above.

Chapter 12:

Page 9

6. Access your university’s guidelines for ethical computer and Internet use. Are there limitations as to the types of Web sites that you can visit and the types of material you can view? Are you allowed to change the programs on the lab computers? Are you allowed to download software from the lab computers for your personal use? Are there rules governing the personal use of computers and e-mail?

Hopefully this information is easily accessible. Ask the students if they agree or disagree with the policies. Then ask them how these rules might be used in a business environment.

7. Access http://www.albion.com/netiquette/corerules.html. What do you think of this code of ethics? Should it be expanded? Is it too general?

Students will have varying responses, but each student should provide evidence to support his or her opinion.

8. Access www.cookiecentral.com. Does this site provide information that helps you protect your privacy? If so, then explain how.

This site deals with cookies and how they are used to track users and invade privacy.

9. Do you believe that your university should be allowed to monitor e-mail sent and received on university computers? Why or why not? Support your answer.

Again, bring to the discussion how these rules might differ in different types of businesses.

Closing Case You Be the Judge Terry Childs worked in San Francisco’s information technology department for five years as a highly valued network administrator. Childs, who holds a Cisco Certified Internetwork Expert certification, the highest level of certification offered by Cisco, built San Francisco’s new multimillion-dollar computer network, the FiberWAN. He handled most of the implementation, including the acquisition, configuration, and installation of all the routers and switches that comprise the network. The FiberWAN contains essential city information such as officials’ emails, city payroll files, confidential law enforcement documents, and jail inmates’ booking information.

On July 13, 2008, Childs was arrested and charged with four felony counts of computer tampering. Authorities accused him of commandeering the FiberWAN by creating passwords that granted him exclusive access to the system. In addition to refusing to give city officials the passwords necessary to access the FiberWAN, Childs is accused of other actions. Authorities allege that he implemented a tracing system to monitor what administrators were saying and doing. Authorities also discovered dial-up and digital subscriber line (DSL) modems (discussed in Chapter 6) that would enable an unauthorized user to connect to the FiberWAN. They also found that he had placed a command on several devices on the network that would erase critical configuration data in the event that anyone tried to restore administrative access to the devices.

Chapter 12:

Page 10

Further, he allegedly collected pages of user names and passwords, including his supervisor’s, to use their network login information. He was also charged with downloading terabytes of city data to a personal encrypted storage device. The extent of Child’s activities was not known until a June 2008 computer audit.

Childs had been disciplined on the job in the months leading up to his arrest, and his supervisors had tried to fire him. Those attempts were unsuccessful, in part because of his exclusive knowledge of the city’s FiberWAN. After his arrest, Childs kept the necessary passwords to himself for ten days, and then gave them to the mayor of San Francisco in a secret meeting in the city jail. What was he thinking? Had he become a rogue employee? His lawyer paints a different picture of the man and his situation.

Childs seems to have taken his job very seriously, to the point of arrogance. He worked very hard, including evenings and weekends, and rarely took vacations. Because the FiberWAN was so complex and Childs did not involve any of the other network engineers in his unit, he was the only person who fully understood the network’s configuration. He apparently trusted no one but himself with the details of the network, including its configuration and login information.

Childs had a poor relationship with his superiors, who were all managerially oriented rather than technically oriented. He considered his direct supervisor to be intrusive, incompetent, and obstructive, and he believed the managers above him had no real concept of the FiberWAN. In fact, he felt that his superiors were more interested in office politics than in getting anything done. He also complained that he was overworked and that many of his colleagues were incompetent freeloaders.

Childs’s lawyer maintained that his client had been the victim of a “bad faith” effort to force him out of his post by incompetent city officials whose meddling was jeopardizing the network that Childs had built. He further charged that in the past Childs’s supervisors and coworkers had damaged the FiberWAN themselves, hindered Childs’s ability to maintain the system, and shown complete indifference to maintaining it themselves.

Childs was the only person in the department capable of operating the FiberWAN. Despite this fact, the department had established no policies as to the appropriate person to whom Childs could give the passwords. Childs maintains that none of the persons who requested the passwords from him was qualified to have them.

Childs’ lawyer raised the question: “How could the department say his performance was poor when he had been doing what no one else was able or willing to do?” Interestingly, the FiberWAN continued to run smoothly while Childs was holding the passwords.

As of May 2011, San Francisco officials maintained they had paid Cisco contractors almost $200,000 to fix the problems with the FiberWAN. The city has retained a security consulting firm, Secure DNA (www.secure-dna.com), to conduct a vulnerability assessment of its network. It has also set aside a further $800,000 to address potential ongoing problems.

On April 27, 2010, after nearly three days of deliberation, a jury convicted Childs of one count of felony computer tampering for withholding passwords to the city’s FiberWAN network.

On August 9, 2010, the judge sentenced Childs to four years in prison.

Questions 1. Do you agree with the jury that Childs is guilty of computer tampering?

Chapter 12:

Page 11

(a) Discuss the case from the perspective of the prosecutor of the City of San Francisco.

Childs, as a network administrator, had many responsibilities to protect the network from intruders and implement security policies. He did a thorough job. However, the city, his employer, has the right to know details about the passwords and security schemes and may need additional access rights. If Childs was asked for these things from higher-ups and refused them, then that is a violation of his employment contract. (b) Discuss the case from the perspective of Childs’s defense lawyer.

Childs, as a network administrator, had many responsibilities to protect the network from intruders and implement security policies. The job he did seems to be quite thorough and robust from a technical aspect. It was his supervisors’ responsibility to inform him that his policies had to be approved by higher-ups before they were implemented in the network.

This later policy document/planning document is missing, which constitutes gross negligence by the city administration.

2. A single point of failure is a component of a system that, if it fails, will prevent the entire system from functioning. For this reason, a single point of failure is clearly undesirable, whether it is a person, a network, or an application. Is Childs an example of a single point of failure? Why or why not? If he is guilty, then how should the City of San Francisco (or any organization) protect itself from such a person?

Yes. Childs is a single point of failure. If he were to face a tragedy, who else would be familiar with the network, the passwords, and the security schemes? There needs to be a delegate, backup, or cross-trained person to handle this crisis.

Glossary accountability

a tenet of ethics that refers to determining who is responsible for actions that were taken. code of ethics a collection of principles that are intended to guide decision making by members of the organization. digital dossier an electronic description of you and your habits. electronic surveillance tracking people’s activities with the aid of computers. ethics the principles of right and wrong that individuals use to make choices to guide their behaviors.

Information privacy the right to determine when, and to what extent, information about you can be gathered and/or communicated to others liability a legal concept that gives individuals the right to recover the damages done to them by other individuals, organizations, or systems. opt-in model a model of informed consent, where a business is prohibited from collecting any personal information unless the customer specifically authorizes it.

Chapter 12: opt-out model

Page 12

a model of informed consent that permits a company to collect personal information until the customer specifically requests that the data not be collected. privacy the right to be left alone and to be free of unreasonable personal intrusions. privacy codes (see privacy policies) privacy policies (also known as privacy codes) an organization’s guidelines for protecting the privacy of customers, clients, and employees. profiling the process of forming a digital dossier. responsibility a tenet of ethics where you accept the consequences of your decisions and actions.

Rainer, Turban, Splettstoesser-Hogeterp, Sanchez-Rodriguez, Introduction to Information Systems, 3rd Canadian Edition -Instructor’s Manual

CHAPTER 13: Information Security Chapter Outline 13.1 13.2 13.3 13.4 13.5

Introduction to Information Security Unintentional Threats to Information Systems Deliberate Threats to Information Systems What Organizations Are Doing to Protect Information Resources Information Security Controls

Learning Objectives 1. Identify the five factors that contribute to the increasing vulnerability of information resources, and provide a specific example of each one.

2. Compare and contrast human mistakes and social engineering, and provide a specific example of each one.

3. Discuss the ten types of deliberate attacks.

4. Define the three risk mitigation strategies, and provide an example of each one in the context of you owning a home.

5. Identify the types of controls that organizations can use to protect their information resources, and provide an example of each one.

Teaching Tips and Strategies Information security has become a critical issue in today’s business environment. Businesses who thought they did not need or wanted to spend the funds for information security are increasingly finding out the hard way that they were wrong.

Information security has become an issue that all types of organizations need to be concerned about and operate around to protect their information resources and assets. Every day there seems to be news stories of businesses that have had their networks or information resources breached. Check, or as an assignment have the students check, a few of the technology news sites, such as http://computerworld.com or http://news.cnet.com/security, before you start this chapter to bring some current events into your discussion.

Many students still use simplistic passwords. While you should NOT ask your students what their passwords are, you can come up with some good and bad password examples that you can post on the board. Have a discussion which ones might be better or worse than others, and why (length, pattern, easily guessed, real word, etc…)

Ask which students use passwords on their own devices? In addition to laptops, being into the discussion their smart phones, tablets, etc. While we have not got to telecommunications chapter yet, consider bringing security of their home WiFi network into the discussion. (Check out Lifehacker.com for some ideas.)

Chapter 13)

Page 2

There is no way to fully secure an information system against every potential mishap, but there are lots of ways to significantly reduce the risks and recover the losses. The best organizations recognize that fast recovery is good business. The days are behind us when organizations could continue serving their customers for several days or even weeks without the aid of IT. Information rich industries are totally dependent on the technology. Imagine a university that cannot bill its students or pay its faculty; imagine an insurance company that has no access to its customers’ computerized policies; or, imagine a bank that cannot provide you with your checking account balance! One of the most hated and increasingly unacceptable phrases we can hear from a customer service representative is “The computer is down, could you come back later?”

Potential of events associated with natural and “man-made” disasters have become risks that organizations can no longer dismiss. A scenario was once noted by a computer expert, “The only truly secure system is powered off, cast in a block of concrete, and sealed in a lead room with armed guards, and even then I have my doubts”. Given this amusing picture, the author is correct. What if were able to align ourselves with the armed guards and gain access to the system?

The last part of the chapter briefly discusses disaster planning. The type of threats and their potential level of impact will be different depending on the part of the country (or world) the business is located. For example, in 2011, areas of the United States along the Mississippi River that have not seen flooding in decades where adversely impacted that year. Similarly, in 2011, some areas were hit by tornadoes, impacting businesses in those and surrounding areas. For business affected, disaster planning and recovery quickly became very important to their survival.

“Before you go on…“ Review Questions Section 13.1… Before you go on…

1. Define information security.

Information security is the protection of information and information systems from unauthorized access, use, disclosure, disruption, modification or destruction.

2. Differentiate among a threat, an exposure, and a vulnerability.

A threat to an information resource is any danger to which a system may be exposed. The exposure of an information resource is the harm, loss, or damage that can result if a threat compromises that resource. An information resource’s vulnerability is the possibility that the system will be harmed by a threat.

3. Why are the skills needed to be a hacker decreasing?

The reason is that the Internet contains information and computer programs called scripts that users with few skills can download and use to attack any information system connected

Chapter 13)

Page 3

to the Internet. (Security experts can also use these scripts for legitimate purposes, such as testing the security of various systems.)

Section 13.2 … Before you go on…

1. What is an unintentional threat to an information system?

This includes such threats as human errors, power outages, etc..

2. Provide examples of social engineering attacks other than the ones just discussed.

There are a number and have grown through the use of social networks.

Section 13.3 … Before you go on…

1. Why has the theft of computing devices become more serious over time?

Partially due to potential of confidential data that may be stored on the devices.

2. What are the three types of software attacks? a. Remote Attacks Requiring User Action b. Remote Attacks Needing No User Action c. Attacks by a Programmer Developing a System 3. Define alien software, and explain why it is a serious problem.

Alien software is clandestine software that is installed on your computer through duplicitous methods. It typically is not as malicious as viruses, worms, or Trojan horses, but it does use up valuable system resources. In addition, it can report on your Web surfing habits and other personal behavior.

4. What is a SCADA system?

SCADA systems are used to monitor or to control chemical, physical, and transport processes such as oil refineries, water and sewage treatment plants, electrical generators, and nuclear power plants. Essentially, SCADA systems provide the link between the physical world and the electronic world.

Section 13.4 … Before you go on…

1. Describe several reasons why it is difficult to protect information resources. a. Hundreds of potential threats exist. b. Computing resources may be situated in many locations. c. Many individuals control or have access to information assets.

Chapter 13)

Page 4

d. Computer networks can be located outside the organization, making them difficult to protect. e. Rapid technological changes make some controls obsolete as soon as they are installed. f. Many computer crimes are undetected for a long period of time, so it is difficult to learn from experience. g. People tend to violate security procedures because the procedures are inconvenient. h. The amount of computer knowledge necessary to commit computer crimes is usually minimal. As a matter of fact, a potential criminal can learn hacking, for free, on the Internet. i. The costs of preventing hazards can be very high. Therefore, most organizations simply cannot afford to protect themselves against all possible hazards. j. It is difficult to conduct a cost-benefit justification for controls before an attack occurs because it is difficult to assess the impact of a hypothetical attack. k. Among others…

2. Compare and contrast risk management and risk analysis.

Risk analysis involves three steps (1) assessing the value of each asset being protected, (2) estimating the probability that each asset will be compromised, and (3) comparing the probable costs of the asset’s being compromised with the costs of protecting that asset. The organization then considers how to mitigate the risk.

In risk mitigation, the organization takes concrete actions against risks. Risk mitigation has two functions: (1) implementing controls to prevent identified threats from occurring, and (2) developing a means of recovery should the threat become a reality. There are several risk mitigation strategies that organizations can adopt. The three most common are risk acceptance, risk limitation, and risk transference.

Section 13.5 … Before you go on…

1. Differentiate between authentication and authorization. Which one of these processes is always performed first?

Authentication confirms the identity of the person requiring access. After the person is authenticated (identified), the next step is authorization. Authorization determines which actions, rights, or privileges the person has, based on his or her verified identity. Let’s examine these functions more closely.

Authorization determines which actions, rights, or privileges the person has, based on his or her verified identity. Let’s examine these functions more closely.

2. Compare and contrast whitelisting and blacklisting.

Chapter 13)

Page 5

Whitelisting is a process in which a company identifies the software that it will allow to run on its computers. Whitelisting permits acceptable software to run and either prevents any other software from running or lets new software run in a quarantined environment until the company can verify its validity.

A blacklist, then, includes certain types of software that are not allowed to run in the company environment. For example, a company might blacklist peer-to-peer file sharing on its systems. In addition to software, people, devices, and Web sites can also be whitelisted and blacklisted.

3. Describe the major types of controls for information systems.

Students should describe application controls, communication controls, logical (software) controls and general controls.

4. What is information system auditing?

In an IS environment, an audit is an examination of information systems, their inputs, outputs, and processing. Such observers perform the task of information systems auditing.

5. What is the purpose of a disaster recovery plan?

Business continuity is the chain of events linking planning to protection and to recovery. The purpose of the business continuity plan is to provide guidance to people who keep the business operating after a disaster occurs.

IT’s About Business Questions

13.1 Thomas Tax Service 1. Why did Dwight restore his data manually by himself?

He had no backup.

2. What are the advantages and disadvantages of Dwight’s backup plan?

Advantages: Simple and easy to implement Disadvantage: Manual backup so it relies on individuals’ initiative; Only the three most backup are kept, so it is impossible to retrieve data in earlier stages.

13.2 Virus Attack Hits the University of Exeter 1.

What other actions could the University have taken to prevent the attack?

Chapter 13)

Page 6

Student will have various responses to this question. Possible responses include: • Ensure all vendor operating system and software security patches have been applied to all machines connected to the network.

• Ensure all malware software is up-to-date along and perform automatic daily updates virus definitions.

• Install network firewalls capable of monitoring and blocking known malware • Place student (non-administrative) traffic on a separate network 2. What actions should the University now perform to prevent future attacks?

Again, student will have various responses to this question. In addition to the above some actions might include, • Periodic security training.

• Automatic malware scans of all files passing across the network.

13.3 The Stuxnet Worm 1. Describe the implications of the precisely targeted nature of the Stuxnet attack.

This means that with adequate knowledge and resources for development, a country or organization could potentially develop malware capable of disrupting or destroying the digital resources of another country or organization without disrupting other processes being used by that group.

2. Analyze the statement: “Nations use malware such as the Stuxnet worm when their only alternative is to go to war.”

Given the growing dependence on technology by most nations, it might be less expensive and strategically advantageous to attack another’s electronic and other assets remotely rather than attack militarily.

13.4 Information Security at City National Bank and Trust 1. Why is it so important for organizations to establish enterprise-wide security policies?

Maintain consistency across the organization.

2. Are the bank’s e-mail policies too stringent? Why or why not? Support your answer.

No. Given the type of data maintained by the bank, it is important to maintain stringent controls.

Chapter 13)

Page 7

Discussion Questions 1. Why are computer systems so vulnerable?

The level of complexity makes it difficult to understand all of the vulnerabilities. There are many threats internal and external, intentional and unintentional.

2. Why should information security be of prime concern to management?

Most companies would be severely impacted if their systems were interrupted.

3. Is security a technical issue? A business issue? Both? Support your answer.

Both. Technology creates security holes and allows hackers to break in, but businesses must adopt policies and controls to minimize these break-ins.

4. Compare information security in an organization with insuring a house.

We pay for insurance but hope that we never have to worry about using it.

5. Why are authentication and authorization important to e-commerce?

Authentication confirms the identity of the individual and authorization determines what they are allowed to do.

6. Why is cross-border cyber-crime expanding rapidly? Discuss possible solutions.

International organized crime is taking over cybercrime which is illegal activity taking place over computer networks. The online commerce industry is not particularly willing to install safeguards that would make it harder to complete transactions. It would be possible to demand passwords or personal ID numbers for all credit card transactions. Companies are developing software and services that deliver early warnings of trouble. These early-warning systems are proactive, scanning the Web for new viruses and alerting companies to the danger.

7. Discuss why legislation is having an impact on information security.

Legislation like the Sarbanes-Oxley Act requires certain safeguards to be built into systems and has strict audit requirements.

8. What types of user authentication are used at your university and/or place of work? Do these authentication measures seem to be effective? What if a higher level of authentication were implemented? Would it be worth it, or would it decrease productivity?

Students can answer based on their environments.

Chapter 13)

Page 8

9. Why are federal authorities so worried about SCADA attacks?

Federal authorities are concerned because SCADA (supervisory control and data acquisition) systems are used to monitor and control a plant or equipment in industries such as telecommunications, water and waste control, energy, oil and gas refining and transportation networks.

Problem Solving Activities 1. A critical problem is assessing how far a company is legally obligated to go in order to secure personal data. Because there is no such thing as perfect security (i.e., there is always more that you can do), resolving this question can significantly affect cost. a. When are security measures that a company implements sufficient to comply with the obligations?

Security measures are sufficient when they have completed a comprehensive risk analysis and determined that they have covered all threats that have a reasonable likelihood of happening and provided protection against those threats. b. Is there any way for a company to know if its security measures are sufficient? Can you devise a method for any organization to determine if its security measures are sufficient?

There is nothing absolute in this world of technology, knowing that some individuals consider it a challenge to see if they can break through any safeguard that is implemented. The only sure way to know is if there are no breaches. Monitoring and staying vigilant are the best ways to protect against intrusions.

2. Enter www.scambusters.org. Find out what the organization does. Learn about e-mail scams and Web site scams. Report your findings.

“ScamBusters Has Helped People Protect Themselves From Clever Internet Scams, Identity Theft and Urban Legends Since 1994” Students responses will vary.

3. Visit www.international.gc.ca/crime/cyber_crime-criminalite. aspx (Foreign Affairs and International Trade Canada’s page on cyber-crime). Read the section on “Domestic Initiatives” and write a report on accomplishments to date using the links found in this section.

Students will use the search function on the site to locate the document.

4. Enter www.alltrustnetworks.com and other vendors of biometrics. Find the devices they make that can be used to control access into information systems. Prepare a list of products and major capabilities of each vendor.

Chapter 13)

Page 9

When students use the link, they can select “merchants” and it will take them to a menu which will allow them to select “Biopay technology”.

5. Software piracy is a global problem. Access the following Web sites: www.bsa.org and www.microsoft.com/en-us/piracy/. What can organizations do to mitigate this problem? Are some organizations dealing with the problem better than others?

Students should enter a search argument of “software piracy” after entering the bsa.org site and access any number of links on the topic to complete their assignment. The Microsoft site offers a variety of links to explore options available to organizations.

6. Investigate the Sony Playstation Network hack that occurred in April 2011. a. What type of attack was it?

It was actually two different attacks. One group slammed the servers with a major denial-of-service attack while other hackers gained access to personal information on the servers. b. Was the success of the attack due to technology problems at Sony, management problems at Sony, or a combination of both? Provide specific examples to support your answer.

In the letter to Congress, Sony said it took several days to determine what had happened at the Sony PlayStation Network, which consisted of approximately 130 servers and 50 software programs. Sony thinks the hackers breached 10 of its servers.

The problem was due to a combination of issues. Some involved funding issues. c. Which Sony controls failed?

The PS3 hack is similar to many attacks on security systems: It is not really one hack, but rather an incremental series of attacks made over a period of time, which successively defeat various security subsystem features via a variety of techniques. These kinds of attacks often take place over many days or weeks and use knowledge gained in each successful stage to advance to the next stage. For example, one of the earliest initiatives was a physical attack that induced glitches on the memory bus, enabling the hackers to take control of the operating system and perform additional investigations. The PS3 hack can teach designers much about how to approach and plan platform security. (http://www.edn.com/article/518212The_Sony_PlayStation_3_hack_deciphered_what_consumer_electronics_designers_can_ learn_from_the_failure_to_protect_a_billion.php) d. Could the hack have been prevented? If so, how?

Chapter 13)

Page 10

The students should have a number of suggestions, both systematic and administrative, based on how the attack took place. e. Discuss Sony’s response to the hack.

Since the attack new security has been implemented, the data center has been moved to an undisclosed location, and the company has created a new position: Chief Information Security Officer, directly reporting to the Chief Information Officer of Sony Corporation. Here are some of the new security measures: • Added automated software monitoring and configuration management to help defend against new attacks • Enhanced levels of data protection and encryption • Enhanced ability to detect software intrusions within the network, unauthorized access and unusual activity patterns • Implementation of additional firewalls (http://arstechnica.com/gaming/news/2011/05/hirai-update.ars) f. Describe the damages that Sony incurred from the hack.

Sony suffered greatly after a hacker attack at the end of April forced it to take down its PlayStation Network online service and rebuild it in a more secure manner, after intruders managed to steal personal information from all the 70+ million PSN users. (http://news.softpedia.com/news/PSN-Attack-Has-Made-Sony-Hyper-Vigilant-AboutSecurity-207544.shtml) Team Assignments 1.

Access www.ftc.gov/sentinel and www.publicsafety.gc.ca/prg/ns/cybr-scrty to learn more about how law enforcement agencies around the world work together to fight consumer fraud. Each team should obtain current statistics on one of the top five consumer complaint categories and prepare a report. Are any categories growing faster than others? Are any categories more prevalent in certain parts of the world?

2.

Read the article “Why You Might Need to Rethink Your Internet Security—Now” at www.entrepreneur.com/article/224007 . Each team should download a product that addresses security concerns and discuss its pros and cons for the class.

Closing Case Who Is Minding the Security Store?

The Problem On Wednesday, April 21, 2010, computers in companies, hospitals, and schools around the world became trapped in a cycle of repeatedly rebooting themselves after an antivirus program from security vendor McAfee (www.mcafee.com) identified a normal Windows file as a virus.

Chapter 13)

Page 11

Computers running Windows XP Service Pack 3 in combination with McAfee VirusScan 8.7 were affected. The repercussions were widespread.

• About a third of the hospitals in Rhode Island had to postpone elective surgeries and stop treating emergency-room patients who were not experiencing traumas.

•

In Kentucky, state police officers were instructed to shut down the computers in their patrol cars as technicians tried to fix the problem.

•

The National Science Foundation in Arlington, Virginia, lost computer access.

•

At Illinois State University in Normal, Illinois, dozens of computers in the College of Business became inoperable.

McAfee’s policy is to update its corporate customers on a daily basis. The April 21, 2010 update was intended to detect and destroy a minor threat, the “W32/wecorl.a” virus. However, the update incorrectly identified the critical “svchost.exe” file in Windows XP Service Pack 3 as malicious software and then quarantined it. In some cases, the update actually deleted the file.

Without “svchost.exe” a Windows personal computer will not boot (start up) correctly.

When users applied the McAfee update and then rebooted their computers, the computers crashed and rebooted repeatedly. Most of these computers lost all network capability as well.

Adding to these problems, some computers became unable to recognize their own USB drives.

This problem turned out to be a major one, because recovery required users to reinstall svchost.exe, a process that could be done more easily by walking a flash drive from one crippled computer to the next.

The Solution Because virtually all the affected personal computers were unable to connect to a network, corporate IT personnel had to manually fix each machine. Of course, this process became much more difficult if the affected computers could not recognize their own USB drives.

Later on Wednesday, McAfee placed a document on its Web site that specified the necessary recovery steps. The following day the company made available a semi-automated tool that had to be run on affected computers after entering Windows’ Safe Mode.

The Results McAfee took two days (until April 23, 2010) to post a list of frequently asked questions (FAQ) concerning the update disaster on its Web site. Late on April 23, McAfee’s home page contained a link to a blog post by McAfee’s Barry McPherson that attempted to minimize the issue.

(Interestingly, McPherson was McAfee’s executive vice president of support and customer service, not its CEO.) McPherson pledged that McAfee would improve its quality assurance processes to see that this problem did not reoccur.

Most large McAfee customers had their computers up and running in two days or less.

However, a number of small businesses that did not have IT departments were still trying to fix their computers several days later.

Interestingly, perhaps modern organizations are somewhat to blame for this problem.

Today, organizations are pushing for more rapid updates to their antivirus software to minimize their exposure time to new malware threats. Antivirus vendors have responded to these pressures by speeding up the delivery of their software updates in an attempt to match the pace

Chapter 13)

Page 12

of new malware development by hackers. These rapid updates can cause security vendors to make mistakes in their quality control procedures, which apparently is what happened to McAfee.

Questions 1. Discuss McAfee’s handling of the update disaster. Should McAfee have done anything differently? If so, what? Support your answer.

It appears that McAfee might not have adequately tested the update prior to it being distributed. The news release also did not come from the highest person in the organization.

McAfee should evaluate its quality control process and make changes to ensure patches do not get release before stringent internal review and testing.

For public relation reasons, establish a policy, if one is not already in place, to limit who is authorized to make news releases dealing with major issues to only the company CEO. 2. What should organizations do to prevent such problems in the future?

Where possible, organization IT departments should develop a process to internally test all software updates, including virus updates, in a controlled environment prior their being pushed out to the computers on their network.

Develop, as part of the disaster recovery plan, procedures that could be used to recover systems that they believe have been compromised.

Additional Resources Due to the importance information security has on organizations there is a continuous stream of news reports of various attacks and security issues taking place. Instructors should periodically check, especially around the time this chapter is presented, technology news sites such as http://www.computerworld.com, http://news.cnet.com/security or http://news.cnet.com/insecurity-complex/ to be able to interject current security related events into the class discussions.

If you are teaching an online class or are looking for a short video for a lecture class, I have sometimes had luck finding topic relevant videos in http://youtube.com. The problem is that sometimes they are product demos or sales videos, but they still sometimes present relevant information or concepts.

Another source of security -related how-technology-works audios is a weekly podcast done by Steve Gibson and Leo Leporte, called SecurityNow. The complete archive of the audio version of the shows can be found at http://www.grc.com/securitynow.htm. (You can find video versions of the more recent shows at http://www.thisweekintech.com/sn.) However, while the content of

Chapter 13)

Page 13

the topic specific shows is usually very good, the two hosts sometimes spend the first part of the podcast talking on some unrelated topics. These podcasts are released under the Creative Commons License. I have used them for my online classes and as more detailed support of specific topics for students in my lecture classes.

Chapter Glossary access controls

Controls that restrict unauthorized individuals from using information resources and are concerned with user identification adware Alien software designed to help pop-up advertisements appear on your screen alien software Clandestine software that is installed on your computer through duplicitous methods anti-malware systems (antivirus software) Software packages that attempt to identify and eliminate viruses, worms, and other malicious software audit An examination of information systems, their inputs, outputs, and processing authentication A process that determines the identity of the person requiring access authorization A process that determines which actions, rights, or privileges the person has, based on verified identity back door Typically a password, known only to the attacker, that allows the attacker to access the system without having to go through any security procedures biometrics The science and technology of authentication (i.e., establishing the identity of an individual) by measuring the subject’s physiologic or behavioral characteristics blacklisting A process in which a company identifies certain types of software that are not allowed to run in the company environment certificate authority A third party that acts as a trusted intermediary between computers (and companies) by issuing digital certificates and verifying the worth and integrity of the certificates cold site A backup location that provides only rudimentary services and facilities communications controls (also network controls) Controls that deal with the movement of data across networks controls Defense mechanisms (also called countermeasures) cookie Small amounts of information that Web sites store on your computer, temporarily or more-or-less permanently copyright A grant that provides the creator of intellectual property with ownership of it for a specified period of time, currently the life of the creator plus 70 years cybercrime Illegal activities executed on the Internet cyberterrorism Can be defined as a premeditated, politically motivated attack against information, computer systems, computer programs, and data that results in violence against noncombatant targets by subnational groups or clandestine agents cyberwarfare War in which a country’s information systems could be paralyzed from a massive attack by destructive software

Chapter 13)

Page 14

demilitarized zone (DMZ) A separate organizational local area network that is located between an organization’s internal network and an external network, usually the Internet denial-of-service attack A cyberattack in which an attacker sends a flood of data packets to the target computer, with the aim of overloading its resources digital certificate An electronic document attached to a file certifying that this file is from the organization it claims to be from and has not been modified from its original format or content distributed denial-of-service (DDoS) A denial-of-service attack that sends a flood of data packets from many compromised computers simultaneously employee monitoring systems Systems that monitor employees’ computers, e-mail activities, and Internet surfing activities encryption The process of converting an original message into a form that cannot be read by anyone except the intended receiver exposure The harm, loss, or damage that can result if a threat compromises an information resource firewall A system (either hardware, software, or a combination of both) that prevents a specific type of information from moving between untrusted networks, such as the Internet, and private networks, such as your company’s network hot sites A fully configured computer facility, with all information resources and services, communications links, and physical plant operations, that duplicate your company’s computing resources and provide near real-time recovery of IT operations identity theft Crime in which someone uses the personal information of others to create a false identity and then uses it for some fraud information security Protecting an organization’s information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction information systems controls The procedures, devices, or software aimed at preventing a compromise to a system intellectual property The intangible property created by individuals or corporations, which is protected under trade secret, patent, and copyright laws least privilege A principle that users be granted the privilege for some activity only if there is a justifiable need to grant this authorization logic bombs Segments of computer code embedded within an organization’s existing computer programs malware malicious software such as viruses and worms network controls (see communications controls) password A private combination of characters that only the user should know patent A document that grants the holder exclusive rights on an invention or process for a specified period of time, currently 20 years phishing attack An attack that uses deception to fraudulently acquire sensitive personal information by masquerading as an official-looking e-mail physical controls Controls that restrict unauthorized individuals from gaining access to a company’s computer facilities

Chapter 13)

piracy

Page 15

Copying a software program (other than freeware, demo software, etc.) without making payment to the owner privacy The right to be left alone and to be free of unreasonable personal intrusion privilege A collection of related computer system operations that can be performed by users of the system public-key encryption (also called asymmetric encryption) A type of encryption that uses two different keys, a public key and a private key risk The likelihood that a threat will occur risk acceptance A strategy in which the organization accepts the potential risk, continues to operate with no controls, and absorbs any damages that occur risk analysis The process by which an organization assesses the value of each asset being protected, estimates the probability that each asset might be compromised, and compares the probable costs of each being compromised with the costs of protecting it risk limitation A strategy in which the organization limits its risk by implementing controls that minimize the impact of a threat risk management A process that identifies, controls, and minimizes the impact of threats, in an effort to reduce risk to manageable levels risk mitigation A process whereby the organization takes concrete actions against risks, such as implementing controls and developing a disaster recovery plan risk transference A process in which the organization transfers the risk by using other means to compensate for a loss, such as by purchasing insurance secure socket layer (SSL) (also known as transport layer security) An encryption standard used for secure transactions such as credit card purchases and online banking security The degree of protection against criminal activity, danger, damage, and/or loss social engineering Getting around security systems by tricking computer users inside a company into revealing sensitive information or gaining unauthorized access privileges spam Unsolicited e-mail spamware Alien software that uses your computer as a launch platform for spammers spyware Alien software that can record your keystrokes and/or capture your passwords threat Any danger to which an information resource may be exposed trade secret Intellectual work, such as a business plan, that is a company secret and is not based on public information transport layer security (TLS) (see secure socket layer) trap doors (see back door) Trojan horses A software program containing a hidden function that presents a security risk tunneling A process that encrypts each data packet to be sent and places each encrypted packet inside another packet virtual private network (VPN) A private network that uses a public network (usually the Internet) to securely connect users by using encryption

Chapter 13)

viruses vulnerability warm site whitelisting

worms

Page 16

Malicious software that can attach itself to (or “infect”) other computer programs without the owner of the program being aware of the infection The possibility that an information resource will be harmed by a threat A site that provides many of the same services and options of the hot site, but does not include the company’s applications A process in which a company identifies acceptable software and permits it to run, and either prevents anything else from running or lets new software run in a quarantined environment until the company can verify its validity Destructive programs that replicate themselves without requiring another program to provide a safe environment for replication