Introduction to

Information Systems
Supporting and Transforrning Business
Fourth Edition

R. Kelly Rainer Jr.
Casey G. Cegielski

John Wi ley & Sons, Inc.

Vil-e Prc~idcnt & Exccutiv<• l'ubli; her E xecutive l~ditor Content i\ lanager E xecutive Marketing Manager CJ ·cativc Director Senior Design er Senior Photo Edit or Editorial Assistant Senior Conte nt Editor Product Designe rs Editorial Operations Manager S enior Prod uction l<~litor l\11cdia Specia list P roduction Management Services
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Do n Powle y Beth Lang Golub Kevin Holm C hristophe r Rue! ll:ury Nolan Maureen Eide Lisa Cee I~Iizn beth M ills Wendy Ashen berg Tom Kulesa/)ennifer Welter Melissa Edwards Joh n C urley Lisa Sabatini Aptara"', Inc. lvledia Bake1 y Image Copyright Monkey Business Images, 2011 Used under license from © Alberto Perez Veiga/iStockphoto © Manker Business lmages/Shutterstock, Svjatogor/Shutterstock, VectorForever/ Shutterstock. chudo-yudo/Shutterstock, VIPDesignUSNShutterstock, urfin/ Shutterstock, © william schultz/iStockphoto

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'Vhat Do lnfonnation Systems Have to Do with Business?
TillS edition of RJiner and Ceg1 dski's Introductiou to lu{ormatiou Systems will m1s"er this
question for you. In e\·ery c hapter, you will see how real globa l businesses use techn ology and inf orma tion systems to increase their profi tability. gain ma rket share . impro,·e their customer ser\'icc, and manage their daily opcmtions. In other words, you will leam how information systems proVIde the foundation for modern business enterprises. Our goal is to teach all business majors, especia lly undergraduates, how to use IT to master their current or future jobs and to help ensure the success of their organization. Our focus is not on merely /eami11g the concepts of informati on technology but rather on applyiug those concepts to perform business processes more efficiently and effecth-ely. We concentrate on placing information systems in the context of business, so that you will more readily grasp the concepts presented in the text.

\iVhat's ln M




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The theme of this book, \\'hat's in IT {or Me?, is a question asked by most students who take this course. Our book will showyoll that IT is the backbone of any business, whether you're majoring in Accounting, Finance. ~larketing. Human Resources Opemtions 1\lanagement, or MIS.

New to This Edition
The fourth edition contains many exciting additions and changes. These elements make the text more interesting and readable for students of all majors, while still providi ng the most current information poss1blc in the rapidly cha nging field o f infom1ation systems.

• • A new chapter on Web 2.0 and social networks (Chapter 9). Split the third edition's eth ics and security chapter into two sepa rate chapters (Chapter 3 on ethics and privacy, and Chapter 4 on information security) to provide g reater focus on these two critical areas. A new Technology Guide (Technology Cuide 3) on emerging types of enterprise computing. O f particular importa nce here is a tho rough discussion of cloud computing. All-n ew chapter-opening and closing cases. All-n ew or updated IT's About Business fea tures in e\·ery chapte r.

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All-n ew or upd ated examples in every chapter. New and updated Powcrl'o i nt slides incorporating extensive im<1gcs and video. New and UJXlated Test B,mk with questions labeled according to difficulty: e::1sy, medium , and hard , and new "Apply the Concepts" questions that require critical thinking or analysis.

• C hapters I and 2 have been extensively reorganized: • • , the stud ent; to C hapter I focuses on the import ance of information system s: to yolm organiza tions; and t·o society in general. C hapter 2 opens with ~n expand ed discussion of business processes, busine5s process m anagement, and business process reengineering. T he remaind er of C hapter 2 focuses on organizational strategy and how in formation system s h elp organizations gain a competitive advantage in the marketplace.

C hapter 6 (Networks) has been reorganized for enhanced readability. T he chapter begins by describing what a computer n etwork is and then discusses network funda m entals. Next , it bri efly addresses the basics of the Internet and th e World W id e Web. T he chapte r concludes by explor ing what networks enable us to do; namely, to discover, com munica te, and colb borate. C hapter II includes both custom er relationship m an agement (CRM) and supply chain m anagem ent (SCiv'l). This organization helps students understand h ow an organization's inform ation systems reach outsid e the company to enable business with customers and suppliers. C hapter 12 has been refocused on business intelligence (BI) and extensively rewritten . The c hap ter begins with an overview of n1anagers and decision n1aking, and continues with a definition of business intell igen ce. It th en covers Bl data analysis applications, followed by Bl presentation applications. T he c hapter conclud es by focusing on corporate periornlan ce m anagetnent.

Key Features
We have been guid ed by the following go<J is that we bel ieve will enhance t he teachi ng and leaming experience.

"What's in IT for Me?" theme
• We s how why IT is important by ca1ling , 1 ttcntion in each chapter to how th<J t chapter's IT topic rebtes to students in each major. • • A new feature of this edition is chapter-opening "teJSers'" that list specific tasks for each m a jor that the chapter will help prepare stud en ts to do. Through out: each ch apter, icons guide the rea der to releva nt issues for their specifi c function al area - accounting (ACC), finance (FIN ), marketing (M K'T), O perations Management (Ol'vl), Managem ent Information Systems ( MIS), and human resources m anagem ent (HRM). Every chapter concludes with a summary of how the concepts relate to each functional area ("Wh at's in IT for Me?").

Active Learning
VVe recognize the need to actively involve students in p roblem solving, creative thinking, and capitaliz ing on opportunities. Therefore, we have incl u ded in every cha pter a vari ety of handson exerdses, activities, and mini-cases, in cluding exercises that require students to use software applicati on tools. T hrough these activities and an interactive Web site, we enabl e students to apply the con cepts they lea rn. Examples of these applications are improving a business through IT, configuring products, < md using spreadsheets to facilitate problem solving.

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Diversified and Unique Examples from Different Industries
l~xtensive use of vivid examples from lmgc corporc1 tions, sma ll businesses, nnd gove rnm ent and n ot-for-profit organiza tions helps to en liven concepts by dem onstrating the cap,lbilities of rr, its cost and justification, and innova tive ways in which real corporations are using IT in their operations. Eac h cha pter consta ntly h ighlights the integral conn ection between IT and busin ess. 1ll is is especially evident in the " IT 's About Busin ess" boxes and a new '' IT s < lbout Small Business'' box in each chapter.

Successes and Failures
Like other textbooks . this text presents mcmy ex.1mples of IT success. But we ;dso provid e nu merous exe1mples of IT fa il ures, in th e context of lessons that can be leamed from suc h fa ilures. M isuse of IT can be very expensive, as we illustrate.

Lessons From:tJw Faiht.f38

Innovation and Creativity
In today's rapidly changing environment, creativity and innovation are essential for a business to operate effectively and profitably. Throughout the text we demonstrate how IT facilitates these concepts.

Global Focus
Because an understanding of global competition, partnerships, and trading is essen tial to success in business, we provi de a broad selection of inte matiom1l cases and examples. \• Ve discuss how IT facilitates export and import, the managem ent of multinational companies, and electronic tnding around thegl obe. l neseglobal examples are highligh ted with the global icon.

Focus on Ethics
\~1ith corporate scandals appearing daily in the news, ethics and ethical questions have com e to the forefront of business people's m inds. In addit ion to a chapter that con centrates on ethics a nd privacy (Chapte r 3), we have includ ed examples and cases that focus on busin ess ethics th roughout th e ch:1 p tcrs. These ex.1 mples are highlighted with the eth ics icon.

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Ped ~1gogical


O ther pedagogica l fe atures provide a structured learning system that reinforces the con cepts through features suc h as chapter-opening orga nizers, section reviews, frequ ent applications, a nd hands-on exercises ;m el activities.

C lraf>ler-oJJeuiug orgmrizer• include the following pede1gogical features: • The Learning Objectives provid e an overview of th e key con cepts studen ts should come away with after reading the chapter. • Web Reso11rces h ighlight ancilbry llHlterials ava ilable o n the book compa nion site and within WileyPLUS for both instructors and students.
• • T he Chapter Outline lists the major chapter he., dings. An opening case identifies a business problem faced by an actual company, describes th e IT solution applied to the business problem, presents th e results of th e IT solution, and summarizes what students can learn from the case. New "Vvhat's in IT for Me?" "teasers" give students a qu ic k hint about skills in their ma jors for which this chapter will help prepare them .

S tudy aids are provided throughout each ch apter. These include th e following: IT's About Business boxes provide rea1-world applications, with questions that relate to concepts covered in t he text. Icons relate these sections to th e specifi c functiona I areas. • New " IT's About Sm all Busin ess" boxes show exampl es of small busin esses to which students may relate m ore closely than to large corporations.

llll·~i~!i~II PREI'AC I;:
• • • Highlighted Examples interspersed throughout the text illustrate the use (ond misuse) of IT by real-world organizations, thus making the conceptual discussion more concrete. 'J(,b/cslJst key pomts or sum marize different concepts. End-of-section re,;ews (Before You C.o On ...) prompt students to pause and test their und<:rstanding of basic concepts before mo,·ing on to the n ext section .

Eud-o{ -clwpter shuly aids provide extensive opportunity for the reader to revie\\· and actually '"do something" with the concepts they ha,•e just studied. • V.'/wt's in IT {or ,\/e? is a unique chapter summa ry section that demonstrates the relevance of topics for different functional areas (accounting. finance, marketing, production/operations management, and human resources management ). The Chdpter Summdry, keyed to learning objectives listed at the beginning of the chapter, ena bles students to review the major concepts covered in the chapter. Th e end-d-chapter Glossary facilita tes studying by !.sling and defining :11l of the key terms introduced in the chapter. Discussion Questions, Problem-Solving Activities, and Team Assignments prmid e practice through active learning. These exercises are hands-on opportunities to use the co ncepts discu ssed in the chapter. A Case presents a brief case study organized around a business problem and explains how IT helped to soh·e it. Questions at th e end of th e case relate it to con cepts discussed in the
c h~pter.

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" Interactive Case: Ruby's Club'" gives the studen t an assign ment as an intern for Ruby's C lub, a downtown music venue that needs help redesigning its Web site and overhaul ing its technologica l infrastructure, among other things. Students arc referred to \\'ileyPLUS or th e Student Companion Srre for support infonnahon and assignments.

Online Supplements
"~'~''· iner This text also fucil itates the teaching of an introd uctory IS CO\Jrse by providing extensive support materials for instructors and students. Co to w•vw.wiley.comlcolfegelrailler to access the Student and Instructor Web Sites.

Instructor's Manual
The Instructor's Mcmudl, created by Bob Ceh ling of .\uburn Uni,•ersity at ~ lon tgomery, includes a c hapter overdew, teaching tips and strategies, answers to all end-of-chapter questions, supplemental mini-cases with essay questions and answers, and experiential exercises that relate to particular topics.

Test Bank
The Test Bank, written by Da"na DeWire of Babson College is a comprehensive resource for test questions. It contains multiple-ch oice, true/false. short answer, and essay questions for each chapter. The multiple-choice and true/fulse questions are labeled according to difficulty: easy, medium, or hard. New to this edition are ~Apply the Con cept'" questions that require the students to use critical thinking to solve a problem. The test ba nk is available for use in Respondus' easy-to-use software. Respond us is a powerful tool for creating and managing exams that can be printed to paper or published directly to Blackboard, WebCT. Desire2Leam, eCollege. ANCEL, and other eLearning systems. F'or more infom1ation on Respondus and the Respondus Test Bank Network, please visit www.

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PowerPoint Presentations
T he mcdia-cnrichc<l f'owerPoinl Presentatiom cre<ltccl by Kelly Rainer consist of ,, seri es of slides for each c hap ter of th e text that are designed around the text content, incorpowting key poin ts from the t ext and all text illustrations as appropria,te. In add ition , th ey include links to relevant Web sites, videos, and articles to enhance classroom discussion. T h e PowerPoints make extensive use o f images and video clips.

Weekly Updates
vV eekly updates, harvested from around th e web by David Firth of the Unive rsity of Mont:ma, provide you with th e latest IT news and issues. T hese a re posted every Monday m orning throughout th e year ;~ t http:llwileyiu{ormationsystemsu(Jdates.coml and includ e links to articles and videos as well as discussion question s to assign or use in class.

Image Library
A ll textbook figures a re available for download from the Web site. These figures can easily be

added to PowerPoint presentati ons.

BusinessExtra Select
This feature allows i nstructors to package th e text with sofh¥are applications, lab manuals, cases, articles, and oth er real-world cont ent from sources such as INSEAD, lvey and Harvard Business School cases, Fortune, The Economist, The \Vall Street foumal, and much m ore. You can combine the text with the content you ch oose to create a fully customized textbook. For additional information, go to

T his online teac hing < llld learning enviro nment integrates the en tire digitall·c xtboo k with the m ost effective instruc tor and student resources to fit evely le:.Jrni ng style. \ Vith WileyPLUS: • • Sb1dents ;1chieve con cept m astery in a rich, stmctured en vironment that's ava ibblc 24n. Instructors person alize and manage their course m ore e ffectively with :1 ssessm ent, assignm ents, grade trilcking, and m ore.

rpt'u v s


'vYileyPLUS c•m com plem ent the textbook or replace the printed textbook altogeth er for a bout
h alf the pri ce of a new textboo k. F'or S tudents Different leamingstyles, different levels of proficiency, different levels of prepe1ration -each of yom students is unique. Wi/eyPLUS empowers them to take advantage of their individu:al strengths. Integrated , multi-media resources provide multiple study-paths to fit each student's learning preferen ces and en courage m ore active lea rning. Resources in clude: • • • • • Author podcasts, several for each chapter, to use for r eview, Manager Videos, Ruby's C lub lnteractive C ase, Student lecture slides (PowerPoint) for note-taking, M icrosoft O ffice lab manual and How-1o ilnimations

WileyPLl!S includ es many opporhtnities for self-assessment linked to th e relevant portions of the text. Students ca n take control of their own learning and practice until they master the material. Resources in clud e:

···~~• • I'REFACI~
• • • Automatically-graded practice questions from th e Test Bank Pre- and post-lecture quizzes, Vocabulary Aash ca rds and quizzes

For Instructors:

WileyPLUS empowers you with the tools and resources you need to make your teaching even
m ore effective. You can customize your classroom presentation with a wea lth of resources and functionality. You can even add your own materials to your 'v\'ileyPLUS course. Resources include: Media-enriched PowerPoint presentations, created by Kelly Rainer Completely revised Testbank with a wide range oflevels and new ''Apply the Concepts" questions. With \VileyPLUS you can id entify those students who are falling behind and intervene accordingly, without ha,~ng to wa it for th em to com e to office hours. • •

WileyPLUS simplifies and automates such tasks as student performance assessment, making assignments, sco ring shtd ent work, keeping grades, and more. For more information on WileyPLUS or for a demo, contact your 'vViley sales representative or visit

C reating, developing, and producing a new text for an introduction to information techn ology course is a formidable und ertaking. Along th e way, we were fortunate to receive continuous eva luation, criticism, and direction from many coll eag ues who regularly teac h this course. We would like to acknowledge the co ntributions mad e by the foll owing individuals. We would like thank the W iley te<1m: Beth Lang Go lub, Executive Editor; Wendy As henberg, Seni or Content Edi tor; Tom Kules<1 and Jennifer Welter, Product Designers; C hris Ruel , Executive Marketing Ma nager; and Elizabeth Mills, Editorial Assistant. We also thank the production tea m, including Ke,~n Holm, Content Manager; John C urley, Senior Production Editor; and Denise S howers of Aptara. And thanks to Harry Nolan, Design Director; Maureen Eide, Senior Designer; and Lisa Gee, Senior Photo Editor. We also would like to thank Robert Weiss for his skillful and th orough editing of th e manuscript.

C aya P. Agra wal , Rutgers University lhssan Alkadi, South Louisi<trW Community College Mary Ba ld win-Crimes, Gateway Technical College Nora Barnard , Il!PUI Neelima Bhatnagar, University of Pittsburgh at Johnstown Mark Best, The University of Ransas Dan Brandon, Christian Brothers University Pam C arter, North Carolina AO>T State University Ba ny C umbi e, University of Southern Mississippi S ubhasish Dasgupta, George 'v\'ashington University Lauren Eder, Rider University Jonathan Ezer, Rider University G reg Foudray, Salem State University Bob Gehling, Aubum University Montgomery Eileen G riffin, Canisius Coflege Jim Howatt, Luther College C hang-tseh Hsieh, University o(Southem Mississippi Scott Hunsinger, Appalachian State University

George Vr'ttshington University Robctt Ma rmclstcin ." We also thank Dawna DeWire of Babson Coll ege for her diligent and generous work on the 1 est Bank and Aditi Mukherjee of University of Flor ida for her all of h er work on th e quiz questions for \. Southam Arkans11s U11iw:~rsity O lga PetkO\·a. U»iversityofWest Georgia Lisa Rich . Troy University Jim Ott. U11iversity of Louisiana at Lctfayette D ezhi \ Vu . Columbia Basin College Li Richard Ye. Western Washington University Rodger Morrison. Clemson l111iversity Dana I . 1\ilst Stroudsburg University Tom!Vbttson . Richard Klein. KELLY RAINER CASEY CEGIELSKI . Gateway Technical C ollege Supplements Authors \~le are grateful to Brad Prince. Central Connecticut State University Sean Piotrowski. C1misius College S houhong \ Vang. University of !vlississippi Brian \Vest. California State University. 1\1/ississippi State University Linda Volonino. Athens Stelle University T roy S trader.Veb site. Rider U11iversity Brad Prince. University of West Georgia . Gateway Tee/mica/ College S usan Li. wrot e the "IT's About S mall Business" boxes.add.\T ileyPLUS. llJiiversity of I /aul(tii Lee McCbin. who created the Virtual Company case that is on the book's '. We also acknowledge and appreciate the scores of useful su ggestions from Efi·em Mallach of University of Massachusetts Dartmouth in his "Super Review. Eastem Nazarene College C h ristine Laza ro.. Sit/em St1tte University Gmy Templeton. Drake University Zaiyong Tang. University of Massachusetts Dartmouth John Wee.I'RI• :Ei\CI•: ·-·~ · Ifill. School of Business/Adelphi University S teven Ma nd elbaum. Fo11tbo111>e University S heih1 Pea rson. and h elped w ith many other aspects of the book. Northridge Saad Yousuf. Southern Utah University Carol Wysocki.

~trc [Technology Guide 3] L:merging 'l ~vcs of Enterprise Computing [Technology Guide 4] lntclligcnt S~stc ms [Chapter 3] L:thics and Pri.a tional 30 60 78 [Chapter 13] .0 and Social 1\ch. and Information Syste ms Or~an it.stcms [Chapter 2] 2 [Chapter 11] C ustomer Relationship 1\ lanagcm<:nt and Su ppl~ C hain \ lanagcmcnt [Chapter 12] Business Intelligence 284 316 StrategY.-stems and .Brief Contents [Chapter 1] Introduction to lnfom1ation s.acy [Chapter 4] lnfomwtion Sccnritv [Chapter 5] Dahl and Knowledge 1\ lanagcmcnt [Chapter 6] 1\ctworks [Chapter 7] E.ttions 342 [Technology Guide 1] 11a rdwme [Technology Guide 2] ~ofh. 1\ lobilc Comput ing.\ppli(·.-Business and E-Connucrcc 372 110 144 390 180 400 [Chapter 8] \\'irclcss. and 1\ lobile Com me rce 212 [Chapter 9] \\cb 2. Comp<:titi'c Advantage.\ cquiring l nform:ttion s.orks [Chapter 10] lnfonn:ttion Systems "ithin the Organi7~1tion 414 242 [Technology Guide 5] Protecting Yo ur Information .\ sscts [Index] 430 454 262 .

4: r\lternahve i\ letha<).ioDI Actions to Prot~ I Your lnfom1ation Assets 437 TG 6. FUU) l. \cqmrmg rJ \pphubons >50 13.3: \ 'irtualization 40'l T G 3.3: The Traditional Srstems Oe-elopment Life Cyde 356 13.5: Genetic Algorithms 424 T G 4 .1 tionship 1\ lanagement S}~tem\ 29- [Technology Guide 3] 1 •~mcr~ing ' l\1x·s of F nkrp risl· Computin~ TG 3 .skm ' T G 4 .6: Cloud Computmg 406 T G 3. IT Applications 3-16 13.7: Emerg1n.6: lntelllgent Agents -!2S [Technology Guide 5] Protecting Yom lnfonnation \..11Jonsh•p 1\ lana.2: BehJ. lana~ment ~OS 400 [Chapter 12] Bm in<:ss l n td l i~c ncc 12.ue Sdechon >64 T C 4.ement 10 I 11.5: llhlitr Computing 406 TG 3.1honship ..:~hon lechnoi<Y.\pplication Soft.·stcm~ TC 4 .3: Computer 1 -hcrarch\ r . lanagement 288 [Technology Guide 2 ) ~ofu.2: Software Issues W> T G 2.3: :'\eural :-letworb 422 342 13.5: The Cenlr.4: Cnd Cornputmg 405 11..ll Process111g Umt 3SO r [Index] 454 .1: . \ppl1Cations for Data Analysis 32S 12.2: E. nt .\Sd s TG 5 .3: Business Intelligence.tgt"IIK'Ilt 284 U .1: Introduction 372 4 T G 1.t'llt S\slems 416 414 [Chapter 13] kquiring lnfo nnat ion and \ pplit·••tions s.ement System\ 296 11.6: Supplv Chain \lana!.ltions for Presenting Results 330 12..1: Introduction 402 TG 3.~trc T G 2..1: Introduction to lntelll!..4: Other Types of Customer Rel.3: Computer-Bascod.. \chon\ to Prot~t Your Information .. Software Trends 409 12 . tanagers and DeciSIOil 1\lakmg 3~0 12 .og1c4.-l' TG 1.7: lnform.\.'nre W5 390 11.\pert S}~tenu 418 T G 4 . 1: Introduction to SofmJr~ 192 T G 2..3 : S}slems Soft.-\s>ets 4 'l5 430 [Technology Guide 1] l lard".5: Business lntell1gcnce 111 Action· Corporate Performance \lana~.4.2: Operational Customer RclJh01 "h'p i\ lanagement Systems 292 11.2: Strateg•es for.2: What Is Businc~~ Intelligence? >H 3 16 T G 3.1: Planning for and Justif\in.:!> T G 4.···~~ ~·~·· CONTF '\I'I'S [Chapter 11 ] Cmtomn R<:laticm shi p \ hmil ~<:lll<.3 : Anal}tlcal Customer Rei.ement H5 [Technology G uide 4] 1ntdligcnt s.2: Server Famu 40"> TG 3.5: SupplyCimns 299 11.~e liard\\ are 1 15ucs r 4 TG 1 .1: Definin~ Cmtomer Rcl. are W-1 T G 2.4: ..2: St:nte..~nd Su p ph( hain \ lan.4: Input and Output lechnolog1es 3ii T G 1 . .4: Business lntell•gcnce Apphc. TG 'looh for S\~ten" Development 36 1 • 13.5: Vendor and Softw.1: Introduction H2 TG 5 .!) Support for Supply Chain .

Introduction to Information Systen1s Supporting and Transforrning Business .

Chapter Introduction to Information Systems .

.. information system.g. and kno. Define the terms data. Define the terms information technology.·c and • E-book Gs • !VIini-lecture by auth or for each chapter section • Practice quizzes • Flash C mds for vocabulary review • Additional "What's in IT for Me?" cases • \'ideo inten·iews with managers • Lab Manual for Microsoft O ffi ce 2010 • HO\v-to Animations for l icrosoft Office 2010 What'slnM T For ACCT e. ]edge. and application.-/rainer • Student PowerPoints for note taking • Interactive Case: Ruby's Club Assignments • Complete glossmy 1 1 1 Overview of Computer-Based Informati on Systems I low Does IT Impact Organizations? Importance of Information Systems to Societv Wiley Plus All of the nbo. computer-based information system. three ways in which you depend on information technology in your daily life.mageri<11 workers.and give examples of each . Discuss three ways in which information technology can impact managers and three \\'ays in which it can impact non m. information.\PTER OUTLINE ] [ WEB RESOURCES] Begin the process of becoming an informed user of your organization's information systems.. MKT 7 POM Process customer orders FIN Detennlne best sources for funds HR Hire new employees M IS Directly support all functiona l areas Forecast revenues Develop new goods and services .[ LEARNI"\G OBJECTIVES ] [ CH. List three positive and three ncg<1tivc societal effects o f the increased use of infom1ation technolog}'· ldenti~· Whr Should I Study Information Srstems? Student Companion Site wile com/col•.

deepened the popular rage . Saied's deatl1 became the foca l point for Egyptians who had not been previously involved in the protest m ovem ent. millions of protesters from a variety of backgrounds and religions demanded the overthrow of Egyptian President Hosni Mubarak.~sm. leading to at least 100 deatl1s. President Ben Ali was forced into exile. Beginning on January 25. diplomats had cataloged cormption at tl1e highest levels of the Tunisian governm ent. erupted in Tunisia when a small-town policewom an slapped a fruit selle r named Mohammed Bouazizi and ordered him to pack up his street cart. . 'vliddle Eastem countryLater that m onth. was fmstrated by the overall lack of opportunities. on Janua ry 14. providing millions of angry young Tunisians with a martyr." an acti vist with th e group \Ve Rebuild wrote in a Twitter message on January 28. tvl r. Protesters had no trouble assembling increasingly larger crowds. he was turned away. tl1ey were able to undermine the regime's propaganda for th e first time in many years. By rend ering the state television and radio stations irrelev. Instead. and wired devised strategies to evade the government's c rud e firewa lls. Khaled Saied. another popular uprising broke out in a different l Egypt. multilingual . The Results ''Wh en countries block.all we nt ''cbrk. Despite this dire warning. and Etisalat Misr. at 12:34 AM. turning to land line telephones. fax machines. Young Tunisians .Link Egypt.~d ers. including scenes of the police beating and shooting at protestors. As a result.000 people who assembled in cenb·al Ca iro on Janua ry 29 to demand an end to Mubarak's rule.C II APTER I Introduction to Information Sy. Bouazizi was a computer sc ience graduate who was unable to lind any work as a computer technician. his story went viral. An Attempted Solution ln an effort to silence th e dem onsh·ators and avoid th e fate of Tunisia's President Ben Ali. Documents posted on Wiki Lea ks (see C hapter 3). like many young." On Janua ry 28. 20 10. O n February 2. had been bea ten to death by the police. 2011 . following weeks of determined popular protest and pressures. He went to the governor's office and dem anded an appointment.S. Mubarak "turned off the Internet. Bouazizi.educa ted. Protestors spent several hours each day on Face book and other social netwo rks. Vodafone/Raya. 2011. We Rebuild and other activist groups scrambled to keep the country connected to the outside wo rld . Egypt's embattled leaders realized that the communications blockage was largely ineffective and indeed counterproductive. sparking the Jasmine Revolution . tl1e Arab world 's first successful popular uprising. T he protesters used the one weapon tl1at they und erstood much better than did the government: the lntem et. For him. called the Jasm ine Revolution (after the national flower of T unisia). the revolution was fueled by a stead y stream of anonymous text m essages and Twitter and F'acebook updates. Bouazizi carried out his threat. O n F'ebrumy 11. a young m<m from Alexa ndria with no history of politi ca l acti. the slap was the final straw. on December 17.<tcm s [Revolution!] The Problem I n Jammy 2011. Balazik!Shutterstock took to the streets. we e\•olve. in which U. Mobile phone vid eos posted online documented the go. Vast numbers of protestors Robert F. Fina lly. The shutd own proved to be m ore a source of fresh anger than an impediment to the protest m ovement. Telecom Egypt. culminating \~than estimated 250. and even ham ra dio to keep information flowing in and out of Egypt. The activists were successful. Egypt's four prima ry Internet pro. In response. When he died 18 da ys later. The blackout appeared to be designed to disrupt th e orga nization of the country's protest m ovem ent." That is. ln 2010. th e four ))fO\~ders stopped transmitting all Internet traffic into and out of Egypt. he was forced to se ll fruit to support his seven siblings. Muba rak resigned ti·om office. Protesters rallied around a E1cebook page called We Are Afl Klwled Saied.•ernm ent's brutal response. who had held office since 198 1. The Jasmine Revolution did not need any prominent leaders to rally the protesters or to organize the demonstrations. educated Tunisians. threa tening to set himself on fire in public if the governor refused to see

' Egypt Lifts Blockade on Internet Service. Th erefore. Bahrain. intensely compe titive. organiza tions. McfV O man.CAS 1~ Th e Jasmine Revolution and the Egyptian Revolution helped to instigate m ajor uprisings throughout the tvl iddle East and North Africa . "After F. 2011.perts in technol- ogy to be successful.-olk World. Kuwait. No matter what area of business you ma jor in. your organiza tion must effectively use IT. or not-for-profit. C. You will encounter many other exa mples of the soc ietal and environmental effects of information technology throughout this text. it is the se rvice of saving time < md money. com. 2011. 2011. or the size of your company. janual)' 31. collaborate. February 2. T he case also dem onstrates that the impacts of informati on technology are wid eranging and globa l. rapidly changing. Your organization will have to survive and compete in an environment that has been mdica lly c hanged by informa tion technology. In fact. this chapter begins with a discussion of why yo u should beco me knowledgeable about IT. ma ssively interconnected. ~aces of Eg)-pt's ' Revolution 2. •west to Isolate Cadhafi. Rath er. )anuary 28. As the case of E-tvlealz illustrates. ). she has effectively employed social media and available Internet-related tools to create a successful business. Solomon and C. February 15. 2011. it consid ers the imp<~ cts of information systems on orga niza tions and on society in general. priv<Jte sector. and Yemen all had experienced major protests. 2011. whether it is public sector. analyzes. but for you as well. \~lhen you graduate. and knowledge. Morocco. you eithe r 'viii start your own business or will go to work for an organization. 2011. and our phys ical environment. Accordingly. w n.l. your organiz<1tion does not have to be large to benefit from IT. 2011. Wh o knows? Maybe yo u will use the tools you learn a bout in this class to make yo ur great id ea a reality much the way Jane D eLaney ha s! ·n. IT is making our wo rld sm aller. 'Tunisia's Nenu us Neighboll< Watch the Jasmine R evolution. "Eg)-pt Bloc. stores. you will also have to 1mke effective use of IT. Iran . CNN. Th e opening case is a dramati c exa mple of the far-reaching effects of IT on individuals. Sou/O!s: Compiled from). Somalia . In addition. McNamarn.Computet>m/d. February 26-27. January >1. N.gypt. processes. Moreover. Time. You must compete with human talent from around the world . 201 1. Jord an. As you re<Jd this chapter and this text. keep in mind that the information technologies you will learn about are important to businesses of all sizes. Libya. However. rea l-time. what industry you work for. and it differentiates computer-based information systems from application progr<1ms. People Power Hits Like a Tsunami. M. yo u will benefit from lea rning a bout IT. Solomon. Februal)' 2. 201 1. Februal)' 11. Before we proceed. P. "Egyptian President Ste):6 [.v11 Amidst Croundbreaking Digital R evolution. It also distinguishes among data. enabling more and more people to communica te. January 28. "Without Internet. and compe te. Algeria . Although this text is largely devoted to th e many ways in which IT has transformed m odern organizations. Finally. and Syria. US>\ Toda)'. you will also learn a bout the significant impa cts of IT on individuals and societies.' Nen. "The Day Partofthe Internet Died: Egypt Coes Dark. e modern environment is inte nsely competitive not only for your organiza tion. Information technol ogy (IT) relates to any computer-based tool that people use to work with information and to support the information and information-processing needs of an orga nization. Blue. small business owners do not need to be e:o. V. Egyptians Find New Ways to Cet Online. What We Learned From This Case The chapter-opening case illustrates how information tec hnology is encourag ing and assisting people lh~ng und er repressive regimes in their struggles to attain freedom of expression and economic opportunity. and our pbn et. By April 20 \l . 24n /365. as you will see in the case of E-Mealz in n·•s About (Small] Business l. "Tunisia's Re\ulution Should Be Wake-Up Call toM idclle East Altocrats. Robertson.l:ed in China: Is Internet Access a Human Right?• ZDNet. CNN.0'. Cohring and R. and minor inciden ts had occurred in Iraq. Ma uritania.S. V. 2011. 171e Wall Street/oumal. thereby leveling th e digital playing fie ld . Wall. Were Blindsided by R e>ulution. January 15. Coker. To compete successfully. An information system (IS) collects. and information-intensive . "How Cairo. and disseminates information for a specific purpose. for-profit. U. Saudi Arabia. The core competency of Jane's business is not tec hnology."' CNN. You will learn about social networking technologies in detail in C hapter 9. information. February 21. 1l1is environment is globa l. . 11~e Washington Post. social networking tec hnologies literally provided the necessary und erpinnings of th ese uprisings. th e global economy. and J. we need to de fine information technology and information systems.' The Wall Street ]oumal. 2011.. Sudan .

:R I Introduction to Information Systems about [small] business 1. her goal was simply to provide a way for families to spend time together. she could not have transformed her dream Into a reality without Jane and a few employees create a weeKly meal plan for different-sized families. www:daveJamSey. In Planning Resource Review. sell your "stuff''. make and upload vid eos to You Tube. take. Provide two additional examples of how Jane might use Information technology to Improve her service. Since Its Inception. Power Points. Questions 1. resea rch dass papers and presentations. pa y your bills. quite l iterally. surrounded by a mov. (Note: lf any of these terms are unfamiliar to you. that she could both use herself and offer to other families. 2011. Jane has successfully utilized IT to accomplish her goal of helping families spend time and they can manage their accounts to determine which particular plan they will join. you are. you practice continuous computing. while feeling confident that they have purchased all the Ingredients they will need for the weeK . search for. http://E-Mealz. 2011. you use m ore information technologies (in the form of digital de. take classes (and not just at you r university). and buy products from compani es or other people. T h ink of everything you do onl ine. access class syllabi. you will find that she also uses T witter and FacebooK to promote her product and to create a community of customers. and apply for. and 'Neb-based tools for finding information and communicating and collaborating with other peopl e.c1ble information network . never out of touch. How does E-Mealz worK? Essentially. If you visit her site. Your network enables you to pull information about virtuall y anything from anywhere. 2.and they receive their grocery list at the beginning of the weeK.E-Mealz. from wherever you are. " E-Mealz. text and tweet your fri ends and famil y t hroughout your clay. Essentiall use RSS feeds to create your pe rsona l electronic newspaper. Informati on technologies are so deeply embedded in your lives that your da il y routines would be almost unrecognizable to a coll ege student just 20 yea rs ago. media pla yers. called E-Meatz (www. Be specific. information. and many othe r activities. Caldwell. and lectures. the cost was only $1. via a mobile cb~ce. She wanted the same for her family. Provide two examples of how Jane uses Information technology to provide her service. save money. 1. the wired and wireless networks that you access as you m ove about. make your travel reservations (hotel. Jane Delaney grew up In a home where family meals around the table were the norm. laptops. Visitors can submit th eir own recipes to be included In the system. Rather. shop. research. She created a meal-planning service. airline. T he f'v[ IT Tech nology Review refers to you as Homo conexus. jobs. Jane decided it was time to do something about the problem. than any generation in history. Jane needed information technology to put her great Idea to worK . The E-M ealz Web site promotes her products and convinces customers to sign up for her service. You will lea rn about everything m entioned here in detail later in t his text. and to push your own id eas back to the \\leb. http:l!maketimeforfami/y. renta l car). Members testify that they are able to shop more quickly and spend less money. her objective was not to create a huge meal-planning service. often with your smart phone: register for classes. all of which Is updated weekly. Although the tools that Jane uses are not complicated. They then draw up a grocery list w~h prices from various grocery stores.85 a weeK.) . Customers pay for the service -In April 2011 . February 17. conduct banking. and are bombard ed with more information. accessed March 21.1 E-Mealz about a host of nutritional needs.• BHssfu/ly Domestic.~ces).···11·*•1 e C II APTI. design your own page on Facebook. and print your own digita l photog raphs. much as they did when she was growing up.1 Why Should I Study Inforn1ation Systems? You are part of the most connected generation in history: You ha ve grown up online. and it provides Information When Jane Del aney started E-Mealz. com. T his network is created by constant cooperation between the dig ita l devices you carry (for exa mple. E-Mealz has been acclaimed for improving family meals while helping families control their budgets. and enjoy delicious meals. edit. She would go from one week of a somewhat organized meal plan to another weeK of sheer chaos. for m ore tasks. Members can sign up for newsletters. don't worry. at any time. and sma rt phones). but she found It very difficult du e to their busy schedules. create your own blog and post your own podcasts and '~deocasts to it. The Web site offers plans for coupies and families. Sources: Compiled from A. " burn" your own custom-music COs and D'vDs.

Th e • m swer lies in your becoming an informed user.2 illustrates how one couple uses IT to run their own mnlt in. T hat is. IT's About Business 1. the question is: W hy you sho uld le~m about info rma tio n systems ~mel informati on techn ologies? After ~11. I \\' loy Sloo uld I Study lo oformatio n Spt<:ons? ·=·~···· The Informed User.~ties. the adoption and use of these tedm ologies. T h ird. li'irst. What do you think is this woman's job? (Source: © Slawomir Faje r/ iStockphoto) . you will benefi t m ore fr om your o rganizati o n's IT applic<1tions bec<n tse you will understand what is "be hind " those applications (see Figure 1. There are several reasons why you sho uld be an infom1ed user. you will quickly be in a position to recommend-a nd perhaps hel p select-th e IT applications tha t you r organizati on w ill use. you have been surfing tbe \ • Veb for years. USERS MIS FIGURE 1. In general. a person kn owleclge<lble a bo ut inform~tion systems a nd info rmation tec hn ology. informed users tend to get m ore value fronu whatever techn ol ogies th ey use. if you have ideas of becoming an entiepreneur. T he overall objective in this text is to be able to immediately contribute to m anaging the IS function in your organizatio n from the user's perspective. being an inform ed user will keep you a breast of both new information technologies and rapid devel opments in existing technologies. even as a n ew graduate. F inally. Fourth. Managing the IS function within an organiz<1tion is no longer the exclusive responsibility of the IS deparhl1ent. wh at you see on yom computer screen is broug ht to you by your MIS department operating "behind" your screen .Jtiona I busin esses from their ho me.1 IT skills o pen many doors because IT is so widely used. users n ow play key roles in evety step of this process. Second. you C<111 comfort~bly use a computer (or other electronic devices) to perform many acti.1). you will be in a position to enhance the quality of your o rganization 's IT applications with your input. Rather. that is. You wi ll enjoy many bcnefitll from being an informed user of IT . then being an inform ed user will help you use IT wh en you st art your own business. you will understand how using IT can improve your o rganiza tion 's performan ce and te<Hnwork as well as your own productivity. In short.S I•:CTION I. th e goal is to help you b ecom e a very informed user! In addition . R emaining "on top of things" will h elp you to anticipate the impa cts that ''n ew an d improved" technologies will have on your organ iza tion and to ma ke recommendations on. and you feel confid ent that you can m anage any IT applicati on that your orga niz<1tio n's MIS depa rh11ent installs.You! So.

August 25. Elgan.globetask. A digital nomad Is someone Who uses Info rmation techno logies such as smart pho nes. Interestingly. A. March 23. . remote help has enabled Randy to shift his emphasis within the changing Ind ia. 18 were from outside the United for $300 a n Ind ian artist designed Nicola's letterhead as well as the logo of a n Infant peering over the words "Baby Fresh Org•nlc Raby Food "'" A I ondnn-h. for examp le." Business 2. T. the Wllburns employ representatives o f a growing lifestyle trend: the digita l no mads. design. 2007. She now farms out design work to freelancers and Is startIng to sell organic baby rood she cooks herself. Professionals fro m around the world are at their service. They accomplish these tasks by making effective use of outsourcing. Companies In this Industry Include Elance (www. and design work to other countries than to perform t hese services themselves. Rosenwald." The New Yorl< Times. One Is GlobeTask (wlvw. DoMyStuff (www. July 14 and 21. ' Ever Heard of a Digital Nomad?" www. Global outsourcing Is no longer used on ly by big corporations. graphic designers. T he demand for traditiona l IT staff. The 4-Hour Workweek: Escape 9-5. September 14. 2005. 2010. June 10. so he spends more time advising no nprofit o rganizations across the U nited States o n how to help homeowners avoid foreclosure. "Recession woes? wny Not Become a Dlgttal Nomad. July 26. For $125. IT Offers Career Opportunities Because informa tion technology is vital to the operatio n of m odern businesses. all lor less than $10. 2. ' Is Digital Nomad Uving Going Mainstream?" Computei"MJ/1d. small businesses are find ing it easier to farm o ut software development. (Hint: Consid er capital outlay. and design PowerPoint graphics." SmaH Business Trends. 2009.programmers.domystuff. affiliate mark et ers. Elgan. and baby food enterprises out of their home. Ind Explain how global outsourcing can affect people who are starting t11elr own bu siness. Identify and evaluat e the advantages and disadvantages of outsourcing work overseas. Digital nomads have locatio n Independence. The W llburns began buying graphic designs through Elance In 2000. and Web. 2007. wireless Internet access. 2007. an d design ers . P. and multimedia desig n. Take Randy and !Nicola Wilburn. M. As exampl es of added features. T he Wllburns operate real estate. Can anyone do what Randy and Nicola Wilburn are doing? Or. network security. Engardlo. and vworker. Sources: Compiled from substantial. a coffee shop. and similar locations. ' Ahoy the Micro-Multinational. Webgrlty designed a logo for Randy's real estate business. Elance has developed software t o track work In progress and to hand le b Virtual assistants handle routine corresponde nce and put together bus iness materials while he travels. Web (www. labor costs. She Is setting up a Web site lor that b usiness and has offered $500 lor the design work. and other types of knowledge workers. 2009. In addition . Would you like to be a d ig ital nomad? Why or why not? Be specific. August 1." Forbes. M.:m s G [about business] 1. Guru (www. Uve An}Where and Join the New Rich. suppo rt services. payments. accounting.'' San Jose Mercury Ne. does their strat egy require special q ualificatio ns or knowledge? Support your answer. a Jerusalem-based outsourcing Questions 1. 2006. "Digital Nomads ChOose Their Tribes: The Washington Post. Harris.2 Build Your Own Multinational Company l lrm that employs graph ic artists.based applications to work remotely -fro m home. search engines. and they frequently work as freelance writers.elance. M. Their house is the headquarters of a multinational company. Web d esigners. Retired brokers In VIrginia and Michigan handle real estate paperwork.mcQr wrot " r romotlo nal materials. Brickwork Ind ia (www. "Mom-and-Pop Multinationals. a nd new features are boosting the o nline services Industry.) 4. Nicola decided ~o work from home after having their second child. McDermott. H. etc. July 14. consulting. Crown Publishing Group: B. Guru has launched a system t o avoid disputes over payments by the work Is received. and tax records. Varian. the W llburns are digital no mads as well. Increasingly. For example.soo f rA"I. developers.000 per year." Computerwortd. and virtual assistants In Israel. h eadquartered In Kolkata. it offers many employment opportunities. IT Infrastructure costs. 2009. The other vendor Is Webgrlty (www. many well-paid jo bs exist in areas su ch as the Internet an d electwnic commerce (e-commerce).0 Magazine. ''Technology Levels the Business Playing> Field.webgt1tycom). an Internet cafe.·h. Ferriss. w hich he maintains would have cost as much as $1000 In the United States.brentonrussell. 3. allowing buyers to put funds Into escrow until> meanwhile. Randy emp loys ''Virtual ass istants• In Jerusalem to transcribe voice mall.vs.•••m= ••• C II A I)T it:l( 1 Introduc tio n tu lufunnatiuu Sy:o-. 2008. Russell. m obile commerce . In fact. February 20. "The Trend of the Micro-Multinationals. Of the 20 bidders who responded via Elance. Improved softWare. update his Web site." BusinessWeek. The company gen erally charges $8 per hour. Today. writer s. systems analysts. photographers. M. The couple emp loys two primary offsh ore vendors. "'Rise of the Micro Giants. " The Mighty MicroMultinational. His real estate business has slowed In response to the 110uslng crisis. July 28.b2kcorp. and the United States. 2007. Campbell. telecommunications. S. business analysts.

training. In today's digital environ ment.. he or she actively parbcipt•tes m the orgamz:Jlion's strategic planning process. you could become the C IO of your organization one day..see . At the top of the list is the chief information officer (C IO).comlcarecrtopicslcareers and . As a result. Table Position 1.orlcl.. 1 \\"hy Sho uld I Study Information System s? ···E· JI··· The infonna ti on systems field mcludes the people m o rganizations who design and build information systems. and the people responsible for managing those systems.. although mostC IOsstill rise from the IS dcpa rt·ment. the people who use those systems. the IS function has become increasingly important and strategic within organizations. ·n.·.SECTION 1.). finance. Therefore. interfaces closely with users to demonstrate how IT can be used innovatively Creates the computer code for developing new systems software or mainta ining existing systems software Creates the computer code for developing new applications or maintaining existing applications Forecasts technology trends.compulel.1 pro. com.rides a list of IT jobs along \\ith a description of each one.·w. determines information requirements and technical specifications for new applications Focuses on designing solutions for business problems. the chief financial officer (CF'O). is responsible for all strategic planning in the organization Manages a ll s ystems throughout the organization and the day-to-day operations of the entire IS organization Manages IS servi ces s uch as help desks. the C IO works with the c hief executive officer (CEO). regardless of your major.1 Job Description Information Technology Jobs Chief Information Officer IS Director Info rmation Center Manager Applications Development Manager Project Manager Systems Manager Operations Manager Programming Manager Systems Analys t Business Analyst Systems Programme r Applications Programmer Emerging Technologies Manager Network Manager Database Administrator Auditing or Computer Security Manager Webmaster Web Des igner Highest-ra nking IS manager.. So..g. and other senior executives. a gro\\ing number are coming up th rough the ronks 111 the business umts (e. is is another reason to be an informed user of inf onnation systems! Table 1. hot lines... marketing. etc. In most modem organizations. 1l1e C IO is the executive who is in charge of the IS function.. For further details about ca reers m fl '. evaluates and experiments with new technologies Coordinates and manages the o rganization's voice and data networks Manages the organization's databases and oversees the use of databasemanagement software Oversees the ethical and legal use of information systems Manages the organization's World Wide Web site Creates World Wide Web sites and pages .mousier. and c onsulting Coordinates and manages new systems development p rojects Manages a particular new systems development project Manages a particular existing system Supervises the day-to-day operations of the data and/or computer center Coordinates all applications programming efforts Interfaces between users and programmers.

000. T he re is no standard way to divid e responsibil icy for developing and m aintaining infonna tion resources be tween the M IS deparb11ent and the end users. the M IS departm ent is responsible for corporate-level and shared resources. computers are located in all departments.~ ly that. T he Bureau of Labor Statistics. an agency within the Department of La bor that is responsible for tracking and analyzing trends relating to the labor market. In fact. when these systems are not working (even for a short time). In fact. viewing them as custom ers. th e M IS department "owned" the only computing resource in the organization. First. but th e pay is excell ent as well. T hese jobs (with their ran ks) are: • • • • • • • • • • Software architect (# I) Data base administrator (#7) Information systems sec urity administrator (#17) Software development director (# 18) Information technology manager (#20) Telecommunications and networking manager (#2 1) Netwo rk operations manager (#24) Information technology business analyst (#26) Information technology consultant (#28) Software development engineer (#3 0) Not only do IS careers offer strong job growth . and even the countries in which the company operates. This arrangem ent raises several important ques tions: 'vVhich resources are managed by whom ? \lv'hat is the role of the M IS department. Instead . In conb·ast. th e attitudes of top management towa rd com puting. the mainframe. . the main function of the MIS department is to use IT to solve end users' business probl em s. Ta ble 1. th e amount and type of IT resources. it is essential that the J\1 ] IS department and the end users work in close cooperation. Cenerally speaking. its structure. consultative functions of the M IS deparb11ent. Firms re ly on them so hea. that division depends on several fuctors: th e size and nature of the organization . and its pla ce within the organization? \Vhat is the appropriate rela tionship between the MIS department and the end users? Regardless of who is doing what. the maturity level of the tec hnology. and almost all employees use computers in their work.cnn.2 identifi es both the traditional functions and various new. Managing Information Resources l'vla naging information systems in m odern orga niza tions is a difficult. has led to a parb1ership between the M IS department and the end users. information systems have enormous strategic value to organizations. W hen businesses first bega n to use computers in the ea rly 1950s. end users did not inte ra ct directly with the mainfram e. when Money Magazine's Best Jobs in Am erica (http:llmoney. in the modern orga niza tion .-· C II APTI. As a result of these developmen ts. in some cases. the amount and nature of outsourced IT wo rk. A third fac tor contributing to the difficulty in managing information systems is th e evolution of the management information systems (MIS) function within the orga niza tion . information systems are vety expensive to acquire. notes that the median salary for "computer and information systems managers" is approximately $ 11 5. and maintain. the responsibili ty for m anaging inf01111ati on resources is now divided between the M IS department and the end users. known as end user comput· ing. T he MIS departm ent now aC'ts as more of a consultant to end users. the organization 's attitud es towa rd computing. Se.•eral factors contribute to this complexity. At that time. operate. This situation . (This situation is called "bei ng hostage to information systems. the firm C'a nnot function .com/magazinesl moneymag/bestfobs/2010) listed the "top jobs" in America in 20 10. compl ex task. and the end users are responsible for deparh11ental resources.") Second .:R I Introduc tion to Information System s C areer opportunities in IS are strong and are projected to remain strong over the next ten years. lO of the top 30 jobs related directly to information technology.····~(~ .

The best way to bring these innovative uses of IS to life is to partner closely with your MIS department. . • Partnering with business-unit executives o Essentially. etc. including the computer center • Staffing. security. • Educating the M IS staff about the business 0 Communication between the MIS department and the business units is a two-way street. • Incorporating the Internet and electronic commerce into the business 0 As an end user. you will provide critical input about the IS infrastructure needs of your department. and how the l'v11S deparhnent acts as your advisor. its needs. where do the end users come in? Take a close look at Table 1. you will be primarily responsible for effectively using the Internet and electronic commerce in your business. your MIS department will act as your advisor on various issues. You will learn about syst ems development in Chapter 13. • Proactively using business and technical knowledge to seed innovative ideas about IT 0 Your business needs often will drive innovative ideas about how to effectively use information systems to accomplish your goals. Under the traditional i\IIS functions. • Managing outsourcing 0 Outsourcing is driven by business needs. You will be responsible for seeing that this partnership is one "between equals" and ensuring its success. You will work with the MIS department to accomplish this task. and you will provide input into developing these systems. and extranets. You w ill be primarily responsible for advising the MIS department on the most effective use of the Internet. your corporate intranets. training. and its goals.. So. Again. • Educating the non-MIS managers about IT 0 Your department will be primarily responsible for advising the MIS department on how best to educate and train your employees about IT. communications. rou will see how you exercise the primary responsibility for each function. The MIS department.2. and extranets o As an end user. development. intranets.2 The Changing Role of the Information Systems Department Tradition al Functions o f the M IS Departm ent • Managing systems development and systems project management 0 As an end user.SECTION 1. New (Consultative) Functions o f the MIS Department • Initiating and designing specific strat egic information syst ems 0 As an end user.·e MIS functions. you will have critical input into the systems development process. and extranets to accomplish your goals. with you). Such close partnerships have amazing synergies! • Creating business alliances with business partners o The needs of your business unit will drive these alliances. your corporate intranets. your business needs will determine how you want to use the Internet. will advise you on t echnical issues such as communications bandwidth.1 \\"hy Should I Study Information Systems? ·-·~····· Table 1. and developing IS skills • Providing technical services • Infrastructure planning. You will be responsible for educating the MIS staff on your business. • Managing system integration including the Internet. • Managing computer operations. implementing extranets. Under the consultati. the outsourcing decision resides largely with the business units (I.e. typically along your supply chain. your information needs will often mandate the development of new strategic information syst ems. you will be in a partnership with the MIS department. and security. you will see two functions for which you provide vital input. Therefore. including hardware and software compatibility. You will decide which strategic systems you need (because you know your business needs better than the MIS department does). working closely with you. and control o As an end user.

sto re!. uttam gurjnr/Shutterstock) Kn owledge . however. Because information systems are intended to supply useful info rmatio n. th e Information Systems (IS) D epartment. 1. this functio nal area deals with th e planning fo r . Info rmatio n technology relates to any computer-based tool that people use to work with info rmatio n and to suppo rt the infom1ation and information-process ing needs of an orga nization .2 Binary Code. It has been said that the purpose of information systems is to get the rig ht info rmation to the rig ht people. including the i'vi!S Department. Rate yourself as an informed user.:R I Introduction to Information System s before you go on. this isn't a test!) 2. is the key to making complex decisions.and the development. we need to differentiate between info rmation and two closely related terms: data and knowledge (see Fig ure 1. processes.2). An information system collects. Explain the benefits of being an informed user of information systems. (Sources: © janaka Dharmasena-Fotolin. and in the rig ht format. com. and disseminates information fo r a specific purpose. the foundation of info rmation and knowledge. Regardless of the rmation technology tools to help people perform all the tasks related to info rmatio n process ing and managem ent. at th e r ight time. (Be honest. Discuss the various career opportunities offered in the IT field. FIGURE 1. the Information Technology Department.llll~f~-· C II APTI. mamgem ent. in the right amount.2 O verview of Computer-Based Information Systems O rganizations refer to their managem ent infonna tion systems functional area by severa l names. 3 . Exactostock/SuperStock. analyzes.JJ~~ 1. and the Info rmation Services Department. and use of.

figures. Figure 1.92 1. activities. Togeth er.16 2. The first four are called information technology components.92 1.95 + + + + John Jones = GPA Sue Smith = GPA Kyle Owens = GPA Tom Elias = GPA • Job prospects • Graduate school prospects • Scholarship prospects [Prof ession al b aseb all pitcher context] 3. can mean entirely different things in different contexts. l' roced ures are the instructions for combining the above components in order to process information and generate the des ired output.08) <1nd cha racters (e.S I\CT IO 1. trade pitcher.39 + Hugh Carr = ERA 3. Information refers to data that have been organized so that they have meaning <Jnd value to the recipient. Knowledge consists of data and/or information that have been organized and processed to convey unde rstanding. Sofhmre is a program or co llection of programs that enable th e hardwa re to process data. today most are. suppose that a company recmiting at your school has found over time that stud ents with grade point averages over 3. sounds. Within th e co ntext of a un iversity. O rganizational kn owledge. A computer-based information system (CB IS) is an information system that uses computer technology to perform some or all of its intended tasks. and trans<J ctions that are recorded. with no context. For this reason th e term " information system" is typically used synonymously wi th "computer-based information system.95 3. class ified. Consid er the examples of data provided in the preceding paragraph . experience. 3. and printer.g.•ices accept. B.39 3. Based on this accumulated knowledge.39 3. Now that you have a clearer understanding of cbta.g. monitor. A. C). 2. th e foc us shifts to computer-based information systems. the numbers co uld be gr<~de point averages. B. le tters. As you have seen. a grade point average (C PA) by itself is data.95. 2. keyboard.92 + Ed Dyas = ERA 1. and images. ERA is the number of runs per nine innings accountable to a pitcher You see that the sa me data items. F.99. Although not all infonnation systems are computerized. which reflects the experience and expertise of m<~ny people.2 Overview of Compute r-Based Information System s IMI]F!JIIII Data items refer to an elementary description of things. Consid er this example: Data Information Knowleclte [University context] [No context] 3. A. For exa mple.. and the letters could be grad es in an Introduction to M IS class. . Data items can be numbers. but a student's name coupled with his or her CPA is information . accumulated learning. and display data and information . that company may decide to interview only those students with CPAs over 3.3 shows how these four components intera ct to form a C BIS.95 + Nick Ford = ERA • Keep pitcher. events.. • • • • • 1 -l:ord ware consists of devices suc h as the processo r. and expertise as th ey apply to a current business problem. For example.0." T11e basic components of computerbased information system s are listed below. and knowledge. these de.96. C.1 6 2.92 1. The recipient interprets the meaning and d raws conclusions and implications from the information. information. Examples of data items are collections of numbers (e. D.95 [N o context] 3.39 3. these systems process data into information and knowledge that you can use.16 2. process.1 6 + Ken Rice = ERA 2. A database is a collection of related fi les or tables containing data . 1. has great va lue to all employees. and stored but are not organized to convey any specific meaning. or send pitcher to minor leagues • Salary/contract negotiations GPA = grade point average (higher is better) ERA = earned run average (lower is better).0 ha ve exper ienced th e g rea test success in its management program. A n etwork is a connecting system (wireline or wireless) that permi ts different compute rs to share resources. 3.1 I.

} ic~ _ Transaction Processing Systems Cll IT Components !:: IT Platform . you see that the IT components of hardwa re. The IT co mponents plus IT services comprise F IGURE 1. broukoid/ Shutterstock. alexmillos/Shutterstock. Angela Waye/Shutterstock. oversee securi ty and risk.IIII~G~ · ·· C II APTI. IT personnel use these compo nents to deve lop info rm ation systems. and nelworks) with appropriate procedures to make a CBIS useful for people. interfuce with it. F'igure 1. n etworks (wire line and wire less). software. databases.:R I Introduction to Information System s FIGURE 1. Starting at the botto m of the fig ure. (Sources: Nasonov/Shutterstock.3 It takes tech nology (hardware. and manage data . or utilize its output. software. Business Intelligence Systems Dashboards !:!! c en = c :I . zhu difeng/ Shutterstock) Procedures Procedures Database Hardware Procedures computer-based Information system Procedures Sof tware Net work • People are th ose individua ls who use th e hardware and software.4 Information technology inside your organization. These activities cumulati vely are call ed info rmatio n techn o logy services.4 shows how these compo nents are integrated to form th e wid e va riety of informatio n systems in an o rganiza tion . and databases fo rm the information technol ogy platform.'i 8 r-L-------------------------~~~~T~~~N~on~lces ~ne~l--------------------------~---.

Examples are accounting IS. Allow quick and inexpensive access to vast amounts of infonnat ion.nctional area infomwtion system). Major Capabilities of Information Systems Perform high-speed. Computer-based information systems have many capabilities. Reca ll that each deparbnent or functional area within an organiza tion has its own collection of applicati on programs.5 shows the different types of information systems that function among multiple organiza tions. marketing. Table 1. managers use 1T systems to forecast revenues and business a cth~ty. Breadth of Support of Information Sy8tems. frs About Business 1. Certain information systems support parts of organizations. At the top of th e pyramid are the various organizational information systems. Store huge amounts of information in an easy-to-access. or informati on systems. such as accounting. Fo r exa mple. Interpret vast amounts of dat a quickly and efficiently. and enterprise resource planning systems in C hapter 10. Y ou will study transaction processing systems. T here are collections resources area is called the hu.3 summa rizes the most important ones. depa rb11enta l information systems. These function~ I area information systems (FA ISs) are supporting pillars for the information systems located at the top of Figure 1. high-volume numerical computations. (A synon ym ous term is application prog ram . and production/operations. Table 1. finance. and to pe rform audits to ensure that the organization is fundamentally sound and that all financia I reports and documents are accurate. worldwide.that is. others support entire orga nizati ons. As the name suggests. An application (or app) is a computer program designed to support a specific task or business process.3 .) Each functi onal area or deparb11ent within a business organization uses dozens of application programs.4 illustrates th e different types of information syste ms that function within a single organization . marketing IS.s ~:cno 1. the collection of application programs in the human ormation system (HRIS). finance IS. the human resources deparm1ent sometimes uses one application for screening job applicants and another for monitoring employee turnover. Types of Computer-Based Information Systems Modern orga nizations employ many different types of information systems. Figure 1. This section addresses all of th ese the oth er functiona 1 areas as well . In finance and accounting. You will also read a bout the types of support these systems provid e. management information systems. Automate both semiautomatic business processes and manual tasks.3 illustrates how electronic discovery software applications improve the efficiency and effectiveness of the legal discovery process.2 O ver view of Compute r. namely. each FA IS supports a particu lar functional area within the orga nization. and Figure 1. The collection of application programs in a single department is usua lly referred to as a departmental information system (also known as a fu. and human reso urces IS. Provide fast. business intell igence syste ms and dashboards. accurate communication and collaboration within and among organizations. yet small resources inf of applica tion programs. lnfom1ation sys tems perform th ese va rious tasks via a wide spectrum of applicati ons. to de termine the best so urces and uses of funds. Consider these examples of IT systems in the va rious functiona l areas of an organization. You will lea rn a bout customer relationship managem ent (C Rl\11) systems and supply chain management (SCM) systems in C hapter 11 .Based Information Systems IMI]t~···· th e organ ization's information technology infrash·ucture. In the next section yo u will learn about the numerous and diverse types of information syste ms employed by m odern orga niza ti ons. production/operations management (POM) IS.4. For instance. and still others support groups of orga nizations.

." C/0. and telephone calls. 2011. even In the absence of specific terms. Kerschberg.:m s G [about business] 1. 2011 . Some e-dlscovery applications go beyor~d just rapidly find ing documents with rei evant terms." Forbes. and o bjective.3 Electronic E -Discovery Software Replaces Lawyers Another e-d lscovery company. In 2010. clearwellsystems. an e-dlscovery flnm. the software finds "call me" moments .com) analyzes documents for Info rmatio n pertaining to the activities and lntenactlons of peop le-who d id what and when. Is convinced that the u. Quantifying the Impact of these software applicatio ns on emp loyment Is dlfflcun. the d iscovery process Is becoming Increasingly auto mated. Clearwell's sortware uses language analysis a nd a visual way of representIng general concepts found In documents. 2011. accessed March 21. This p rocess decreases the time required to locate relevant material In litigation.2011: M. For For "x"mrl" .5 million d ocuments fo r less than $100.c/earwe//systems.autonomy. Kerschberg. !December 30. softw~r" from Cataphora (www. More advanced applications filter documents through a large number of Interrelated word and phrase deflnnlons. as a result. O ne lawyer used e-dlscovery software to reanalyze work that his company's lawyers had performed In the 1980s and 1990s. a shift In an author's e-mail style from breezy to unusually fo rmal can raise a red flag about Illegal activity." The most basic ling uistic software uses specific search words to find and sort relevant documents. Blackstone Discovery (www. • E-~scovery: How a Law Firm Slashes Time and Costs." Forbes. What are the advantages of e-dlscovery software? Provide specific examples. Today. autonomy.blaci<Stoned/scovery. The Cataphora software also can recognize the sentiment In an e-mail message. For example. March 4. The law firm required just o ne more day to Identify more ·than 3. 3 .cataphora. For example. Based on this scenario. J. Replaced by Cheaper Software.000 documents that were relevant to the discovery motio n. K.whether a person Is positive o r negative.s. What are the d isadvantages of a-d iscovery software? Provide specific examples.cataphora. The software then manipulates this Information to visualize chains of events. The software then c aptures digital anomalies that whltt&-collar criminals often create when they try to hid e their activities. 201 1. and can deduc e patterns of behavio r that would have eluded lawyers examining millio ns of doc um er~t s. They can extract relevant concepts. He discovered that his huma n colleagues had been o n 1y 60 percent accurate. ' E-Discowry Moves In-House. man<>gers use informa tion techn ology to perform th e foll owing function s: • • • Product analysis: developing new goods and services Site cllutlysis: determining the best location for production and distribution facilities Promotion analysis: id en tifying th e best advertising channels • Price analysis: setting product prices to obtain the h ighest total revenues . or what Cataphona calls " lo ud taiKing"-unusual emphasis that hints that a document mig ht c oncern a stressful situation.b/acl<stonediscovery. r:losAiy rAsQmbling hum~n rA. telephone. f ive te levision studios became Involved. February . W~rvw. www. soc1 :o1 og1 ca1 applications add Inferential analysis. ' E-Discovery and the Rise of Predictive Coding. "Armies of Expensive Lawyers. As part of the d iscovery process which Includes providing documents relevant to a lawsuit-stud io lawyers and paralegals examined 6 millio n documents at a cost of $2. for example.·h. the founder of Autonomy (www. www. Instant messages.• Computerworld. legal sector will likely employ fewer people In the future.000. In contrast. the DLA Piper law firm used Clearwell software to search thro ugh some 570. In sales an d ma rketing. perhaps from an e-mail conversation to Instant messaging. Clearwell lyvww .000 d ocuments under a court-Imposed deadline of one weeK. However. MarKoff. When the U. February 15. E-d lscovery software Is d oing an excellent job and . Fogarty.2 million. and who talked to whom. This process usually Invo lves switching med ia. 2 . •surviving a-Discovery with the Department of Justice's Antitrust h elped o ne company analy ze 1. The software ana lyzed the d ocuments In two days. has developed software that analyzes d ocuments to find concepts rather than s peclflc keywords. In January 2011 .com. electronic d iscovery (e-dlscovery) software applications can analy ze documents in a fraction of the time at a fraction of the cost. He estimates that thA shift from mllntJ" I ctor:llmAnt rllscovAry to A-cllsr:ovAry w ill lead to a manpower reduction because o ne lawyer can now do the work that once required! hundreds of lawyers.••• ll(~·· C II A I)T it:l( 1 Introduc tio n tu lufunnatiuu Sy:o-. Pratt.sonlng." The New York Times. It Identifies d iscussions that might have taken place across e-mail. E-dlscovery sottware generally falls Into t wo broad categories that can be describe d as " linguistic" and "sociological. com). B. com). The cost to the stud los was extr emely h lgh. scientific. or even a face-to-face encounter. Justice Department sued CBS for antitrust vio lations In 1978. how do you think a-discovery software will affect the legal profession ? Sources: Complied from B. March 23. Questions 1.those Incidents when an employee decides to hide a particular action by having a private c onversation.S. www.

. con tro l fj ~ inventory levels. ERP systems were an impo rt<1nt innov. storage. The c hart o f accoun ts is only part o f the firm's d a ta base. En te rprise resource planning (1 \RP) syste m s are d esig ned to correct a lac k o f communicatio n am o ng the functio nal a rea ISs. collection .2 O"" '" "icw <>f Cumpootc r. This move wou ld be a tran sac tion to the university's information system. managers u se IT to p rocess c u sto me r orde rs. but not to the university's accounting d epartmen t. T hey :1 lso e mploy IT to help employees 1111 111agc their jo b applica1 careers. 'Tney also use IT to d esign :md manufacture p roducts. Finally. Th e informa tion system definition of a transacti on is broade r: A transaction is anything that changes the firm's database.Basc<l l oofor111atiu u Systcuos ·-·~£111. T hese processes are called compll. T he re also are differe nt definitio ns of a transa ction in a n o rganization .SI<C'I 'IC>N 1. C onside r a scenario in which a student transfe rs from one section o f an intro ductio n to M IS course to another section. each of whic h gene rates data. they e nhance co mmun icati ons a m o ng the functio nal :neas of an organizatio n. ERP syste ms resolve this p roble m by tightly integ ra ting the functio nal area ISs via a common database . .5 lnfonnalion systems that fundion among multiple o rganizations. CUSTOMERS I I I I I I I I I Business-to-consumer e lectro ni c comme rce (B2C) Pllyslcal products Online orders I -==~~t~~~~=======--l SUPPLIERS Business-to-business electronic commerce (B2B) 1 Internet Business Business-to-bustness e lectro nic commerce (82B) FIGURE 1. \\ihe n you a re c hecking out at \• Val mart. a transaction occurs each time the cashier swipes an item across the bar cod e read e r. Two info rma tio n syste ms support th e entire o rganizati o n: e nterprise resource pla nning syste m s and trans:1ct io1 1 processing syst e ms. for example.ler-assisted design (CAD) and com p 11 fer-assistecl mcmu{aclllring (CAI\1!). In accounting. Managers in lwman reso11rces use IT to m anage th e recru iting process. expe r ts credit ERP syste m s with g reatly in c reasing o rgan izational p roductivity. an d to m onitor e mployee p roductivity. they rely on IT to manage compensation a nd be nefits pa ckages. A transactio n processing system (TPS) supports the m o nitoring. :md hire ne w employees. and processing of d ata fro m the org<mization's basic business tra n sactions. In do ing so. For this reason.m alyze and screen 1ts. to administe r performance tests to emp loyees. For this reason Figure 1.4 sh ows ERP syste ms spanning th e F'AISs. a transaction is a nything that changes a firm 's chart o f accounts. fo r example. In m<lllll· {clcfllring. devdop p ro duc tion schedu les.1tio n because the various fun c tio na l area ISs were often d eveloped as sta nda lo ne systems and did not communicate effecti1 ··ely (if n t all ) with o ne ano the r. ~ndl m on itor p roduct q uality. Marketing managers also use IT to manage their relationsh ips with their c ustomers.

. Information systems that connect two or m ore organizations are referred to as intcrorg:mi7"otional inf o rmation system s (lOSs). information Knowledge workers ai'C professional empl oyees such as finan cial 8nd marketing aMlysts. Finally. Digitizable products are those that can be represented in el ectronic form. execulil'es make decisions that d eal with si tuati ons that can signifi cantly c hange th e m anner in wh ich busi ness is don e. ca lled business-to-consumer (BZC) electronic commerce. Office 11utom11tion systems (OASs) typically support th e clerical staff. yon have conc<:ntrated on inform. Tl'Ss m e consid ered critica l to th e success of any en terprise because th ey support core operations. your credit ca rd is approved and your order is processed). So far. and con1n1unicate (e-tn ail. lOSs support many intcrorganiza tiona l oper. In fact. Business inte lligence (BI) system s pro. secre taries. These employees use OASs to develop documents (word processing and desktop publishing software).Lower-level 11W1wgcrs handl e th e <by-to-day operations o f th e orga nization . and knowledge workers. inform ation. act as adviso rs to midd le m. who su pport m anagers at all levels of the orgo nization. Note that the supply chain in Figure 1. ERP systems and TPSs function primarily within a single organization.Vhen your transaction is completed (that is.m agers and executil'es.5 illustrates BZB and BZC electronic commerce. E-commerce system s typically are lntem et-based. makin g routin e decisions such os assigning bsks to employees and placing purchase orders. and cust omers to conduct transactions with businesses. organizing. but n ot all TPSs are ERP systems.. vid eoconferencing. Figure 1. as soon as th e data are generated-and prol'id es th e input data F or th e corporate databases. Now you will learn about information system s thot typica lly support po rticular employees within the organizotion. For ex. m odern ERP system s in corporate many functions that prel'iously were hand led by th e orga nization's fun ctional <lrea information systems. An organiza tion's ~oopply cha in is the Aow of materials.Jtion systems that support specific fun ctiona l areas and operations. primarily for middle managers and knowledge workers.IIIIII: ]MI C II AI)Tit:l{ 1 Introduc tion tu lufunnatiu u Sy:-. which dea l with activiti es su ch as sh ort-term planning. and digitizable products go through the Internet. financia 1flows. They create inform ation and knowledge. Because these reports typica lly concern a specific functional area.1 continuously. money. b wyers.·h. primarily for middle managers. n early all ERP systems are also TPSs. acqui ring oth er businesses. called business-tobusiness (B2B) electronic commerce.1 il in C hapt er 10. typica lly in recti time . enginee rs. El ectronic commerce system s are so important that we discuss them in detail in C hapter 7.~ d e com puter-based support for com plex. of which supply chain managem ent is th e best known. rep ort generators (RPCs) are an important type of functional area IS. with additional e)wmples interspersed throughout th e text. 1mple. l\1/idd/e 111011Clg ers make tactica l decisions. and insuran ce cbim pmcesso rs . and groupware ). Clerical workers. and "ccountants. Knowledge workers. wh en you ord er a computer from www.1tions. and serl'ices from suppliers of raw materials th rough fe1ctories and wa rehouses to the end custom ers. All know ledge workers are experts in a pa rtic ula r subject area. lnionnation flows. el ectroni c fil e clerks. Dell sh ips your computer to you . nonroutine decisions. Functional are::~ information system s summarize data and prepare re ports. whi ch they integrate into the business. You stllCly both TPSs :md F. in turn . such as music and software. voice n1ail. Examples of execu tive decisio ns are introducing a n ew product l ine.1tional FmpluH·t. schedule resources (electro nic calendars). include bookkeepers..5 sh ows physica l Rows. Sign ifica ntly. (T hey also support "iupport fur On~an it. \.RP systems in dc t. and co ntrol..:m s Th e TPS collects at is. Elech·onic commerce (e-commerce) system s are another type of interorganiza tiona l information system .. and relocating operation s to a fo reign an d financial flows. . but som etim es for lower-l evel managers as well. your information goes to Dell via th e Internet. . whereas physica l products are shipped. lower and midd le managers.. These systems enable organizatiions to conduct transactions.

pri ma rily but not exclu& ively a reas involving dec1 sion making.mel they ena ble users to perform their own data anal}~is. Presents structured. They have become valuable in many applicati on areas. and information among organizations. Table 1. Manages flows of products.4 provides an overview of the different types of informa tion systems used by organizations. .st-:C'I'ION 1. Chapte r 12 pro.) Th ese systems are typica lly used \nth a data warehouse. Supports daily work activities of individuals and groups. but to a lesser Electronic commerce system . Dashboards (also called digital ci. Produces reports s ummarized from transaction data.-.. Significa ntly.2 OvcrvicwofConlputc i"-Bascd Information SystcnlS •••IPJI··· lower-level ma nagers. Enables transactions among organizations and between organiza tions and customers.~shboards) are a specia l fom1 of IS th at support all ma nagers of the organiza tion. knowledge. Dashboards that are tailored to the information needs of executives are c-alled execut ive dashboards.ides a thorough discussion of dashboards. Integrates all functional areas of the organization. Table 1. You learn about Bl systems in C hapter 12. usually in one functional area. They provide rapid access to timely mformation and direct access to structured mfornlJtion in the form of reports. Provides access to data and analysis tools. expert syste ms can operate as standalone S)'l>tems or be embedded in other applications. summarized information about aspects of business important to executives . For example. navigation systems use rules to select routes. Decision support system Expert system Executive dashboard Supply chain management system Walmart Retail Link system connecting suppliers to Walmart www.4 Function Types of Organizational Information Systems . Processes transaction data from business events.~ ofs-t m Exam pi• System for processing payroll Walmart checkout point-of-sale terminal Oracle. \Ve examine ESs in grea ter de tail in Technology G uide 4. Expert SJStems (ES) attempt to d uplicate the work of human experts by app lying reasoning capabilities. SAP system Microsoft® Office Report on total sales for eac h c ustomer "What-if" a nalysis of changes in budget Credit card approval analysis Status of sales by product Functional area IS Transaction processing system Enterprise resource planning Office automation system Management information system Supports the activities within specific functional area. and expertise within a specific domain. but we do not typically th ink of these syste ms as expert systems. Mimics human expert in a particular area a nd makes decisions.

you consistently will have to add value to your organization and to make certain that your superiors are aware of this valu e.. business i11telligence applications such as dashboa rds. What is a computer-based infonnation system? 2. A major conseqnence of IT has been to chJ nge th e manner in which managers make th eir decisions. that in coming years organizations will have fewer managerial levels and fewer staff and line managers. you will incrc. persed. Explain how Information systems provide support for knowledge workers. If this trend help managers handle the volumes of information they must dea I with on an ongoing basis.:m s before you go on. promotional opportunities will decrease. electronic or "rem ote" supervision will bec om e the norm . As we move up the organization's hierarchy from clerical workers to executives. IT Reduces the Number of Middle Managers IT makes managers m ore productive and increases the number of employees who can report to a single manager. then. As you read this section you will learn h ow IT will affe ct you as well.3 How D oes IT Impact Organizations? T hroughout this text you will encounter numerous examples of h ow IT affects various types of organizations. and intranets. increased globa l competition. how does the type of support provided by Information systems ci1 ange? 1. therefore. and increased consum er sophistication by increasing their ." Will IT Eliminate Jobs? O ne major concern of every employee. 5 . Now. (cor th ese employees. 3. TI1Us. IT also provid es m:my tools-for example. making promotions much m ore competitive. ('(' ultimately has chamged managers' jobs. So for in this section . Many companies have responded to difficult econ omic times. You will have to reassure your employees that th ey <lre valued m embers of the organization . demands for customization . and teams r an consist of employees who m e literally dispersed th roughout the world . thereby dimi nishing <lilY feelings they migh t have of being isolated and "out of the loop. IT ultimately decreases the number of managers and experts. IT often provid es managers with near real-time inform ation. In th is W<ly. se<Hch engines.11112I•~·· C II AI)Tit:l{ 1 Introduc tion tu lufunnatiuu Sy:-. m eaning that they have less time to make decisions. is job seCLITity. Employees can work from anywhere :~t any time.JJ~t 1. It is reasonable to assum e. let's focus on you. Regardless of your position. Relentless costcutting m easures in modern organizations often lead to la rge-scale layoffs. organizations are respo nding to today's high ly competitive environment by doing m ore with less. F'ortunatcly. Describe the components of computer-based information systems.~singly supe rvise employees and teams who are geographically di. Information technologies such as telepresence systems (discussed in C hapter 6) can help you manage these employees even though you do not often see th em face-to-fa ce. T his section provides an overview of the impact of IT on m odern organizations.·h. part-time or full-tim e. Bottom line: Pay attention in school! IT Changes the Manager's Job O ne of the m ost im portant tasks of managers is making decisions. Remote supervision places greater emphasis on completed work and less emph asis on personal contacts an d office politics. What is an application program? 4. we have been focusing on managers in general. Due to adv:m ccs in IT. making their jobs even m ore stressful. Put simply.

Although computerization has benefit<>d organizations by increasing productivity. The \\' Windows) can be diffic ult to liSe for people with impaired vision . indi. a hair brusher. F1gure 1. At the sa me time. Oppnt+' mitic• fm Pco1 •I . 1\lanagement can help allevia te these problems by pro\'iding training.111d lfd\ Although computers and information systems are gen erally regarded as agents of "progress.obstress. they conti nuallr attempt to design a better computing em·nonme nt. i th O r abihtt Computers can c reate ne\\ emplormen t opportuniti es for people \\lth disabilities by integrating speech. as computers continue to advance in terms of inte lligence and capabilities. IT Impacts Employees at Work 1\lany people have experienced a loss of identity because of computerization. . Some workers feel overwhelmed and have become increasingly anxious about their job performance. Describe how lT might change the manager's job.!'~~ 1. however. An increase in an employee's workload and/or responsrbrlitiescan trigger . To add ress these problems. O n a more specific lc\'cl. it also has crea ted an ever-expanding workload for some employees. and hiring more workers.3 II ow D ocs IT Impact Organizations? ···~}1111 rm·estments m 11'.and \'Jsionrecognition capa bil ities. ways for people "ith disabilities." they can adversely affect individuals' health and safety. lmp:t l'mplm ' H I h . just another number" because computers redu ce or elrminate the human eleme nt present in noncompute rized systems. a robotic page tumer. Other devices help improve the quality oflife in m ore mundane.SI~C'I'IO.- 1. This process frequently leads to layoffs. Coing further. redistributing the workload among workers. Examples are a two-way writing telephone. IT crea tes entire!)· new categories of jobs. and comfortable.. The goa 1of ergonomics is to create an e nvironment that is safe. but useful. Carpalttmnel sy11drome is a particularly painful form of repetith·e strain injury that affects the wrists and hands. and a h ospital-bedside 'ideo trip to the zoo or the museum. Audrble screen tips and voice mterfaces added to deal with th is problem essentially restore t he funchon ality of computers to the way it was before graphical interfaces become standard . Why should employees in all functional areas become knowledgeable about IT? 2. The science of designing mac hines and work settings that minimize injury and illness is called ergonomics. 3 .. the com petiti\'e adV<Jntage of replacing people with machines is increasing rapidly.6 drsplays some sample ergonomic products . and individuals who cann ot travel can work at home.1re of the potential proble ms associated with th e prolonged use of computers. For example.. These feelings of stress and anxiety can actually drminish rnther th:1n improve workers' produclldty while jeopardrzing their physical and mental health . we conside r two issues assoc iated with IT: job stress and long-term use of the keyboard. Discuss several ways in which IT impacts employees at wor1<. well lit.. such as electronic medical record keeping and nanotech nology. I~ Prm LJ. the long-term use of keyboards can lead to repctitil·e strain injuries suc h as backaches and muscle te nsion in the wrists :md fingers. Th e Internet threate ns to exert an even more isolating inAuence than have computers and television.1duals who cannot type can use a voice-<>perated keyboard.g. Encouraging people to work and shop from their living rooms could produce some unforhmate psychologrcal effects. In fact. To illustrate this point. They feel like . Exa mples of ergonomically desig ned produc ts are antiglare screens that allC\~ate problems of fatigued or damaged eyesight and c hairs that contour the human body to decrease backaches. Several organizations specialize in IT designed for people with disabilities. adaptive equipme nt for computers e nab les people with drsabilities to pere b and graphical user interfaces (e. before you go on. such as depressron and lon el iness. Designers are aw. form tasks they normally would not be able to do.

IT Affects Our Quality of Life IT has sig nificant implic<1tio ns fo r o ur quali ty of life.:R I Introduction to Information System s b d FIGURE 1.' which m eans they are never truly away fro m the o ffice. Going further. even if it doesn't inc rease the total amount of leisure time.!Ca tion . IT can provide employees with flexibility that can significantly improve the quali ty of le isure time. !"rom the opposite perspective. IT also can place employees on ''constant ca ll. 80 percent did som e work while vac<1tio ning. and alm ost all of them checked their e-mail. (Source: Media Bake ry) (d) Adjustable foot rest. . (Source: Media Bakery) (b) Back support. O ther e:om1ples of the impa ct of IT on society appear thro ug hout the text. IT l ite rally provid ed the unde rpinnings of the revolts against the Tunisian and Egyptian reg imes. (Source: Media Bakety) (c) Eye-protection filter (optically coated glass)..•••tat~·· C II APTI.4 Importance of Information Systems to Society As you saw in the chapter-opening case. (Source: l-.11edia Bakety) 1. a recent poll revealed that 80 percent of respond ents took their laptop computers on their most recent vacatio ns. T he workplace can be expanded fro m the traditional 9-to-5 jo b at a central loca tion to 24 hours a da y at any loca ti on . and 100 percent took their cell phones. This section will explain in g reater detail why IT is important to society as a whole. even when they are o n \. (a) Wrist support. In fact. however.6 Ergonomic products protect computer users.

If he needed to see so mething on tlle shop floor. Now. Nevertheless. without having to spend hundreds of thousands of dollars on tra vel costs. a robot could wand er tlle floor with a customer who asks it purchasing or support questions. Bloomberg Busi11essWeek. moved from tll e company's location in Virginia to the Dominica n Republic. The following example illustrates how organizations use these robots." It also has wheels and can be moved around remote ly by computer.or see what is being written on a whiteboard . B ennett. Sources: Compiled from D. These "robot tractors" use global positioning systems (G PSs) combin ed with vid eo image processing that id entifies rows of uncut crops. Telepresence robots are a recent development in the field of robotics. These robots are design ed to help companies save money on travel and on expensive teleconferencing technology. Healthcare organizations are employing tllem for home care. Samuels was out of luck. May 18. january 29. Around the world. tvlany robotic devices are be ing developed for militaty purposes as each location." "nursebots. 1e rdiman. Interestingly. in hospital corridors. Libya. For example. D. In f. l t-"l.('0111. easily hea r what is be ing said." lnfomrationWeek. 2. The pe rson controlling tlle robot could answer the questions.irobot. essentially making th e robot a mec hanical sales clerk. For home use..rom. and the Looj to clean our gutters. the Pentagon is researc hing self-driving vehicles and beelike swarms of small surve illance robots. each of which would contribute a different view or angle of a combat zone. Storage co mpanies are utilizing them for security.011. and in fam1 fields. iRobot (www. the company purchased a telepresence robot for Samuels. Essentiall y. . The robots enable people in remote offices or locations to have a rich communications experience with out using a complicated video conference system. and if no one was available. Carnegie Mellon University in Pittsburgh has developed self-d irecting tra ctors that harvest hundreds of acres of crops around the clock in California. At first.SEC TION 1.vgocom. 2011. for example. In an example of precision agriculture. robots that can perform practical tasks are becoming more common. Example Telepresence robots have been humorously described as a cross between a Segway and a Wall-E. 20 11. tl1e Verro to clean our pools. WM V.n 2010. answering questions and inspecting designs. A telepresence robot has bocll a vid eo camera and a video screen embedd ed in its " head .1miliar situations. A Diana . Th e Predator. customers. accessed r v1arch 23. or cli ents. and interacting \vitll people . some companies are buying multiple units to place in their remote locations. a conference room during a meeting.cmybot$. for example. the Dirt Dog to sweep our garages. O ne of the firm's electrica I engineers. Consid er how Reimers Electra Steam uses a telepresence robot. To resolve this problem. he would attend mee tings ba ck in Virginia tllrough Skype." and other mech<mical beings may be our companions before we know it. The user places the robot at a remote location and directs it to move around. a human had to act as th e remote Samuels's virtual body.4 Impo rtance of lnfonnation System s to Society ···~JiJIIII Robot Revolution on the Way O nce restricted largely to science fi ction movies. Pakistan . It probably will be a long time before we see robots making decisions by themselves. handling unf. "1'11 Have My R obots Ta lk lo Your Robots. Febrnary 21-27. or dangerous to humans. someone running a meeting could . Business managers are using telepresence robots to walk factory floors. "he" wheels easil y from desk to desk and around tl1e shop floor. robots are extremely helpful in various etwironments. "12 Advances in Medical Robotics. "The Telepresence Robots Are Coming. an unmanned aerial vehicle (UAV).w. particularly th ose that are repetitive. John Samuels. The robots enable a person to maintain a consistent connection with produces the Roomba to vacuum our floors. It is des igned to steer its way clear of obstacles and people. and Afghanistan. the robots actuall y break down barriers of awkwardness that people sometimes feel in person-to-person meetings.1ct. "cyberpooches. quasi-autonomous devices have become increasingly common on factory floors. broadcasting what is go ing on to the human controlling it from afar. In the retail environment. is being used in Iraq. the Scooba to wash our floors.. harsh. a colleague would cany around a laptop. Alcllough this tec hnology is rath er expensive. pointing it wherever Samuels instructed. That way. often using the robot's vision feature to examine wiring in detail.

th ey must think " busin ess needs" first and ''technology" second .com) only to ask questions of their phys icians. G iven th eir position. are~ For the MIS Major What's In IT For The MIS fu nction directly supports all oth er func tion. 1e"' computer simulations recreate the sense of touch . Th ese systems perform functions ran gmg from detecting insurance fraud. to c reating nu rsing schedules.d areas in an organization. Me? . Explain how IT has inproved healthcare practices.webmd. The overa ll objective of MIS pe rsonnel is to help users improve perfo rmance and solve business problems using IT. What are some of the quality-of-life improvements made possible by IT? Has IT had any negative effects on our quality of life? 2. They se lec ted three to five searc h te rm s from eac h case a nd the n conducted a Coogle search.•••El{~ · ·· C l L\I''I'I•:R I lntwdnc tion to Information System s Improvements in Healthcare IT h as brought abou t major improvements in heah hcarc delh·ery. Here we examine the t\ I!S func bon . resea rc he rs at the Princess Alexandra Hospital in Br isbane. against the dangers cases. to financial and marke ting management. ·ia ' ·ideoconferencing.2. Th ey also use surgical robots to perform long-distance surgery.!1~1 1. Australia. Finally. In an inte resting sh1<ly. IT also has streamlined th e process of researching and devel oping n ew drugs. Describe the robotic revolution. the MIS function is responsible fo r provid ing the information tha t eac h functional area needs in orde r to make dec isions. iden ti fied 26 diffic ult diagnostic cases published in the New England /oumal of Medicine . before you go on. administrative systems are critically important. Th ey discovered that th eir Coogle searc hes ha d fo un d the co rrect diagnosis in 15 of the 26 ·s ca ution . Of the thousands of other applicati ons rc lalcd lo hca hhcare. doctors discuss complex mcd1ca l cases . Th ey main1<1in that people sho uld usc diagnosti c information gained from Coogle and medical Web sites such as WebMD (wltM.webmd. To accomplish this objective. The Inte rnet contains vast amoun ts of usefu l m ed1 ca l information (see w••w. They th en compared th ese results with the correc t diagnoses as pu blished in the journal. M IS pe rso nne l must understand both the information requirements and the tec hno logy associated with each functional area. Expert S)·stems now h elp doctors diagn ose diseases. Tha t is. a success r<1te of 57 pe rcent. Surgeons use virtual rea lity to plan compl ex surgen es. com for example). however. and ma chine \1SIOn is enh an cing th e work of radiologists. and consider its possible implications for humans. Th e researche rs se lec ted a nd recorded the three diagn oses tha t Coogle ranked most prominently a nd tha t appeared to fit the sympto ms and signs. 1\ledical person nel use IT to make better and faster diagnoses and to moni tor critically ill patien ts more accurately. allowing doctors-in-tra ining to perform virtual procedures without risking harm to an actual pahenl.. 3 . In section 1. \\'e discussed how IT suppo rts each of the functional organization . The rcsem·c hc1 of se lf-d iagn osis. howeve r.

where you are surrounded with a m ovable information nenvork. and disseminates information for a specific purpose. and give examples of each. a company recruiting at yom sch ool has found over tim e that stu dents with grade po int averages over 3.O. computerbased information sy s t em. The benefi ts of b eing an informed user of IT include: • You will benefit m ore from yom orga niza ti on's IT applic. A computer-based information system (CB!S) is an information system that uses computer tech nology to perform some or all of its intended tasks. information . search for. but a stud ent's name coupled w ith his or her CPA is informati on . Define the terms data. 4 . access class syllabi . Examples of data items are collections of numbers (e. but are not orgamized to convey any specific meaning. Information is data that ha ve bee n organ ized so that th ey have m eaning and value to the recipi ent. • You will play a key role in managilflg the information systems in your organ ization . accumulated learning. • You will understand the potential impacts that "new and improved" teclhnologies will have on your org< mization and th erefore will be qua lified to make recommendations concerning their adoption and use. conduct banking. F'o r examp le. sto res. PowerPoints. the numbers could be gr~de point aver~ges. that company may decide to interview only those studen ts with C PAs over 'J. For example . An information system (IS) coll ects. 3.0 h. C. experience. thus improving the quality of those applic. D . shop. 3. an d transactions that are recorded . a grade point average (CPA) by itself is data. Data items refer to an elem entary description of things. information system.~ ve enjoyed th e greatest success in its m anagem ent program. and buy produ cts from com panies or other people. and lectures. and expertise as they apply to a curren t bnsincss problem. • You will be able to keep up with rapid developments in existing information technologies.11. Knowledge con sists of data and/or information that have been organized :a nd processed to con vey understanding. classified. or p<~ rti cipate in th e selection of IT applica tions tl>at your organization will use. 1. and knowle dge..96. Think of all you do online.S 1n11111ary ···~J. 3.g. A. jobs.08) and characters (e. as well as th e introduction of new techn ologies. Define the terms informa tion technology. take classes. activities..g. ana lyzes..~ · 1111 [ Summary ] 1. 2 . B. • You will be in a position to use IT if you decid e to start your own business. • You will quickly be in a position to recom mend .99. and stored. processes. and apply for. 2. C). Infomwtion technology (IT) relates t o any computer-based tool that peopl e use to work with information and to support the information . Begin the process of becoming an informed u ser of your organization's information systems. • You will be abl e to provide input imto your organizati on 's IT applica tions. have your own page . often with your phone: register for classes. and not just classes from your university. 2. and t·hc letters could be gn1 des in an Introdu c tion to M IS class. sell your "stuff". and application. B. In the above examples.95. Based on this accumulate d knowledge. informatio n. Identify several ways in which you depend o n information technology in your daily life. A. pay your bills. events.1 tions. research. F.1tions beca use you will un derstand what is " behind" those appli cations.mel information-processing needs of an organization. An application (or app) is a computer p rogram designed to support a specific task or business process. Y ou are practicilflg continuous co1nputing.

11113IWII C II A I)Tit:l( 1 Intro duc tio n tu lufu nnatiu u Sy:o-. dashboards A special form of IS that support all managers of the organization by providing rapid access to timely information and direct access to sb·uctured information i n the form of reports. work from anywhere. .:m s on F<lcebook. information Data that have been organized so that they have meaning and valu e to the recipient. IT can provide people with flexibility in their work (e. expe1t syst em s (E S) Attempt to duplicate the work of human experts by applying re asoning capabilities. List three positive and three negative societal effects of the increased u se of information technology. and stored but are not organized to convey any specific m eaning. 6. Together. text and tweet your friends and family throughout your clay: and many oth er < 1Ctivitics.1 lly dispe rsed employees and teams.·h. and comfortable. th ese devices accept. • IT may cause employees to experience a loss of identity. computer-based in formation S)'Siem (CB IS) An inform ation system that uses computer technology to perform som e or all of its intended tasks. nonrontine decision s. cntc q)l'ise resom ce pbnning (!': RP) S)'Stc m s Information systems that correct a b ck of communication among the functiona l mea ISs by tightly integrating th e functi onal area ISs via a common d. and transactions that are recorded.Jtabase. primJI'i!y for middle m anagers and knowledge workers. called busin ess-to-business (B2B) electronic comme rce. Robots will t ake over mundan e chores. • IT can cause job stress and physical problems. business in tell igcuce (0! ) S)'Ste ms Provide compu ter-based support for complex. !Twill enable improvem e nts in h ealthcare. . classified. Poten tial IT impacts on nonmanagerial workers: • IT may eliminate jobs. activiti es. monitor. Potet1tial IT impacts on m • m agcrs: • IT may red uce the numb er of midd le nwm1gers. data item s An elementary description of th ings. hardware A device su ch as a processor. electronic comme rce (e-commerce) systems A type of interorganizational info rmation system that enables organizations to con duct trans<J ctions. functional area information systems (FAL Ss) ISs that support a part icular functional area w ithin the organization.magcrs w ill have to supervise gcogrnphic. 5.. • IT will in crease the l ikelihood th at m. well lit. or printer. • IT can potentially misinform patients about th eir health problems. Discuss three ways in which information technology can impact managers and three ways in which it can impact nonmanagerial workers. such as repetitive stress injury. and expertise within a spec ific domain. keyboard . custom ers to conduct transactions with busin esses. database A collection of related files or tables containing data. and display data an d information. • IT will provide managers with real-time or near real-time information . ergonomics T he science of adapting machines and work environtne nts to peopE e. focuses on c reating an enviromnent that is safe. calle d business-to-consum er (B2C ) e lectronic comm erce. events. Negative societa I effects: • IT can ca use health probl ems for individuals. m eaning that managers will have less time to make decisions. anytim e). Positive societal effects: • • • • IT can provide opportunities for people with disa bilities. knowledge. [ C hap te r Glossary ] applica tion (or app) A computer program design ed to support a specific task or busin ess process. • IT can place employees o n constant C<l II.g.

and expertise as they apply to a curren t problem or activity.job. inform ation on the Web a good thing? Answer from the standpoint of a patie nt and from the standpoint of a physicia n. marketing personn el .. oversee security and risk. Find out about the "package tracking" system .com . information. analyzes. Dis~uss l1 uw you would use global outsou rcing to accomplish your goaDs. How do you fe<'l about Coogle searches finding the correct diagnosis in 57 percen t of th e cases? Are you impressed with these results? W hy or why not? W hat are the im plicat ions of this study for self-diagnosis? [ Problem-Solving A c tiv ities ] 1. financial pe rsonn www. networks (wirelin e and wireless). . W\V\v. and services from suppliers of raw m aterials through factories and warehouses to ~he end custom ers. 9. 3 . 2.. 2. (2) t he information that your recruiters would process from these data. For other information o n IT salaries. nization's basic business transactions. Provide ex:1m ples of (I) the da ta that your recruite rs would gath er in this process. network A co nnecting system (wireline or wireless) that permits different computers to share resources. Wlvw.Problcl u·Sulvi••g 1\c.x:hno logy components I brdw~re. knowledge D ata ami/or information that have been organized and processed to convey understan ding. Com pare th e IT salari es to salaries offe red to acco untants. 8. Can th e terms data. [ Di sc ussio n Questi o n s ] De.-dm cs Th e set of imtructions for combining hardware. inform ation technol ogy infrastructure IT componen ts plus IT services. www. Robots have the positive impact of being a ble to relieve humans from wo rking in dangerous con ditions. inform ation system (IS) <~nd dissem inates informati on for . and n1anage data. in formation technology p latform l"ormed by t he IT compon ents of hardwa re. com.. specifi c purpose.~riLe " Lusi11ess lli" l yu u wuuhl lik« lusl. Refer to th e study at Princess Alexandra llospit:al (in the " Improvements in llenlthcare" section). software. each of which ge nerates data. stores. and www.jobcentral. which they integrate into the business. 7. inform ation . 4 lawyers. accumulated learning. ch ec k Computerworld's annual salary survey. Is the vast amount of m edica l. Find out what information is available to custom ers before th ey send a package.11l. b ilflussiule lu eJJtbllg«J yums«l f Ly a~~e"i11g lou JJJud J medical information on the \ Veb? W hy or why n ot? Sup· port your . software. and network components in order to process informatio n and generate the d esired outpu t. database. b.con1.:tivi ti(:s ··· m . operations personn el. \>Vhat are some n egative impacts of robots in the workplace? 1. pmc<. m on ey. inform ed user A person knowledgeable about information systems and information technology. and human resources pe rsonnel. and knowledge have different meanings for different people? Support your answer with exmn plcs. knowled ge worke rs Professional em ployees such as fi nancial and m arketing analysts. 6.tnwcareers. Prominent examples are: www. a nd data bases. processes. '~ww. who are experts in a pa rticular subject area an d crea te informati on and knowledge.mswer. informatio n techno logy services IT personnel use IT comp onents to perform these IT sel'\~ces: develop inform ation syste ms. < md (3) th e types of knowledge that your recru ite rs would in fer from th is information .com. engin eers. \'lhat are the major reasons why it is im portant for employees in all functiona l areas to becom e familiar with IT ? 10.lilable to your employers and clien ts (regardless of where you < lre or what you arc doing). Your university wants to ret'ruit high-qtw lity h igh school students from your state. transaction pmcessing system (TPS) Supports the m onitoring. software A program or collection of programs that enable the hardware to process data." Discuss th e pros and cons of always being av. Describe other potential impa cts of IT on societies . monster. lnfonm tiotl techn ology 111:1kes it poss ible to "never be out of touch .simplyhired. \VlVlv. Visit som e \'Veb sites that offer employm ent opportunities in IT.cctreerbuifder. a.1sed tool that people use to work with infonnation and support th e information and information-processing needs of an organization. www. supply cha in The A ow of material s. intemrgani:wtional information system s (lO Ss) Inform ation systen1s that connect two or n1ore organizations. Enter the \ Veb site of UPS (ww1v. inform ation t<. software .col fegerecruiter. data bases. a nd accountants.cllreer. storage? and processing of data fro n1 th e orga- information technology (1'1') Rebtes to any computer-b. 5. and networks. collecti on.1s a whole. experien ce.

Ioreal.wh ile prom oting L'Oreal's best practices. could not support its goal of Be~c h. Co to http:!! Step 7: N ow you can customize you r group and invite people to join. Step 6: Select you r Yahoo! Profile and e-mail addresses for your group . The reports should emphasize the role of each application and its benefit to the o rganization . T he compa ny has a tr·em endous challenge to produce h igh-quality. Step 5: D escribe yo ur group. between plants. FlexNet runs on servers located in individ ual factories so that . L'O real employs m o re than 67. The integrati on of SAP an d FlexNet resu lted in a global . [ Team A ssignments ] 1. th e com pany used to t ake bet ween two and five years to upgrade to the la test version of SA FlcxN et for operations managem ent. l"l cxNet is a unified set of m anufacturing software applications that coordinate a com pany's manufachuing operat ions with in a plant. The Proble m l lcadqu. As a result. [ Closing Case L'Orea l Re too ls It s Info rm a ti o n Syste m s ] also wanted to improve produc tivity. where the master data for the !business are stored. For exam pi e. The company's philosophy is tho t eve1 yone asp ires to beauty. T he company integrated its SAP ERP system with Apriso's (www. an d local n ewspapers for th e last three mo nths to find stories about the u se of computer-based info rmation systems in organizations." Step 3: Nam e your group. 4. and com pare th eir prodncts w ith those of iRobot.yohoo. Review th e Wall Street Journal. Step + E nter your group e-mail Ea ch m ember of the group must establish a Yahoo! e-mail accou nt (free). com) is the world's largest cosmetics and beauty'tered in France. S mf the Internet fo~· infonm tion abont the Dcpartmcn t of Homela nd Secu rity (D II S). L'Oreal rcc111gincercd its entire manufacturing process to work m ore effi ciently while still supporting the qu ality an d integrity of its bra nds. Step 8: C on duct a discussion online of at least two topics of interest t o the group. ISIS runs in L'Oreal's central dat a cente r in Montpellier. groll. the company is acti ve in dermatology and pharmaceut icals. (c) Compare Yah oo! Croups and Coogle Crou ps. C alifornia. (or to L111sing.:m s c. < manufactured in m ore than 40 factori es located around the world. if you live in or near Long Beach). and investigate the compa ny's Education and Research Robots. \IV rite a repor t for your instructor. 3. Step 1: C lick on "Sta rt Your C roup. It must ensure that all of its prod ucts are c reated with uniform produ ction processes and quality control.IIIIJI: ]MI C II AI)Tit:l{ 1 Introduc tion tu lu funnatiuu Sy:-. ] produ ct uniformity without consolid ating its many different informati on system s located aro und the world. and across an entire supply chain .including production. Present an d discuss your work. T'he firm's products are tries.apriso. based on software manufactured by SAP. safety. quality assuran ce. consistent produ cts globa lly. Access www. ISIS consists of all th e transactiona1applications. France. Com pare the fastest del ivery against the least cost. weighing 40 pounds. The Solution To accomplish its m ission. skin care.'. finnncial controls. C oncentrating on hair color.·h. Sur f the Web for other com pa nies th at manufacture robots. Step 9: Find a simila r group (use Yahoo!'s "find a grou p" and make " connection). L'Oreal had multiple versions of SAP running in different regions and countries. and comm ent on the role of infom1a tion tcchn ologi cs in th e depa rtment. from your hometown to L. sun protection .eek. M (b) N ow. Continu e until you see the button: " Place My G roup Here. 2. Business V.. and purchasing. L'Oreal an d quality by standardiz ing the best-pn1cticc business p rocesses th roughont the firm . and its core mission is to help people around th e world realize that aspiration. Exa mine the ava ilable inform~tion . Eac h group will prepare a report describing five applications. perfumes. follow the sam e steps for Coogle C roups. By 2010 L'O real had com e to realize that its cu rrent enterprise resource planning system . centra l IT system called the lntegratedl Solu tion for Ind ustr-ial System s (ISIS). or use th e Browse C roup Categories tool). FlexN et and ISIS support all factory processes.imbot. Fortune. m akeup . (a) C reate an onlin e group for studying IT or an aspect of IT that you are interested" Step 2: Select a category that best describes your group (use Search C roup Categories. and purchasin g transactions in tegrated into th e m anufacturing operations on the plant floor. and hair care . Compute the cost of delivering a 10' X 2(J' X 15' box. the L'O real C roup (•~nM. Yah oo! will force you to be ve ry specific in categorizing you r group.000 people in 130 counmd it supports 23 g lobal bmnds.

The new software implementati on also all ows L'O real to bring facto ries o nlin e muc h mo re quickly.acn?~. This demanding level of com plexity can lead to human erro r. April 30. Every on e of L'O real's manufa cturing facilities handles tho usands of different recipes fo r L'Orc."" MciWt:dne. Describe several reasons why L 0 real needed to reengineer its infor1 mation system :s. This step ensures th at all m aterials arc tested. and efficiency practices. "What's Happe ning with ERI' Today.(Ipri. 2009. By upg rading so quic kly. As a result·. C<Jmputent10rld. Sources-: Compiled from J. "Business Process Ma n<~gement in M~mufact uring: l:>.. T he new software guides the open1 to rs thro ug h each redpe a nd automa t ica lly records the weig ht of each ing redient to ensu re that t l1e quantities are exactly correct. No•~mber )0. which ca n threate n quality. slow the wo rkfl ow.:om. w'lvW. better-m anaged inventories at sig nifi ca nt cost saiVings. Explain how the benefits you dcscl'ibe . ' 'Microsoft Brings Bl to th. In the past. O nce raw materials are teste d fo r q uality.port. Lllttcflctd. 2. Playe. Janual)' 27. it took ye.. glo bn l instance of SAP and FlexNet. the new soft ware cnn bled !. T hey also provide info rmation on shelf life.s ProcC"ss Managemc·nl ln Manufac:lurlng:. "'C3se Study: Siemens. when L'Orea l acquired a factory." C/0.~.• . b]e to maintain lower. Laurent f<>ctory tlha t it had :1 cqui red. a downtown music venue. th e firm was <1bk to update its systems witho ut disrupting its factories. so th e last upgn1<le took o nly one weekend ..'<~lldl R. [ Interactive Case ] Planning a New Web Site for Ruby's Club Go to th e Ruby's Cllub link at the Stud ent Companion we b site o r W il eyPLUS wh ere you will find a description of your internship at Ruby's C lub. Plann inb a Nt:w \ Vcb . . Your assignment will inclu de providing input on Ruby's new web site design in a mem o to the club's man agers.l l cosm etic products. "'L'Oreal's : Manuf. Describe the benefits of L'Oreal's new information >) January B'~Setine Aberci<'<lll 28. 2011 ."' www. along with its quality assurance. and info rmatio n fo r yom assignment.ns to b1 ·ing it onlin e. JohnO>n. using spe cific examples to suppo1 t yoLH arguments. 2010. and create waste.lntcra~ti\•c Case: e<1 ch factory can continu e operations in case a problem arises in the central data center. L'Oreal implem ented a single. 2008. ln contrast.... Questions 1. glo bal instnnce of SAP •mel F'lexN et. 2010. th e company is . Th e labels also give fo rklift drivers directio ns as to whic h materials need to be taken to the packaging st atio n. and every wo rke r must foll ow each recipe exactly." A/Nrdren lkseuldl R£port. L'Oreal has inc reased its overall capacity.. Lli. . they arc given b bels that the worker must sea n before adding th em to the recipe. M.dvi11g lhe \ Vay fo1 · Effective CollaOOratio11. I~ very ing redient must be tested fo r qua lity. 2011 .. E.oom.:Jcturing Makeo\'er. )< 111U OIJ' 20. Sho p worke rs confirm that the new syst em is easy to use and has reduced co nfn sio n an d stress. By deployin g a single. decreased discrepa ncies in its actua l-versus-planned production. M.·elated to l}Or~ol's stmtegic goals.e Cloud. safety.~itc ror Ruby's C lub ···~&D · 1111 The Results In its reengineering process. in two m onths. and reduced its wasted ma teria Is.lortal. 2011 ~ '"Busines.'Orca I to integmte an Yves S t. /le. <lCCe)SCd March 1. www.

and Information Systems . Competitive Advantage.Chapter Organizational Strategy.

and describe one IT response to each. and Information Technology Suppmt Wiley Plus Competitive Advantage and All of the nbO\'C and Strategic Infonna tion Sptems • E-book Business-In fom1ation • !VIini-leeture by author for each Technology Alignment chapter section • Practice quizzes Gs • Flash Cmds for vocabulary review • Additional "What's in IT for Me?" cases • \'ideo inten·iews with managers • Lab Manual for Microsoft O ffi ce 2010 • HO\v-to Animations for l icrosoft Office 2010 What's ln M T For ACCT e. Business Pressures. Describe the strategies th.\PTER OUTLINE ] [ WEB RESO URCES] Understand the concept of business processes. Differentiate between the terms business process reengineerirtg and business Business Processes Business Process Reenginecring and Business Process Management Student Companion Site wile com/coU~. Identify the five competitive forces described by Porter. Define busincss-infom1ation technology alignment. Organizational Responses. MKT Conduct price analyses 7 POM Monnor product quatty FIN Determne best uses for funds HR Help employees manage their careen M IS Develop systems to suppon firm's strategy Perform audits .[ LEARNI"\G OBJECTIVES ] [ CH. and provide examples of business processes in the functional areas of an organization.. and cxpl<1in how the Web has an impact on each one.Qe/raine • Student PowerPoints for note taking • Interactive Case: Ruby's Club Assignments • Complete glossmy 2 2 process management.t organizations typically adopt to counter the five competitive forces and achie\'e competitive advantage. and describe the cha racteristics of effective alignment. List :md provide examples of the three types of business pressures.

T he rest cons isted of som e 1. most of whom refused t o talk with one another for fear of losing their share of BP's business.t=. a signifi cant reduction in t he nu mber of applications. T he m ost pressing issues were the organizational location of the IT function. D easy und erstood that BP's IT group would have to do a much be tter job of su pporting the C EO's go:ds: to restore revenue growth across the ~normous (a nnual revenues of $300 billion) company. aud lu fonna tiuu Systcn1s [Double Trouble for BP] BP's First Pro blem I n 2008. to halve the number of IT vendors. in h is first 11 m onths as C IO. C onfronted with a vast sprawl in people. D e asy repla ced 80 percent of th e top IT leadership with in th e organization .500 software applications in use at BP wo rldwide. S ignificantly. These vend ors handle all of th e work according to a standard operating m odel. Cuulp< : til·ivl· J\dvo 111 h•g. priorities. and to h ansform the IT function from a cost center into a business-driven .200 n.000 IT employees (excluding t he rem aining contractors). but th e 20 largest vend ors accounted for only 30 percent of IT spe nding. In th is area . Deasy m ade accoun tabil ity the first priority for th ose C IOs. and to re duce the complexity o f the organization .200 IT vend ors and saved th e company $900 m illion over the n ext five years. BP rebid multiyear appl ication developmen t and maintenance contracts total ing about $2 bill ion and end ed up with just five ven dors. De<lsy undertook a three-year overhaul of evety facet of BP's IT operations. . only 55 pe rcent of h is IT personnel were actua lly BP em ployees. a 60 percent reduction in the nu mber of vend ors.900 comtra ctors. to reduce the 8. Deasy then h ired IBM to con duct compreh ensive a ssessm ents of the top I .about $1. reducing BP's reliance on ou tsiders . unfocused. The Results D easy and his team accompl ished their goals in two years instead of thre e. and suppliers. C EO ' lb ny l ln}"Vll rd of BP (niWw . Deasy then set out to reduce the numbe r of IT vend ors. D easy predicts some $500 million in savings from th is effort alone. and unconm ce an d accountability.•••E:f~-· C II AI)T it:l( 2 ()rg auizational Strategy. Not only was BP c u rrently contracting with m ore than 2. to evaluate BP's 4.e IT group had becom e bloated. D easy cut 1. to refocus the beba. Medi" B"ketJ cerned with perform< D easy wanted to eliminate $&00 million in expenses &om BP's overall IT buc~get of $3 billion. BP created a t eam focused on sta ndmdizing project del ivery and m anagem ent of SAP applications around the world . As a resu lt of the bidding process. n . pro ject and portfolio J l1< 111agcm ent. BP re alized $800 million in IT savings.000 fu ll-time contra ctor positions. and an ove rhaul of the IT reporting structure in the business units. BP eli minated 1. D easy also aggressively reworked vendor relationsh ips in the area of appl ication developm ent an d mai ntcn < informed h is top 500 m anagers thnt the giant oil compa ny had become a seria l underpetformer In the audience was Dana D easy. To make this arrangem ent m ore man age< lble. In his next move. BP had been us ing som e fifty vendors. The Solution to BP's First Problem D easy m ade BP's IT employees his first priority.bp. employees. their prima ry responsib ility was to help the busin ess units use IT effectively to drive new reven ue < lll d reduce costs. As one of SAP's lorgest cust om ers. BP's goal was to deliver new SAP cap abilities 50 percent fast er and 40 percent chea per than under the existing system . In additi on . BP's chief information officer (C IO ). business ob jectives. T his assessm ent iden tihed talen t gaps as well as inherent strengths. passive. requirem ents.up for rebid! in one year.000 vendors. strategic weap on . Deasy ma ndated that th e C IO for each BP business u nit work for th e business unit leade r while also reporting to Deasy in a m atrix arrangem e nt. and vend or ma nagem ent. b udget.~or of the com pany around high performance and accountabil ity. 5 bill ion . T hat is. BP put 65 percent of its annual global IT spending.

Th e profound overhaul of the IT organization's culture. and relentless improvement an<l innovation. now packaged in a tamper-resistant pill contain er . an authority created by President Barack O bama. or of animals dying from the effects of the spill. just as BP was beginning tro profit from its IT i nnovati ons. and socia l networks. However. com panies had time to devise strategies to dea I with disasters. Just a couple of deca des ago. explod ed. T he drug's h . they n eecled much m ore support from BP's automated systems. T he commissi on also criticized H alliburton for failing to share data from tests on its cem ent m ix with BP." "volunteer. located in the Gulf of Mexico. The commission further charged that BP had ignored the results of the O ptiC em cem ent m odeling software implem ented by Halliburton. BP also failed to take advantage of social n etworking to open a clear line of communication with people living on the coast of the Gulf of Mexico and a round the world. excellence. Nota bly missing were any pictures of the oil spill itself. bloggers.ile d to provide automatic wa rninga lerts. ' l11e well took three month s to ca p. financia lly irresponsible. BP cou ld have used socia l m edia sites su ch as Facebook. the two m~ jor benefits m ay well have been: • • ' l11 e top-to-bottom changes in IT personn el.." T he BP \ 'Veb site conta ined press releases and photographs of people involved in the oil clean up. In contrast. immediately shut down distribution and recalled all of th e capsules that were on th e market. YouT u be. Next. wh ich routed people to BP's re latively inaccurate Web site.. Lessons From}Jw Failui(!s The Solution (?) to BP's Second Problem In addition to techno logical efforts to cap th e spill.Ct\S I': ···~k!JII. for which Johnson & Jo hnson received wiclcsprcad acclaim. during which time oil continued to pour into the G ulf. The explosion was investigated by the O il Spill Commission.. it spent huge sums of m oney to buy up Coogle ads. when seven C hi cago residents died after ingesting T ylenol capsules la ced with cyanide. T he key verdict of the com m ission was that BP's m onitori ng IT systems on the Deepwater Horizon oil platform had f. The Results It took three m onths. but BP was able to cap the spill. th e cem ent contractor. to tH 1e market. where lon g-time genera lists were repb cecl with technology specialists or business-dom ain experts. .d tampered with th e capsules < m :mu facturer. of oil-drenched wetlands. O ptiCem h ad indicated that m ore stabilizers were needed t o support the underwater cement work. Johnson & Johnson . inwa rdly focused . Experts conclud ed th at som ebody l fter they h.d been pa ckaged and distribnted . Because th e engineers ha d to perform so many simultaneous functions over long work days. Reports from Reuters asserted that BP was buying Coogle ads so that its own \ 'Veb site would rank higher or even at the top of th e list of advertisem ents that appeared with sea rch results when Internet u sers searched on terms such as ''oil spill . th e company reintroduced Tylenol. comp:mies cannot wa it even a few cbys to generate a public response. and lmilcconntable philosophy to a culture with a sense of purpose centered on business growt h and ~uccess. An excellent illustration is the Tylen ol poisoning crisis of 1982. This entire process. scientists said th<1t the damage from th e oil would continue for m any years. the com pany's D eepwater Horizon oil we ll. resulting in the la rgest marine oil spill in the history of the petrol eum industry. BP's Second Problem In April 20 10.1p the spill and contain the damage. In addition to these p roblems." and "claims. BP had relied on engineers who had to manua lly m onitor and analyze complex data from th e well for long periods of time. and Twitte r to report on the problem ond explain w hat steps th e com pany was taking to c. For exa mple. lnstead . in today's world of viral videos. where D easy changed the passive. However. BP spare d n o expense on public relations. took several weeks.

1 983. accessed March 22.2010. 201 1. l. Cr. government laun ched a $21.ilnble and sa fest dri ll ing technology" to m onitor pressm e in the well. Cold. 2010.1lla. and N. His strategy was simple: Sell "A s Seen on TV'' products before they get Into the stores.• Babson College Press Releas e. He had sold 11 s new Idea he Items on the Web before. international compa ny. but to Implement 1 would need a muc h more sophisticated order fu lfi llment system.. However. whi ch are clearly just as strategic as the firm's business information sy~tems. Sources: Compiled from "Befo re the Stores Finds Success w[ h Amazon Services. Finally. "'Staffing Le\·els on DeeP"'·ater Horizon Are Questioned.w. Sources: Compiled from L. as a sophomore In college." The \\bsliington Poot. However. T. rather tnan sellIng these products through commercials." Computmmrld. "'BP's Dis.S. Inventories. Mufson. during the 2009 holiday season. And what college sophomore has t ime to develop this type of system? Amar found his answer with the Amazon Web store.m y information system can be slmlegic. Poy.bp. In 2008. was a success. S. 1 billion lawsuit . Th e case dem onstrates that . Before the Stores would capitalize on two major markets: (1) the Infomercials that often advertise these products and (2) Amazon's customer base.iled .Babson College In Marylandbelieved Before the Store would be a success. all eging th at they had ''f. "BP. King. only time would tell if this venture wou ld be successful. Transocean.0. many people go to Questions 1. S. King. Bates. Amar was shipping more than 1. fvfisses Soc-ial Nern. B. Before the Stores LLC.:1ster Contaimnent Plan-·nuow Plenty of Tvloney at Coogle. Additionally. "BP Accepts Blame for Gulf of Tv1exico Spill After Leaked Memo Reveals Engineer M isread Pressure Re.1 Before the Stores Amazon to try to find a product that they heard Amar won the Business Plan Competition and a significant cash award. Then. Provide specific examples of the value that Amar provides his customers. the company seem ed to n eglect those informatio n systems that support ots drilling operations. What We Learned from This Case The BP case illustra tes th e im portance of information systems in h elping the company respond to busin ess pressures and in supporting th e company's global strategy. me. .-orking Target. He used the Fulfillment by Amazon (FBA) service offered to Amazon's business customers. BP did an excellent job of revamping the inform ation system s tha t support its business op erations. to u se th e best . 2008.. This service provides businesses with an easy method of listing products. accessed March 22."" Computenmr!d." Lo11don Dailymail. l\'iarch S. Evans. and prices: taking orders.v. The results speak for themselves. Win Babson's 2008 Business Plan Competitions. t ried to remember It. . ·The Tylenol Crisis: How Effective Public Relations Sm·ed Johnson & Johnson. Janual)' 5.1 illustrates how inf ormation syst em s are strategically important to Before the Stores... D.. June 15. O ther lawsuits ~ re pending." Amazon ServiCils Seller SUccess Sfol}'.-er. his school. "Incentive Targeting. Information systems c~n be just as strategic to a small or m edium-sized company as they are to a large firm. April1 0. scheduli ng deliveries." New Jersey Betl/oumal.ming that it can provide a com petitive adv:m tage if used properly. 2010. "'BP. accepting payment. Amar was going to make It easy for them to find it. IT's About [Smal l] Business 2. 2010 . Provide specific examples of the services that Fulfillment by Amazon provided for Amar. G about [small] business 2. Before the Stores. Halliburton Blamed by Presidential G ulf Oil Spill Commission. However. By the fourth q uarter of 2009. June 11. Fortunately for Amar. aud lufonna tiu u Systcn1s At the end of 20 10. 2011. Where would you start? How would you find that product that you wanted? Amar Kahbunl has the answer to your problem. 2011 . lOll . Kaplan.w-. ultimately." ln{on1wti01tWeek.t=. but just could not seem to get It right. "BP O il Spill IT Systems Lacked Key Al:mns. S. 2. The case also demonstrates the incredible complexity of th e information S)JStems employed by a large. 2010. he founded a company called Before the Stores.llll: lGJMI C II AI)Tit:l( 2 ()rg auizational Strategy.~ga inst BP and its drilling p~rtncrs.500 orders per week through FBA Amar•s business. Sales tripled from the th ird quarter ol2008 to the third quarter ol2009. Have you ever seen a commercial for something sold "As Seen on TV" and forgotten the phone number? Maybe you also heard about a Web site. January 6.. Gaudin. "'BP's IT Tr ansformation. In fact. the U. June 8. Cuulp<:til·ivl· J\dvo111 h•g. Augu~ i: 3." The Walt Street /oumal. and. sales In creased 300 percent over the same period In 2008." Co mputen~'Orld. BP CEO Tony Hayw~rd resigned his position on October 1.1ding. ZOl O. R. Amar wou ld capitalize on the commerclall s and sell t hem on the Web. P'. As a sophomore In 2008. in Crisis Mode.

it leads to control of a market and to brger-than-avemge profits. the business pressures addressed h ere will affect your organiz<Jtion. As you stllldy this chapter. o rganizati o ns ga in co n1petitive adva ntage by n1anaging th e ir business p rocesses better than th ei r competitors do. acquiring competitive advantage is essential for your organization's surviva l. design. D o any of them use Twitter in an interesting way? F'acebook? Amazon? PayP. T herefore. or speed. Arnar's exampl e dem onstrates that an entrepren eurial spirit <Jnd " solid understanding of wh at IT can do for you will provid e competitive adv<mtages to sophom ores in college just as they do for Wall Street CIOs. This chapter encourages you to becom e familiar with you r organization's stra tegy. Therefore.not ~cl' up . In addition. It will 1nizational strategy. engineering . m arketing. l ie on ly had to sign11p. Many organizations achieve competitive adva ntage through the efforts of their employees. After studying th is chapter. O ther processes involve only a single fu nctional area. You will then ~ce how inform <ltion systems enab le organiZ<l tions to respond to busi1 1ess pressm cs. (Competitive ad. First. Additionally. thi111k of the sma ll businesses in your a rea that are doing interesting things with popubr techn ologies. q1mlity. and its activities can be m easured. and evenh. how an organization's IT function supports th e organization's strategy. The chapter concludes by discussing business-IT alignment.SI<C'I'ION 2. As a put his business in opem~on .scs IMI!Jl~ · ···· S tm tegy and competitive adv:mtage come in many forms. becnuse Amazo n provided the infra~tructure for his business. Amar had very little overhead because Amazon handled the e-comrnerce side of his operation . you will be . li e also enjoyed a distinct advantage over stores that ultim. he got to the customers first. can you think of any businesses that would benefit from using these technologies? l11is chapter is important for you for several reasons.) Amar found .. ition will help you throughout your career. but they also will affect you. A process lhas inputs and outpull. Vhat could you do with an By the way. design .~mtage is an advantage over competitors in som e me. many other business processes.1ally your organization. In n1any cases.1 Business Processes A business process is an ongoing collection of related activities that create a product or a service of value to the organization. you w illleam how information systems help organizations ga in competitive adva n!Jges in the mar ke tpb ce.l? If not.-e to purchase. Amazon is always looking for unique business ideas. in other words. you li kely will ibecom e a m ember of business/IT committees that decid e (among many other things) whethe r to adopt n ew technologies and how t o use existing technologies m ore e ffectively. \• Amazon store? Although there are many examples of companies th at use technology in m ore expensive w<Jys.tcly sell these items because he provided an e:1 sy way fo r customers to find th e product as soon as they heard a bout it on TV. For example.lSllrc s11c h ~s cost.•e advantage. Capitalizing on Am azon's custom er base and advertising from infomercials. you must understand how information systems can help you. or sec11re costly information systems. Many processes cross functional areas in an organization . cut across multiple . respond to these pressures. He did not ha. he started <1 busin ess that a !ready had a market. 2. Basica lly. Cross.. you begin this chapter with a brief introduction to business processes and business process managem ent.. and/or its custom ers. product development involves research. mission .1 blc to m ake immediate co ntrib utions in these committees wh en you join your orga niza tions.1 Boosiu<·ss l'rocc.1 id entifies the fundam ental busin ess processes performed in an organization 's fun ctional areas. becoming knowledgeable about strategy and h ow information system s have an impact on ' tmtegy and competitive po. manufacturing. and goals and to und erstand its b usiness problems and how it makes (or loses) m oney. set up. f"u rh elp you understand how information technology contributes to orgc t her. niche where he could use existing electronic commerce (e-commerce) systems and advertising to create a competiti.. Table 2. Next. its business parh1ers. such as procurem ent and fulfillment.Functional Processes All of the busin= processes discussed above fall within a single functional area of the company. However. and distribution.

and d istribution Processing physical inventory Managing purchasing Managing quality control for finished goods Auditing f or quality assurance Receiving. collaborative way. Cuulpt:tit·ivt. crea tes a purchase ord er based on the purchase requisition. . T he p rocess begins when the warehouse recognizes the need to procure m<1terials. purchasing. inspecting. multiple functiona l areas coll aborate to perform the process. and sends the order to the vendor (Step 2). T he vendor then sends an invoice. aud lufonnatiuu Systcn1s Table 2.t=.· Advo111 h•g. T he p rocurem ent p rocess includes all of the tasks involved in acquiring needed materia ls externally from a vendor. files. In turn. Procu rem ent comprises five steps that are completed in three different functional areas of the finn : warehouse.IIII: IIWII C II AI)T it:l( 2 ()rgauizational Strategy. storage. they arc cross-fuuctionul business pr·ocL'SSCS. each functional area must execute its specific process steps in a coordi nated. let's examine the procurem ent and hdfillment cross-functional processes in m ore detail. lt1ther. which it sends to the purchasing department (Step I ).1 • • • • • • • • M anaging packing. and stocking parts and materials Handling shipping and freight claims Handling vendor selection. that is. and accounting. meaning tl1at no single hmctional area is responsible for their execution . Th e warehouse documen ts this need with a purclhase requisiti on. To clarifY this point. which are received in the warehouse (Ste p 3). perhaps due to low inventory levels. and inspections Examples of Business Processes Accounting Business Processes • Managing accounts payable • Managing accounts receivable • Reconciling bank accounts • Managing cash receipts • Managing invoice b illings • Managing p etty cash • Producing month-end close • Producing virtual close Finance Business Processes • Managing account collection • Managing bank loan applications • Producing business forecasts • Applying customer credit approval and credit terms • Producing property tax assessments • Managing stock transactions • Generating financial cash flow reports Marketing Business Processes • Managing post-sale cust omer follow-up • Collecting sales t axes • Applying copyrights and trademarks • Using customer satisfaction surveys • Managing customer service • Handling customer complaints • Handling returned goods from customers • Producing sales leads • Entering sales orders • Training sales personnel Production/Operations M anagement Business Processes • Processing bills of materials • Processing manufacturing change orders • Managing master parts list and files Human Resources Business Processes • Applying disability policies • Managing employee hiring • Handling employee orientation • Managing files and records • Applying health care benefits • Managing pay and p ayroll • Producing performance appraisals and salary adjustment s • Managing resignations and terminations • Applying training/tu ition reimbursement • Managing travel and ent ertainment • Managing workplace rules and guidelines • Overseeing workplace safety M anageme nt Information Systems Business Processes • Antivirus control • Comput er security issues incident reporting • Training computer users • Computer user/staff training • App lying disaster recovery procedures • Applying electronic mail polic y • Generating Internet use policy • M anaging service agreements and emergency services • Applying user workstation standards • Managing the use o f personal software functiom1l areas. W hen the vendor receives the purchase order. it ships the materials. Fora cross-functional process to be successhdly completed. the purchasing depa rtment identifies a suitable vendor.

F'igure 2. The fu lfillment process is concerned with e fficientlr processing c ustomer orders.1 Airline (web site) Business Proce sses IMI!lf!JIIII FIGURE 2. "They can also be !. Notify traveler wh1ch is received by the ac-cou nting departmen t (Step -f). it creates an invoice and sends it to the customer 1l1c customer the n makes a paymen t. Define a cross. An organization's business processes can create a competitive advantage if they enable the comp.functional business process. An u p-tCK!ate. Fulfillme nt is triggered by a customer purchase order that is received by the sales department. O nce ac-counting is notified of th e shipment. It has become a competiti. 3 . 1. and p rovide several examples of such processes. In contrast.·er. which accounting records. user-friendly site will attract customers and increase revenues. thereby completing the procu rement process (Step 5). Accounting sends paymen t to the vendor. Describe several business processes carried out at your university. howe. a site that prO\·ides outdated or inaccurate infonnation will hurt rather than improve business.111 y to innova te or to exec ute better than ib competitors. . and it tracks the progress of the order. these sites must be highly responsive and provide the most current infonnation on flights and prices.1 Business process for ordering e-tieket from airline Web site. The sales order communicates data related to the order to other fun ctional areas w1th in the organization. At the same time. What is a business process? 2 . 1 illustrates thee-ticket purchasing business process. The warehouse prepares and sends the sh ipmen t to the customer. Sales the n validates the purchase order and crea tes a sales order. Consider the airline in dustry.abilities if they make the company less responsive and eliicient.S I~Cri ON 2.•e necessity for a ll of the airlines to offer electronic ticket purchases via their vVeb sites.

th e Request Services depa rb11ent engaged key stake is on e of the largest car rental companies in the world . however. Micha el Hammer and Jam es C hampy argued tha t in ord er to becom e m ore competitive. w. E nter prise initiated a BPM project and selected a product from Appian (www. called business process reen gineering (UPR).early in the project. The impact on e mployees. :malysis. and fulfills re quests for IT hardware.]] significant measures of competi tive performan ce in an organization. and production processes. and o ptimization of business processes.•e.dv< mtage by improvin g organizational A cxibility. Quality: the resu lt of optimi zing the design. and even on organizati onal c ulture was overwhelming. called business process ma nagem ent. and services from 65. and more increm ental approa ch. develo pment. approves. and too comprehensive. D etermined to improve this process. T he company also educated employees about BPM in general as well as how to use the new Appian system .primarily th e people who approve IT product and service r equests and the people w ho fulfill these requests . software. In a ll ca>CS th e company's str:~tegy shoul d drive the BPM effort. Example Enterprise Rent-A-Ca r® (www. The key to BPR is for enterprises to examin e th eir business processes from a ''clea n sheet" pe rspective and th en determine how they can best reconstruct those processes to improve their business functions. The authors further asserted that information technology is the key enabler of suc h ch ange. o n existing invesh11ents in information system s. Business process m :magem ent (BPM) is a managcmelflt technique that in clud es meth ods and tools to st~pport th e design . Before Enterprise actually started the pro ject. is a strategy for improving the effi ciency and effectiven ess of an organiza tion's business processes. for exa m ple: • Customer satisfaction: the result of optimizing and aligning business processes to fulfill custom ers' needs. Cuulp<:til·ivl· J\dvo111 h•g. on facilities. BPM initially helps companies improve profitabil ity by decreasing costs and increasing revenu es. BPM can provid e cost benefits and in crc01sc c ustom er satisf<lction. Cycle <Wd fulfillment time: the result of optimizing th e manuE 1cturing and logistics processes. D espi te th e m. first published in 1993. less disrupti.appim1 .my failures in BP R im plem entati on. ProdHctivity: the resu lt of optimizing each individua l's work processes. As the company expand ed.000 E nterprise employees l ocated in 7. too radical. this system could no longer keep up with the growing number of IT requests. T he result was a less for this p roject.IIII: I!: ]MI C II AI)Tit:l( 2 ()rg auizational Strategy. Conside r th ese measures. T he question is: How does an organization ensure business process excell ence? In th eir book Reengineering the Corporation. Enterprise recogn ized that implem enting a n ew process woul d transform the company's tradition al work behaviors. as th e c~1se of Enterprise illustrates. BPM can create a competitive . impl em entati on. aud lufonna tiuu Systcn1s 2. T his radical redesign.enterprise.2 Business Process Reengineering and Business Process Manage1nent Excell ence in executing business processes is wid ely recognized as th e underlying basis for. T he company's Request Services depa rb11ent p rocesses. ma n<1gcm ent.000 loca tions worldwid e. Altho ugh som e enterprises successfully implem ented BPR. however. the company mad e certain that its strategy was in place. American businesses needed t o radically redesign the ir business processes to reduce costs and increase qua lity. many organizations found this strategy t oo difficu lt. Over time. For mm1y com panies. • • • • • Cost reduction: the result of optimizing operations and supplier processes.1nts.. and desires. Diffe rentiation: the result of optimizing the marketing and in novation processes.t=. businesses increasingly began to organize work around business processes rather than individual tasks. . Th erefore. Historically this deparhnent had used multiple m anual systems to manage this process.

They enable an organization to integr. because BAM tracks process operations and indicates wh eth er th ey succeed or fail. identify fai lures or exceptions. and societal pressures. Violino.mel sen•ices. Organizational Responses. B. Web-enabled teclmologics display and retrieve data via a Web browser.] depiction of a II the steps in a process. . 2009.bpminaction. socia l. Globalization is the integration and interdependence of economic. March 13. techno logy. To remain competitive they must react rapidly to problems and opportunities that arise from extremely dynamic conditions. and ecologica l facets oflife. . and political factors in which businesses conduct their operations. Let's look more closely at each of these facto rs. In his book The vVorld Is Flat.1te th e n ecessa ry people and app lications into each process. S ignific<mtly. "BPM Success at Enterprise. Important compcmcnts of BPIVI arc pr ocess modeling. or service am employee is entitl ed to). thereby making it "Aat. the changing nature of th e workforce.1suring <1nd rn anaging business processes." CJO Insight. l\'larket pressures are gen erated by the global economy. and th e information they require to optimally perform their t<lsks. accessed March 20.. cultural.3 Business Pressures. "Appian BPM at Enterprise: Can Renting BPM Be Like Renting a Car?" www.g.After the BPM syst em was implem ented. O rganizations typically respond to these pressures with activities supported by IT.Jch for mc. Enterprise elim ina ted its manual processes entirely. made possible by rapid advances in inform. Web-en:1bled technologies. physical. economic. the new process contains business rules that provide appropriate restrictions on fulfillment (e. In addition .~ure. Byron. Globalization. !\ JarJ. Business activit)' mo11itorhrg ( BAM) is a real-time appro. D. www. Pulitzer Prize-winning author Thomas Friedman argues that technology is leveling the globa I competitive playing fie ld. before you go· Baseline Magazine. What is business process management? 2. www. March 13. and Information Technology Support !vlodern organization s compete in a chall enging environment. which is a graphic. o rg<mizational performance and responses. l egal. 2009. and IT support.. and busin ess activity m onitoring. 2008. Further. Iits employees now use th e Appian system to I 'CCjliCSt IT products . accessed March 30.JJ~ 1. March 24. "Enterprise Rent-A-Car Goes Live w·ith Appian Enterprise. the information systems they rely on.. Figure 2.2 illustrates the relationships among business pressures. Business Pressures The business environment is the combination of social. intense competition. it creates vn lua bl e records of j>rocess be haviors tha t organizations can use to improve th eir processes. In this section you examine some of the major pressures confronting modern org~nizations and the strategies that organizations employ ~o respond to these pressures." Sources: Compiled from B. and powe1ful c ustomers. Companies use BAM to m onitor their business processes. March 24. You will lea rn a bout three major types of business pressures: market. Significant changes in any of these factors are likely to create business pressures on organizations. they n ow fulfill requests more promptly while making fewer erro rs than th ey did with the mamd system.ct Pre." Appian Press Release. What is business process reenglneering? 2.1tion technology. "BPM: Strategy Before Software. Violino. BPM begins with process moe/cling. what IT hardware. 2008. Process model ing helps employees und erstand the interactions and dependen cies among th e people. software. and address th ese failures in real time.

horsepower. lasted from 1492 to 1800. satellites. or even language bmriers. b sted f.0 was on companies. Business process restructurin!l and management (BPM) Continuo us improvement efforts (just·in·time. the force behind 1t is. These observati ons highligh t th e importance of ma rket pressures for you ." Table 2.2 Business pressures. In this era .tcn1s FIGURE 2. Cuull'l'til·ivl· J\d vo111h1g. to exchange knowl edge. The focus of G lobalization 1. you and the organizations you join will be compet. commun icate.1nd the railroads. In the second ha lf. and to produce and sell goods and services.0. In this e ra. In the first half of this era. C loba lization 1. note that nine of Friedman's ten flatteners directly relate to information technology (a ll except the fall of the Berlin Wall).o. ·n. to access limitless amounts of information. anytime and all the tim e. These flatteners enable individuals to connect. People and organizations can now operate without regard to geography.e first era. ERP foriedman identifies three eras of globc1liz"tion. companies that had their globalization was th e em ergence of multinalion:d companies. the force behind globa lization was h ow nnuc h muscle.2. According to Friedman.0. and IT support.2 id entifies these forces. and the focus of Globalization 3. . Internet and World W id e \• Around the year with people and organizations from all over a flat world.t:. During this era. fiber-optic cabl e. As you look at Table 2. orgunizntional performance nnd responses. G loba lization 2. wind power. collaborate. the world entered G lobalization 3. globa lization was driven by falling transportation costs. 'I h e m odern globa l econ omy began to evo lve during this era.0.0 was on countries. distance. the driving force was fall ing telecommunications costs resu lting from the telegraph . l11e bottom line? G lobal ization is markedly increasing competition . ser\~ces. gen erated by the development of the steam engine . computers. Simply put. and the V eb. and compete everywhere and any"•here . or steam power a country cou ld deploy.IIII·IU~-· C II AI)Tit:l{ 2 ( )rg auizational S trategy. th c headquarters in on e country but operated in several countries. the focus of G lobalization 2. globalization has been dl'iven by the convergen ce of ten forces th< lt Friedman calls ''flattene rs. KM. aud lufonnatiuu Sy. total quality management]. and entertainm ent. telephones. each era has been c haracterized by a distinctive focus. time.·om 1800 to 2000. compute. T he second era .0 is on groups and individuals.

• Informing 0 The ability to search for information.Jsed global competition. regardless of their location. IT h as mad e such moves mt1ch easier to implemcnt. have contributed to in creased world trnde <mel inc reased competition . which can be a major benefit for parents with young c hildren and for people confronted with mobility and/or transportation issues. • Outsourcing o Contracting with an outside company to perform a specific function that yoLir company was doing itself and then integrating their work back into your operation. Powe rful Customers. o Enabled faster.erefore. 0 Led the transition from a passive approach to content to an active.3 B11 Si11l'~S l )rcS"~III'CS". and the valu e of C hina's currency has steadily risen . moving a n e ntire manufacturing operation to China. many labor-intensive industries have moved their operations to countries with low labor costs.2 • Offshoring o Relocating an entire operation. to a nothe r country. The workforce. • lnsourcing o Delegating operations or jobs within a business to another company that specializes in those operations . for example. However. Regional agreement> such as the North American Free Trad e Agreement (NAFTA). :ntd l 11f411111atiu11 "l 't. • Supply c h a ining 0 Technological revolution led to the creation of networks composed of compa nies. driving the cost of doing business even high er. ·n. best illustrated by search engines.SI• :C'I'IC>N 2.• • • • Table 2. o Led to the emergence of the European Union and early thinking about the world as a s ingle.ise of In db and C hina as economic powerh ouses has incre. to employees.>:1 Salvador.2 illustrates the problems that can arise when compani es outsource their manufac turing processes overseas. manufacturing wages in Ch ina doubled betv1een 2002 and 2008. wh ich includ es th e United States. and personal. Canada. or certain tasks . 1989 o Shifted the world toward free-market economies and away from centrally planned economies. IT is easing the integration of these employees into the traditional workforce. and their customers. ()rg a••i:t. such as h e:dth c:1 re. For example. developed countries usually offer greater ben efits.:dmu logy S 11ppwt ··· ·]. Increasing numbers of women.s C hin a and 1 . 1995 0 Popularized the Internet and the World Wide Web. single parents. tnanufacturing overseas is n o longer the barga in it once \Vas. the r. O ne important pressure that businesses in a globa l market must contend with is th e cost of labor. IT's About Business 2.:. for example. Further. global market. participatory. Friedma n's Te n Flatte ne rs • Fa ll of the Be rlin Wa ll o n Nove mbe r 9. In general. minorities. wireless technologies. • Uploading 0 Empowered all Internet users to create content and put it on the Web. for example. l@bor costs are high er in developed conntri cs like the United States and Japa n thm1 in devel oping conntri es snch . Let's consider som e examples of globalization. Also. particularly in developed countries. and computer graphics) o Technologies that amplify the other flatteners. videoconferencing. Customers can use . mobile. which varies widely among countries. is becoming more diversified. and Mexico. a ll of which could collaborate and share information for increased efficiency.lti<Jiwl Rl·~ponsc~. Dell hires FedEx to "take over'' Dell's logistics process. their s uppliers . collaborative approach. • Netscape goes public on August 9. ins tant messaging and fil€ sharing. Voice over Internet Protocol. and n1anufac turing in the United States is n o longer as expensive.. Consumer sophistication and expe ctations increase as customers become more knowledgeable about the products and services they acquire. closer collaboration and coordination among employees. moving customer call centers to India. o Enable all forms of computing and collaboration to be d igital. • The Steroids (computing. and persons with disabilities are now employed in all types of positions. IT is a lso enabling people to work from h ome. The Changing Nature o f the Workforce. • Deve lopment of work-flo w softwa re o Enabled computer applications to work with one another without human intervention.

located close to their headquarters in Palmetto. "In Reverse of Offshore Trend. R. In one case. The second categOJ)' o f business pressu r es consists of those p r essures related to technol ogy. F· a mistake that cost the company millions of dollars. For example. March.1p ter 11 . and to purch ase item s at electronic auction s. Sleek Audio has projected 2011 to be Its most profitable year ever. Dynamic Innovations (wvvw. October 25.v. Th is process. 2010. to day's state-of-the-art pr oducts may b e obsol ete tom orrow. only 11 m onths later.tJd/o. China. mag azin es. Further.llll·lf]WI C II AI)T it:l( 2 ()rg auizational Strategy. . O rgan iza tion s r ecognize the importance o f cu stomers and have incr eased their efforts to acquire ~nd r etain them . J. h ow fast are n ew versions of your smartph on e being r eleased ? How <jUickly are el ectron ic versions of books.d-lnno. company. as shown In Chapter 1. Read. June 25. delivery delays caused by the factory's lax approach to deadlines forced SleeK Audio to spend huge amounts of money air-freighting products to the United States. B.' The Oregonian. accessed March 21. One year later. to compar e prices. factory the company automate d this process by repla cing human labor w ith robots. Sourcing Finns Bid to Reverse Offstnoring Trend. Technology Pressures. 2011. Sleek Audio had to discard an entire shipment of 10. "Made In the was ft\Jstrated with a contract factory In Dongguan. 2008. Questions The CEO of SleeK Audio ~w. Con sider th e Apple iPad (ww w. is an important compon ent of customer relationship management (C RM) .S. 2011. M o dern firms str ive to l earn as much as possible ab out th ei r cu stom ers to b etter anticipate and address th ei r n eeds. A s a r esult. W\VIV. and sup erb quality. April 8.S. Managers redesigned the entire product around a solid aluminum center Into which robots Insert t he speaker. aud lufonnatiuu Systcn1s G [about business] N ew and improved tech n ologies rapid ly create or support substitutes for p r oducts. H igh-Q ual~y Products Are Needed. Rather th an taking time to en joy itts success. al ternative service options. an d newspapers replacing traditional h ard copy versions? These changes force busin esses to keep up with consumer demands. that assembled the majority of his company's products. 2011. Koerner. robots are becoming more skilled and less expensive. They found called wstomer intimacy. Which of Friedman's flatteners apply to Sleek Audio's decision to bring Its manufacturing back to the United States? Support your answer. 2010.000 earphones because they were Improperly welded. 2007. T. an or ganization -wide effort toward maximizing th e cu stom er exp erien ce. In the but manufacturing problems In the factory threatened to banKrupt his company. When Sleek Audio was considering how the company could return manufacturing to the United States with Its higher labor costs.sleek-a. Sleek Audio 's earphones featured plastic sid e panels that the Chinese factory had to w eld Into p lace by hand. Sleek Audio had a full-scale manufacturing operation that could be ~~~~ :b:: 1. Cuulp<: til·ivl· J\dvo111 h•g. com. Each earphone costs roughly 50 percent more to produce In Florida than In China Sleek Audio Is happy to pay the premium. however. 201 1." Wired.t=. Appl e r eleased th e fi rst iPad in Apr il 2010 and sold 3 million o f th e devices in 80 days. for the assur:'lnc:A that botc h An ornArs ann shipping <iAI"Ys w ill not nJin thA Sources: Compiled from "Bring Manufacturing Jobs Homel" Deloitte Debates (\VIVW. Teehnol o gicallnno va tion and Obs olescence. S leek Audio decided to search for a manufacturlng partner that possessed the necessary tools and Fail\li3S expertise to produce their earphones. 2. "Is Reverse Offshoring a Trend?" Supply ChsJner. Apple made its iPad2 avail able for sale on J\1 b rch 11 . T wo major techn ol ogy-related pressures are tech nologi cal innovation and information overload. This new assem bly process requires neither welding nor human hands. September Based on enthusiastic customer response. "Offshore Manufacturing: A Risky Proposition?" CRN. company executives realized that the only way to make the the Internet to find detail ed information about produc ts and serv ices. This process meant redesigning product s to take advantage of automated tools andJ robots. Identify some potential negative implications of Sleek Audio's increasing reliance on robots In Its manufacturing processes. Oregon Manufacturing Thrives When High-Tech.2 Sleek Audio move feasib le was to m inimize the role Of humans on the assembly line. the company had far too much money tied up In Inventory that took month s to arrive after the prototypes were developed. Not only did he have to travel to China every few months to troubleshoot quality flaws. "U. reached with a 15-mlnute car ride rather than a 24-hour flight. Altoro." Nearshore Americas. Moreover. Yol l w ill l earn about CRM in C h. As a result.

th ey are turning to IT executives to develop the systems needed to calcubte and track carbon throughout th e md its supply chain . IT managers must und erstand environm ental compliance ." Example Companies Going Green Use Info rmation Technology Companies are '·going green. In sh ort. As compani es try to red uce th eir c~trbon footprints. for example. ·n.lti<Jiwl Rl·~ponsc~. Energy manage ment. in turn. such as sea rch engines (discussed in C h. A growing IT initiative. and intemational environmenl<ll standards before buying. Consider. n.:. IT exe cutives must deal with state laws and international regulations that affect everything from th e IT products they bu y. The following example illustrates h ow IT is instrumental in organizational efforts to "go green .e third ca tegory of business pressures includes socia ! responsibility. to their company's carbon footprint. IT m anagers will have to ask whether an application will require new hardware to test and run. First. O rganizations are creating m ore sustaina ble work environments. managers must be able to a ccess.e amount of information ava ilable on the Interne t doubles app roximately every year. Facilities design and management. IT must becom e fam iliar with the metering and m onitoring system s used in green buildings and the requirem ents of buildings computerized infrastructure. O rganizations consider IT to be a natural choice to lead their sustainability efforts. Socia l Respons ibility. Interna tional and U. spending for social programs. . to company and individual philanthropy. T'hc Internet and other telecommunications ttion to managers. and utilize these vast stores of data . to education. n· Carbon management. IT executives must understand their entire organization 's en ergy n eeds." and IT professionals are facing increasing pressures to help their companies accomplish their environmenta l goals.and how these issues translate into carbon output. information. to how th ey dispose of them . IT personnel have to consider h ow their computing decisio ns have an impact on sustainable design and . is ad dressing some of the most pressing environmental concerns. Consequently. severa liT executives listed four areas where IT is particularly v. government regulati on/deregulation. state e nvironmental laws. people. energy managem ent systems are becoming increasingly sophisticated .erefore.1 ffcct modern bttsincsses. This section will expb in how all of these elements .S.ssues so they can ask their vendors the right questions regarding specifi c state. Information Overload.t lua ble . fo r several reasons. and disposing of equipment. a nonprofi t group that promotes the construction of em~ ron mentally friendly buildings. infraslructmc. or h ow much additional server space (and thus en ergy) it will require. and ethics. navigate. ()rga••i:t. :ntd l 11f411111atiu11 "l 't.3 B11 Si11l'~S l )rcS"~IIrcs.SI• :C'I'I()N 2. Information technologies.S. They also need to establish a good relationship with their com pany's electrical utilities. O n e impact of this development is that IT professionals are expected to help create green facilities. provide valuable support in these efforts. Social issues that affect businesses and individuals r~nge from th e state of the physical environment. which can be global in scope. and knowledge. Many orga nizations arc pursuing Leadership in Energy and Environ n1ental Design ( LEED) certification from the U. Socid:l i/Po litlt'a l /ll·ga l l'rc~~urc~ ·n.mel data mining (Chapter 12). spending to protect aga ins~ terrorism. IT employees n eed orga nization < to become knowledgeable about embedd ed carbon and how to m easm e it in the company's products and processes. ' l o tmke decisions effectively and n etworks are bringing a Aood of inform< efficiently. Som e corporations and individuals are willing to spend time and/or m on ey to address various social probl ems. Green Building Council. application development.1pter 6) . IT managers must have an equipment strategy from cradle to grave.:dmu logy S 11ppwt ···~ · R!JII. These efforts are known as organizational social responsibility or individual social responsibility. an d servers. national . G reen design inAu enccs the type of IT h ow the building's design affects th e devices used and the locations where IT dusters personal computers. In a series of interviews. and much of it is free. because IT touch es every area of an organization. ll environment. deploying. O ne critical social problem is the state of the physic< called green IT'.

November 23. Sources: Compiled from J . <l ncl equa l opportunity. 201 I. As technologies develop and become less expensive. O LPC is a nonprofit associJtion dedicJted to research to develop J very in expensive IJptop . rely on IT support to provid e the nccessa1 Protec tion against Terroris t Attacks. ~>ww. th e USA PATRIO T Act. govemmenl passed many new laws.3. January 30. s~1 fcty. Still another soci. wa terproof. employees who are in th e military reserves have been called up for active duty.o. environmental protection ." Forbes. uses less power th.11'bane~Oxl ey Act. including cyber attacks (discussed in C hapter 4). 1ted with terrorist activit ies. Another major source of busin ess pressm es is governmen t regubtions regarding health.e n ext generation of inexpensive laptops. 201 0." InfomwfionWeek. . the U. and have a projected price of $75. "15 Green Tech Innovations. The first generation of inexpensive laptops appeared in 2007 with a price of $ 188. O rganizations must be in compliance with th e regulations contained in these statutes.tcn1s ® To empl oy these systems effectively and m ake intelligent consumption decisions. Con tinning onr discussion of socia l responsibility. util ities are offe ring va riable rate incen tives depe nding on when companies use electricity and how much they use.ttsgbc. Many governm ent and international organozations are trying to close the digital divide.laptop . September 2. A. Anoth er problem that concerns conlTibutors is that they often exert little influence over the selection of projects their contributions will support. "Whyand How . 2009. m ore utilities are developing an expertise in cre.1na. creating personnel probl ems. Matthe"~• "For IT Accountability Act ( Ill PAl\). which was too high.'' C/0. the Internet can act as a fa cilitator of generosity. questions arise as to what percentage of contributions actua lly goes to th e inte nd ed ca uses and recipien ts and what percentage goes to the charity's overhead. Informa lion technology can help protect businesses by providing security systems and possibly identifying patterns of behavior associ. A well-known p roject is th e O ne Laptop pe r C hild (OLPC) project (http ://one. and half the thickness of an iPh one. n a light bnlb and is unbrce1bble. Going Green Can Save You Some Long Green. The digital divide refers to the wide gap between those w!ho have access to information and commtmications technology and those who do not. a touchscreen tablet computer for schoolchildren in the devel oping world. th e C ramm-Lcach-Biilcy Act. In addition. orga nizations have been und er increased pressure to protect them selves against terrorist attacks. A. the speed at which the gap can be closed will accelerate.~ties. Businesses tend to view government regu lations as expensive constrain ls on their acti. In som e cases. January 5. In gen er<d. Second.ll problem that affects mo dem business is the digital divide. 2001.llll·l§JMI C II AI)Tit:l{ 2 ( )rg auizational S trategy. aud lufonnatiuu Sy." Compttferworld. T hird . IT man agers sh ould tap that expertise to improve their own depa rtments' energy perform ance.t:. 2011. Since September 11. governm ent deregu lation intensifies competition.1nngcm cnt <1 cross th eir netwo rks nn cl designing energy-efficient data centers. tv!.org). In the wa ke of 9/1 I and numerous corpor<Jte scandals. C. 2010. Compliance with Government Regulations. Finally. Oi." /nfomwlionWeek. including the S. utilities are offering incentives to commercial custom ers wh o take certa in energy conservation steps. Penttila. and the ll ealth Insurance Portability . "Hire Green IT Managers Now. accessed March I 5. This gap exists both within and among countries..S. 2011 . As you will see in IT's About Business 2. n. Nguyen.J technology that aims to revolutionize how the world can educate its children . Forrester Urges. social problems all over th e world may be add ressed through corporate and individua l philnnthropy. Cuull'l'til·ivl· J\d vo111h1g. organiz<1tions y controls and information for compliance.1ting energy-effi cient IT depHb11ents. The process of becoming and remaining com pliant is expensive and time consuming. T he second gen eration of the laptop was scrapped because the price remain ed too high. March 31. IT personn el must famibrize th emselves with th e S}'Ste m's complex monitors and sem ors. such as e nabling compt1ter power m. T hese issu es require IT systems that can regubte electri city use. "How to Get Your Green IT Cred. This computer will be a single sheet of plastic.Your Co mpany Should Go Green. In almost all cases. Pratt.

0 . followed by time. Users pledge Interestfree loans rather than tax. including major international p orts o f entry by air. sea.sparked.cofJaboratiVaconsumption. The use of IT raises m an y ethica l issues. ''The Case for Generosity." Fastcompaf'&'. ( )rgani. accessed March 28. Questi ons 1. Kiva (www. 2011. CouchSurflng (www. 2.glffflow. the pressures on organizations are incr easin g. hltp:!Jb/og.a tiona I 1\c~pousc. su ch as fingerprint and ocular ( eye) scanners . Clearly. Disc uss why people will give away their time and knowledge for tree.kiYa.ourgoods.deductible donations. • • • • snm<> ~cidltloM I <>x:~mrl<>s of W<>h s lt<>s th ~t M- abie generosity. N. a Web site such as PatlentsllkeMe (www." lnformatlonWeek.giftflow. US-VISIT 0 1 f. [about business] 2.OUrgoods. Sociologists contend that contributing to such communities helps people gain self-esteem by donating their time and experiences to people In need. These hubs translate the peer-to-peer principles of sharing from the virtual world to the real world. • Sparked (www.surcs. and land. March. and lnfonnation 'l'c dmulogy Support IMI!] •1~111.patlentsllkeme. otg. Consider. WIVW. or any of the thousands of message boards dedicated to Infertility. where they can share resources. they can damage an organization's image ancUdestroy its empl oyees' morale.. Th e system is n ow operati onal in more tha n 300 People w ill most readily share Information. and various other aliments. then. Describe the various ways In which the Internet can facilitate generosity.p2ptoundafion. Collaborative Consumption (www. February 2. Ethical DonorsChoose Is an edltcatlon-or1ented Web sne that !Unctions entirely within the United States. while also receiv ing much-needed emotional support from strangers. WIVW.3 million travelers find willing and free hosts throughout the world. Sou~: Complied from A. 'Lending and Phil anthropy In the Internet /V.donorscnoose. • GlftF/ow (www. Information ethics relates specifically to standards of right and wron g in information -process ing practices. Glftflow connects community organizations. that ti es into government databases and wa tch lists to ch eck th e id enti ti es of millions of p eopl e entering the United States. DonorsChoose (www.thredup. What Is the main reason that people allow strangers to sleep on their couch for free? The answer Is that they give away something that has little marginal cost In exchange for the opportunity to meet peo pie from all over the world. WIVw. Kiva directs 100 percent of the loans to borrowers. Many Web sites help concerned Individuals provide goods and services to others. An exampl e o f protection against terrorism is th e Depa rb11 ent of H om eland Security's p rogra m . meet one another's needs. ww'\ has helped 2. Ethics r elates to gen eral standards of right and wrong. OurGoods (www. and coordinate their efforts to build a better world.donorschoose.Je..sparked. I <>l's look ~~ More work Is accomplished In networks of shared respect and shared resources than In competitive Isolation. if handled poorly. C h apter 3 covers ethical issu es in detail. 3 Businc~s Prc:o. The Web sne addresses the huge problem of underfunded public schools. You wi ll l earn about these organizational r esponses in the n ext section. Kamenetz. For example.:~. and then physical goods. thredUP (www. and neighbors In a network of reciprocity. couchsurtlng. thredUP Is a Web site where parents trade children's c lothing and toys. businesses. US-VISIT is a n etwork o f biom etric-sc reening system Glrtf low Is a virtual community Where you can obtain things you need for free and find people who need the "stuff'' you have to give The Internet Facilitates Generosity The Internet can facilitate acts of generosity and true connection. www. • W\ com): This Web site Is an online hub for d iscussions about the growing business of for example. 2011.klva. and organizations must be prepared to take responsive actions if they are to succeed . ran ging from m onitoring e-mail to invading the privacy of millions of customers wh ose data are stor ed in private ancU publ ic databases. cancer.S ECT IO N 2. and barter (with many linKs to Web sites engaged In these practices). Users make donations rather than Kiva Is a nonprofit ernterprlse that provides a link between lenders In developed countries and entrepreneurs In developing countries. People use these sites and message boards to obtain Information about life-and-death decisions based on volunteered Sparked Is an online "mlcrovolunteerlng• Web site where large and small organizations list opportunities for people looking to OurGoods enables creative people to help one another produce Independent projects. Ethical issu es are very important because. 2008.

com. ' tl\tc Ill r Focu~ Organizational atte mpts to provide superb customer service can make the difference between attracting and keeping custo mers and losing the m to competitors. February 2. and o nlme \'lrtua ltry-on . and t'urvy. March 23.mel/or pro fi b. Within these ~cyberworlds.. Based on its experience with made-to-measm e )C ans. T he business problem 1 reasonably low cost. January 18. 2011. make-to-order . which ha s an am azing resemblance to her or him . With made-to-m easure )C ans. com . and to prevent competito rs fro m entermg the1r markets.t II' S tratcg1 c '. L. Bod} metrics has 1dentified three body slupcs: str.sty/eguru.1ss cust01mzation uwo lving m t n's and wo me n's JC. solution is to change manufacturing processes fro m mass production to mass customization. accessed March I.1l.1ight . Sources: Compiled from "The First T ime I Had a Bodymetrics Scan. Talbot.1 se tl1e1r market shJre .lllS .miz. but it custo mizes th e m to fit the needs and preferences of individual custom ers. semicurvy.bodymetrkHom. based on your previous purchases. D ell guides you thro ugh the process of buying a computer by providing info1 mation and choices th at help you make an info m1ed buying decision.1pe rs and al II) models to test des1 cosmebcs.Jtle rn fo1 the 1 e.blogspot.1s fo r the nC\t bre.Organizational Responses O rg. As an e'1. "Turning Tailoring Over to a Computer. at which time the custom er has a Bod vmctrics ( 11'11W lxxlymdrics com) IS m1 excellent e~mple of m.1s' uses fo r product design \\ Ork.1 ss custo mit. for example. 2007: www.thro ughs 111 products suc h .mt. product placement research.wo rdpress.1tc " ith supplaers. ~tud1e<i." http:!lhowfareseesit.·elo ped a v-irtualized emiro nment that the comp.): R.. a company produces a large quantity of identical ite ms. 11m scan 1 s then used to prmide three senices: mad e-to-measure jeans.1ph1rc\ m o re than I SO measurem en ts.u l' 1pedfit'.1 dressing room .mel services. the cust om er can pick \'ario us styles of jeans and "virtually see" whatthe jeans look like on her or his 3\'<ltar. 1\I:IJ.111ons \lith ad\•. T he online virtual try-on allows custo m ers wh o have been sca nned to try o n jeans virtua lly on th eir own bodies without physica lly trying o n jeans in .11ly designed to fit these different body shapes.1ges that enable them to mcre. C onsider Amazon. Th e service c reates < 111 avatar (a three-dimensional g raph ical represen t.e-to-Order and !\lass Cmtomtz"tiOll ~b ke-to-ordcr is a strategy of producing customized (m ade to individual specificatio ns) prod ucts . body-shape 1 eans.1l fitting w1th a Bod ym etrics tailor.ltion . ''Bodyrnetrics: Whars Your Jean Shape?" http:!!liJatalbot. In another example. Body-sl1. Janu. 2011. . \ Vhen you visit Amazon's Web site an)1ime after you r first \'isit. After custom ers are scann ed." P&C can rap1dl} test product perfo rnunce as well as consumer respo nses to ..tio n of the custo mer). P&C uhl1zes virtual reg n 1de. elo ped a ''body scanne r" tha t scans the cu\ to mt r's body.m1t. Part of the is how to manufacture custom ized goods effic iently and .. Bod}metrics de. In mass custo mizatio n .Jrious p1cmm. Y oung. wh1ch are hand-tailored to the exac t lmes Jnd conto urs of the cu\ to mt r's bod}.1cl. !\lass c usto m 1 1.1 mple. the scan 1 s U\cd to c reJtc J I). to bette r ncgoh.1ddrc'\ th1> problem . Custom ers can the n insta ntly pu rchase jeans matching their body sh apes off the rack in the store.:\ 1ust discus\cd hy imple menting IT such as strategic systems. a Bod)111CITiC's jeans expert helps the m determine their bodv shapes. 2007 (Note: StyleGuru is a promotional blog. Asmita . the IT d epartment at P&-G (M•w. This sectio n explores each of these responses. and produces a dig ital replica of his o r her SIZe a nd shape. it also produces a large quantity of item s..1pc JC. 'l11 c 1 eans are ready in three to six weeks.1! . "Custom-Fit Jeans with Bodymetrics.1ry 15. custo mer foc us. and e-busmess. the site welcom es yo u back by name and presents you with info n11ation about items th at you might de.m d m.1ns. Then .m s Example \Ve ll-fithng Jeans are no to no usly d1fficult to find 'lo .·ario us kinds of ingred1e nt and packaging c hoices." '"'"w. ll \ .atio n is simply an attempt to pe rform make-to-orde r o n a large scale. and comumc r fcedb.)Stcm5 pro v1de or~. In mass production.1tions are responding to the \'. c. Numerous IT tools and business processes have been designed to keep custo m ers happy. 2011.'' In lema· tiona/ Herald Tribune.

e-comm erce applications appear throughout the text. Discuss some of the pressures that characterize the modern global business environment. including the lntemet. In addition to the buying a nd selling of goods and services. qua lilies as a strategic info nnation systetn. Porter's m odel identifies five major forces that can endanger or enhance a company's position in a given industry. Conducting business electronically is <111 essential stra tegy for companies that ore competing i11 tod. A competitive strategy focuses on achieving a desired o utcom e when competitors want to prevent you from reachi ng yom goal. Strategic inform01tion syst em s (SISs) provid e a competitive advm1tage by helping an organization impl em ent its strategic goals and improve its performance and productivity. ' n. Porter's Competitive Forces Model The best-known framework for analyzing competitiveness is l'vlicha el Porter's competitive forces m odel (Porter . these sb·ategies rely heavily on informa• tion technology. T fo r th e most effective responses. such as ga ining market share. In th e new dig it:d economy.3 high] ights these forces. an organization seeks a competitive :~dva ntage in an industry. quality. excellent customer service. -+ Cmupd·itivc Adva ntag e a nd S tTatcgic ln fonuOJtiuu Sysh:1us IMiu ·i!JII.4 Competitive Advantage and Strategic Information Systems A competitive strategy is a statem ent that id entifies a busin ess's approach to com pete. What are the characteristics of the modern business environm ent? 2 . especially strategic infom1ation syste ms. before you go on. its goals. it seeks to outperform its competitors in a cr itical m easure such as cost. or reduce a com petitive disa dvantage. and performing e lectronic tnmsac tions within an org~mization. In addition. in general. E/cclro11ic comm(?rce (EC or e-com merce ) describes the process of buying. services.mizations choose to manage these press\~res. but you must:J lso anticipate and counter your compc ti tors' m oves. Competitive advantage is increc1sing~y important in todny's business environment. and time-to-market. when yott create a competitive strategy. 1985). Companies use Porter's m odel to develop strategi es to increase their competitive edge.1 y's busin ess environm ent. :1nd the plans and policies that wi ll be re quired to carry out those goals (Porter. Are any of these responses specific to a particular pressure? If so. compani es formulate strategies.S EC'J'J()N 2. suc h as l ow cost. You n ow h<we a gen eral overview of the pressures that affect companies in today's business o pbn environm ent ~md the responses that org. In general. Any information system thJt helps an organiza tion gain a competitive advantage. the core busi11ess of com panies has rem ained the sa me. can apply to a desired outcom e. colbbomting with busin ess pMlners. and superior supply chain managem ent. T hrough its competitive strate~. as you w ill note throughout the text. £ -business is a somewhat broac!er concept. C hapter 7 focuses extensively on this topic. F-Bll\ill<">~ :md 1<~-Commercc·. erefore. inform ation technologies simply offer tools th at can enhance an organization's su ccess through its traditional som ccs of competitive advantage. Although the Web ha s changed th e . e-business also refers to servicing customcrs. o r exchanging products. 1985). Figure 2. you must plan your own m oves. A stra tegy. 3.y. which ones? 2. selli ng. ' !nat is. ' !nat is. Competitive advantage h elps a company function profitably with <1 market and generate largcr-t han-ewe rage profits. transferring. Identify some of the organizational respon ses to these pressures.JJ~ 1. or information via computer networks. You examine tlhese topics in the next section. Porter's m odel also demonstrates how IT can m ake a company m ore competitive.

for funding from higher levels of governm ent . they compete for businesses to locate in their disiTicts.1ct of th e Web is lo increase competihon.'ltl. For most firms. and for many other things. music ind ustry). which generally diminishes a firm 's profit. Pay-at-the-pump is an IT -bJscd ba rrier to entering ti11S m.1rc . This observation applies even to org<1 niz<1 tions th at you might n ot consider competitive. it h as not changed Porter's five fundam ent::~! forces.11 to p r. such as local governme that new c0111JX'htors will enter your m.·e to offer pay-at-the-pump scn ' ICC to vour custo mers. uud FIGURE 2. A compehng orgamzahon must offer this feature in order to stmive in tlte marketplace ·n1e re . for example..trkc t bcc. the \• Veb i11cre<1ses the thre<t t that new competitors will e nter the market becouse it sharply reduces traditional barriers to entry. Jre not for-profit enterprises. 'I h e thrc.·e come to expect a nontrivia l capabil ity from their suppliers. competitors frequently need on ly to set up a Web site. is driven by these forces. or what business it is in.1tq. Cunlp<:tit-ivl' Advo111h1~l·. T his threat of increased competition is particula1 ·ly acute in industries that perform an intermediation role. The first gas station that offered this service gain eel fi rst-movc ad\". T/1e threat of eulrr of uew compelilon.ppllers) t Competing organlzatlona - Buyer power (bar~Jahlng power Olbuyers) Threat of substitute products 0< services noture of competition.1t customers hJ\ e lc.ccnscs . as well as in industries wh ere the primary product or ~crvice is digit al (for example.uket 1 s h1gh "he n entry I S easy and lo" " hen thue . no matter how largc or sma ll .1\\ or . Every competitive organiza tion . In addition.1b1ltt) Let'~ c-w mme Porte r's five forces and the ways that the \Veb influences th em.1rnecl to expect from organizations in a certain industry. where only a ccrlam numbe r of J.y. I.ul. such as the need for a sales force or a physical storefront.1 blc Suppose you want to open a gasoline stahon.1t the owmrll imp.n1~c you mmt o ffer it for free.lllficJ nl barr iers to entry :\n cntl'} barrier 1 s a product or sen 1 ce feature th. legal requirements such as admiSSion to the l:o. ( ~ I L\P'I'It' l( 2 ()rgnui:r. S1 gni ficantly.1chce ). Cons1cler. Although local governmenll. Today. l uf o nun l iou S yl"l l.111 tage and esto b lished barriers to entl)'· T his advantage did not last. stock bmkers ond travel agent s). whic h is a link between buyers and selle rs (for example.llll· l!J :M. th .ue man~ types o f entl) barners. This scenario occurs primarily when custom ers ha. In order to compete in that industry. Porter (200 I) concludes th.1 ltccnse to serve·ional Sho. because competitors qu ic kly offered the same service and thus overcame the entry barri er. . In some cases the \Veb increases barriers to ent ry.3 Porter's Competitive f"orc~s 1\tod~l. you would ha. however. In fac~ what makes these for ces so valuable as analytic<l l tools is that they have not changed for centuries. for employees. the geographical ·reach of th e Web enables distant competitors to compete m ore directly with an existing firm . For example.1rc \ l!.w.\ Threat of new entrants S'4'1'118rpower {bar~Jahlng power 01 s!.

customers who receive "perks" fro m loy. Safeway. th e visibility of Internet applications on the Web makes proprieta ry systems m ore difficult to keep secret.•ub8titute fJrodud8 or 8etTi. the switching cost involves time rather than m oney. For example. For the store gains valu able busjness intelligence on customers' buying preferences. The threat fro m riva lry is high when there is intense competition am ong many fi rms i. consider the hig hly competitive grocery industry. If tlh ere <1re many <1lte rn<1tives t·o <1n organization's prod ucts or services.1nagem ent. As th eir name suggests.have prO\~d ed strategic advantage to fi rms in highly competitive industries. Today. Tlte bargai11i11g fJower of ~11/JfJJ. 5.) . which you will study in C h apter 11 .wc few ch oices.mies to track the activiti es and accounts of mill ions of custom ers. Information-based industries experience the greatest threat from substitutes. p. of a decision t o buy elsewh ere. 3. Tlw lxtrgai11i11g l>ower o( customers (burer>). I will rapidly match its features in order to rem ain competi tive. Tire rivalry among existing firms ·in tire indust-ry. Competitors were fo rced to follow.dty programs are less likely to do business with com petitors. stud ent buyer power has incrc01sed dramati cally. Stores . hotels.system s that belon g exclusively to" single organization . Supplier power is h igh when buyers have few choices from whom to buy and low when buyers have many choices. music. contracts with smart phone providers typically include a substantial pen alty fo r switching to another provider until th e term of the contract expires (quite often. In the past. Therefore. For example.S I~C'I'I()N 2. loyalty programs reduce buyer power. 2. Even when there are m any substitutes for the ir products. in m oney and time. then th e threat is low. students had low buyer power. As onolh er example. In this case.iCI">. The threat of. when I see my competitor's new system online.4 Cuntpc titivc A<hantagc arul Strategic l ufonm1tio u Sy~h:n1s MIC ·4D •1111 the first company to offer Web-b< l sed pacbge tracking gain ed a competitive advantage from that service. Switching costs are the costs. then t he threat of substitutes is high. To und erstand this concept. proprietary information system s. lfth crc are few altennatives. which leads to more intense competition in an industry. T he result is fewer differences among competitors. as companies use the Internet to integrate their supply chains. < mel delivery term s. it enables buyers to find alternative supp liers and to compare pri ces m ore easily. thereby reducing the supplier's barga ining power. The threat is low wh en the competition is among fewer firms and is n ot as in tense. companies can create a competitive advantage by increasing switching costs. in th e past. Information technology en<1blcs comp.<. The Interne t's impact on supp liers is mixed. If you switch to another on line vend or. O n th e one hand. the Web provides studen ts with access to a multitude of potential suppliers as well as detailed information abont textbooks. That is. one or two campus bookstores). where 'Nalmart. and ethanol inst ead of gasoline in cars. the company develops a profile of your shopping habits and recommends products targeted to your preferen ces. organizations would rather have more potential suppliers so they will be in a stronger position to negotiate p1 ·ice.n on industry. that company w ill need time to develop a profile of your wants and needs. t hereby reducing buye r power. (Loyalty programs are associated with cu stom er relationship m. and remtal car companies). C ]lWiity. customers today can purchase wireless te leph ones insteacl ofland-line telep hones.Hticipa ting suppliers pTospcr by locking in cnstom crs. when you buy products from Amozon. books. however. As a result.·e. and other companies compete essentially on price. Som e of these companies have IT -enabled loyalty programs in which customers receive discounts . there were few locations where studen ts co u ld purchase tex~books (typically. Today.f. and software) must \~ew t he Internet as a threat because the Internet can convey thi s information efficiently and at low cost and high quality. 1oday. Buyer power is high when buyers have many chokes from whom to buy andl low when bnyers h. Internet music services instead of tradition al COs. however. loyalty programs reward c ustomers based on th e amount of business they conduct with a pa rticular organization (for example. O n the other hand. In this situation . two years). Any industry in which digitized information can replace material goods (for example. n ew technologies c reate substitute products very rapidly. airlines. In contrast. In simple terms. This switching cost is m oneta ry. Kroger.

compute r-aided flexible manufacturing Automated sh ipment scheduling systems. career development Workforce planning systems. track customers through th e store. At that point. specification Opcratlowls Manufacturing. online point of sale and order processing Computerized' ordering systems. In fact. Invoicing E-commerce Web portal for s upptiers M:. virtually for free. C:roccry companies also usc IT to tightly integrate thei1 · supply chains fo r maximum efficien cy and thus reduce prices for shoppers. To id entify specific activities where they c8n use competitive stra tegies for greatest impnct. aud lu fonna tiuu Systcn1s use this business intelligence in th eir m~ rketing and promotion<'! c<1mpaigns. involve cosh. product development extranei with partners 'T1 1 r Procurement Supplier management. training. For exam ple. Porter's Value Chain Model O rganizations use the Porter com petitive forces m odel to design general strategies. such as COs or DVDs of the songs for sale in m usic stores.bout business intcl ligcncc in C hapter 12. finance management Electronic scheduling and message systems. upgrades c m ~ Automated warehousing systems Computer-controlled machining systems. quality control. th eir songs are captured in digita l format. Physica l products.t=. maintenance. once a digita I produ ct h as been developed.1111 #~~~-~ C II AI)Tit:l( 2 ( )rg auizational Strategy. consumers will no longer need brokers to give them information that they can obtain themselves.:: e.. eo IV Icc (/) 0 lni. FIGURE 2. th e cost of producing JJdditional " units" appro ac hes zero. targeted marketing Customer relationship management systems . collaborative workflow Intranet E > 1- w Human resource management ~ ~ Personnel. som e analysts predict that commissions for onlin e stock trading will approa ch zero because investors can search the Internet for information t o make their own decisions regarding buying and sell ing stocks.) Crocerystore~ me also experi menting with wireless technologies su ch as raclio-(reqttency identifoccttioll (RFID. raw materials control. emp toyee benefits Intranet a: (l. maintenance OutboumJ toglc!loo Finish ing goods. dispatch. funding.. production control. o rder taking. market research Customer :0 . order handling.1l products. sates analysis. Compet ition also is being affected by the extren• ely low va riable cost of digit. delivery. for free. production engineering. recruiting. Cuulp<:til·ivl· J\dvo111 h•g. research and development Computer-aided design systems. discussed in C h apter 8) to speed th e checkout process.4 Porter's Value Chain 1\· !odel. T he value chain m odel also identifies points where an organization can use i nformation technology to achieve competitive adva ntage (see Figure 2. subcontracting. in the future compani es might give ~way som e producb. Product and technology development .JoumJ logistics Quality contro l. education and training. Consider the nn1sic indust·ry ~s a n exampl e. p romotion. T he costs of a physical distributi on channel are much high er than those involved in delivering the songs digitally over th e l nternet. packaging. (You will lea rn . receiving. th ey use his value ch a in m odel (1985). and n otify custom ers of discounts as they pass by certain products. Administration and management (/) Legal. supply schedules ) Warranty.4). accou nting.uKotlng and catce Customer management. T hat is. W hen ~1rtists record music.:) (/) Product and process design.

have different value ch .~ tion. Inbound logistics (inputs) 2. stor<Jge. t h ese products pass through the value chains of distributo rs (wh ich also h ave their own value chains). Specifically. whatever t h ey are. Primary activities re late to the productio n and distributio111 of th e firm's products and se rvices. A value syste m . Acco rding to Po rter's va lue chain mod el. A firm's value chain is part of a larger stream of activities. In addit ion. 4. 2. fin. o r an industry wtlue chain.Jtcria ls in to 3-. you will see examples of primary and suppo rt activities in the va lue chain of a manufacturing company. includies the suppliers tha t provid e th e inputs necessary to the firm along with their valu e chains . th ey contril)\tte to th e firm 's com pe titive ad vantage by suppo rting th e pri mary ac tivities. prin1a:ry ~ctivities involve purchasing 111ateria ls. th e support activiti es can also support one another. After the firm creates products. Marketing and sales sell the prod ucts to custom ers. . Suppo rt :1 co nsist of: I . and to suppo rt that adva nt age with informati o n technologies. Finally. T hese activities c reate value fo r whi c h custom ers are will ing to pay.~ il. processing th e materia ls into products. These products are prepared for del ivery (pa ckaging. All parts of t hese ch ains are inc luded in th e value system . ·n. th e pri mary activities nre bu ttressed by su ppo rt act ivities. Product and technology development (R & D) 4. cduc. I Iuman resources management 3. and o th e rs. and so on ) in activities called i11bound logistics. Marketing and sales 5. the company performs after-<>ales service fo r the c ustom er. are transformed into m o re valuable o utputs. support activiti es do n ot add value directly to th e firm's products o r services. Procurem ent Each support acti vity can be applied to a ny o r all of the prim ary activities. such as wa rranty service or upgrade notification .e key point is that every org.•idecl into two categori es: primaty activities nncl support activities.111iza tio n has . the activiti es conducted in any org anizati on can be cli. ret.1 seq ue nce of D ctivitics thro ugh whic h the org. Rathe r. The primary activities < He b uttressed by s upport activities. U nlike primaty activiti es.S EC'I'I()N 2.~ ins.H e used in opera tions. The incoming m aterials are processed (in receiving. <IS their nam e suggests. The finn's infrastructure (accounting. a firm must understand every compon en t of this value system . Services As work progresses in this sequence. whi ch Porter calls a value S)'stcm. vJ!ue is added to the product in each activity. in creasing product valu e by creating demand fo r the comp.1lth care.m y's produc ts.m ce. Companies typically perform five primary activities in th e following sequence: l . and shipping) in the outbound logistics activities. th e following steps occur: I . 5. adding furt he r va lue. -+ C mupd·itivc Adva ntag e and S tTa tcgic l nfo nuOJtiu u Sysh:1us ···· ~$111. h e.1 va lue cha in: . O utbound logistics (storage and distribution) 4. and delivering the products to customers. wh ere value is add ed by tuming raw m. In a nlJnufacturing c ompany.~n i­ zatio n's inputs. . such as tra nsport ation . man:rgem ent) 2. To ach ieve and sustain J competitive odvantage. The m<ttcrials products. all the way to the custo m ers. ctivities As no ted :rbove . Next. Keep in mind that o ther types of firms. whatever they are. Operations (manufacturing and testing) 3. storing.

2.\ FIGURE 2. Southwest Airlines. add new features to existing products and services.•ge over its competitors. Before we go into specifi cs.'I is a competitive necessilv for any bank. an AT}.6 Strategies for Competitive Advnntoge.1111\f~W· ( ~ I L\P'I'It' l( 2 ()rguui:r. 111 turn. th e finn lllhlhlc to 111110\. new anel you can1 catch up. a compa ny that uwests in customer happmess (cmlomeJ-orKnt. l111s selection. sh orttegy for competing in the high ly haul.tb on •tra tegy) will expen ence increased costs. For example. Strategies for Competitive Advantage O rganiz<Jtions continually try to develop strategies to coun ter the five competitive forces id entified by Porter. however . it is important to note that an organi1.'ltl. Cunlp<:tit-ivl' Advo111h1~l·.1 confused strategy cannot succeed. Wa lmart stores use floor space only to sell p roducts. dcc1cks how .. lcJ\111!. and not to st ore th em. As . Th e con\'enience and costcutting features of this innovation gave C itibank a huge aclv.y. An example is \ Valmart's automatic inventory replenishm ent system . which enables \ Val mart to red uce inventory ~to r. The following list presents the most common!\' used strategies below Figure 2. a firm that t'Ont'entrates only on cost lcader~hip might not h. the ATM c hanged the nature of competition in the banking industry. Also. Dltferentl811on 1can sen at a lower cost than you can.JVc the resouTt'es a\':Jilable for research and development.1t cJn nnprO\e customer sei'\Jct but wlllmere.zc 1ts mformallon systems. You wi ll learn ~bout five of those strat egies here. CuSIOmer Oriented I treat my customers better than you do. l>eCJIISC . or develop new wa}~ to prodl ucc th em .1nothcr example. A new mformation system th. D ell has diffcrcnti< l lcd itself in the persona l computer mJrke t through its m ass-customization stmtcgy. Today. .5 prov1des an ovel'\1ew of these strate~1cs I. uud l ufonunliou Syl"l l. This has proved to be a winning str:1 com petitive airl ine industry. Like many innovative·ional Sho .mt. I am t:>ener because 1am Cltnerent Innovation 1 'm Clotng somethtng Opemlonal E1fecltvell can e1o the same th1ng more en!Qently than you can. lmiOHithm strategr. A classic exa mple is the introduction of automated teller machines (AT/'vls) by C itibank.1tq.1 comp•ml wllluh!. Companies must select a strategy and then slav w 1th 1t. Produce products and/or Scf\'I Ce~ at the lowest cost in the industry.ation's c hoice of strategy involves trade-offs. Diff erentiation strategy.ut. th ereby red u cm g inventory costs.1se cosb. has clifferentiated itself as a low-cost. Cost le<Jdership strategy. Introduce new pmdu cts and services.1ge re<jtm c mc nb As <1 result. slightly will be welcomed at a high-end reta1ler such as 'ordstrom's. Offer different p roducts. services. 3. but not at a discount store like Walm.tlc. or product fe3tures than your competitors. express airline. for exam ple.

only 16 percent of the IT and business executives who participated agreed that th eir organization had adequate a1 ignment between IT and the business.. productivity.5 Bnsii H. often creating ne w revenue streams.5 Business-Information Technology Alignment The ''holy gm il" of o rganization::. the IT function directly supports the busin ess objectives of the org:mization. Improve the mann eD' in which internal business prol ctiviti cs better than its rivals.IT a1 ignment. according to a McKinsey & Company survey on IT strategy and spending. Business-information technology alignm ent is the tight integn1tion of the IT function with th e strategy. O rganiza tions en sure that IT employees understand how the company makes (or loses) mon ey. O rganiza tions rotate busin ess and IT professionals < l cross cl eparh11ents and job fun ctions. What strategies can companies use to gain competitive advan tage? 2. Unfortun.S EC' I 'I< )N 2. 'l11at is.rtions provide overarching goals that are comple tely cl ear to each IT and business employee.:~s-l ••foruwtio••" l 'c<elmulogy Aligmncnt ···~!j(!JII. why do so many orga nizations fail to implem ent this policy? The major reasons are: • • • Business managers and IT managers ha ve different objectives. and goa ls of the organization. Describe Porter's value chain model. m. 5. on e-toone relationship with each customer. i::. According to Porter. business executives know little about information technology. mission.ltely. 4. inforn1ation technology ll1ignnle nt. Such imcesses :rre execute d so that a firm pe rforms these < provements incre ase qua lity.l~~f 1. O rganizatio ns c reate a vibrant and inclusive con1pany culture.t continually tnmsfom1s the business. Different iate between Porter's competitive forces model and his value chain model. What are strategic information systems? 2. before you go on..l nes::. 4. o r stmtegic a lignment (which we will call simply alignment).my organizations fa il to ach ieve this typ e of close alignment. vVeb-based sys- tems arc particubrly effective in this area beca use th ey c. and IT executives understand the technology but do n ot understand the real n eeds of the business. In fact. O rganiza tions view their internal and externol custom ers and their custom e< service !iJnction as suprem ely important. C u sfOIIIei'-OI-ienhJN0 11 sfmtegy. Concentrate on making custom ers happy. what are the five forces that could endanger a firm's position in its industry or marketplaces? 3. Put simply. O rganiz. . G iven the importance of business. and employee and customer satisfaction while decreasing time to market. bus.m provide a person< l lizcd. Of>erational effectiveness sfwtegy. ~l11ere are six c horocteristics of excellent alignment: • • • • • • O rganiza tions view IT as an engine of innovotion th. The business and IT departments are ign orant of the other group's expertise_ A lack of communica tion .

suppose that a customer goes to zappos. 2010. Babcock. shoppers are onered a customized Insurance package that Includes the limits and deductlbles available wtthln that pr1ce range.' C/0." Forbes.!'~ Is a major manufacturer of clothing. (Hint: What are the "business" goals of your university with regard to student registratiOn. State Farm.T h e good news is that so m e org~mizations "get it right. 2010. "Ho w CIOs See the World. Sperling. a nd determine a rating algorithm tor competitors• rates. "10 Megatrends Affecting Corporate IT Through 2020. and accessories." IT's About Business 2. and other competitors charge for the same coverage. King.4 system handles the n ew business as Zappos expands Its produc t and service offerings. March and own. Scott.' lnformat/onWeek.4 illustr:ltcs lm sincss-IT a lignment ~1 t two comp. 201 o. To provide tnls transparency tor Its customers.progresslve.?) G [about business] 2. when Zappos expanded Into selling luggage. The company's exclusive IT-enabled online Name Your PriCe application allows customers to choose the priCe they would like to pay tor Insurance and then see the coverage they can buy for that priCe. The Insurer uses highly automated underwrnlng software. spot the K ey data. 2011. he or she will be able to nnd all of the same Information just as quickly. IT . After entering basiC car and driver Information. Progressive Progressive (www. Pro~rcs~ivc . before you go on. Its mission Is to make Insurance easy to shop for. T. Th is Sources: Complied from M." C/0. www. 2011. What IS bus1 ness-fT alignment? 2. and the application Instantly responds wtth lnfomnatlon about how such changes wtll anect the price. because suitcases take up much more room than do shoes. December 20. The reason for this Is that a Zappos unit called Powered by Zappos built and runs the Clarks Web site. In fJct . The company's primary business platform Is an enterprise data warehouse (discussed In Chapter 5) that essentially contains a ll of the company's data.) 2. Map~. Questions 1. J. both com]Xlllles maintain that bu~iness . fee payment. etc. grade posting. com. " Enterprise Architects' Role In Aligning IT with Business. Progressive developed software that allows the company to quickly extract pricing data flied with government regulators. Provide specific examples of problems that could occur at Progressive and Za ppos If the firms' business strategy and Informatio n technology are not aligned. For example. neither comes before the other. www. The customer can see all of the Clarks sandals available In stock. "Don't Just Build Business-IT Alignment. Powered by Zappos Is a revenue-producing business application aeated by the Zappos IT department. " Beyond Alignment. com for a pair of red ClarKs sandals In size 8." Compute/ Z:1ppos. Zappos Zappos (www. July 26. buy. Consider the cases of Progressive and Zappos. What does It mean that the business strategy and Information technology go hand-In-hand? (That markets ltse~ as an Insurance provider that offers choices to' C/0. On the IT side.' Computerworld. February 18. The software allows Progressive managers to read a state regulatory filing. 2010: T. acces~ March 19. Betts. the company needed to reconfigure Its data warehouse to reflect that change. Give examples of business-IT al1 gnment at your university. •cvs IT Chief on the Remedy for Business-IT Alignment. beauty v~rtu:dly inchstnlg•nsh:1ble 1 11 their strategy and operations. C. March 29. marketing data.mics. November 16 . It h ad to set up a special p lace at Its distribution center to store the new Items.Web site traffic. and It presents data to customers In an easily understandable way.2011: E. regarding student systems. wa11gum. Shoppers can also manipulate an online dial to change various options. As another example. merchandising analytlcs. Wallgum. 201 o: J. and so on. Progressive's Web site also allows customers to comparison-shop to find out what Allstate. If the customer goes to Clarks. progresslve. May 24. Launched In 2009. "Absolute Alignment: How One CIO Remains in LockStep with the Business.

All functional areas in any organization must work toge th er in an integrated fa shion in ord er for the firm to respond adequately to business pressures. managing accounts receiva ble. lTaining staff and computer users. A business process is an ongoing collecti on of related acti. mission. First.~ties that produ ce a product or a service of va lue to the orga nizati on. managing bills of m<1te rials. In many cases. These responses typicall y require each functional area to utilize a va riety of information systems. it is critical tl1at you understand how infonn<1tion systems can help you . Differentiate between the terms business process reengineering and business process management. Understand the concept of business processes. hiring employees. its business parh1ers. and identify the "customer" of each process. Exa mples of business processes in the functi onal areas are managing accounts pa yable. These capabilities will enable you to make the organization's business processes more efficient and e ffective. It is also important for you to appreciate how each process fi ts into your organization's strategy. You have seen why companies must be con cerned with strategic advantage. You also hm•e acquired a genera I knowledge of how informati on technology contributes to orga niza ti onal strategy. appl yi ng disability policies. 1l1e key to BPR is . and others will involve several (or all) of the orga niza tion's fun ctional areas. But why is this chapter so important for you? There are several reasons. and provide examples of business processes in the functional areas of an organization. and applying Internet use policy. managing post-sale custom er follow-up. respond to these pressures. and eventually your organiza tion. Regardless of your major. having general knowledge about strategy and a bout how information systems affect the organization's strategy and competitive position will help you in your career.. as well as its business problems and how it makes (or loses) money. but tl1ey also affect you as an individual. you will be involved in a va riety of business processes from your first day on the job. C losely following this discussion. yo ur tea m . What's In IT For Me? [ Summary ] 1.S unnnary ···~*~··· For all Majors All of the functional areas of any orga niza tion are literally composed of a va riety of business processes. Y ou now know how to analyze your organization's strategy and value c hain. all functional areas must work together fo r the organization to gain compe titive advantage in its marketpla ce. und erstand the inputs and outputs of each process. as well as the strategies and value chains of your competitors. achieving competitive ad vantage is essential for your orga niza tion's sun~val. In addition . the business pressures you have learned about ha ve an impa ct on your organization. Some of th ese processes you will do by yourself. This knowledge will help you to do your job better. and/or its customers. the timeliness and accuracy of these responses is even m ore critical. Business process reengineering is a radica l redesign of an organization's business processes that is intended to improve the efficiency and effectiveness of these processes. you. th e functional areas use a variety of strategic informati on systems to achieve this goal. It is important for you to be able to visualize processes. In toda y's competitive global marketplace. This task generally involves incorporating infornuation technology in the process. 2. to be promoted m ore quickly. and goals. and all your colleagues will be responsible for creating a competitive advantage. managing manufa cturing change ord ers. and to contr·ibute significantly to the success of your organiza tion . Aga in . some will involve only your group or department. You also need a basic knowledge of your organization's strategy. So. T herefore.

. • Customer-orientation strategy . newspapers. and the \• Veb makes information about these products available alm ost insta ntly. • • • • 5. T'he visibility of Internet applicat-ions on the Web makes proprietary system s more difficult to keep secret. • Differentiation strategy.11114~-~~ C II AI)Tit:l( 2 ( )rg auizational Strategy. services. Cuulp<:til·ivl· J\dvo111 h•g.Veb can also increase barriers to entry. As a resu lt. "n1 e fi ve strategies are as follows: • Cost leadership strategy. put n ew fea tures in existing products and services.mel optimization of business processes.. thereby increasing suppliers' bargaining power. pa rticipating suppliers can lock in customers.~a l capability from their suppliers The bargaining power of sup-pliers: The Web enables buyers to find altemative suppliers and to compare pri ces more easily. T herefore. Porter's five competitive forces: • The threat of e11try of 11ew competitors: For m ost fi 1 m s. m usic. the \• Veb increases the threat that new competitors will enter the market by reducing b·aditional barriers to enhy. so that it wi ll cost custom ers time and/or m oney to switch from your company to a competitor. From a different perspective. Ide ntify t h e five competitive fo rce s d escribed by Porte r. • l\l[arket pressures: An example of a ma rket pressure is powerful custom ers. compa nies can implem ent loyalty programs in which they use th e We b to m onitor th e activities of millions of custom ers. competitors n eed only to set up a \ \feb site to enter . boo ks.o ffer different products. analysis. However. BPM is a management technique that includ es methods and tools to suppo1 1 the design.1 market. 4. ll owcver. .in troduce new products and services. aud lufonna tiu u Systcn1s for enterprises to examine th eir business processes from a "clean sheet" perspective and then determine how they could best reconstruct those processes to improve their bllsin css functions. thereby reducing supplie rs' barga ining power. C reen IT is on e response th~t is intend ed to improve the environment. software). proprietary information system s provided st·ra tegic . Because BPR proved diflicLU!t to implement. exa mple of o technology pressure is inforn1 ation overlood. and e xplain h ow th e W e b has a n impact o n each o n e. Such progmms reduce buyer power.concentrate on m aking custom ers happy.. Describe the s tra t e gies t hat orga niza tio n s typically ado pt to counter the five compe titive fo rces a nd achie v e compe titive adv a ntage . or product features. T1w threat of substitute products or sen•ices: New technologies create su bstitute pro ducts ve ry rapid ly. • Operational effectiveness strategy . magazines. Search engines and busin ess intelligence applications enable managers to access. • Tecllllology presSilres: An. The \. os well as information about those cho ices. The rivalry among existing ~rms in the industry: ln th e past. List and provide examples of the three types of business pressures. as when customers come to expect a nontri.g. and utilize vast amounts of information . • Societal/political/legal pressures: An example of a sociehll/political/legal pressure is social responsibility. • Innovation strategy. navigat e.dwntogc for firms in highly competit-ive indns1ries. Frequently.improve the manner in which internal business processes are executed so that a firm performs simila r activities better tha n its rivals.produce products and/or services at the lowest cost in the indushy.t=. managem ent. 'l11e bargaini11g fXJwer ofc ustomers (buyers): T he Web provides customers with incredible allflounts of choices for products. As a result. as compani es use the Web to integrate their supply cha ins. 3. C ustom er relationship managem ent is an effective IT resp onse th<1t h elps companies ochieve custom er intirm1cy. a nd describe one IT response to each. or develop new W<lys to produce them . the \'v'eb makes strategic adwntage more short-lived. the \~leb increases buyer power. impleme ntation . industries (p< u ticularly information-based industries) are in great d< mge r from snbstitutcs (e. organizations have turned to business process man01gement. such as the state of th e physical e nvironment. the \• Veb also can enable a company to bui ld in switc hing costs.

also shows the support activities. individual social responsihility See organizational respon sihility. mass customiz:~tion A production process in which ite ms are produced in large quantities but a1·e customized to fit the desires of each C \ISI'o rner. husiness process management (13PM) A managem ent technique that includes m ethods and tools to supp01t the design. c ross-functional hns iness process A process in which no single functiona l area is responsible for its com pletion . compcl'itil'e :~d v:~ut"'gc An adv:mtage over competitors in som e measure such a s cost.IT ~lignm ent is the tight in tegration of the IT function with the strategy. overa rching goals for all employees. support act. O rga niza tions view custom ers ancl custom er service :1 O rganizations rotate business and IT professionals across departmen ts and job functions. analysis. all with th eir value chains. and goa Is of the organization . [ Di sc ussion Questi o n s ] 1. cultura l. its business partners. thus creating va lue. mission. soci:~l make-to-order The strategy of produc ing customized products ~nd services. • D escribe h ow information technology is used in each step of the process (or is not used). globalization T he integration and interdependence of economic. " '" I optimiz<1 tion o f business processes. implement01tion . social. and political fa ctors in which businesses conduct their operations. quality. [ C hapter Glossa ry ] husiness environment The combination of social. 2. compel iti1• c fmees m odel A business fmm ework devised by Michael Porter that analyz. husiness process reengineering (B PRJ A radical redesign of a business process that improves its efficien cy and effectiveness. O rganiza tions ensm e that IT employees nn dersh1 nd h ow th e company makes (or loses) money. Business.infOI'matio n technology alignment The tight integ ration of the IT function with the strategy. rnultipk functional areas collaborate to perform t<h e function. W hy is it so diffi cult for an org<1nizot ion to actually implem ent busin ess process reengineering? . e nh·y barrie r Product or service feature t hat custom ers expect fro n1 o rganizations in a certain indus try. and/or its customers. value system Includes the producers. and goals of the organization .es competitiveness by recognizing fi ve major forces that could endanger a company's position . husiness process A collection of related activities that produce a pro duc t or a service of valu e to the organization. physical. econ omic. There are six characterist ics of effective al ignment: • • • • • Org~nizations view IT as an engine of inn ovation th<1t: continn<11ly transform s the business. m<1nagcm ent. s suprem ely important.~ of effective alignment. mission. and describe t h e characteristic. an o rganizatio n trying to enter this market must provide this product or service at a minimum to be abl e to compete. De fine business-information tech nology a lignment. O rganizations provide clea r. value c hain model Model that sh ows th e primary activities that sequentia lly add value to the profit margin. d igital divide The gap between those who have access to info rmation and communications technology and those who do not. Consider the student registration business process at your university: • Describe the steps necessary for you to register for your classes e<1ch sem ester.ivities Business activities that do not ad<l value directly to a fi rm's product or servi ce under consid eration but support th e primary activities th at d o add v.1 lu e. distributors. • O rganizations create a vibrant and inclusive company culture. and ecologica l facets of life. husiness. often by beginning with a ''clean sheet" (from scratch ). primary activities T hose business <1ctivitics related to the pro· duction and distribution of th e fi rm's products and services. 1*1· 3ii!JII. org:~niz:~tion:d ~oci:~l respon sibility (also individual soci:d responsibility) Efforts by organizations to solve vo riou s social problems. suppliers. enabled by rapid advances in information technology. or sp eed. legal. stmtcgie information system s (S ISs) Systems that h elp an organization gain a competitive advantage by supporting its strategic go:ds ~nd/or increasing pet'formance and prod lJClivity.Di~cussiun Q uestio ns 6. and buyers. leads to control of a market and to la:rger-than-average profits.

l. (a) As . \\~lJt is Dell's competitive str." 2. ' fne combined company became the second-largest Sta tes.mdard of h\lng? 6. 2. S u mm"rize yom e xpe rie Eac h m e mbe r o f th e group must have a Yah oo! e-mail Clccount (free). iprint. T he market fo r optical copiers is shrin king rapidly.S.·•ty 1-!ow would Costco's information systems con tr1bute to Costco's competiti. 4.111 mformahon system by 1tself can rarely prO\ 1de a sust. htm).lJOr? In your c hoice of a ca reer? Will you have to be a " (.1 try the Un1led St. Apply Porter's v.mcc). com).. 2008. 7.lm:nt (consider products. Enter \Valmart C hina (www.-100 branch and office locations. two g iant finan cial institutions announced a merger.1 s . Apply Porter's value c hain model to Dell (www. d. Id entif y all the bu1ines~ p rcmn es o n Xerox.3 trillion.go-fcr1sfomer. [ Problem -Solvin g Activities ] 1. m adn. \\'h.IT\' .d w. F111d some of Xerox'~ rc~pon~c 1 mples o f how a m .wells{argo. Amtr..•~s.1nies had to m erge their people and technology as well . Divide the class into tea ms. as Wells Fargo (•"vw. Why might it be difficult to justify a strategic infonmtion 5)'l!te m 7 Dc~cnbc the five force~ 111 Porte r's compell tive forces model.are Dell's major competitors? Describe Dell's bminess model. •1nd w••w. It is expected tha t by 2010 as muc h as 90 percent of all duplicated d ocume nts will be done on computer printe rs.~rc the services offe red b y each country. 9. Each tea m will select a country's govern me nt a nd \~sit its official \ • V eb site (fo r exam ple.O\'CI'1 1111Cnl is 1\'ll~•·. How does the United States sta c k up? Are you su rprised at th e numbe r of scn •iccs offe red by coun tries through \ Veb sites? \ Vhic h cotmtry offe rs th e most services? T he least? [ Closin g Case Two Financial Giants Merg e ] ba nk in the United The Problem On Decem ber 31.fdong le. 3. ldenbfy the role o f IT as a contnbuto r to the business technology pressures (for <. with 2008 sales of $1.jctguar. 8.o r exa mple.. the Umted Kingdom.1c t of . [ Team Ass ignments ] d.1c1 htator of Xerox's crillca I rc. the Netherlands. descnbe the busmess p ressures o n your universil)• Each ~roup will the n create an online group fo r studying one of these bmme<>s pressures. How would Dell 's inform ation S}'l!te m s contribute to Costco's competitive stra tegy.1s t heir financial assets. Form your g ro ups in Coogle Croups (http://grorsps. 5. '"'''"·findarticles. Describe the tasks th at Dell must accon1plish for each prim ary value cha in activity. D1$CU$S the 1ded t ha t . b.compclltl\e forces model and the value c hJm modd? .1c weapon or a su rvival tool? Discuss.3.1111 model.easf' une. c.1ble competith·e advantage. given the nature of its business? 7.1 lue c h. C.~rslgov. Is IT a stratcs.bluenile.1ch pnm.1in model to Coslco ( 10.1tcgy? Who .S. e tc. uw u• rahoo. Experience c u stomization by design ing your own shoes at Hw·w. New Zealand.1rn cr"> \Vh) or why not? 5. com. f.":ample.cni)C the t. Read abo ut the proble ms a nd solution s of Xerox from 2000-2010 at '"'"w. Identify the rok of IT .com/englislr! indcx. Cerm.IJOr competitors? Describe Costco's business model Dc.. and you r diam ond ring at www. Can a compa ny suc h as Xerox Corpora tion su rvive? a.·e strategy. Wh. and 12. the two comp. th e o fficiJ I Web po1lJ I fo r Ihe U. V\~1at d oes this company d o a nd whe re is it loca ted? Who are its custom e rs? Whic h of Friedmnn's A11ttc ne rs does this company fit? PrO\~ de ex.ll<:s.1tll\1hes.googlc.300 ATMs in North America..pon~ . What docs a Aat world m ean to you in your choice of a m. and how your uni' crsit) u~cs 1 '1' t o rc~pond to this pressure.costco.lch. Expl:dn why IT is both a business p ressure and an e nable r of response activities that counter business prC))I\ (see '"•~•·. I low does Walmart Chi na differ from your loc. 4 .com. ( . your CD at www. Examine the available information. D c nnlJrk.1t world be on your $t. and '"v"'·googlc. your bu siness card a t wMv. Singapore. Surf the Internet for informatio n about the Department of Homeland Security. given the nature o f its business? 6.1in..)? Dcsc nbc these d1 ffcrcnces.1lue ch. . obsolescence).com ) completed its $15 billion acquisition of Wachovia (w"~"· .1lr..1~ks that Costco must accomphsh for c. What is the relations111p betwnn the. Describe Po rtds v. company would use its services. Access www.gOI•.1 f. and comme nt o n the ro le o f information technologies in th e deparhnent . and f.000 e is Costco's compe titive strategy? \Vho are Costco's m.. and expbin ho" the Internet has affected each one. A. Review an d comp.luc chJ m .1t 11111>ht the 1mp. For the merger to be suc- cessful. prices.r. com). your car a t wtvw. services.

000 employees just to handle those orders. 2009.Inte rac tive Case: St1ppo1 ·ting a C u:itOJncr-Oricn tcd S h·ategy at Ruby's C lub ···~~D · 1111 In pa rticular. accessed February 15. 2011. l11at is. www. customers can ha \'e ATM receipts sent to their e-mail addresses rather than on paper. Flllther. 201I. customers were to experience no disruption in services during the m erger process. the merger required a m ajor network integration to combine both banks' operations. Nearly 25 percent of the customers who bank online also use m obile banking to c heck balances. so the transition team used the former."' Baseline Magazine. January I. ' l11e Wells Fargo application was better at handling that demand and conducting secure transactions than was the Wachovia added 10. vVhen two giant financial firms m erge. The Solution The ma jor initiative of the entire IT integration was to select and implement the best ex isting applica tion in a business area. "20 1I State of the C IO. rega rdless of whic h bank already u sed that applica tion .lvells(argo. l<o r instance. from an IT perspective.t banking send about two dozen m essages per m onth . For exa mple. "'Mobile f\'lean. • ' l11e Wells Fargo moti gage lending application was superior in scab bility. Wells Fargo was stmggling to fill the demands created by the mortgage refinancing boom. To ensure that employees remain ed as productive as poss ible during the merger.wachovia. and those brands are delivered by their IT structure. T he transition team 's str·ategy was to c hoose one busi ness process. K. In this way the newly formed bank focused on business outcomes rather th an technology. a third-quarter profit of $3. and then make certa in that all of the employees who were involved in that process knew how to use that application .3 4 billion. financia 1 institution s use IT to strategically differentiate themselves from the ir competitors. and pay bills." CJO.5 billion . Provide two specific examples o f difficulties the companies experienced in integrating the ir info1mation systems. Consider the mortgage lending and online ba nking busi ness processes. As one financial consultant explained. and specialized smart phone applications. they have to consid er m ore than just integrating their financia l cultures. D. and a fourth-quarter profit of $3. [ Interactive Case ] Supporting a Customer-Oriented Strategy at Ruby's Club Go to the Ruby's C lub link at the Stud ent Companion web site or W ileyPLUS for information about your current inte rnship assignment. Wells Fargo is combining ph ysical and virtual tools. \~lells Fa rgo's custom ers constantl y commented on how easy these applica tions were to use and how intuitive th e interfa ce was. which was to evaluate which systems would best serve the new bank's c ustomers. customers who use te:. " Banks have their brands. At Wells Fargo. T he overall goal of th e transition team was customer retention . The challenge was to get all employees to focus on the overall goal. 2 . Wells Fargo and Wachovia faced the add ed challenge of m elding th eir distinctive id entities into a new identi ty. "J oining Two Financial C iants. a mobile browser. what happens if one bank maintains a highly decentralized rr approach in which each individual business unit has its own IT policies.s Business. • Wells Fargo's online banking applica tions we re also found to be superior to \~lachovia 's. Th e transiti on team rea lized that they were integrating disparate IT teams. with more than 48 milli~n custome rs.. They have to consider their IT cultures as well. McCafferty. The Results T he bottom line? In T he bank. Wells Fargo provided ongoing support for nearly all of the 4. Creengard.4 b illion .000 applications that the two ban ks used before th e m e rger. the focus is on providing a level of service that toda y's custom ers demand . For example. it now offers banking services through m obile channels: text banking. Janual)· 28. Questions I.000 IT systems. September 1. WMll. Your assignment will entail outlining how Ruby's Member's site can best support their custom er-oriented strategy and creating a presentation for the dub's manage rs. Also." Buseline M<-tgd· <ille. tl1e b. Nash. select the most appropriate application for that process. In fuct. Provide two specific examples o f why it was so impo ttant for Wells Fa r go and \Vachovia to integ rate the ir info rmatio n syste ms to e ns ure the success o f the me r ger. 201I. Wells Fargo posted a second-<juarter profit of $2. has made mobility a key component of its business. and the other bank has a centralized approac h? In addition. ' l11 e integration process was intr·icate because th e two companies were using more than 4. Soultff: Compiled from S. At the time of the A g roup from the transition tea m oversaw the transition to new. best-of-breed applications. . m eaning that it could accommodate the increased processing needs generated by the m erger. make transfers." T hus. in which every tea m m ember had his or her individual preferences regarding th e systems they were using.

Chapter Ethics and Privacy / / I I I • / / .. N ' /" J / . . I I • .. ' I I I I· · 'J I .......I'I T . I ~ .I .. . .. / .. 1 - .

/rainer • Student PowerPoints for note taking • Interactive Case: Ruby's C lub Assignments • Complete glossmy Wiley Plus All of the nbO\'C and • E-book Gs • 1\'lini-lecture by author for each chapter section • Practice quizzes • Flash C mds for vocabulary review • Additional "What's in IT for Me?" cases • \'ideo inten·iews with ma nagers • Lab Manual for Microsoft O ffi ce 2010 • HO\v-to Animations for l icrosoft Office 2010 Wl1at's ln M 7 T For e. 1ist and describe the three fundamental tenets of ethics. lllld for each one. :md descri be the four categories of ethical issues related to infom1ation technology.. ldenti~· three phlces that store personal data.\PTER OUTLINE ] [ WEB RESO URCES] Dcfi nc ethics..g. discuss at least one potential threa t to the privacy of the data stored there.[ LEARNI"\G OBJECTIVES ] [ CH. ACCT FIN Adhere to regulatory environment MKT Ensure pnvacy of customers POM Monttor Labor laws HR M onitor appropflate use o f IT In MIS Monitor correct use of sensitive company data Ensure correctness of annual repons oveneas . Ethical Issues Prh·acy Student Companion Site wile com/col•.

com) hid its clients' profits from even the Swiss government by concealing them in what seem ed to be shell companies in th e C aym<Jn Islands.juliusbaer. WikiLeaks was offi cially unveiled in December 2006.000 local inhabit<mts. often with little or no collateral. and exerting influence ove r.employees with insider knowledge of an organization.000 documents marked "secre t:' T he U. appeared on the evening news and explained that a legal injunction had prevented the station from airing an expose on the bank. T he report indicated that th e company had dumped tons of toxic waste in th e Ivory Coast that sickened 100. 20 10.S.2 million docum ents. Bogi Agu stsson . Code Section 1030(a)(1). probably the most controversial \~likiLeaks expose involved th e U. Iceland 's Kaupthing Bank collapsed. In its first yea r. Beginning on November 28. From November 2009 to April 2010. People who took Agu stsson's ad vice found a summaty of Kaupthing's loans posted on the Web site.•••l!!if~W· C II APTI. T he public became aware of the tr<msgression . he suggested. Among these cables were 11. if released. In addition . In September 2009. political. \IJikiLeaks rece ives approximately 10. one of the contributors to the study. the largest unauthorized release of contemporary classified information in history. government's definition of a secret document is one that. Manning violated 18 U. anywhere. Although Tra figLml could prevent the offic ial media from reporting this story. the organization's database expand ed to 1.000 diplomatic cables. They can send the information through pe rsonal e-mail accounts or online drop sites. \~likiLeaks has had significant impa cts on both businesses and governments. and historica l significance. According to its Web site. In doing so. WikiLeaks promptly became a household name in Iceland. detailing more than $6 billion funneled from the bank to its own ers and companies they owned.S. We discuss seve ral exa mples below. G iven (fSS D fN/[01 the existing technologies.can capture huge amounts FSTOP/Image Source of incriminating documents on a laptop.S. The bank filed a la wsuit against W ikiLeaks for publishing data that it claimed had been stolen from its clients. it could not stop W ikiLeaks from publishing the informati on . whistleblowers. th e anchor for Icelandic national broad caster memory stick.:R 3 l•:thicsa nd Privacy [What to Do About The Problem (?) Wikileaks?] 0 ne of the major controversies generated by the Vieb1am War occurred in 1971. In January 2008.000 new documents every da y. As consequential as these business leaks were. or portable hard drive. Wi kiLeaks focuses on material of ethical. T he resulting attention helped to terminate the project.trafigura. He then passed the infom1ation to W ikiLeaks. Viewe rs who wa nted to see th e material . saddling the country with $ 128 billion in debts. whic h criminalizes unauthorized computer downloads. when The New York Times and other so urces publicized excerpts from a secret Defense D epartment study-quickly labeled The Pentagon Papers -that detailed the hist01y of U. Assange intended WikiLeaks to serve as a dropbox for anyone. a World Health O rga niza tion (WHO) pro ject to fund drug researc h in the developing world. should visit WikiLeaks. WikiLeaks published the contents of m ore than 250. Ellsberg had to photocopy thousands of documents by hand. Today. T he following year. wikileaks. or they can simply submit it directly to WikiLeaks (www. In October 2008. one of the founders. who disagreed with any orga niza tion's activities or secre ) requested an injunction from the co urts preventing the British m edia from mentioning a damaging internal report. commodities company 'Hafig ura (www. These documents had been copied by defense A( ana lyst Daniel Ellsberg. W ikiLe<Jks posted documents alleging that the Swiss bank Julius Baer (wMv. Ju lian Assange. and Trafigura eventually had to pa y out m ore than $200 million in se ttl em ents.S.S. Am1y Private First C lass Bradley Ma nning downloaded hundreds of thousands of diplomatic ca bles to a CD at an outpost in Iraq. W ikiLeaks published documents from a pharmaceutical trade group implying that its lobbyists were receiving confidential documents from. U. was reportedl y inspired by the leak of the Pentagon Pape rs. Baer later dropped the lawsuit-but only after generating embarrassing publicity for itself. would cause "serious damage to national security. involvement in Southeast Asia. gO\•ernment. Since its inception . Ten m onths later." -- ----- .

Symantec. boils do\\11 to this: How can governments. Moreover. Since 2007. organizations. Unfortunately. because Wiki Leaks. it does not identify th e it simpl y jumps to another. the number of mirror Web sites . eve ry major security softwa re vend or (for example. is legally protected in the United States.trendmicro. threa tens nati onal security. which is th e process of constantly collecting every digita l " fingerprint" on an orga nization's servers to tra ce and id entify an intruder who has broken into the system. .l ] security. man y indi. atta cking the Web sites of !asterCard and companies suc h as Amazon . government. the State Department system was merged into a new digit<ll records system controlled by the Deparbnent of Defense. When the organization is blocked from one host server. The problem. unknown ha ckers tried to shut down WikiLeaks by exposing its Web site to den ia l-of~ervice attacks (discussed in C hapter 4). supported vViki Leaks' has spent hundreds of millions of dollars to acquire companies in the data leak prevention (DLP) industry. WikiLeaks' supporters retaliated with anonymous hacktivism. DLP softwme has not been effective. and und ermines our e fforts to work with other countries to solve shared problem s. and T rend Micro. State Deparb11ent had operated its own intemal cable system and encrypted documents to ensure security. and l\1 PayPa l. including Daniel Ellsberg. and even individuals prevent future disclosures? Is it possible to accompl ish this task. because its assets are spread all over th e world. After the attacks. to date. as a m ere conduit for documents. but th ey seem ed to end orse th e government's claims that th e disclosures threatened nation.S. www. Iranian President Mahmoud Ahmadineja d discovered that his Arab neighbors were pleading with the United States to launch an attack against Tehran's nuclear program.CASI~ D iplomatic flaps quickly ensued . Although this softwa re gathers data and makes them eas ily available.S.essentia lly clones of WikiLeaks' main content pages -had mushroomed to 1. Mvw. In oth er attempts at thwa rting WikiLeaks." From the opposite perspective. The Results How can orga nizations and governments respond to WikiLea ks? Lawsuits will not work. Secretary of Sta te Hilary C linton charged that th e ma ssive cable leak " puts people's lives in dange r. McAfee. even if a company or a government some how won a judgment against \~liki Leaks. and it established new measures to control electronically stored documents. U. the State Department has temporaril y severed its connection to the new system whil e it takes steps to prevent future unauthorized<t{ee. It is unclear whether the hackers we re working on behalf of the U. North Korea n leader Kim )ong II learned that C hina would consid er supporting th e unification of the peninsula und er th e leadership of the So uth Korean government. ·n.S. all attempts to stifle W ikiLeaks have proved futile . com. Ultimately. which had thrown \~likiLeaks off its servers.~duals and groups. www.300 by the end of 20 10. then. the release of the cables also had wide-rangi ng repercussions within the United Sta tes. T he government ord ered a clampdown on intelligence sharing between agencies. Since the \• VikiLeaks disclosures. For example. Not surprisingly. governments and companies have turned to cyber security. e failure of DLP software has prompted organizations to turn to network forensics. Similarly. that would not shut down the company. These companies produce software that loca tes and tags sensitive information and th en guards against its being stolen or illegall y duplicated. the U. Prior to 9/ll. whic h had frozen the organization's accoun ts and prevented its supporters from donating to the ca use. given that the sources of WikiLeaks' information appear to be internal ? I*I*EIIII The Solution (?) In the initial moments after the State Department cables were released.

M. F.ic""~<ll'rivacy In fa ct. J . ' n 1ere is. www. 2010.~ileaks. An Assault on Fr ee Speech. Should Wikileaks falter. "Pro-\Viki Leaks Cyber Army Cains Strength. 20 10."' CNN. J. Pegoraro. E. Birgitta Jonsdottir. created the Icelandi c Modern Media Initiative (IMMI). For example. In fact. Rashid. 2010. December Launch NewOpenLeaks Site. December 12. Febnmy 6. 2010. Wikile:Jks has a nation-size ally-Iceland. Freedom of information .ml for ." CNN.or g) is a Web site for whistl eblowers on environmental issues. . You will be able to :m alyzc the potentia I P''ivilcy and clhical implications of implementing these technologies. rather drily. December 3. Since Wikileaks discovered the corrupt lo. '''The Sweep: \Vikil. "\VikiLeaks Back Online After Being Dropped by U.and perha ps governmen ts to som e extentreform their practices to avoid being targeted. PostFinance Hit by DoS Attacks. are WikiLeaks' acti ons ethical? Does WikiLeaks violate the privacy of governments. For exam ple. "'In \VikiLeaks Aftermath. the C'ountry has set out to becom e th e conduit for a globa l A ood of leaks. \ Varrick.ssues you will study in this chapter: ethics and privacy. 2011. "\Vinning the Info \Var.eaks Colleagues Fonning New \Veb Site.miz. 201 1.. You will encounter num erous ethica l and privacy issu es in your career.S. '"Holder: 'Significanf Actions Taken in \VikiLeaks Investigation.m s that helped destroy Iceland's biggest bank. is a Web site th at will not openly pu blish information sent to it. For example. L1bott. I.eaks' StepCh ildren. 20 10. November 30. H-'i.-ized lea ks? Icelandic WikiLeaks staffer Kristinn Hrafnsson suggested." Forbes. "'·n e \Varon Secr ecy. that compan ies. January 17. C.e aks' AdvocateS' Are \Vre<~ king 'Hac l1ivism'. de li cate b." e\Veek. 2010. December 9. This initiative seeks to bring to Iceland all the laws that support protecting anonym ous sources. December 8. but will g ive it to reporters a nd human rights organizations to disseminate. "Reporto Ex-\VikiLeake."' e\Veek. Dougherty and"" Forbes. 2010." Compttterworld. November Z 9.s ShutdOYo11 as Supporters \ Vorld\vide Go on the Offensive. Both issues are closely related to rr and ra ise significa nt questions. Anonymous l< Or ce Change to Federal Covernmenfs Security Approach. 2010. Decembe r 14. must be con cem ed with ethics. ® . r rsAbout [Small] Business 3.1ctiviti es supporting free expression . CalabreS'i.eaks Stirs Anarchy O nline~" CNN. Do111. accesred February 11 . Calabresi. 2010.eaks.IIII~W~ ·JMI C lli\I'Tim 3 l•:tl. acressed May 12. 201 0. Ultimately this b1ds to :moth er quest ion: D oes the s1mll business even l111ve " code of ethics lo fall b" ck on in this type of silU<lti on? Sourt"eS: Compiled from R. OpenLeaks. December6.. July 29. organizations. t he hacker collective. July 7. IMl'vll had yet to becom e b w. many of which will involve IT in som e manner.·Time. IM!'vll also would make Iceland the world 's m ost friendly leg:d base for wh istl eblowers. Shapira and J."' CNN. 2010. E. ''\VikiLeaks Rep:>rts Another Electronic Disnlption. ''\Vikil. It would then set up . Keizer. sL!ppose your organiza tion decid es to adopt Web 2. 2010. M. A. T his balance is best mainta in ed by hiring honest and trustworthy employees who abide by th e organization 's code of ethics. it will help you to make imm ediate contributions to yolll' company's code of ethics and its p1 ·ivacy policies.CNETcom. 2010. "\\'ikiLeaks Q&A with Daniel Ellsberg. Crcenle~ks (www. :1 m ember of IC'el:111d's parliam ent.1l eth ic<J I and privacy imp< lcls o f yom org. "'Feds Open Criminal Investigation into \ VikiLe:ak:s D isclosures.2010.0 technologies (whic h you will see in C h. Z O JO.1 illustrates an ethical problem in a small bank.openlcaks.gree11lecJks. Furth er. "F o rmer \Vikil. Mills. December 6. and individuals? The answers to these question s are not straightforward . All organiza tions.ltion's informatio n systems on people within and outside the organization. ''\Viki Leaks' Julian Assange."' Time. ""\ VikiLeaks December 20. December 15. b rge and small. O pen Leaks (www. "\Vikil." The Welshing ton Post. Counter·Attack in Pr ogress. "PayPal. As o f May 2011 Somaiya. W hat is th e best protection against unautho. Robinson. other Web sites around the world are ready to take its place. N obel-style internationnl .c:om.." 111e Washington Post. 20 11 ~ A Greenber g. L.'" Tf1e \\'c1shington Post. Sm all business owners fa ce a very difficult sil\ wtion when their em ployees have access to sensitive custom er information ." The New York Times."' The WaS'hington Post. The Christian Science Monitor. the 1 v1an Behind the Pentagon l"•pers.• CNN. \Varrick and R. December 12..<1in Name Provider. and transparency from arollnd the world . C<Xxlale. Pe rhaps the m ost controversial site is Anonym ous. December 20. Greenberg.Jlance betwee11 acces~ to information nnd its appropriate use >1nd the temptation for workers to be nosey and curious about what th ey ca n find. "\Vikil. December 10. Rdshid. "Anny Intelligence Analyst Charged in \VikiLeaks Case. Thousands Join DDos Attacks. G.lpter 9) to inclu de busin ess parh1ers and custom ers in new product developm ent. Fadel. IT has made finding answers to these questions even m ore difficult. What We Learned from This Case T he Wikileaks case addresses the two major . 20 11. This chapter will give you insights into how to respond to these issu es. F. Y ou will also be able to provid e meaningful input concerning the potcnli. l \v.

T he eth ica l corporate action would be the one that produces the greatest good and does th e le<Jst harm for all affected parties .11· !1··· about [small] business 3. the rights approach. However. if unequally. Ultimately. 3. An ethical organizational action wou ld be on e th at protects and respects the m oral rights of custom ers. those employees could be talking about her account next! In ShaNiqua's small town. the nature of their predicament provides much that we can learn.custom ers.1 Ethical Issues Etl1ics refers to the principles of right ~ nd wrong th~t individu~ls usc to ma ke choices lh<1 t guide th eir behavior.s approach maintains that an ethical action is th e one that best protects and respects the m oral rights of the affected parties. The fairness approach posits that ethical actions treat all human beings equally. For example. business partners. While there has never been any report of theft by employees or complaints flied by customers. n ot to be injured. shareh olders. The right. while their competition has grown. On the other hand . spending habits. and to a degree of privacy. l"ortun ate ly. the fairness appro<J ch . the number of n ew accounts the bank has opened In the past five years has steadily declined. th en fairly. What would you do in this case? Be specific. ShaNiqua Is afraid that If she tells what she knows she could get In trouble. there are many fr~meworks tha t ca n help us make ethical decisions. there have been numerous rumors of employees talking to their friends and family about various bank accounts. Moral rights can include the rights to make one's own ch oices about what kind of life to lead. You are the manager of tl1e bank. but these four are representative. T he utililltriatl ap(Jroach states that an eth ical action is the one tlmt provid es the most good or d oes the least harm. and recent purchases. Source: Comp iled from personal Interviews with t he author. Neverth eless. Possible solutions to the problem Inc lude restricting access to bank accounts. Was the advice that ShaNiqua initially rec eived good or bad? Support your answer. At the time of this writing. most people migh t . and the comm on good <1pproach. 2. employees. to be told th e truth. ShaNiqua had worKed at MidTown banK lor 10 years. T here are m. Any decision Is likely to have unanticipated results due to the delicate balance of providing access to Information to enable employees to perform their jobs and restricting access fo r security purposes.e @ Sl •:< :TION 3. the best solutions may simply be (1) to educate employees of the legal Implications of misusing customer Information and (2) to create very strong policies to guard against this type of activity. This situation becomes a problem when curious bank tellers begin "snooping• Into personal bank accounts. The advice she received? Leave It alone because bank managers are trying to deal with the situation. everyone knows everyone else. or.and und er what circ umstances-is widely debated. shareholders. and they are having difficulty det ermining how to handle it. Wh ich of these rights people are actually entitled to . She recently overheard a conversation between two employees regarding a customer's account. Ethical Frameworks T he re are many sources for ethical standards. or hiring auditors to reconcile any unnecessary Questions 1. m ost people acknowledge that individuals are entitled to som e moral rights. based on som e defensible standard. she Is afraid that If she does not tell. This Is a totally new situation for them. the community. employees. the banK has yet to determine the direction It will take. She asked a co-worKer w hat s he should do about It because she lelt this conversation was not appropriate. and even competitors. and th e environment. Deciding what is right or wrong is not always easy or cl ear other sources. Here we consider four widely used standards: the utilitarian approach .1 MidTown Bank account access and monitor all employee activity. Names have been changed at the request of the interviewees. Adding t o this problem.1 r•:tloical Issu e' 1*.

and liability. For exa mple. and not just som e m embers? (the o \• common good appro<J ch) Make a decision and test it o Considering all the approaches. the Association for Co mputing Machin ery (wunv.html). effective police and fire deparb11ents. F'inally. Liability is a legal concept . Ethics in the Corporate Environment Many companies and profess ional orga niza tions develop their own codes of ethics. A code of etl1ics is a collection of principles intended to guide decision making by m em bers of th e organization . Therefore.acm. This approach argues that respect and compassion for all others is the basis for ethical actions. However. It emphasizes th e common conditions that are important to the welfare of everyo ne. health care. a person who is a member of two large professional computing-related orga nizations may be simultan eously required by one orga niza tion to comply with all applica ble b ws and by th e othe r organization to refuse to obey unjust laws. These conditions can include a system oflaws.:R 3 l•:thicsa nd Privacy believe it is fair to pay people hig her salaries if th e'/ work hard er or if they contribute a grea ter amount to the • ° • Recognize an eth ica 1issue Could this decision or situation damage someone or some group? 0 Does this dec ision involve a choice between a good and a bad alternative? 0 Is this issue about m ore than what is lega l? If so. a public educational system . Man y peopl e question wheth er this huge dispari ty is based on a defensible standard or is the result of an imbalance of power and hence is unfair. C II APTI.orglconstitutionlcode. and even public recreation areas. Fundamental tenets of ethics include responsibility. If we combine these four standard s. an individual might be expected to conform to multiple codes. h ow? Cet the facts 0 \o\1lat are th e releva nt facts of the situation? o Do I know enough to make a decision ? o \• \-1lic h individuals and/or groups ha ve an important stake in the outcom e? o Have I consulted all relevant persons and groups? Evaluate alternative actions Which option will produce the m ost goo~ and do the least harm ? (the utilitarian approach) o Which option best respects th e rights of all stakehold ers? (the rights approach ) o \%ich option treats peopl e equally or proportionately? (th e faimess approach) \-1lic h option best serves th e community as a whole. we will foc us specifically on ethics in a corporate environment. Keep in mind that diffe rent codes of ethics are not always consistent with one another. we ca n develop a general framework for ethics (or e thical decision making) . Responsibility m eans that you accep t the consequences of your decisions and actions. and what did I learn from this specific situation? 0 Now that we have created a general ethical frame·. accountability. Accountability refers to determining who is responsible for actions that were taken .vork. whic h option best addresses the sittwtion ? 0 • • • Act and reflect on the outcom e of your dec ision How can I implement m y decision with the g reatest care and attenti on to th e conce rns of all stakeholders? o How did m y decision tum out. th ere is less certainty rega rding CEO salaries that are hundreds or thousa nds of times larger than those of oth er employees. F'or example. acm. an organiza tion of computing professionals.llllflfl!lW. This framework consists of five steps. has a thoughtful code of ethics for its m embers (see www. the common good approach highlights the interlocking relati onships that underlie all societies.

In addition. and disseminating infonmtion about individuals. ethi ca l problems are a rising concerning tlhe appropriate coll ection and use of customer information. Pril•acy issu. property. or systems.ded music or video files? 'lne diversity and ever-expa nding use of IT .1 lists representative questions and issues for eac h of th ese categories. These issu es fall into four genera l categories: p rivacy.1ations that involve ethical or unethical bel1avior. Consid er the fo llowing decisions that you might have to make: • • • · employees' Web surfing < md e-mail ? S hou ld organizations monito1 S hou ld organizations sell custom er i11 formation to oth er companies? Sh ould organizations audit employees' computers for unauthorized softwa re or illegally down]o. In the next section. and society at large. More recently. an individual or orga niz<Jtion f<1ccd with an ethic:1l decision is not consid erin g wheth er to break t he h11v. 2. enabling them to store more data on individuals for longer p eriods of time. 1nizations are m ore dependent than ever on their information systems. not to mention ou tright c riminal behavior. Accuracy issues involve the authentic ity. . Computing processing power doubl es about eve1 y two years. For example. but it can raise many ethica l questions. In recent years we h ave wih1essed a Iorge num ber of extremely poor ethical decisions.1 l•:tloical Issues ·-·~*~··· that gives individuals th e right to recover the damages done to them by other inclividua Is.. Accessibility issues revolve around who sh ould have access to information and whether a fee should be paid for this access. it is very important that you rea lize that what is 1methical is n ot necessarily il/eg(LI. and accuracy of information that is collected and processed. and a ccessibility. As th e fo reclosure ~xam ple involve collccling. storing. During 2001 :md 2002. Before you go any further. organizations. meaning that org. involve privacy as well as ethics. th e subprime m ortgage crisis exposed unethica I lending pra ctices throughout the m ortgage industry. 4. WorldCom . ethica l decisions c:111 have serious consequen ces for individuals.S. financial industry as well as th e global financial system. Many of the issues and scenari os discussed in this chapter.s a result. then . and ' Iyeo. such as photo t agging and geetagging. 'n1 ese actions l ed to the passage of th e Sarbanes-Oxley Act in 2002. th ree highly publicized fiascos occurred at Enron. Sarbanes-Oxley requires publicly held companies to implement financial controls and company executives to personally certifY financial reports. ® t ' Ethics and Information Technology A ll employees have a responsibility to encourage ethical uses of information and information technology. and distribute enorm ous amol!nts of information on individuals. Property iswes involve the ownership and va lue of infom~ati on. At e:1ch company. a bank's decision to foreclose on a hom e ca n be technically legal. persona l privacy. A. Online Ethics Cases presen ts 14 ethics scenarios for you to consid er. particularly the Internet.lppli ca ti ons have crea ted a variety of e thica l issu es. organiz~tions. integrate. and the protectio n of intellectua l property. however . executives were convicted of various types of fraud for using illegal accounting practices. you will learn about privacy issues in more detail. Computer networks. accura cy. T he crisis also highlighted pervasive weaknesses in the regulation of the U. and institutions. 3:. Table 3.2 illustm tes.SI•:CTION 3. In many instances. l. groups. fid elity. Improvements in information technologies have gen era ted a n ew set of ethical problems. l'vb ny of the business decisions you will bee at work will have an ethica l dimension. as IT's About Business 3. It ultimately contributed to a deep recession in the global econ omy. O rganizations can store increasing a m ounts of data at decreasing cost. en able organizations to coll ect. These scenarios will provide a context for you to consider sih.

" Compulerwortd . Harbert. Are users responsible for their loss o f privacy If they do not know that their photos can be tagged and that they can be located wHh GPS sensors? SoorClls: Compiled from Autopia Slog. technOlogy to analyZe the hereaslng amounts of digital sensor data Is becoming more efficient as well as less expensive. For Instance. particularly w11h the capacity of databases to share data and therefore to put together the pieces of a puzzle that can Identify us In surprising ways. The technOlogy could be used by a car dealer who takes a picture of you when you step on the car lot. the Individual Is not aware of this process.Google Picasa and Facebook Photo Albums. DriVe down a city street. B. Blips.ett. Inexpensive dlgRal sensors are now everywhere. They are Incorporated Into laptop webcams. P. and employee ID cards. Intel and Microsoft t"ltroduced an In-store digital b illboard that can memorize your face. T. Marketing consultants are using the bands to discover what pleases or frustrates shoppers. For example.2 Big Brother Is Watching You photos. the cost of storing digital data Is decreasing. and your license plate will be recorded and time-stamped.lllma~ :-· C IIA PTER 3 Ethics and Privacy G [about business] 3. "To p Secret America. Once you are tagged In a photo. "How the iPhone Spills Your Secrets. "Ce~hone Net'Mlfks and the Future ot Traffic. banks. The result Is an explosion of sensor data collection and storage. 2. This process allows the user to qu ickly group photos n which the tagged person appears. step out your front door and you could be captured In a high-resolution photograph taken from the air or from the street by Google or Microsoft. and how you live your U ta. before you go on. the software looks tor similar facial features In untagged photos. One marketing analyst has predicted that your experience In every store will soon be customized. "The Internet of Cars. September 29. December 18. " Helpful Digital Sensors. 2011 : D. January 26.• Wired. In addRion." USA Today. embedding Images with the longitude and latitude of the location shown In the Image. The dealer could then quickly profile you on the Web to gain an edge In making a sale. Priest and W.• Wired. These actions would show the criminals exactly where you live." USA Today. . Facial-recognition software then t"ldexes facial features. Another problem arises w ith smartphones equipped wHh global positioning system (GPS) sensors. as they update their mapping services. and other pu bile venues. What does a code of ethics contain? 2. These sensors routinely gootag photos and videos. motion sensors. that photo could be used to search for matches across the entire lntennet or In privata databases. and IT: Making Sense of Sensor Data. a practice referred to as photo tagging." The Washlnaron POst. cross a toll Clearly. Acohido. utility meters. One prtvacy attorney says that losing the right to anonymity v. 2011. or park at a shopping mall. Describe the fundamental tenets of ethics. Big Brother: Dighal Sensors Are Watching Us. surveillance cameras track you at airports. In addRion. 2011. Significantly. These billboards can keep track o f the products you are Interested In based on purchases or your browsing behavior. For example.atrect/va. Etner-DeWitt. smart phone cameras. with vehicle ownership records. accessed March 17. 1vww. and biometric readers. January25. At a recent International Consumer Electronics Show. People today live with a degree of surveillance that would have been unimaginable just a few generations ago. 2010. June 24. 2011 . March 2. a11omeys have begUn to use brtdge toll records to establiSh travel patterns of spouses In divorce proceedings. 2010. In addition. " Hello. whom you meat. Apply the general frameworK tor ethical decision making to the practices of photo ta~Xjng and geotagglng." Fortune. several developments are helping to Increase tne monnorlng of human activity. privacy concerns must be addressed. taken by cameras located at Intersections. You could be Inadvertently supplying criminals with useful Intelligence by posting personal Images on social n etworks or photo-sharng Web sites.JJH 1. These companies are using facial-recogn ition software . Both companies encourage users to assign names to people In Questions 1. Including low-cost digital cameras. 2010. T. a stranger In a restaurant could photograph you with a smartphone. Al1dn.uuld have a chilling effect on where you go. and then go online to promeyou. passports. 2008. Pollee looking to issue traffic citations now correlate photos. One of the most troubling privacy problems Involves a practice advocated by Google and Facebook. Affectlva (Www. Even worse. December 20. Carmody. Once an lndMdual ln a photo Is tagged. 3.In their popular online photo-editing and sharing services. "Beeps. New R&D For Mobile TraffiC recently Introduced biometric wristbands that monHor tiny changes In sweat-gland activity to gauge emotional reactions. videogame motion sensors. subways. Discuss and provide examples of the benefits and the drawbacks or photo tagging and gaotagglng. Including databases fed by surveillance cameras.

groups.2 Privacy In general. fidelity. and to what extent. data transmissions. Information pri. 2. Privacy must be balan ced ag:~inst the needs of society.S. The right of privacy is not absolute.2 Priv-•c~· •••m~·:~••• A Framework for Ethical Issues Privacy Issues What information about oneself should an individual be required to reveal to others? What kind of surveillance can an employer use on its employees? What types of personal information can people keep to themselves and not be forced to reveal to others? What information about individuals should be kept in databases. However. and accuracy of the information collected? How can we ensure that the information will be processed properly and presented accurat ely to users? How can we ensure that errors in databases. sta tes and by the federal gm·ernm ent. under what conditions. and how secure is the information there? Accuracy Issues Who is responsible for the authenticity. and with what safeguards? Table 3. The right to privacy is recognized today in all U. The public's right to know supersedes the individual's right of privacy.S EC T IO N 3. and institutions. court decisions in many countries have followed two rules fairly closely: I . and data processing are accidental and not intentional? Who is t o be held account able for errors in information. privacy is the right to be left alone and to be free of unreasonable personal intrusions.·acy is the right to determine when. and how should the injured parties be compensated? Property Issues Who owns the information? What are the just and fair prices for its exchange? How should we handle software piracy (copying copyrighted software)? Under what circumstances can one use proprietary databases? Can corporate computers be used for private purposes? How should experts who contribute their knowledge to creat e expert systems be compensated? How should access t o information channels be allocated? Accessibility Issu es Who is allowed t o access information? How much should companies charge for permitting access to information? How can access to computers be provided for employees with disabilities? Who will be provided with equipment needed for accessing information? What information does a person or an organization have a right to obtain. Privacy rights apply to individuals. The definition of privacy can be in terpreted quite broadly. These two rules illustrate why determining and enforcing privacy regulations can be difficult. . information about you can be gathered and/or communicated to others. either by statute or in com mon law.1 3.

which is an electronic profile of you and your habits.ull'ri•~cy Rapid ad. is rapid ly inc reasing.m ces in information technologies h a\'e tmde it much easier to coll ect. your municipality). especia lly when threats to national security are in\'olved. more than three-fourths of organizations are monitoring emplorecs' Inte rnet usage. a practice called URL{iltering. The executives quickly made the decision to implement a URL filtering product.·.·chicle records. retail establishments. the chief mformal!on officer (C IO) monitored :tbout 13. As a nation the United States is still struggling to define the appropriate balance between personal privacy and electronic surveillance. hospitals. In one organization.cightmaps com). or criminals. and police. the referendum that outlawed s:nne-sex marri. a controversial n ew map in California identifies the addresses of donors who supported Proposition 8. 1l1ey ultimately sell these dossiers to law enforcement agencies and com panies that conduct background checks on potentia l employees. are good examples of profiling. and othe r institutions. . claimmg that the map invades their privaC} and could expose them to retribution. as well as the amount of time th ey were spending on those sites. telephone calls (Jandline and cellular). employees ha.. These companies collect public data such as real estate records and published telephone numbers. in public places. Other institutions that store personal information include ba nks and financial institutions. Further. organizations are insta lling monitoring and filtering software to enhance security by stopping ma licious softwa re and to increase producti\'itr by discouraging e mployees from wasting time.. In addition.·e very limited legal protection against surveillance by e mplorers. F'o r example. credit card transa ctions. Surveillance is also a concem for private indi. Perhaps the most . telephone. Electronic suT\·e illance is conducted by employers.. Today. cable lV. and utilities compan ies. Cay acti. and Acxiom (www. your state.000 ernployees for three months to determine the type of tra ffic they engaged in on the network. such as LexisNexis ('"'. mortgage ). In general. Th~ data can be integrated to produce a digital dossier. These executives were shocked at the questionable \Veb sites the employees were visiting.·iduals regardless of whether it is conducted by corporations. banking transactions. com). a process called customer intim acy. T hey then integrate these data to form digital dossiers on most adults in the United St<1tes. financial data . two-thirds use software to block connections to inappropriate \\'eb sites. store. queries to search engines.choicepoint. They also sell them to companies th at want to know their customers better. On an a\'erage day. He then forwarded the data to th e chief executive officer (CEO) :md the heads of the human resources and legal depa rm1ents. data about you are generated in many ways: surveillance cameras on toll roads. The law supports the right of e mployers to read their employees' e-mail and other electronic documents and to monitor their employees· Internet use. C hoicePoint (www. government bodies.~sts crea ted the map by combining Coogle"s satell ite mapping technology with puhlicly availa hie campaign records tlJJt listed Proposition 8 donors who contributed $100 or more.\ I' TER 3 Ethic. government agencies (Internal Revenue SeT\·ice. Personal Information in Databases i'vlodern institutions store infom1ation about individuals in many databases.sible locations of such records are credit-reporting agencies. trackmg people's actl\ilies \\lth the aid of computers has become a major privacy-related problem.acxiow . and at work. and many others. The process of forming a digita I dossier is ca lled profitin g Data the government. and motor . However. employers. The ACLU notes that this monitoring. particularly \\'ith the emergence of new technologies. schools and universities.v. criminal. dat:t on individua ls ca n be used in more controversial manners. in addition to non public information such as Social Security numbers.1ge in Californ ia (see wtow. 111ese donors are outraged. or electronic surveill:mce. and government records (including police records).····~l~ ~-· C II.lexisnexis. and integra te data on individuals in large databases. Electronic Surveillance According to th e American Civil Lthe rties Union (ACLU).

and social networking sites (discussed in C hapte r 9). How does society keep owners of bu lletin boards from disseminating information that may be offensive to readers or s1mply untrue? 1l1is 1s a difficult problem because it involves the conAlet between freedom of speech on the one hand .·ery day you see more and more electronic bulletin boards. In many corpomtions. All the good pri\<IC)' intentions in the world are useless unless th ey are supported and enforced by effective security measures. One privacy tool currently available to consumers is the Platform for Privacy Preferences (P3P).·e their customers some voice in how their information is used by providing them with opt-out choices.1tory informabon that can be found o n the Internet can harm a person's chances of being hired.reJmlationde(wclercom) will search for damaging content online and destroy it: on beha lf of c lients.3 takes a look at Face book's problems with its privacy policies. derog. The opt-out model of informed consent pem1its the company to collect personalmformation until the customer specifically requ ests that the data not be collected.·a cy codes are an organization's guidelines for protecting the prh·a cy of its customers. firms use the Internet in examining job applications. clients.2 Priv-•c~· ~-~~~~~~~ There are severa l concerns about the information you prov1 de to these record keepers. Approximately one-half of U. they must protect it. A blog. In addition.S.·isitors to compare a \Veb site's privacy policy to the 'isitors' preferences or to other standards. .2 the last section .S EC T ION 3. Some of the major concerns are: • • • • • • • • Do you know where the records are? Are the records accurate? Can you change inaccurate data? How long will it take to make a change? Under what circ umstances will personal data be released? How are the data used? To whom are th e data given or sold? How secure are the data against access by unauthorized people? Information on Internet Bulletin Boards. many organizations gi. senior management has begun to understand that when they collect vnst amounts of personal information . Socia I networking sites also can present serious privacy concerns. Table 3.2 provides a sampling of privacy policy guidelines. These sites appear on the Internet. society. sh ort for '"\Veblog. "'Data Confidentiality.· IS a11 inforn1al. T11ere is no better illustration o f the con Ai ct between free speech and privacy than th e tcs contain ~nonymous. such as the Federal Trade Commission's (FTC) Fair lnf om1ation Practices Standard or the European Directive on Data Protection. and employees."' refers to security. and Social Networking Sites E. privacy on the other. Privacy Codes and Policies Pri'"'C)' policies or pri.·isitors to determine the types of personal data that can be ntracted by the \\'eb sites they visit It also allows .S. and 011 blogs. This proble m has become so serious that a company called Reputation Defende r (www. P3P enables . who typ· Internet. personal journal that is frequently updated and intended for geneml public reading. newsgroups. ITs About Business 3. electronic discussions such as chat rooms. incl uding searching on Coogle and on social networking sites. Privacy ad\·ocates prefer the opt-in model of informed consent. a protocol that automatically communicates privacy policies between an electronic commerce Web site and visitors to that site. wi thm corpomte mtranets. whic h prohibits an organization from collecting any personal infonnation unless ilie customer specifica lly authorizes it. as you will see in Chapter 4. derogatory mformahon on indi\lduals. This conA1ct is a fundamental and continuing ethical issue in U. 1\bny Web s1 ically have little recourse in the matter. Newsgroups. In Table 3.

tlon (www. 201O . Johnson. May 11. called Dlaspora (www.. O th er countries have n o privacy laws at all . May 24.Aff. S. May 17. May 27. 4. they made the source code openly available." CNN. wh ich is called tr<111sborder data flows ." Computerwortd. or everyone on the Internet. B. In May 2010." The Guarolan. relationship status. with other Web sites. users who had set their list of friends as p~vate were forced to maKe the list public without even being Informed. "Who Trusts Facebook Now?" Computerwortd Slogs." In FacebooK "language. May 26. In 1998 th e E uropean Com munity Com m issio n (ECC) issu ed guidelin es to all its m ember countri es regarding the . Facebook "s thA FIActronlc FrontiAr Found. and family relations became viewable even to people who did not have a Facebook account." The New York Times. Facebook Unveils Simpler Privacy Controls. To compound this Issue. Gaudin. w~hou t your advance permission. Facebook'S "Instant Personalization" shares some of your data. Perez. Facebook revealed a new draft of ~s p~ vacy policy. When they Introduced their software. Says Facebook Founder. Sutter. Facebook responded by rolling back requirements that some content be public. The Dlaspora "crew" attracted more than 2. rather. Facebook CEO Mark Zuckerberg justified this policy by asserting that privacy Is no longer a social norm." Computerwortd." The Washington Post.:1{ 3 l•:tl. The results of the privacy fiasco? The Facebook p~vacy policy was protested by many people as well as privacy organizations suc h Questions 1. For example. Further. the option to m ake the list private aga In was removed. Instead of being forced to make public every status update and photo for "friends" or other Individuals. Gaudin. 3. January 11. users can put Informat ion such as employme nt history and vacation videos Into buckets designated either for friends. which helps creative people find support. wagner. Fowler. 2010. l'v!a ny of these laws conflict with those of oth er countries. the new Facebook policy can also expose endorsements. International Aspects of Privacy As the number of online users has increased globally. May Iranian dissidents began deleting their Facebook accounts so that the government could not track their contacts. The revised policy does not modify the social network's data-handling practices. C. to raise $10. " Facebook CEO Announces Revamped Privacy Settings. a user whose Family and Relations hips Information was set to be viewable by Friends Only would default to being viewable by Everyone (public ly viewable). for o n e. February 20-27. M. T he European Unio n ( EU). Discuss the trade-otis between conveniently sh a~ng Information and protecting May 26. Information such as the gender of your partner." FacebooK Is also providing otter New Approaches to Boost Web Privacy. such as promotional pages that users respond to. friends of friends. They used an online Web site called Klckstarter (www. " Microsoft. klckstarter. create their own Information hubs. "Amid Backlash. As a result of this change. and control the Information they share. 2010. In another Instance. In tact . or "Like. In addition. " Four Nerds and a cerns Escalate. J. J. 2010. Previously. 2010. to be publicly available. Dwyer Cry t o Arms Against Facebook. of various organizations and groups that you make when you clic k the "Like" button.dlaspora.3 Your Privacy on Facebook a virtual one-click "oil switch" that lets users block all access to their Information from third-party applications and Web sites. with no privacy settings. Users can employ this software to set up personal servers." Facebook maintains that the new policy Is much more of a user guide to managing personal data. Make the argument In support of the privacy policy changes that Facebook Instituted In December 2009. FacebooK adopted a new privacy policy that declared certain Information. "Facebook Meets the ' Unlike' Button. J. Kang. " Facebook CEO Says Mistakes Made. R. Angwin and G.vortd. Further." Computer. Approximate ly 50 counb·ies have some fo rm of data-protection laws. Privacy Changes Coming.ic" "O<I I'rivacy G [about business] 3. May 13. " Privacy No Longer a Social Norm. or they require specifi c security m easures. Including lists of friends. ha s t aken steps to overcome this problem . Facebook users could restrict access to this Information. 201 0.000 followers oi "J olnd laspora" on Twitter In just a few weeKs. In December 2009. In February 2011. 2011. l our college students decided to build a social networK th at wou ld not force people to surrender their privacy.' Washington Post. It organizes Its content around more practical headings such as •your Information and how It Is used" and "how advertising worKs. "Some Quitting FacebookAs Privacy Con." The WaH Street Journal. Sources: Complied from J. Therefore.···E~~-· C ll i\ 1 ''1'1. "Facebook Earns Praise !'or Privacy Changes. Why did Facebook change Its privacy polic ies In December 2009? 2. governments throughout th e world have enacted a large number of inconsistent privacy an d secu rity laws. 2010. Make the argument against the privacy policy changes that Facebook Instituted in December 2009. S. This highly com plex glo bal lega l framework is creating regulatory problem s fo r companies. T he absence of consistent o r unifo rm st andard s for privacy an d securi ty obstructs the flow of informa ti on among countries. 2010.

Discuss how privacy issues can Impact transborder data flows. 1 mple. before you go on. Disclosures of data. Individuals must give their consent before data pertaining t o t hem can be gathered. See Mvw. in consultation with the EU. or employment). insurance.htm. satellite to a British corporation.stice_homel{silprh·acylindex_en. if da ta are transmitted by a Polish company through a U. Third parties should not be given access to data without the individual's knowledge or permission. Data should be kept current. Da ta Accuracy Sensitive data gathered on individuals should be verified before they are entered into the database. should be noted and maintained for as long as the data are maintained. and administrative security measures. The United States and the EU share the goal of pri. Such consent may be implied from the individual's actions (e. These procedures should include physical. rights of individ uals to access information abou t themselves.S. which could face lawsuits for privacy \'Jolation.S. and whe n? Questions like these wi ll become m ore complicated and frequent as time goes on.g.<safe harbor" framework to regulate the war that U.!1~~ 1. de. Data should be adequate.·eloped a . SUIII" of tJJ"st' pti\~1-jl iss u~. applications for credit. The EU data-protection laws arc stricter th :m U. other than the most routine. The file should be made available so that the individual can ensure that the data are correct.. except as required by law. companies export and handle the personal data (such as names and addresses) of European citizens. Describe the issue of privacy as it is affected by IT. The transfer of data into and out of a nation without the knowledge of either the authorities or the individuals im•olvcd raises a number of privacy issues.SECTIO N 3. To bridge the different privacy approaches.S.2 Priv-•c~· •••ifll··· Privacy Policy Guidelines: A Sampler Data Collection Data should be collected on individuals only for the purpose of accomplishing a legitimate business objective. . technical. which country's pri. the United States Department of Commerce. and not excessive in relation to the business objective. but the United States takes a different approach.2 Data Confidentiality Computer security procedures should be implemented to ensure against unauthorized disclosure of data.europa.•acy bws control the data. relevant.exportgov!sa{ehorbor and http:!I ec. the individual's version should be noted and included with any disclosure of the file. Table 3.·acy protection for their citizens. In any disagreement about the accuracy of the dat a. Whose laws have jurisdiction when records are stored in a different country for reprocessing or retransmission purposes? For ex.eulju. where and when necessary. Governments must make an effort to de\'elop laws and standards to cope with rapidly changing information technologies in order to wlH. laws and the refore could create problems for multinational corporahens. 2. Data should not be disclosed for reasons incompatible with the business objective for which they are collected.

They a lso have control over a huge amount of the employees' personal information . What's In IT For For the Finance Major As a result of globa l regulatory requirem ents an d the passage of Sa rhanes-Oxl ey. Q uestions such as th e followin g can arise: Can employees use the Internet. This situ ati on raises serious ethical questions.ource (or offshore ) m anufacturing operations. fiR policies expla i n th e appropriate use of information technologies in the workpla ce. how? How much ? How often? 1-JR managers must formulate and enforce such pol icies while at th e same time maintaining trusting relationships between employees " nd managem ent. However. C ustomers exp ect their data to be properly secured. Marketers do not want to be su ed for invasion of privacy over data collected for the marketing database. e-mail. th ese operations are sent overseas to count1 ·ies that do not hc we strict labor b ws. financial managers are responsible for compliance with all applicable governm ental laws. and shouldn't. for example. regulatory agencies such as the SEC and the Public C ompany Accounting Oversight Board (PCAOB) require accounting departments to adhere to strict eth ical principles. marketing managers must analyze the risks of their operations. In fuct. Custom er relationship ma nagem ent (discussed in C hapter ll ) operation s and tracking customers' online buying habits can expose unencrypted dat<J to misuse or result in privacy violations.nod l'rivacy For the Accounting Major Pu blic companies. what one thinks of what he did. timely. and understandable discl osure in all fin. Me? ~. As a result. In fact. Business ethics clearly mandate that these data sho uld be used only within the company and should n ot be sold to anyone else. They are responsible for full .m cial reports and documenb. because these individuals have control of the information assets. the M IS function must be held to the highest ethical standards. r egardless of what h e actually did. T herefore. and regulations. rules. Failure to p rotect corporate and customer data will cause signific. accurate. as you will see in th e chapter-closing case about Terry C public rebtions proble ms and outrage ""tomers. a person in h is situation has the opportunity to behave improperly. financia l managers must follow s trict ethical guidelines.IIIIZ4JMI C ll i\ 1''1'1-:1{ 3 l':tl. through business-to-consumer electronic commer ce (discussed in C hapter 7). Furth er. their accountants. • For the MIS Major Ethics might be more important for MIS personnel than for anyone else in th e organization.ic s . or chat sys tems for persona l purposes while at work? Is it ethical to m onitor employees? If so. In some cases. profit-motivated crimina ls want that data . For example. that th eir companies submit to the Securities and Exchange Commission a nd in all other public financial reports. and their auditors have s ignifi ca nt ethi ca I responsibilities. For the Production/Operation s M an agement Major POl'vl professionals decide whether to oub. is i~ ethica l to hire employees in countries with poor working conditions in order to reduce labor costs? For the Human Resources Man agem e nt Major Ethics is critically importc mt to HR managers. fair. For the Marke ting Majo r Ma rketing professiona ls have new opportunities to collect data on their custom ers. . Accountants now are being h eld professionally and personally responsible for in creasing the transparency of transactions and assuring compliance with Gen erally Accepted Accounting Principles (CAAP). and whether his conviction was justified.

or systems. and dat<1 confid entiality C<111 help organizations avoid legal problems 2. Privacy m ay be violated when data are held in databases or transmitted over ne tworks. information pri vacy T he right to determine when. T he privacy threat in Internet bulletin boards. opt·in m odel A model o f informed consent in which a business is prohibited from collecting any personal information unless the custom er specifically authorizes it. The students were scheduled to present th eir findings in Las Vegas at the DEFCO N computer hacking conference. newsgroups." Specifically. In 2008. Fundamental tenets of ethics include responsibility. Liabili ty is a legal concept that g ives indh~duals th e right to recover the damages clone to them by other individuals. and social networking sites. [ Chapter Glossary ] accountability A tenet of ethics that refers to determining who is responsible for actions that were take n. and access to information . newsgroups. digital d oss ier An electronic desc ription of an individual and his or her habits. ethics T he principles of right and wrong that indi. Ethics refers to the principles of right and wrong that individuals use to make choices that guide their be ha vior. personal information in databases.t the data not be collected. profiling T he process of forming a dig ital dossier. Responsibility means that you accept the consequ ences of your decisions and acti ons. list and describe the three fundamental tenets of ethics. the I 0-day injunction prohibited the students from revealing vulnerabilities of the MBTA's fare card . [ Discussion Ouesti ons ] 1. or systems. discuss at least one personal threat to the privacy of the data stored there. opt·out model A model of informed consent that permits a compan y to collect personal information until the customer specifically requests th. data accuracy. clients. orga nizations. and liabnli ty. and for each one.~dua ls use to make choices to guid e th eir beha viors. property (including imtellectual property).Discussio n Questions IMIIEikll··· [ Summary ] 1. Are th e students' action s legal ? Are their actions e thical? D iscuss your answer from the stud ents' perspective th en from th e perspecti ve o f the MBTA. code of ethics A collection of principles intend ed to guide decision making by m embers of an organization . electronic surveillance. and empl oyees. Privacy policies that address issues of data co~lec­ tion. Identify three places that store personal data. responsibility A tene t of ethics in which you accept the consequences of your decisions and actions. the Massachusetts Bay Transportation Authority (M BTA) obtained a temporary restraining order barring three Massachusetts Institute of Technology (MIT) students from publicly displaying what they cla imed to be a way to get "free subway rides for life . organizations. liability A lega 1concept that gives indi. privacy codes (see pri vacy poli cies) privacy polic ies (a lso known as privacy codes) An organiza tion's g uidelines for protecting th e privacy of custom ers. and describe the four categories of ethical issues related to information technology. and social networking sites is that you might post too much personal information that many unknown people ca n see. privacy The right to be l eft alone and to be free of unreasonable persona 1inh·usions. electronic smveillance Tracking people's activities with the aid of computers. Define ethics.. Internet bulletin boards. The major ethical issues related to IT are privacy. llueats to privacy include advances in information technologies. . personal information can be gath ered by and/or communicated to others.~duals the right to recover the damages done to them by other indh~duals. and to what extent. accuracy. Privacy is th e right to be left alone and to be free of unreasonable personal intrusions. Accountability refers to determining who is responsible for actions that were taken. accountability.

9.. C hilds has been accused of other actions. O n july I 3.1dy these rules and decide whether any others sho uld be . Access .lt nl." St1..eff. 01scuss the mator pomts of this code. Why do these companies h ire t he perpetrators (if caught) .lissucslcthtcolcO!t 'll1e s1tc offers the 'Ten Commandments of Computer Eth1cs.mcisco's informatio n technology dep.\n mfo rm. Acccs5 . Are th ere limitatio ns as to th e types of Web sites t hat yon can visit and the types of m aterial you ca n view? Are you all owed to change the programs o n th e lob co mpute rs? Are you <t ll owed to download softW< li'C from the bb computers fo r you r personal use? Are th ere ru les governing the pe rsonal usc of com puters and e-mail ? 7.lll\ unplovccs were' 1 s1tmg the "smful s1x" \Vc b s1tcs ( 1o tc· '11H~ "smful s1x'' are We b Sites w1th materml re lated to pom~raphy.-11' nf Pthic-<7 Shnnlcl it h<> ""P'". The FiberWAN contains essential city info nmtion such as officials' e-mails.html. :1..w.. C h ilds was an·ested and charged with four felony CO'Imts of computer tampering.ftc. Di~cms the ethical implica tions of hiring Frank Abagnale as a consultant. Some managers punished their employees.1dded 3 . c l. [ Problem-Solving Activities ] 1.mts7 h this . Is punishing the abusers ethical? Why or why not? If rCCCIH:d o n 1101\"ersitvcomputers? \\'lw o r"'" no t' Support 10 ur .godsclllinello learn how law enforcement agencies aro und the wo rld work together to fight consumer fr. Access you r university's g uide lines for ethical computer and Internet use.1mt categories and prep.\I''I'I'R l 1 t ltic'" '"ll'oivacy 2 .) She then prepared a list of the e mployees Jnd the1r surfing histories and gave the list to management.) Suppo rt your :onswer.'' Re1iew the o rganization's suggestions about ho w to protect your on line pri~cy. She disCOH:red th.. Authorities also .1in current statistic' o n o ne of the lop fi.~rtment fo r live yea rs as a hig hly valued! network admi o 1ish·a and . city payroll files. built San fi'rancisco's new mult imilliondollar computer network..JI? Unethical' Support )Our answer 5.. Frank Ab. end ed up in prison.lho n secunty manager routinelr monitored the \Vcb surfing among her comp. He handled most of the implementatio n..111\\\er [ Team Assig nments ] 1.. the high est level of certifi cation offered by C i. th en what types of punishment are acceptable? c. illegal activities. Is it too gen eral? 8.) 2 .. D o th~>C >Ill's pr011de info unJho n th<1l he lps you protect rour pmac} 7 If so. Access hnp:l/. then e-<piJm ) has a mission of protectmg rig hts and pro moting freedom in the "electronic frontie r.Hid Eac h tea m sho uld o bt. configuratio n .ult.uts of the world? [ Closing Case You Be the Judge] Terry C hi lds worked in San Fr.. Accc>S ""'"' ett~... confid ential law en forcem ent d ocum in ccrt.~iming that they should have a right to privacy. C hilds. in turn.1t...un p. h.v.eve that a Ulll\ e~ll}' should be allo\\·ed to momtor e-m. and jail inmates' booking informa tion .ht maps com h tht usc of d.epublicere. cookiccenlral. Acccs~ the Computer Eth1cs Institute's Web site at wuw. objected to the monitoring. tastelesmess..comlnetiquettelcorerules.•. gambling..-l"cl ? cpsr ort~.. and violence. 6. 2008. After h e left pri~on .mv's e mployees.. Do you be!.. What cln ynn think nf t·hi• C"n..orglconstitulionlcocle. Yo u Jrc the C I•:O of J comp.. the criminal played by Leonardo Di· C apri o in the m o ti on pictmc Cctlch Me !{You Can.albion. Some employees. Is th e security manager's submissio n of the list of abusers to management ethical? W hy or why not? d. Is employee Web surfing on the "sinful six" ethica l? S upport your answer. The ElectroniC fi'ron tler Fo undation (.vw. ho" ever . Wha t sho uld th e company do in this situation? (Note: There are a variety of possibilities a. htnd). and summarize what you c an do to protect yourself. hate.1 good id ea? b.IIIEZ~·· 1 C II. that· he implem ented a tr:~dngsystem to monitor what administrators were saying and doing.1 on tillS \ \'e b s1te 1llcg.Ie.11l sent . Accc\~ the A\~ou.. Authorities accused him of com1nandeering the FiberWAN by crea ting passwords that granted him exclusive access to tl1e system . and installation of all the routers and swit ches tha t compose the netwo rk. Is this code comple te' \\'h~ or 11h\ no t? S upport rour am\\er 4. acm.ue a repo rt Arc any categories gro wing faster than others? Are anycategon cs m o re pr~v. Authorities all> com. the Ji'ibervVAN.111on for Computmg 1\lachinery's code of eth1~ for 1 ts mcmben (se~ " ..~. Is m onito ring of Web surfing by managers ethical? (It is legal. c consumer compl. who holds a C isco Certified Intern etwo rk Expert certific<~lion.. . In addition to refusing to give city officials the passwords necessary to access the fi'iberWAN. he worked as J consultant to many companies on matters of fraud. including the acquisition.

Ids could give the passwords." SI'C<u<'.P. Venezia. 2010. 2 and P. R.000 to add ress potential ongoing problems.1rtm ent say h1s performance was poor when he had been domg what no one else was able or willing to do?'' Interestingly.· Net""'~ Wcrli. After his arrest. if it fails.1>rk Lockout.\1idmarket. R 1\lct. incom petent. 2008. C h ilds had a poor rela tionsh ip with his superiors. "San Franc isco's !l. Further. Venezia. will prevent the entire system from functioning. J. Debate R11gc< in 1crry Childs' Core. he allegedly collected pages of user names and passwords. He was also charged with downloading terabytes of c ity data to a pe rsonal encrypted storage device. Despite this fact.l.~bil ily of Data Netv. Egelko. \Vhy San ~r11ocisco's Neh\1>rkAdmin Went Rogue. July 2>. July ~. August II. 2008. '1eny Ch il<h Is Denied Ivlotion lOr Retrial.<tllll. 2010.orld. Bec:1 use the FiberWAN was so complex and Childs did not invoh·e any of the other ne twork engineers in his u nit.. Veoni. then how should the City of San Francisco (or any organization) prot«:t itself from such o pett<>n? SoultW. April 28." lufoll'orld.n. R_ rv1d\:lillan. (b) Discuss the case from the perspective of C hilds's defense la"Jer. J. a single point of failure is dearly undesirable." Bloomberg BuliiWMII'<tk. and then gave them to the m ayor of San Franc isco in a secret meeti ng 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. On Apnl 27.<>rks. . He also complained that he was overworked and that ma ny of h is colleagues were mcompetent freeloaders. " SFCat<.puten<orld. July 1 6~ ZOOS: P." Car. Officiak Lncl:ed Ott of Ccmpnter Neh<ork. to conduct a vulne rabihty assessment of its network It also has set aside a further $800. He apparently trusted no one but himsel f with the deta ils of rhe network. who were all managerially o riented rather than techmcally oriented." NeM>rk \\brld. He worked very ha rd. Those attempts were unsuccessful.• n Francisco Ne"'ork Still Locl:ed Oul. l-Ie considered his direct supen·isor to be intrusive.1int:ain the S)~tem. July 15. B. he was the only person who fully understood the network's configuration. "City Mis"'d Sleps to Avoid Nelv. Surdin. 2010.F. C h ilds was the only person in the department capable of operating the FiberW AN. and rarely took vacations. "S.ities was not kno>\11 until a June 2008 compute r audit. C h ilds had been disciplined on the job in the m onths leading up to hi s arrest. Much I.. The extent of C h ild's acti. Is C hilds an ex::1mple of a single point of failure? \1/hy or why not? If he is gu ilty. Ch1lds's supervisors and co-workers had damaged the Fibcr\VAN themrekes.a~)-er Sa)' C lient Was Prot<cting City's CO<Ie. "Slouching to. For this 2010.Cl<><iug Ca.m d his supe rvisors h ad tried to fire him.000 to fix the problems with the FiherWAN. Childs' lawyer raised the question: " How could the dep. a jury con\'icted Childs of one count of felony computer tampering for with holding passwords to the city's Fibe r\VAN network. or an application.. Childs maintains that none of the persons who requested the passwords from h im was qualified to have them.lS jeopardizing the network that Childs had built l-Ie further charged that in the past.>rd Jmtice for Teny Child>.c: Yo n Be the )ud~c ···~}/~~~· discovered dial-up and digital subscriber line (DSL) m odems (d1scussed in Cha pter 6) that wou ld enable an unauthorized user to conn ect to the Fiber\VAN. 2008. Chun:h." SmrrhCI0-. "San Frilll Ciooo IT ILack Story Looks a Bil 1bo ~luch ill• Chinatown." SFGate. San Francisco officials maintained thatthey had paid Cisco contr<Jctors almost $200. 2010. Jul)• 18. hindered C hilds's ab1lity to m. Computer Engineer to Stand Trial. l ne city has retained a security consulting fim1." . Secure DNA (www.. he felt that his superiors were more interested in office pohtics than in getting anything done. ·t.·ort. O n August 9.In Derbeken. after nearly three days of dehbemtion. Question s 1 Do you agree with the jury that Childs is guilty of computer tampering? (a) Disc= the case fi·om the perspective ofthe prose. July 23. July 30. C hilds's bwyermaintained that his client had been the victim of a ''bad faith" effort to force hnn out of his post by mcompetent city officials whose medd ling \\". 20 10.In Derbel:en. and he bel1evecl the managers above him had n o real concept of th e F'iberWAN. including evenings and weekends.outor ofthe City o f San Francisco.Jna." Washingtou Post. to use their network login information .' PC World. '"San Francisco Hunb. in cluding his supervisor's. J. ZOOS.b" M}'"Siery Oe\·ice on City Network. ZOOS. "Parl> ofS.l a)orC:. whether it is a person~ a networl. the FiberWAN continued to run smooth ly while Childs was holding the passwords As of l\'lav 2011." Comput." lnfo\\brld. Vija}"'· "After Ver<ict. Niocolai. and obstructive. and shown complete indifference to maintaining it themselves. Vij:l)-.ts BackKe)"' lOlheNro.. December 17. the judge sentenced Childs to four years in prison . P. 2008: Z. J. McMillan.. \'.J. In fact. including its configuration and login mformation. the department had establish ed no policies as to th e appropriate person to whom Ch. lOU~. 2008. to the point of arrogance. ZOOB.sccure.. A single point of bilure is a component of a system that. Au. Childs kept the necessary passwords to himself for ten days. July 23. C h ilds seems to have taken h is 1ob very senously.owt 7. Seplember 11. in part because of his exclusive knowledge of the city's FiberWAN. "N<Iwork Admin1cny Childs Cots -I-Ye3f Sentence. ~lclvlillan. "San Francisco C= Sh010~ V ul ner. "S. l11ey also found that he had placed a command on several network devices to erase critical configuration data in the event that :myone tried to restore administra tive access to the devices. Compiled from R. \'.

....... I I • .... .. 1 - .I'I T . ' I I I I· · 'J I . I ~ . . N ' /" J / .Chapter Information Security / / I I I • / / . .I . / .

Deline the three risk mitigation strategies. Compare and contrast human mistakes and social engi neering. Identify the three major types of controls th<lt organizations can use to protect their information resources. and provide an example of each one in the conte:-._ MKT Secure customer data FIN Manage Investment risk POM Ensure Information HR Secure senshlve M IS Provide security Infrastructure for firm sec. and provide a specific example of each one.•ide an example of each one...ny wtth Sl4'Ptv chain panners employee data .i of 0\\~1ing a home.( LEARNI~G OBJECTIVES ] [ CH. and pro.... com/col.J"'/raine.\PTER OUTLINE ] [WEB RESOURCES] Identify the five factors that contribute to the increasing vulnernbilitr o f information resources. 4 Introduction to Information Security Unintentionai'T11rcnts to Information Systems Deliberate Threats to Information Systems What Organizations Are Doing to Protect lnfonnation Resources Student Companion Site wil.. and provide a specific exa mple of eac h one. Discuss the ten types of deliberate attacks. T For __ ACCT Ensure comp liance with regulations What's lnM 7 e. • Student PowerPoints for note taking • Interactive Case: Ruby's Club Assignments • Complete glossmy WileyPlus All of the above and Information Security Controls • E-book • Mini-lech1re by author for each chapter section • Practice quizzes • F'lash Cards for vocabulary review • Additional «What's in IT for Me?" cases • Video inten·iews with managers • Lab Manual for Microsoft O ffi ce 2010 • How-to Animations for 1\licrosoft Office 2010 .

644 usernames and passwords for Facebook accounts from indi. . the atta ckers were able to log on to the financial fi1m's ne twork. and th ey se nt individual m essages to Bob's co -wo rkers. th e atta cks were likely initiated by fake friendly messages sent to specific employees at the targe ted companies. and financial companies from mid . logge d into it. A phishing at1<1 ck is an attack that acquires sensitive information by masquerading as an auth enti c e-mail.1111:~{~ 1-· C II APTI. however. including Fa ce book. When she clicked on the accompanying Web link.~dua ls in m ore than 2. depending on the number of friends tied to the accounts. once per hour. had come from th e attackers. photos. she expected to see Bob's pictures. she unknowingly download ed a keystroke logger. Bo b wo rks for a large U. which can contain millions of computers. . contact lists. In addition to copyi ng and/or stealing sensitive personal and corporate information. attackers combine many zombie computers into bob1ets.~duals who communicate on social netwo rks such as Face book and ). guaranteed to be valid. (The keystroke logger was available free on th e Internet. These networks pro~ de a rich repos itory of information that cybercrimina ls can use to more precisely target individua 1 co rporate employees through phishing atta cks. She had . received a Facebook message apparentl y from Bob. When Alice clicked on the link. mcafee. The message. known as mal ware. m others' maiden names. Cybercriminals aggressively take ad vantage of an unanticipated gap in corporate defenses: the use of socia l networks in corporate settings. Twitte r. where th ey obtained access to the comp<my's servers and all of the sensitive information they contained. The attackers then use these bob1ets to execute all forms of cybercrime. whi ch targets users of social netwo rking We b sites. asking her to look at som e pictures from a compan y picnic. where a batch of 1. co1porate netwo rk represents a potential point of access to valuable mte ll ectual p1 operty.cJimina ls who use th e Internet. defense. finan c ial compan y. T he attackers also took control of Alice's compute r without her knowing it. grabbe d hi s co ntact list of about fifty fri e nds. Anothe r example of ma licious software is th e Koobface wo rm ( its name is an anagram of Fa ceboo k). How do su ch attacks work ? Consid er th e foll owing karen roach/Shutterstock exa mple. which is a program designed to save eve1 y thing she typed at her keyboard and.attack their targets. The atta cke1s who "' b1 eac hed Coogle and thirty othe1 technology. So m e how. From each account. and the link carried malicious software. patents. and they noted when she logged into a virtual private netwo rk (VPN) account to access her comp<my's network .md str.1tegic docume nts. Successful breaches such as the above example ill ustrate another way in which cybercriminals.) The attackers reviewed Alice's hourl y keystroke reports.000 Facebook username and password pairs. atta cke rs gaine d access to Bo b's Fa :eboo k a ccount. to send a text fi le of all her keystrokes to a free Cmail account controlled by the attackers. such as custome1 infomution . birth dates. Stolen credentials like these flow into hacking We b sites. Th e atta cke rs note d discu ss ions about a recent c ompany pi cni c. can sell for $ 75 to $200 on th e bla ck market.:R -+ lnfonnatio n Security [ Cybercrinlinals Use Social Networks for Targeted Attacks] The Problem E ach infected pe rsonal co mputer in. cyberthieves known as the Kneber gang stole 3. phishing attacks now are so precisely targeted that they have a new name: spe<tr phishing.000 companies.. O ne of Bob's co-workers. In fa ct. und er th e control of the attackers. m edia.S. and bega n manua ll y re. In just four weeks in early 2010. Attackers inc reasingly are using the personal information provided by indi.all useful for targeting specific victims and tuming their computers into zombies. attend ed th e picnic with Bob. Her computer essentially had become a zombi e compute r. Alice. hom etom1s. thieves ca n gather e-mail addresses. Having achieved access to Alice's use rname and password .to late 2009 were after these kinds of infonnati on . Dubbed Operation Aurora by cyber security company McAfee (wu~v. andrecent gossip . in fact.•iew ing m essages and pos tings o n his profil e page.

M. dele te rna li cious links. Bebo. Diana. or both ? The most important questi on raised by th e opening case. T he answers to th ese questions and oth ers are not clear. a securi ty finn. lll{omwtionWed. B. October 25." The Results Unfortunately. Soult'es: Compiled from " Information Security Experts at F. 2010. more than any other coun try. "Social Networks Pose Security Risks to SMBs. A dmin. or by so me co mbination of th ese fac tors? How should socia l ne two rks protect their members more effec tivel y? Does better protecti on on social netwo rking sites involve tec hnology. estimates that 500.kaspersky. "Facebook Fixes Bug That Exposed Privale Chats. October 27. yo u wi ll acquire a better understanding of th ese issues. As you lea rn a bout information sec urity in the co ntext of informati on tec hnology.000 Koobfa ce-controlled personal computers are active on th e Internet on any given da y. Informati on securi ty is closely related to information tec hnology. and if they do decid e to click on a link. 20 11. by the sites' poor securi ty. "Employees Flout Social Network Security Policies. IT's About [Small ] Business 4. th e d ominant social ne two rk and th e re fo re th e b igges t targe t.' C/0. "Enterprise lnfonnation Security and Social Networks. March +. their relationships. January 12. is partne ring with M icroso ft and security firm 1v1cAfee to h elp filte r mali cious programs.liebemwnresearch . 2010. "Social Nehvork Security Policies Lacking. 2010. their importance. policy. Keep in mind that th e issues involved in informati on security impact indi vidua ls and sma ll organizations. October 30. Nobody Predicted. McMillau. ~America ns ?vlaximize Social Nehvork Security. do soc ia l networking s ites show due diligen ce in pro tecting se nsitive. 1 shows how a lack of data backup affects a sma 11 business. however. and Friendste r. l11j0s<'C Island. hi 5. June 28. The answer to this question impa cts each and every one of us.2010. and it raises man y significa nt questions . Eston. What We Learned From This Case T he lesso ns that yo u ca n learn from the security proble ms with socia l n etwo rks address th e major issue discussed in this chapter: information securi ty. February 3. Kaspe rsky Labs (http://usa. and he lp people resto re a ccess to th eir a ccounts. IVIay 5. Schw artz. limit the pe rsonal information they post."' In~mwtion Security Resources. Aoohido. Social networking users in the United "Five 2010 Stories n. 2010. Schw artz. March 4. Ma ny owners of infected zombi e computers do not know that the ir compute rs are compromised. attackers continue to exploit vulnerabilities in socia I n etworking Web sites. class ified informa tion ? Are security breac hes of soc ia l ne two rking sites ca used by members' care lessness. Schwarlz. a biannual stud y conducted by market researc h company Lieberman Research C roup (Mvw. 2011.·ork with Facebook." lnfomwtionWeek. all computer users should be very ca reful when clicking on any link in an e-mail. lnfonnation\VI!('k. EzineMmk. July 23. ZOIO. For exa mpl e.k. and th eir trade-offs.' Compuremorld. N. The best solution to this problem is for all users of social networks to be extremely careful of what information th ey post on their pages. "'An lnvitation to Crime. M. A.CASI~ ···:~IIIII MySpa ce. as well as large compani es." C/0. ~ Ha ck i ng a Corporate Netv. 20 1 0~ tvl. September 14. "Tweet Th is: Social Netv•ork Security Is Risky Bus iness. 2010. th ere is some good news. Freed. A. However.1cebook F'ix Vulnerability D isco\'ered by Indiana Un iversity Students. and they configure privacy settings to restrict which individuals can view their information . its source should be one that they ca n trust. A Face book spokes perso n claimed th at this process should kee p compromised accounts to a minimum .' l11{onnatio11Week. 2010. T. R . An Atte m pted Solution Face boo k. Furthe r. "Social Networks' ·rnreatto Security. is whe th er it is possible to secure the Internet. ." USA 10day. ZOIO. This finding is based on the 20 10 Unisys Securi ty Index. He add ed that Faceboo k is "con stantl y wo rking to improve comp lex syste ms th at quickly de tect and block suspi cious acti vity. January 3."'lnformation\\W.

What are the advantages and disadvantages of Dwight's backup p lan? Source: Compiled from author interview with Dwight Thomas.75 million . Recently. OulckBooks erases the oldest backup and creates a new one. leading to financial losses. you have seen diverse ways in which IT h as made businesses more productive. Dwight keeps the three most recent backups. This finding confirms that organizational employees are a we ak link in information security. he takes the USB drives out of the safe and all the employees back up their flies. or any digital files that you would like to h ave if you lost your computer. two safe backups can still be Questions 1. can ha ve enormous benefits for individuals. ·n. notifying c ustom ers. For example .com) program to maintain all of his customers' flnanclallnfoiTTiatlon. Dwight had peace of mind knowing that If he had to start over from scratch w ith a new computer.s process seems simple.(unllatioll Security G about [small] business 4. owner of Thomas Tax SeNice. Each Friday. When the employees back up each Friday. Therefore. th is process is even more important as any loss of data could mean lost custom ers and lost revenu e. T11e study further conclud ed that employee negligence caused many of the data breaches. For a sma ll business. he cou ld easily restore his data and continue his business operations. Why d id Dwight restore his data manually by hlmse~ ? 2. His tax service relied completely on the OulckBooks (http:llqutckbook.we also explored fi elds such as m edicin e a nd phil:rnthropy in which IT has improved people's he:r lth and well-being. As you consid er this case. organizations. setting up telephone hotlines to field queries from conce rned or affected custom ers.and decreases in customer trust.1 nd cvben•Ytr(<lre. schoolwork. he called a local computer repair service. he realized he had a major problem. using the built-in backup system In Qu. Dwight had another computer failure.s. Fortunately. his system Is enough to keep his business going In spite of any computer failure. The technician determined that the motherboard was bad. think about your personal data .S. such as the loss of business from increased custom er turnovercalled customer chum . videos. finan cial information. In fact.e study also measured m ore intangible costs of a breach. Consid er th e following scen arios: • • • In divid uals ctm have their identities sto len_ O rgan izations can have customer information stolen . found that in 20 10 each security breach cost organizations an average of $6. So he purchased a new computer and began the long and arduo us process of manually restoring his data from his paper Illes. Unfortunately. President O bama's 2009 stimulus package contained billions of dollars to upgrade th e government's digital defenses. properly used . When Dwight Thomas tried to boot up his computer one morning. Dwight also purchased a fireproof safe. You h.llll: lf]WI C ll i\1' '1'1-:R -1 After this Incident. ~ nd respons ive to consum ers.ponemon. A duplicate backup is e asy to keep. It is therefore very important for you to learn about information security so that you will be better prepared when you enter the workforce. Each of his three employees received a USB drive to back up their Q uickBooks Illes.lntult. the Ponemon Institute (wmv. information technologies can also be misused. erosion of customer confidence. Given the nature of Dwight's small business. and he would require a $5000 minimum charge to restore Dwight's data And the worst part of It all? Dwight had no backup. . A soli d backup pbn is critical to information security.lckBooks. and giving discounts for future products and In fact. the problem turned out to be only a few corrupted Illes that were quickly repaired by the local technician for $40. and entiTe societies. T he study measured the direct costs of a data breach. government. effi cient. terms for Internet-based atta cks. Countries face t he thre<1t of C)'berlerrorism . a research finn. but you have to be diligent abou t b:rcking up your essential files. often with devastating consequences. So far.. However. While thl. Information technologies. Dwig ht put a backup p lan In place. After multiple attempts to resurrect his computer. and legal action. Cyberwa rfare is a critical problem for the U.1 Thomas Tax Service accessed If the re Is a problem when the new backup Is being cr~ ated. tl1e mislllse of information technologies has com e to the forefro nt of any discussion of IT. It Is much more effective than not having a backup at all. offering free credit m onitoring. such as hiring forensic experts.

T hese char<1cteristics make it much e. Faster. m aking it much m ore difficult to secure them : • • • • Today's interconnected . Also. 1 ckers. cheaper. such as testing the security of various systems. Also. An informat ion resource's vulnerability is the possibility that the system will be harm ed by a th reat.vork. An untrustecl network. The exposure of an information resource is the harm. a nell or loss. da nger. Th e In ternet now enables millions of computers and computer networks to comn>unicate freely and s~aml essly with o ne another. loss. let's consider these key thus raising the potential of an atta ck on information assets. with gre01ter storage capacity. f< H m ore people or storage device th. computer crimes can be committed from <mywhere in the world. faster. wireless is an inh eren tly nonsecure broadcast communic. th e losses from armed robberies average hundreds of dollars. Significantly. at any time. The nel\. Following this broa d definition. S maller. or destru ction.S I•:CTION 4. 4. Y ou have seen that information and information systems can be compromised by deliberate criminal actions and by anything that can impair th e proper functioning of an organization 's information syste ms. communicate. dam age. For example. ta rgets known software security weakn esses.1 world of \Illtrusted netwo rks ~mel potentia l attackers.~t co1 :n e able to afford powerful computers :mel conn ect inexpensively to the Interne t. in gen eral. wirelessly networked business environment. 'fbe second Factor reflects the fact that m ode rn computers and storage devices (e.) The fourth Factor is that international o rganized crime is taking over cybercrim e . Today.1 lutrudooctiou to loo fonua tio oo Sccmity IMIJ:S!JII.g. A threat to an information resource is <lilY danger to which a system may be exposed. dism ption. modi ficnti on. is any network external to your organization. maintains that groups of well-organized criminal organ izations have taken control of a global bi llion-dollar crime n etwork. A trusted 11etwork. and m ore portable. O rgan iz<1 tions and individuals are exposed to . T he reason is that the Internet contains informa ti on and computer programs c. wireless technologies enable employees to compute. five key factors are contributing to the increasing vulnerability of organizational information resources.1tions medium. Organiza tions collect l111ge amounts of information and e mpl oy numerous information systems that are subject to m yriad threats. a company that specializes in providing security information to governments and Fortune 500 companies. Decreasing skills n ecessary to be a computer hacker. effectively providing an internationa I .mytimc. and those from white-collar crimes average tens of thousands of dollars. interconnected . cheaper computers and storage devices.1lled scripts that users with few skills can down load and u se to attack any information system connected to the In ternet. and a ccess th e Internet anywhere and .ide{ense.Jtion systems (IS) fr om unauthorized e1ccess. • LJck of m anagem ent support. is any network with in your organization. particularly the Internet. infom1ation secmity refers to all of the processes a nd policies designe d to protect an org< mization's information and inform. iDefense (http:lllc!bs. The third factor is that the computing skills necessary to be a hac ker are decreasing.. disclosure. Internation al organized crime t aking over cybercrim e. In addition. powered by skillful h.1sier to steal or lose < 1 compnter 1tnins h uge amou nts of sensitive informntion . interdependent. (Security experts can also use these scripts for legiti mate purposes. thumb drives or flash drives) continue to become smaller. or damage that ca n result if a threat com promises that resource. losses from compute r crimes average hundreds of th ousands of dollars. These crimes are typically nonviolent. use. interdepend ent. in general. but quite lucrative. In contrast.1 Introduction to Information Security Secoority can be defined as the degree of protection aga inst c rimina l activity. T he first factor is th e evolution of th e IT resource from mainfra me-only to today's highly complex. wirelessly networked business environment. Cybercrime refers to illegal activitries conducted over computer networks. Before continuing.

and across all functional areas. Consultants. and the next section addresses deliberate threats. th ese individua ls wo rk for th e co mpany alth ough they technicall y are not employees. This is true because higher-level employees typ icall y have greater access to corporate data and enjoy greater privileges on organizational information systems. Co mpanies frequently ontsource their security and janitoria I services. For the entire orga niza tion to take security policies and procedures seriously. These managers are in close conh1 ct with employees every day and thus are in a better position to determine whether employees are following security procedures.other employees have go ne home. store.IIII:~G~··· C II APTI. perform work for the comp. ma y be overlooked in information security arrangements. th e greater the threat he or she poses to information securi ty. 2. information systems. and information assets. and information assets. but they often control the means to create. lower-level managers may be even more important. Define information security. th ey may also ha ve access to the company's network. Why are the skills needed to be a hacker decreasing? 4. transmit. although technically not employees. Second. from mail clerks to the CEO. and nobody questions thei r presence in even th e mos t sensitive parts of th e building. senior managers must set th e tone. Unintentional threats are acts performed without malicious intent that nevertheless represent a serious threa t to informati on sec uri ty. and janitors and guards. these employees often ha ve access to the company's network. A major category of unintentional threats is human error. and final. and mod ify that data. and a vulnerability. T he two major categories of threats are unintentional threats and de li berate threats. O ther employees includ e contract labor. as you ca n see in Figure 4. IS employees not only have access to sensitive organizational data. an exposure. an article from 2600: The Hacker . Differentiate among a threat. Ultimately. Depending on th e nature of their work. 3 .my. janitors and guards are th e most frequently ignored peopl e in informati on security systems. consultan ts. including th e costs to repair information systems and the costs of lost business. Fina lly.2 Unintentional Threats to Information Systems lnformation systems are vulnerable to many potential haza rds and threa ts. such as temporary hires.:R-+ lnfonnatio n Security safe haven for cybercriminals. before you go on. As with co ntra ctors. th en. factor is lack of management support. ln fact. Th ey typi ca ll y ha ve keys to every office.if n ot all. Computer-based crimes cause billions of dollars in damages to businesses each year. however. Moreover. Human resources employees generall y ha ve access to sensitive personal information about all employees. employees in two areas of th e organization pose especially significant threats to inf01111ation securi ty: human resources and information systems. Likewise. they are usuall y present when mos t. T his section discusses unintentional threats. information systems. The fifth. the higher the level of employee.JJ~1 1. However. Human Errors O rg<mizationa l employees span the breadth and depth of th e organization. Contra ct labor. First. There are two important points to be made about employees. 1.

This lack of awareness comes from poor education and training efforts by the orga nization . Human errors or mistakes by em ployees pose a large p roblem as the result of laziness. contract labor. .~ .1 Security threats. 1. a nd other malware • Physical theft Databases \ contrary to specifications Systems Programmer • BypaBSIII\J S!JGUI ity mechanisms • Disabling security mechanisms • Insta lling non-secure systems Operators • Duplication of confidential reports • Initializing non-secure system • Then of confidential material Users • Data e ntry errors systems software • Failure of protection mechanisms • Information leakage • Installed unauthorized software • Unauthorized access • Copying • Theft INSIDE THREATS • weaK passwords • Lack of training FIGURE 4. janitors • Unauthorized access • Theft • Copying HARDWARE THREATS Terminals • Located in nonsecure e nvironment PCS • Fraudulent identificatio n • Illegal leakage of a uthorized Inform atlon • VIruses. o r a lac k o f awaren ess concerning infonnation security. OUTSIDE THREATS 1111 Internet EMPLOYEES Application Programmer • Programming of applications to function OTHER INSIDERS Consultants.S ECTI ON 4. worms. Human mistakes manifest themselves in many different ways. Quarterly described how to get a job as a janito r for the purpose of ga ining physica l access to an o rganization . care lessn ess.2 l lniu h'utiu nal 'l'lu·cats tu l ufo n1101tiu u Sysh:1us IMIJ : J. as shown in Table 4.

not logging off the company network when gone from the office for any extended period of time. or clicking on links embedded in e-mails (see phishing attack in Table 4. humidity. O th er common ploys include posing as an exterminator. Unlocked desks and filing cabinets when employees go home at night.2). Opening e-mails from someone unknown. The attacker claims h e forgot his password and asks the legitimate employee to give h im a password to use. leaving them in taxis. and so on. an air-conditioning technician. a perpetra tor entered a company building wearing a company 10 card that looked legitimate. llowevcr. result of action s by an attacker. Panera Bread. can result in malware and/or alien software being introduced into the organization's network. Discarding old computer hardware and devices without completely wiping the memory. Losing or misplacing these devices. dust. although unintenti onal. These devices include computers belonging to customers and business partners. In one company.. or a fire marshal. or using them carelessly so that malware is introduced into an organization's network. cell phones. and static electricity.1 Carelessness with computing devices Opening questionable e-mails Careless Internet surfing Poor password selection and use Carelessness with one's office Carelessness using unmanaged devices Carelessness with discarded equipment Careless monitoring of environmental hazards T he h uman errors that you have just studied. fun11atio" Security Human Mistakes Table Human Mivtake Carelessness with laptops Description and Exl'llllpl s Losing or misplacing laptops. Unmanaged devices are those outside the control of an organization's IT department and company security procedures.•••E :!~W· C ll i\1''1'1•:1 { -1 1. 4. which include dirt. He walked around and put u p signs on bulletin boards reading 'The . are committed entirely by the employee. such as a company manager or an information systems employee. These hazards. 96). includes comput ers. The m ost common example of social engineering occurs wlhen the attacker impersonates som eone else on t:he teleph one. Choosing and using weak passwords (see strong passwords in the "Authentication" section on p. Attackers often employ socia l engin eering to induce individua ls to make unintentional mistakes and discl ose sensitive information. Social Engineering Social engineering is an attack in which th e perpetrator uses social skills to trick or manipulate a legitimate employee into providing confidential company information such as passwords. and computers in St arbucks. BlackBerry® units. Examples of social engineering abound . Accessing questionable Web sites. are harmful to the operation of computing equipment. employees also ca n make nnintentiona l mi stakes as. computers in the business centers of hotels.. and digital copiers and printers. and so on.

S IO:C'I'ION 4. the first thing the perpetrator asked for was user name and password. . Two other social e ngineering techniques are tailgating and shoulder surfing. T he new number is 555-1234. when the emp loyee gains enhy.~nd airphm cs.3 Ddihc ratc Threats to l ufo nuatiuu Syst cuos IMIJ :f!JII. h elp desk telephone number lw s been chnnged.ll'e Espionage or Trespass Espionage or trespass occurs when an unauthorized individu. Information Extortion In formation extortion occurs wh en an attacker either threa tens to steal.bly damaging the organization's image and causing its custom ers to lose faith .JJ~~ 1. We provid e a list of ten common types for your convenience. su ch as studying a company's \~le b site and press releases.1l attem pts to gain illegal access to orga niza tion al informati on. This technique is particubrly successful in public areas su ch as in . Naturn lly. and so on. or actions of an organization or govemmentagency. polici es." H e then exited the building and began receiving calls From legitimnte employees thinking th ey were calling the company help desk. Competitive intelligence consists of l egal information-gathering techniques. industria l espionage crosses the legal boundary. He now had the information necessary to access the company's information systems.ese are cases of high-tech civil disobedience to protest the operations. l11." Shoulder surfing occurs when a p erpetrator watches an em ployee's computer screen over the employee's shou lder.mel. It is importmnt to distinguish between competitive intelligen ce and industrial espionage. poss. T he perpetmtor follows clooely behind a legitimnte employee .1irporls and on commuter tr. Tailgating is a technique designed to allow the perpetrator to enter restricted < l reas that arc controlled wirl1 locks or card entry. or actua lly steals. 4. In contrast. O ne form of online vandalism is" hacktivist or cybera ctivist operation. inform ation from a company.tins . or for agreeing n ot to disclose the information . the attacker asks him or her to "hold the door. The perpetrator demands paym ent for not stealing the information. What is an unintentional threat to an information system? 2. for returning stolen infom1ation. Sabotage or Vandalism Sabotage and vandalism are deliberate acts that involve defadng an organization's Web site. before you go on.3 Deliberate Threats to Information Systems There are many types of deliberate thre ats to information systems. Provide examples of social engineering attacks other than the ones just discussed. attending trade shows. • • • • • • • • • • Espionage or trespass Information extortion Sabotage or vandalism Theft of equipme nt or infonm 1 tion Identi ty theft Compromises to intellectual property Software a ttacks Alien softwa re S upervisory contTOl and data acqu isition (SCAD A) attac ks Cyberterrorism a nd cyberwa rf.

Intellectual property is the property crea ted by individuals or corporations that is protected under trade secret. The N e111 Y o rk Times tracked down a pa rticu lar ind ividua I based solely on her AOL searches.lining or h olding a job. patent. It is important to no te that th ese are definitions u nd er U. involves the pn1cticc of rumm aging th rough commercia l or residential trash to fin d informa tion that has been discmded . these devices are becoming easier to steal and e asier fo r attackers to use to steal inform<1tion . can be used for fraudul ent purposes. BlackBerry® units. Recovering from identity theft is costly.1tive info rmatio n fro m their informatio n in compu ter data bases. mem os. however. passwords. digital cam eras. law. ' lne ability to analyze all search es by a single user can enable a criminal to identify wh o lh c user is and wh. In . that is a company secret and is no t based on public informatio n . Because dumpsters <ll'e usually located on private premises. IDs. For example. ' ln erefore.S. Victims also report probl ems in obtaining credit and obt. Such info rmation. smart phones.dditio n. A trade secret is an intellectual work. stealing person. infiltrating organiza tions that store large amo unts of personal info rmation (e. laws award patents for 20 years and copyrig ht protection for th e life of the c reator pl1!1s 70 years. known as dumpster diving. your id entity can be uncovered just by examining your sea rch es in a search engine. There is som e international standardization of copyrights and pate nts. perso nal digital assistants. impersonating a trusted organiza tio n in :m electronic communication (ph ishing). and other forms of informatio n can be found in dumpsters.~ty. and iPods). Tec hniques fo r illegally obtaining person al info rmation include: • • • • stealing mail or dumpster diving..acxiom.S. An example is the Coca-Cola fo rmula . are enforced with v. To demo nstrate th is fa ct . data ~1ggrega tors suc h ~s Acxion1) (ww1 v. usually to gain access to his or her financial information o r to frame him or her for a crime. when recovered. t he o r sh e is doing. Compromises to Intellectual Property Protecting intellectual property is a vital issue for people who make their l ivelihood in knowledge fields. also for a desig nated period. there can be discrepancies between U. A pate nt is an officia I document that grants the holder exclusive rights on an invention or a process for a specified period of time. laptop replacement.. but it is far from tota I. time the loss of intellectual property. law and other countries' laws. Even in these cases. laptops. cre dit cards. victims st< Jte that it is often diffi cul t to rem ove neg. photographs. letters.1ct . and diffi cult. such as their credit reports. Table 4. m any people never consider that the sensitive items they throw in the trash may be recovered. many laptops have been stolen d ue to su ch carel e~sn ess. because the legality of this act va ries. C opyrig ht is a statutory g rant that provides the creators o r own ers of in tellech1a I property with owne rship of the property. Dumpster diving is not necessarily theft.. thumb drives. these law. One form of theft. Identity Theft Identity theft is th e deliberate assumption of another person 's identity. . dumpst er diving is illegal in sante parts of the United States. Paper files. Owners are entitled to coil ect fees from anyone who wants to copy their creations. zmd loss producti.g. C urrent U.1 mple. Unfortunately.IIII: I!: ]MI C ll i\1' '1'1-:R -1 lllfo n11atio ll Security Theft of Equipment or Information C omputing devices and storage devices arc b ecoming sma ll er yet m ore powerful with vastly increased sto rage (fo r ex. su ch as a business plan. As a result. investigation fees. legal and regubt01y costs. In f. T he cost of a stolen laptop includes the loss of ing degrees of rigor.1 points o ut th< lt o ne type of hlllmlll mist. and copyright laws. as well as adverse effects on insura nce or credi t mtcs. Y our personal info rmation can be compro mised in other ways.1ke is carelessness with la ptops.S.

(3) Attacks by a Programmer Developing a System Trojan Horse Back Door Logic Bomb Software programs that hide in other computer programs and reveal their des igned behavior only when they are activated. by itself (without requiring another computer program). Software Attacks Softwore attac ks have e\·olved from the early years of the computer era . blended malware attacks. to the profit-driven. cop)ing a software program without m11king payment to th e owner-mcluding giving a d1sc to a friend to install on his or her computer. Segment of computer cod e that performs ma licious actions and will replicate. Table 4.2 provides an example of a software attack. These attacks are grouped into three categories: remote attacks requiring user action. functions. These computers a re called zombies o r bets. Segment of computer code that is embedded within a n organization's existing computer p rograms and is designed to activate and perform a destructive action at a certain time or date.SECTION 4. l11e O rganization for Economic Cooperation and Development (OEC D) esti mated that in 2009. 1l1e ame ndment provides protection for the source code and object code of computer software. In 1980. commerce in p~rated and counterfeit products totaled roughly $250 billion. and software attacks br progr:1111mers during the deve lopment of a system. . ITs About Business 4.1l trade that year. However. remote attacks requmng no user action. typically by using malicious software. typically via the Web. Phishing attacks use deception to acquire sensitive personal information by masquerading as official-looking e-mails or instant messages. In spear phishing attacks. known only to the attacker. but it docs 110t clearly identi fy what is eligible for protection. and icons. cop}Tight bw does not protect fundamental concepts. C ongress amended the Copyright Act to include software. to make money. without having to go through any security procedures (also called a trap door). the U.2 displays a . An attacker first takes over many computers.2 Segment of c omputer cod e that performs malicious actions by attaching to another computer p rogram.3 D dibcratc T hrcats to Information Systcn1s IMI:: IQJI··· The most common mtellectual property related to IT deals with software. Not surprisingly. that allows him or her to access a c omputer system at will. is a major problem for software vendors. For example. personal information. Web-based attacks of today. when attackers used malicious software to infect as many computers world\\·ide as possible. or spread. Type5 of Snftware A (1) Remote Attacks Requiring User Action Virus Worm Phis hing Attack Spear Phis hing Attack (2) Remote Attacks Needing No User Action De nial-ofService Attack Dis tributed De nial-ofService Attack Attacker sends so many information requests to a target computer system that the ta rget cannot handle them successfully and typically crashes (ceases to function). colors. Typically a password. This number represents almost 2 percent of glob. th is practice. the perpetrators find out as much information about a n individual as possible to improve their c hances that phishing techniques will be able to obtain a copyright violation. The attacker uses these bets-which form a botnet-to deliver a coordinated s tream of information requests to a target computer. causing it to crash.·ariety of software attacks. called pirac). Table 4. Phis hing attacks target la rge groups of people. and general features such as pull-down menus.S. Modem cybercnminals use soph isticate d.

T he point of C. Therefore.000 students on three cam - puses. The attack also affected the students.ja.2 Virus Attack Hits the University of Exeter students and granted short-term deadline extensions. January 21. In fact.:R -+ lnfonnatio n Security [about business] 4. the fact that you can transcribe th em means that you are probably not a software program run by an unauthorized person." ZDNet. The virus wreaked havoc for university faculty. or pestware. you saw an example of a keyst roke logger. 2011. 201 O. " University of Exeter Malware an Internal university e-mail suggested that appropriate patches for the security software had not been applied in a timely fashion. January 20. In addition. the university's voice-over Internet protocol (VoiP) telephone system was disrupted.A. Leyden. Companies have attempted to counter keyloggers by switching to othe r forms of identifying users. Two common types of spyware are keystroke loggers and screen scrapers. Alien Software l'vla ny personal computers have alien software. maKing the system vulnerable to attack. What actions should the university now perform to prevent future attacks? Sources: Compiled from • uni\'ersity of Exeter Shuts Down Its Network Because of the Attack of a Virus. no one had Identified the perpetrators or determined how they managed to infect the university network. January 20." ww1v. "Virus Attack Htts Vista Machines. the University of Exeter (www. According to advertising agencies. Keystroke loggers. also called keyloggers. Adware is comm on because it works. Interestingly. 201 0. Whittaker.exeter.2-viruses. January 21. theft of passwords and sensitive personal information such as credit card numbe rs-to annoying -for example. " Exeter Uni Goes Offline to Fight Myst ery Malware. distorted letters and type them correctly into a box. it can report on your Web surfing habits and other persona l behavior. The Interactive teaching boards in all classrooms became Inoperable. students could not access any data stored In the VLE. Questions 1. In the chapter-opening case. www. What other actions could the university have taken to prevent the attack? 2. but it does use up valuable system resources. became the target of a massive virus com. That string of letters is called a CAPTCHA. recording your Internet search history for targeted advertising. In that causes pop-up advertisements to appear on your screen . 2010. It typically is not as malicious as \ 3 click on it. 2010. As a result. record both your individual keystrokes and your Internet Web browsing history. located in southwestern England. the Cornwall campus was Isolated from the main campuses In Exeter to avoid spreading the virus. running on th em that the owners do not know about. The university faculty promised to make allowances for It took three days to clean Infected computers and bring the networK bacK into operation.PTC HA is that computers cannot (yet) accurately read those distorted letters. F'o r example. 201 0. This " hit rate" is extremely high for Internet advertising. Perhaps the most serious problem was that they lost access to the university's Virtual Learning Environment (VLE)." www.···IJ ·)~ The university also scanned personal computers used by students who had connected to the university's networK . January 21 . computers In student residence halls were th e last to be added back to the operational university networK . However. The university has 16. The virus attack. As of May 2011. or Tro jan horses.softpedia. In January 2010." www. at some point all of us have been forced to look at wavy. so professors could not use PowerPoint presentations or access th e Internet In class. Consequently. Also. worms. students who had assignments or papers due could not access online versions of their work stored in th e VLE. for every 100 people who close a pop-up ad. atta ckers ha ve turned . accessed February 9. Cripples University Network. and it is a test. Alien software is cland estine softwa re that is installed on your computer through duplicitous methods. Spyware is softwa re that collects personal information a bout users without their consent. Z . University officials maintained that this measure was necessary in order to scan and repair all of the university's computers. The vast majori ty of pestwa re is ad ware . " Mystery Computer Virus Hits UK University. two In E xeter and one In comwall. caused the un lverslty to temporarily take Its entire network offline. whlch exploited computers running Microsoft Windows® Vista Service Pack 2. L Constatin. -· 8 C II APTI. such as a spammer. T he purposes range from crimin al-for example." The Register.

This software records a continuous "movie" of a screen's contents rather than simpl y recording keystrokes. as you can see in IT's About Business 4. a master computer. some cookies are passwords and user IDs that you do not want to retype every time you access the Web site that issued the cookie . but it wastes time and m oney. and each sensor typically has an Internet ad d ress (Internet Protocol. what lin ks you cli ck on. SCADA systems pro1~d e a link between the ph ysica l world and the elec tronic world . F'or exa mple. they ca n cause serious damage. vo lt age. Spam costs U. and communi ca tions in fra1S the open/ structure . and other personal data to develop an intrusive profile of your spending habits. These ac ti ons range from ga th ering < to attacking critical infrastructure (via SCADA systems). to C<lUSe phys ica I. can be used to tra ck your path through a \~leb site. S uch actions could ha ve catastrophic results. T hey then Veb sites. the time you spend there. as well as measurem ents such as pressure. W hen yo ur computer is infected with spamware. discussed in C hapter 6). cookie-sharing rings. Most cooki es ca n be read onl y by the party that crea ted them. T he sensors are connected in a network.Veb sites store on your computer. in These companies can track inform<ltion such as which pages you load and whic h ads you click on. distributed m easurement and control system. However. . In many cases. some compani es that manage online bann er advertising are.3 D elibe rate Threats to I nform. purchases. and transport processes such as those used in oil re fineries. Essentially. Not only is spam a nuisance. user support. formerly parts of the Soviet Union . e1•en though cyberterrorism typi call y is carried out by individuals or groups. usuall y to ca rry out a politi cal agenda . For a share this information with their cli ent \• cookie dem onstration. e-mails from spammers are sent to everyone in your e-mail address book. credit ca rd information . We trea t the two types of attacks as synon ym ous here. T hey read status data such < closed status of a switch or a valve. additional storage. see http:!iprivacy. T hey co ntrol th e equipment by sending signa Is to it. whereas cyberwarfare is ca rri ed out by nation states. Spam can also carry viruses and wom1s. flow. wa ter and sewage treatment plants. clogged e-mail syste ms. real-world harm or severe lata disruption . Cyberterrorism and Cyberwarfare Cyberterrori sm and cyber warfare refer to m alicious acts in whic h attackers use a target's computer systems. Trctcking cookies. m<lking it even more dangero us.S I~CTIO 4. whic h ma y number in th e thousa nds. T hese costs come from productivity losses. and nuc lear power plants. Cooki es are also necessary for online shopping beca use merc hants use them for your shopping carts.S. and other details that the com pa ny wa nts to record . S pam ware is pestware that uses your compute r as a bunch pad for spammers. phys ical. suc h as disrupting the power grid over a large area or upsetting the operations of a large chemica l or nuclea r plant. Cooki es are small amounts of information that '. address. T he following example exa mines cybe r atta cks perpetrated against Estonia and the Republic of Ceorgia. T he sensors conn ect to phys ical equipment. and curren t. cookies are useful and innocuous. such as opening or closing a switc h or valve or setting the speed of a pump.3. Tracking coo kies can also combine this information with your n am e. temporarily or more or less permanentl y. however. SCADA systems are used to monitor or to control c hemica l. [f attackers ga in access to the network. compa nies billions of dollars per yea r. particularly via the Internet. electrical generators. usually for marke ting purposes. Sp am is unsoli cited e-mail . or screen grctbbers. or IP. usuall y adve rtising for products and services. SCADA systems consist of multiple sensors. but they appear to com e from you. Supervisory Control and Data Acquisition (SCADA) Attacks SCADA refe rs to a large-scale. and antispam softwa re.~ lion Systems ····~IIIII to screen scrapers.

llapon. At the same time. The worm g111a1 s that control Industrial processes so that an fakes the sensor s1 Infected system does not shut down when ~ behaves abnormally. Estonian security analysts identified som e of th e perpetrators by their Internet Protocol addresses. 2010. Say Researcher. no one knows Who created the wonn . 201 o. " Iran Denies Stuxnet V\l)rm Hurt Nuclear Pla nt. 2010. banks. Estonia is a pion eer of e-govem m ent." The Register. 2010.. political pnrties. Alter Infecting 1ran's nuclear facilities. increasing the sophjstication and volume of their videos and m essages. October 8. Saa kashvili blam ed Russia for th e attacks. that the centrifuges are operating normally. As of this printing. the worm may have damaged Iran's nuc1 1 ear facilities In Natanz an d eventually delayed the start-up of the Bushehr nuclear power plant. and other nations have been quietly engaging In cyberwarfare for several years. Analyze the statement " Nations use malware such as the Stuxnet worm when their only a lternative Is to go to war. "Stuxnet Struck Five Targets in Iran.ootrlfiJgA c. Describe the Implications of the precisely targeted nature of the Stuxnet attack. Good in. T he cyber attack shut down the Web site of the G eorgian president. a three-week wave of m assive distributed denictl-o{-service (DDoS) cyb er atta cks against the Bailie country of Estoniu disa bled the Web si tes of governm ent ministries. M. as It normally would when It malfunctions. November 16. D. experts studyIng Stuxnet have concluded that the worm Is so complex that only a nation state would have the capabilities to produce it. In particular. the reby delaying any plans to produce a nuclear weapon. The worm appears to have Impaired Iran's computer-controlled uranium centrifuges. Whoever constructed the Stuxnet worm must have possessed an In-depth knowledge of nuclear Industrial processes." Tile Week. www. 2011 : M. September 27. suspect that the group that developed Stuxnet was well funded.Invented Altack Against Iran. O ne of th e most w ired societies in Europe. Many of these add resses were Russian. Keizer. O ne security expert has warned that nation states cons truct worms such as Stuxnet when their only other option Is to g o to war. discovered In July 2010. M ikheil Saakashvili." lnformafionWeek. "Is Stuxnet an Israeli. but the Russian government denied. the country is h ighly vulne rable to cyber attack.' Information Week. "Symantec Finds Stuxnet Taroets Iranian Nuclear Enrichment. and it defa ced the Web site of the Georgian Parliament with images of Adolf Hitler.. ·stuxnet spread rapId ly throug hout the country. and no one has taken credit tor creating it. "SCADA Worm a Nation-State Searchand-Destroy l". T herefore. and took six months to create the worm. Kirk. Iran 's Bushehr Nuclear Plant?" Tile Cllristlan Science Monitor. Security experts from Symantec Example In 2007. China. a lead ing vendor of Information security systems. DDoS attacks on Georgian \Veb sites were apparently synchronized with the Russian invosion. 201 1 the system does not shut down.• Networl<Worfd." lnfotmationWeek. newspap ers.000 Internet Protocol addresses. Schwartz." Sources: Compiled from M. Is a worm that targets Industrial supervisory co ntro l and data acquisitio n (SCADA) systems. the worm adjusts the usAr intArfac. in an effort to recruit new members . September 21. the charges. 2011. Iran confirmed that Its nuclear program had been damaged by Stuxnet. Stuxnet heralds a fnlg htenlng new era In cyberwarfare. In Au gust 2008. February 11. September 30. security exp erts around the world sus pect that the worm's target was the uranium enrichment Industrial Infrastruc ture In Iran. Russia. Stuxne t targets Siemens SCADA systems that are configured to control and monitor specific Industrial processes. 2010. C layton. This problem has been compounded by the worm's ability to mutate. "Eset Discovers Second Variation of Stuxnet Worm. "Stuxnet Iran Attack Launched from 10 Machines. and som e of them were from Russian state institutions. for 24 hours." Networ1<Wolfd." Compute!IVortl. "Stuxnet Malware: Is 'Waspon' Out to Destroy . affecting more than 30. 2. In the early ph ase of the attack. "Stuxnet: Declaring Cyberwarfare on Iran. which mysteriously lost 30 percent of their production capacity. In fact. Stuxnet changes the speed of the motors that spin the centrifuges from very high to very low. Russian troops entered th e province of South Ossetia i n the Republic of Georgia to counter Georgian military efforts to prevent the province from breaking away. meaning that new versions of the worm continue to spread. July 20.llll·~f]WI C lli\1 ' '1'1•:1 { -1 l 11f u n11atio 11 Security G [about business] 4.nntrol syst <>ms to ma kA ~ ~rrA~r Questions 1. however. M&SSmer.<> fo r thQ c. Sluxnet. Therefore.3 The Stuxnet Worm (www.2010: T. September 22. consisted of five to ten people. This process stops the uranium fr-om being enriched and also damages the motors themselves. but this worm represents a major technological escalation. According to the New York Times. and then bacK again. 2010. Schwartz. J. the United States. E. As a accessed February 16. February 14. Claburn. Terrmist groups around the world have expa nd ed their activities on th e Inte rnet. 2010. and businesses. On November 29.

Computer networks can be located outside the organization. Ma ny individuals control or have a ccess to information assets . People tend to violate security procedures because the procedures are inconvenient. for free. As one exa mple. Rapid technological changes make some controls obsolete as soon as they are ins talled. military is expandong its offe nsive capa bilities to attack terrorists' \Veb sites. In fact. Many computer crimes are undetected for a long period of time. Another reason why information resources are difficult to protect is that the online commerce industry is not particularly will ing to install safeguards that would make completing trans· achons more difficult or complica ted . The Difficulties in Protecting Information Resources Hundreds of potential threats exist. In response.SEC J"ION 4. What Is a SCADA system? 4. The costs of preventing hazards can be very high.S. a potential criminal can learn hacking. As a matter of fact. Computing resources may be situated in many locations. For credit card companies. making them diffic ult to protect. However.4 'i\'hat Organizations Are Doing to Protect Informa tion Resources \\ 'hy is it so difficu lt to stop cybercriminals? Table 4. The amount o f computer knowledge necessary to commit computer crimes is usually minimal. merchants could dema nd passwords or personal identification numbers for all credit card transactions. Define alien software.3 illustrates the many major difficulties involved in protecting information. Table 4.11~~ 1. most organizations simply cannot afford to protect themselves against all possible hazards.3 . 4. it is cheaper to block a stolen cred1t card and move on than to im·est time and money on a prosecution. and explain why it is a serious problem. What are the three types of software attacks? 3. so it is difficult to learn from experience. It is difficult to conduct a cost-benefit justification for controls before an attack occurs because it is d ifficult to assess the impact of a hypothetical attack.4 \\l1at ()rganizations Arc D oing to Protect lnfo m1ation Rcsonl'ccs ····~F~~··· and raise money. on the Internet . Therefore. before you go on. Why has the theft of computing devices become more serious over time? 2. the U. Because organizing an appropriate defense system is so important to the entire enterprise. IT security JS the business of cn-eryone in an organization. it is one of the major responsibi lities of any prudent C IO as well as of the functiona l managers who contro l information resources. these requirements might discourage people from shopping onlme. rather than just monitor them .

. In oddition to applying controls. O rgan izations sp end a great dea I of time and m oney protecting their information resom ces.2 illustra tes these controls. and (3) comparing the probable costs of the asset's being compromised with the costs of protecting th at asset. th ey perform risk m:m<1gemen t. Before doing so. Risk limitation : Limit the risk by implem enting controls that minimize the impact of the threat. or d efense m echanisms (also ca lled countermeasures). access controls. The three m ost common are risk acceptan ce. (2) estimating the probability that each asset will be compromised.m the valu e of th e asset being protected. ond communications controls. deter intentional acts. organizations utilize laye rs of controls. 4. Risk m itigation has two functi ons: (I) im plem enting controls to prevent id en tifi ed threats from occurring. the org<mization takes con crete actions against risks.5 Infonnation Security Controls To protect their information assets. whi ch is reactive . Vinally. A risk is the pro bability th at a threat wil l im pa ct an in formation resom ce. you will study the vo rious controls thot organizotions use to protect their informa tion resources. it is important to emphasize that the single m ost valuable control is user education and training.mel services that deliver e arly warnings of trouble on the Internet. Figure 4. con trol. hardware. and risk transference.JJ~t 1. Com panies are developing softwar e . Compare and contrast risk management and risk analysis. and networks. Before you study con trols in more detail. th e information secmity industry is battling back. detect problems as early as possible. early-wa rning systems are proactive. sc~ nning the Web for new viruses and alerting compa nies to the danger. In l'isk mitigation . Risk analy. Risk management consists of three processes: risk analysis. risk mitigation . 2. organizati ons plan for business continuity in case of a disaster. T he goal of risk man:rgcm ent is to identify. including data. such as by purchasing insurance. an d m inimize the impact of threats. U nlike tra ditional antivirus softw~ re. organization s implem ent controls. Risk transferen ce: T ransfer the risk by using other m eans to compensa te for th e loss. E ffective and ongoing educ ation makes every m ember of the orgonization aware of the vita l im portance of information security. before you go on. In the next section . Controls are intend ed to prevent accidental involves three steps: (I) assessing the value of each asset being protected. T hese controls a re designed to protect all of th e components of an inform ation system . In the next section. and absorb ony damages that occur. and (2) developing a m eans of recovery sh ould the threat becom e a rea lity.(unllatio ll Security Despite these difficulties. T he organization then consid ers h ow to mitiga te th e dsk. ·e cost effecO rgan izations perform risk ana lyses to ensure that their IS security prog rmm ar tive. or de(ense-in·depth. Describe several reasons why it is difficult to protect infonnation resources. Because there are so many diverse threats. you will learn about three ma jor types of controls: physical contr·ols. software. Th ere are several risk mitigation strategies th at organizations can adopt. and con trols evaluati on . In other words. rf th e costs of implementing ~1 con trol arc greater th. risk managem ent seeks to reduce risk to acceptable levels. in controls evaluati on. risk limitation. • • • Risk acceptan ce: Accept t he potentio l risk. enhance damage recovety. and they . th e organization examines the cost s of implem enting adequ ate control meosures against th e va lue o f th ose control m eosm es. the cot1lrol is not cost effective. continu e operating with n o controls.IIII·~»JMI C ll i\1' '1'1-:R -1 l. and correct problems.

Physical Controls Physic.2 Where defense mecluonisms me located.ection as well. and motion detectors. th e other e mployees harass them. for at least two rea- sons. particularly if th ey slow up th e p rocess of entering the fu cility. the n ext step is authorization . Authorizatio11 determines which actions. You will study lh cse to pics in the next . ~ocks. Access Controls Access controls restrict unauthorized inclividuals from using i nformation gcncm11y do not pay well. After the person is authenticated (identified). More sophisticated physic<tl controls include pressure sen sors. 'T11ese contr ols involve two major functions: authentication and authorization. righbi. Authentication con fi rms th e identity of the pe rson requiring access.SI• :CTION 4. fencing. Common physical controls include wa lls. th ey set the employees' computers to automatica l!y log tl1e user off after a cert1in period of disuse. based on his or her verified identity.g<t lcs. 1111 ACCESS CONTROLS Authentication Access password Personai iD Employee or attacker Employee or attacl<er in office Internet Remote employee or attacker ID System Encryption Access password ACCESS CONTROLS Denial-of-service protection Intrusion detection system Antl-malware software COMMUNICATIONS CONTROLS FIGURE 4. th eir jobs me boring and repetitive . .1l contmls prevent unauthorized individuals fi·om gaining access to a company's facilities. G uards deserve spechtl mention becmtse they have very diffi clllt jobs. and abrm systems. badges. or privileges the person has. (Sources:© Sergey Titov/iStockphoto.5 lnfu11motion Security Contro ls PHYSICAL CONTROLS --A- ···~ · ]~ . guards. © fatihoca/ iStockphoto) periodically < m dit their information resources to detect possible thrcab. These conb·ols also limit the number of unsuccessful login attempbi. One shortcoming of phy~ical contmls is that they can be inconvenient to employees.. d oors. In addition. and tl1ey require all employees to log off their computers when tl1ey leave for the day. Second. Organizations also implem ent physical secmity m easm es that limit computer users to acceptable login tim es and locations. if gnmds perform th eir jobs tho roughly. First. Let's examine th ese functions more closely. temperature sensors.

a strategy known as multi{actor authentication. T he number c hanges with each login. which defeats their purpose. lowercase letters. it can be irritating to users. T hen capitalize every other letter to create "Am C tKh L".) Tokens have e mbedd ed chips and a digital dispb y that presents a login number that the employees use to access the organization's network. but they are used for ~ ifferent purposes. and tokens. Something the user has is an authentication m echanism that includes regular identifi ca tion (10) ca rds. fingerprin ts. as with strong passwords. You will ha ve amgtkhl. a fingerprint). and iris recognition provide the most definitive id entification . the more reliable it is. such as a Social Sec uri ty numbe r or a birthda y. Examples of passphrases are " maytheforcebewithyoual ways. and facial recognition . Common biom etric applica ti ons are fingerprint sca ns. (S mart 10 cards used for identification differ from smart ca rds used in electronic commerce.. S omething the user does is an authentication mechanism that includes voice and signature recognition. or it can help you create a sh·ong password. add special characters and numbers to create "9AmC tKh L//*". which you learn about in C hapter 7. T he vo ice recognition system matc hes the two voice signals.' "goaheadmakem yday. Consequently.:R-+ lnfonnation Secu ri ty Au thentication . Signature recognition systems aha match the speed and the press ure of the signature. The bas ic guidelines for creating strong passwords are: • • • T hey should be difficult to gu ess. Regular 10 cards. • • • Unfortunately. retina sca ns. and/or som ething th e user knows. palm scans. Passwords present a huge infonnation security problem in all organizations. T hey should not be recognizable words. The ideal solution to this dilemma is to create a strong password tha t is also easy to rem ember. or dumb cards. monitored conditions. T hey should not be the name of an ything or anyone familiar." A passphrase ca n serve as a password itself. In voice recognition. . In signature recognition. something the user does. Two-factor auth entica tion consists of a password plus one type of biom etric id entifica tion (e. which is notoriously weak.·····~!~·· C II APTI. iris recognition. and special chara cters. Starting with th e last pa ssphrase above. an orga niza ti on can use one or m ore of the following methods: something the user is. the user sign s his or her name. T hey should be long rather than short. many people use passphrases. strong passwords are more difficult to remember than weak ones. employees frequentl y write them down. the user speaks a phrase (e. and. A passphrase is a series of c haracte rs that is longer than a password but is still easy to mem orize. S omething the user knows is an authentication mec hanism that includes passwords and passphrases. typica ll y have the person's picture. You can turn a passphrase into . take the first letter · J f each word . such as family names or names of pets. To achieve this objective. In most cases. T hey should ha ve uppercase lette rs. commonly consists simply of a passwo rd . To id entify authorized users m ore effi cientl y and effectively. and often his or her sign ature. som ething the user has. which are difficult fer hackers to discover. and the system matches this signature with one previously recorded under controlled. You now have a strong password that you can rem ember. is an authentication m ethod that examines a person's innate phys ical chara cteristics. T hree-factor authentication is any combination of three authen- tication methods. Something the user is.g. stronger authentication is also m ore expensive. All users should use strong passwords. O f these applications. numbe rs. the more fa ctors the system utilizes.g. Finally." and "livelonganclprosper. T his system is partic ularly important when users log in from remote locations. However. T hey should not be a recognizable string of numbers. retina scans. his or h er name and depalt m ent) that has been previously recorded under controlled conditions. also known as biom etri cs.. sm art 10 cards. organizations frequentl y implem ent m ore than one type of authentication. Smart IO cards ha ve an embedded chip that stores pertinent information about th e user. Bo th types of card have em bedded chips.1 sh·ong password in this manner. lo authenticate (identi fy) au:horized personnel. Single-fa ctor authentication.

July 23.5 lnfo m•ation Security Contro ls IMII·iiJI··· After users ha ve been pro perly authenticated. T IT group can provide thIs access to employees without extendIng full external e-mail rights. Are the bank's e-mail policies too stringent? Why or why not? s upport your answer. desktops.m86securlty. meaning It cannot be accessed via the company's system. In these" Baseline Magazine. the security system was protecting the bank from e-mail-based and Web-based malware and offensive content. Is not leaving the company unencrypted. CityNET is designed to maKe banKing easy for Its customers wherever they are. In addition to Its new branches. The M86 Security system also provides ex~ell ent dynamic Web site categorization. Claburn.4 illustrates." lntorrnationWeek. granting rights and privileges to users can be complicated . During this expansion.4 Information Security at City National Bank and Trust The banK occasionally receives rnalware threats that It does not recognize. Why Is It so Important for organizations to astabllsh enterprisewide security policies? 2. In short. the IT group could prevent and remove such malware Intrusions with antivirus software only on . City National BanK and Trust (www. Another policy prevented employees from downloading potentially dangerous flies and accessing offensive Web flies. "How Banks Are Fighting Fraud. The banK can also implement security policies that protect its entire organization from one centralized management console. Meason. which posits that users be granted the privilege for an activity only if there is a justifiable need for them to perform that activity. has placed the banK's networks and Its employees at much greater s also reflect the fact that growing numbers risK. the security system scans all the content on the Web site and looks for characteristics that would Indicate that the site is pomographlc. February 1. It had adequate controls 11 place to prevent employees from installing software. The bank quicKly applied policy-based standards throJghout Its network. Its e-mai I traffic has mushroomed from a few thousand messages per day to 5 million per month. the banK strictly controlled the number of users who had access tc the Web. These changes Included accepting a sender as friendly and blocking or add lng a specific Web site. As IT's About Business 4. accessed February 6. 2008. The banK selected M86 Security (www. not at the gateway to the bank's networK The IT group was also wasting too much time repeatedly making minor changes In the bank's security policies. The bank's e-mail policies also are stringent. May 1 9. If the site has those characterIstics. Threats that do not clear all of the firm's policies are automatically quarantined. 2009. Because the system Is enterprlsewlde and centralized. With in weeks.cnbok. Unfortunately. In add ition. 2011. and the site Is blacklisted. It also conducted scans to ldentnywhlch Web sites those employees were visiting and to determine whether malware Inadvertently had been downloaded.mBosecurity. 2009. The banK also Implemented services for Improved customer convenience. Austin. If an employee accesses a Web site that has not already been classified as pornographic. executable. April 20. It configured the system to block e-mail messages with attached batch. www. the bank doubled the number of employees and quadrupled the size of ~s network. coupled with the global Increase In malicious software. For example. This Is an example of how the M86 Security system can help the bank create situation-by-situation policies without compromising its security standards. 2011 : M. the bank needed to replace its existing piecemeal system with an enterprise security solution. This policy leaves 60 percent of the banK's employees with only Internal e-mail access. the banK can easily extend Web and internal and external e-mail protection to Its new branches. Before the bank expanded. this policy creates problems for employees who need to obtain Information and electronic statements concerning their retirement funds and 401(K ) accounts via o resOlve this problem. the rights and privileges they ha ve on the organization's systems are established in a process called authorization. For example. "Information Security Policies Are Your First Line of Defense. accessed February 9. secure that employees cannot accidentally download mah The M86 Security system also helps the bank comply with Sarbanes-Oxley. The company grants access to external e-mail only when there Is a business justification. This system subjects tile threat to the bank's security policies. T. However. Many of the banK's new branches are located In Walmart Supercenters. Since the bank installed the M86 Security system. Companies typically base authorization policies on the principle ofl~st privilege. the banK Implemented for Its strong content-filtering capabilities and Its capability to dynamically set and modify security policies. the e-mail under the bank's benefits plan.'' Bank Info Security. an example of the principle of least privilege. . The security risK of employees need access to the Web.SI•:CT IO has 32 branches throughout OKlahoma. It scans the t~reat and sends It to the M86 Security content system. the IT group can apply basic security policies to all employees and feel vare. the IT group can samplE Informa- Questions 1. The bank's rapid growth In branches and customer service A privilege is a collection of related computer system operatio ns that a user is authorized to perform . W\\1\v. With this level of control. Its online banKing service. including banKing by phone and providing access to its statewide ATM system. "Most Bank Sites Are Insecure." BankersOnHne. • [about business] such as cred it card numbers. "Bark Protects More Than Money. Au thorization. tion to make certain that customers' conlldentlallnformaJ ion. and It Is continuing to expand the scope of Its operations. 2011 . Sources: Compiled from T. access to It Is blocK ed immediately. and .

anti-malware systems.s softwa re ts ttnplemented at th e organ izahona l level by the Home Computer Internet Broadband connection OSL. then the internal damage may be contained . also called clltti>•inls.ah. again with its own defined security rules. Any messages d esignated for the company's internal network (for example. or AV. Put simply. 3G. which faces the Internet.1ss through tl1e internal firewall. l"igure 4Jb shows an organiZ<1tion that has implemented an e:~:temal firewall. In this case. 1-trl'\\ . for home use. to gain access to the company's pnv.·ent u nauth orized Internet users from accessing private . l"irewa lls t~mge from simple.. and an internal firewa ll. the fi rewall is implem ented as software on the home computer. wh itelasting and blacklisting. encryption. In th is way. its intranet) must p. such as the Internet. and private networks. they are then first pass through the external firewa 1 sent to company servers loc~ted 111 the DMZ. fi rewalls pre.3J illustrates a basic firewall for a hom e computer. cable modem. lb. and other ma lictous software. which faces the company network. (b) Organization with two firewalls and demilitarized zone_(Source. O mit!)' Rukhlenko-Fotolia. d emilitariL. 4G Software firewall (a) Servers Internet Demilitarized zone (b) FIGURE 4 . Corporate firewalls typically consist of software running on a computer dedicated to the task. to very complex for orgamzationaluse.. and employee monitoring systems. T he firewall examines ea ch message and blocks those that do n ot m eet specified secu rity rules. All messages entering o r leaving your company's network pass through a firewall.. are software packages that aHempt to iden tify and ~liminate vintses and wom1s (known as malware). secure soc ket layer (SSL). Figure -1. ·n.1ge requests and e-mail. l\lessages from the Internet must 1. virtual private networks (VP s).. A firewall is a system that prevents a specific type of information from moving between untrusted networks. •nti IH th\ ar "' ~t II~ Anti-n.····~ ·!~ : -· C ll \I'T ER-+ lnfo nnation Sccnril) Communications Controls Communications conrroh (also called netwo rk con trols) secure the movement of data across networks. • . These servers typtcally handle \\'eb p.arc svstetm.t te network. if a vims or worm does get through both the exte rna l and internal firewalls. The da nger from \'iruses and worms is so severe that ma ny orga ni zation s are pla cing firewalls at strategic points imid~ their private networks. If they confom1 to the defined security rules.Cd m ne (D:\IZ) is located between the two firev:alls. Communicahons controls consist of fircwalls.3 (a) Basic lirewall for home computer. softwa re. such as your company's n etwork.

wmkeegro up. b ut 62 percent still suffered malwa re attacks. McAfee VirusScan (uww. When Bob receives Alice's message. Because malwarc is such a serious problem. the software will remo. O rganizations that do n ot have a secme channel for sending information use encryphon to stop unauthorized eavesdroppers. it is possible to ca tc h malware before: it can infect systems. people. and malw. anti-ma lware systems til tcr traffic according to a data base of specific problems. Among the best known are Norton AntiVirus (Mvw.uses two different keys: a pu blic key and a pnvate key (see Figure -+.·ely. The anti-malwar<.·ely as well as reacti. he uses his private key to decrypt (unscramble) In su ch cases.' software then examin es suspicious computer code to see if it matches a known signature. There are currently hundreds of . if Alice wants to send a message to Bob. Whitelisting permits acceptable software to run and either prc. if you encrypt a message using your private which she uses to encrypt (scramble) her message.symalllec. These systems c reate definitions.mca{ee. Because the two keys are mathematically related. a third party. and \Veb sites can also be white listed and blacklisted.•cnts any oth er software from nmning or lets new software run in a qua rantined environ ment until the company can . That is. Alth ough this arrangement is adequate for personal info rmation. O n e solution to this problem is or signatures. therefore. Anti-malware systems are generally reacth·e. of \-:Jrious types of mal ware and then update these signatures in their products. The private key is kept secret. \ lutdt· hnt. an ti-ma lware systems are usuall y reactive. Public -ke) e n cryptio n -also known as asrmmetric encryption. devices. As you Fn n ph >11 . and Trend l\ licro PC-cillin (wmv trenclmicro.1re continues to in fect conl]Xlnles. The certificate authority issu es digital certificates and verifies the integrity of the certificates.5 lnfo m1ation Sccuril) Contm l' ···~ ·lj~ · 1111 information systems deparbnent. If a match is found. Both keys are created simultan eously usmg the same mathematical formula o r algorithm. In this system. All encryption systems use a key. called a certificate authori~-. sh e fi rst obtains Bob's public key.·ities likely to cause problems. a technology resea rch and consulting firm . In theory. acts as a trusted intermediary between companies. In addition to software. blac klisting a llows e\·eryth ing to run unless it is on the blacklist A blacklist. com). The pubhc key is publicly a\·aila ble in a directory tha t all parties can access. Whereas firewalls filter network traffic according to categories of <~cti. Whereas whitelisting all ows n oth ing to run unless it is on the whitelist. never sha red with anyone.·erify its validity. the leading vendors are rapidly developing anti-malware systems that function proacti. For exa mple.4). Whitelisting is a process in which a company identifies the software that it wi ll allow to run on its com puters. The majority of e ncryption systems use public-key encryption. As we have seen.S I•:CTION -l. A recipient can ve1ify that the message came from you by using your public key to decrypt it. A report by the Yankee Croup (www. stated that 99 pe rcent o f organ ization s had anto-malware systems insta lled. and ne\•er sent across the lntem et. Public key systems also show that a message is authentic. a company might blacklist peer-to-peer file shanng on Jls systems. A digital certificate is an electronic document atta ched to a file that certifies that the file is from the organization it claims to be from and has not been modified from its originol format. For this reason orga nizations upda te their malware definitions often. then. which is the code that scrambles and then decodes the messages.tlllt hug. Encryptio n is the process of converting an original message into a form that cannot be read by anyone except the intended receiver. These systems e\-aluate behavior rath er than rel}ing entirely on signature matc hing. you h3\·e electronically "signed" it.\ V software packages available.·c: the code. includes certain types of software that arc not allowed to run in the company em·ironmcnt. the data encrypted with one key can be decrypted by usmg the other key. ·md b •. organizations doing business over the Internet require a more complex system.

Second.-:·· ~ fax FIGURE 4. Sony requests a digital certificate from VeriS ign. en crypti th e right to be left alone and to be free of unreasonable personal intrusion . They use the public Internet as th eir infrastructure. organizations can impose th eir security policies through VPNs.corn.verisig11.ibility. Note that the digital certific<rte conbrins an identificati on n u mber. For exa mples of certifi cate auth oriti es. cybertru. an organization may dictate that only corporate e-mai l appl icati ons are ava ilable to users when th ey connect from unmanaged devices.1te network that uses a public network (usua lly the Internet) to connect (Source: Omnisec AG.entrusl'. th e issue r •. and www. First. Third . To pr ovide secure transmissions. VPNs have several advantages. www. see www. .IIIII!r~ICrll C lli\1 ' '1'1•:1 { -1 l11fu n11atio 11 Security <=? tr!iY <:J Alice < C: : : : : ) ~ ~@ aro 1 / ! '\ Bob's public Bob's private key~ key others ~~ David £ Bob Bob's pubIic key ~ Bob's private key <::::::) Alice ~--fax ~ -·-~Encrypt ~ ~ Decrypt ·"<~:·. For example. In this .secude. T hat is.4 How public-key encryption works. A\'irtual primtc n ct wmk (VI'N) is'' priv. Tunneling encrypts each data pa cket to be sent and pla ces ea ch en crypted packet inside another packet. a certifi cate au . and uses th is certificate when it condu cts busin ess wit h Dell. va li<lity da tes. they provide flex. mobile users ca n access the organization's n etwork from properly con figured rem ote .) can see in Figure 4 . VPNs essen tia lly integrate the global co nnectivity of the Internet with the security of a private network an<l th ereby exten d the reach of the organization's n etworks. and th e requester's p ublic key. They are created by using log-ins.5. \ 'irtual l'ri1atc Nchlutking. VPNs use a process called tunneling. www. VPNs are calle d virtual because they !have no separate physical existence.tha wte. and othe r techniques to enhance the user's privacy. they allow rem ote users to access th e company n etwork.

. These companies are implem enting em ployee mo njto ring S)Stem s. which m onitor their employees' computers. the packet can travel across the Internet with confidential ity. manner . authentication. \l'\. a key that is either broken or whole). tSSL Secure socket b }er. 12691 Issue r. I'm plo' e• \ lonitnnn~ Sy~tem Many companies are taking a proacti. The im portant tlung to remember is that browsers usually pro. FIGURE 4. TLS is indicated by a URL that begins with ""h ttps'" rather than '"h ttp.·ide visual con firmation of a secure connection . now called transpo rt b yer security (TLS). Figure 4. employee m 1 stakes.Uf(' ~~ ·t La L. Using a padlock icon to indica te a secure connect ion and placing th is icon in a browser's status ba r are art1bcts of speci fic browsers.·e approach to protecting their networks against what they \'icw as one of tl1eir major secm ity threats. Sonyand Dell. e-mail activities. use a digital certificate from VeriSign for authentication.6 Virtual primte network and tunneling.g. Vens V atiU F rom lflo 711/lo to t.SECT ION -f.5 How digital certificates work.·ities. is an encryption standard used fo r secure transactions such as credit card pu rchases and online bm1kmg.~>•~ Sony wowll from VeriSign 01J011J010ll~l Sonypublc Ire FIGURE 4." and it o ften displays a small padlock icon in the browser's status bar. namely. business pa rtners. and integrity. Other browsers use different icons (e.6 ill ustrates a VP and tunneling. T LS encryptli and decrypts data between a Web sener a nd a browser end to end. INTERNET Tunnel Your organ ization's intra net / Your business partner's intranet . and In ternet surfing acti.5 ln fo rnution Scc u rityContm ls IIEI!D 1 itJIIII Sony V eriSign 0Sony requests dlgrtal certificate e Dlg rtal Certificate Ver1Sign creates for Sony digital certificate N umber.

cold sites reduce risk the least.iernal auditing performed by a certified public accounting (CPA) firm. IS auditing is usually a part of accounting intemal tluditing. Vendors that provide monitoring software include SpectorSoft ("~•w. and outputs of infom1ation systems. such as those from the Information Systems Audit and Control Association (•m~v. but they are the least expensi. IS auditing procedures fall into three categories: (I) auditing around the computer. applications. ln an IS environment. By comparison. I lo1. Auditing tlround the computer means verifYing processing by checking for known outputs using specific inputs. what ac tions are reqUired to prevent future breaches? These questions must be answered by independen t and unbiased obsef\•ers. Installing high-capacity power lines tokes a long and \Vebsense (www. The objective 1s to restore the business to normal operations as quickly as possible following an attack.1llmg higiH>pced commurucation lines. telephone S}~tems.ides no compute r hardware or user workstations. security and privacy. air conditioning. This type of site pro. In the e.isaca. processing. In ad dition. but it often does not include user workstations. h \uditing I "·cu ted. communications links. lnst. and processing. A warm site includes computing equipment such as servers.·e option. Conversely. I\ J>l'\ mlttol nd \ud1 T here are two types o f auditors and audits: internal and external. an ~udit 1 tion of information . (2) auditing through the computer.ides many of the same services and options as the hot site. l11e plan is intended to ensure that cri tical business functions continue. Information Systems Auditing Companies implement security controls to ensure that informa tion systems work properly. and humidity control. A wam1 site pro. orga nizations can employ severa l strategies for business continuity. and workstations. people responsible for security need to answer questions such as: Are all controls installed as intended? Are they effective? Has any breach of security occu rred? If so. ormation systems. Employees use this plan to prep. and (3) auditing with the computer.n e for.·ides only rudimentary sef\1ces and faetlities. A critical clement in any security system is a business continuity pllln.llll~!1~f~JI C IIA PTER -f lnfonnation Security These products are useful to identify employees who spend too much time surfing on the lntemet for personal reosons. Business Continuity Planning An important security strategy for organizations is to be prepared for any eventuality. budgets and expenditures. such as a building or a room with heatmg. I lot sites reduce risk to the greatest extent. cost control. Such observers san examinape 1 ·form the task of in{omwtion svstcms (ludiling. An extemal auditor reviews the findings of the internal audit as well as the inputs. and cold sites. buying and installing servers should not take a particularly long time. A hot site is a fully configured computer facility. A hot site dupl1cates compuhng resources. react to. often from two or more carriers.ide guidance to people who keep the business operating after a disaster occurs. outputs. with a ll services. or even renhng.·en t of a major disaster. It focuses lS auditing considers all of the potential hazards and controls in inf on issues such as operations. [n auditing . This approach is best used in systems with limited outputs. The point of a cold site is that it takes care of long lead-time issues. and it is frequently performed by corporate internal auditors. The externa l audit of information systems is frequently a part of the overall e>. Installing controls is necess:ny but not sufficient to pronde adequate security.. G uidelines are available to assist auditors in their jobs. Building.websense. it l)pically does not include the actual applications the company needs. also known as a dis<Jstcr recovery pltln Business continuity is the cham of events linking planning to protection and to recoverr The purpose of the business continuity plan is to pro. However. softwa re applications. and physical plant operations. but they arc the most expensive option .spcclorso{t. data integrity. or they can be added after a system is m operahon. These controls can be install ed in the orig inal peripherals. and prod uctivity. who \'isit questionable Web sites. takes a long time. These strategies include hot sites. A cold s ite pro. their inputs. and recover from events that affect the security of informa tion assets. space takes a long hme. or who download music illegally. warm sites.

Finance personnel must be awa re of both the hazards and the aV.!1~~ 1. are a key con cern for financia l 1 TH111&1gcrs. As a result of glob. IT For Me? ln addition. for example. What is tt1e single most important information security control for organizations? 2. com b ination of client <bta.5 lufcorouat·iull S<·c ootity Cuuhuls ~~~~~~S~II through the computer. Banking and finan cial institutions are prim e targets for com puter criminals.Jilable conh ols associated with these activities. Forensic accounting. They know that a security breach of any kind can have dev. CRM operations and tracking custom ers' on line buying habits ca n expose data to misuse (if they are not encrypted) or result in privacy viola lions. outputs. Auditi11g with the computer means using.S I•:CTION -1. This app ro11 ch enables the auditor to perform tasks such <lS si mulating p<>yroll program logic using live data. For the Marketing Major Marketing professiona ls have new opportunities to coll ect data on their custom ers.. Compare and contrast whitelist ing and blacklisting. rnay lead to lawsuits.~singly in vo lved with investmenl:l. .. in information technology. and client and auditor h(trdwa re. is on e of the m ost r~pid ly growing 3reas in accounting tod~y. make custom ers very angry. What is the purpose of a disaster recovery plan? 5 .~ccounting and information security. CFOs and treasurers ar e in cre. 4. Auditors review program logic tmd test da ta. assuring complian ce.] regulatory requirem ents and t he passage of S:nba nes-Oxley. Custom ers expect their data to be properly secured . However. tmditor software. among oth er regubtory agencies. Failure to protect corporate and custom er data will cause significant public relations prob~ems. inputs. Accountants are now being held professionally responsible for r educing risk. a combin ation of . marketing m anagers must analyze the risk of th eir operations. and interna 1 controls over financia l reporting. Differentiate between authentication and authorization.. before you go on.1stating financia l effects on a company. Which of these processes Is always performed first? 3. through business-to-consumer el ectronic comm erce. T herefore. profit-motivated criminals want those data. fraud prevention and detection. and increasing the transparency of transactions according to Generally Accepted Accounting Principles (CAAP). and may resu~t in losing custom ers to competitors.ations today. and their auditors have signifi cant in formation security responsibilities. responsibility for information security lies with the CEO and CFO. What's In For the Finance Major Because information security is essential to the success of organi?. The SEC and the Public Company Accounting Oversight Board (PCAO B). A related problem is fraud involving stocks and bonds that are sold over the Internet. r<'guire infomution security. including the security of information and information systems. Consequently. the ir accountants. all aspects of the security audit. What is information system auditing? For the Accounting Major Pub! ic companies. it is no longer just the con ce rn of the C lO. and processing are ch ecke d. eliminating fraud.

network deploym ent. T h is function is cri tical to th e success of th e functional areas also look to the M IS functi on to help them meet their security responsibiliti es. However. Compare and contrast human mistakes and social engineering. employees can also make uni ntentiona l mistakes as a result of actions by an attacker. A ll application development. M IS personnel must customize the risk exposure security model to help the -company id entify security risks and prepare responses to security incidents and disasters. Senior executives of publicly held companies look to the !viiS function for help in m eeting Sarbanes-Oxley requirem ents. Human m istakes are unintentional errors. Beca use it is difficult to know exactly where cybe r attacks origin ate. [ Summa ry ] 1. producti on .ca n be disrupted by an information technology security breach or an IT security breach at a business parb1 er. thumb drives. receiving. Any weak l ink in supply chain managem ent or enterprise resource ma n<1gcm ent system s pu ts the entire ciH1in at risk. O th.1ctors are: • Today's interconnected. • Lack of managem ent support Exampl e: Suppose that your company spent $10 million on information secu rity countermeasures last yea r and experienced n o successful attacks on informati on resources. cheaper computers ~nd storage devices Examples: Netbooks. iPads • Decreasing skills n ecessa ty to be a computer hacker Example: Informati on system hacking programs ci rcu lating on th e Internet • lnterna tiom1 l org~nized crime l<lking over cybercrime Exampl e: O rganized crime has formed transnat iona l cybercrime cartels. wirelessly n etworked business environm ent Example: The Intern et • Smaller. even though it is almost invisible until an attack succeeds. and inboduction of new information technologies h ave to be guid ed by IT security considerations. T h e fi ve F:. such as social engineering. th ey must ensure that all employees explicitly verify that they understand the company's information securi ty policies and proced "1res. these ca rtels are extremely hard to bring to justice. For the Human Resources Management Major fiR managers ha ve responsibilities to secm e conficl cntial employee clah1. In addition . Social engineering .-mation assets. 2. quality cont rol. interdependent.IIIII!t~$~11 C ll r\ 1' '1'1-:R -1 l11fu n11atio 11 Security For the Production/Operations Management Major Evetey process in a compa ny's operations . Identify the five factors that contribute to the inc reasing vulne rability of information resources.inventotey purchasing. and shipping . Sh ort-sig hted manageme nt might conclud e that the company could spend less during th e next year and obtain the same results. Bad idea. For the MIS Major The M IS function provides the security infrastructure that protects the organization 's info. f~stcr. particula rly in detecting "significant deficien cies" or "m at erial weaknesses" in internal controls and remediating th em . and pro vide a s pecific example of each o ne. C ompanies may be held lic1ble for IT security fa ilures that impa ct other companies. and provide a specific example of each one.

fiJsk limitation .~ . An example of socia l engin eering is whe n an attacker calls an employee on the phone and impersonates a superior in th e company. Alien soft••Yire is clandestine software that is installed on your computer through duplicitous m ethods. where the organization accepts the potential risk. 1111 is an atta ck where th e perpetrator uses soci<1l skills to trick or manipulate a l egitimate employee into providing confid ential C'ompany information .. SC ADA systems are used to monitor or control chem ical. Information extortion occurs when an attacker either threatens to steal. distTibuted measurem ent and control system . locks. Protecting intellectual property is particularly difficult wh en that property is in digit<1l fo rm.1ctice risk transference by purchasing insurance on their h ouses and oth er possessions. rc:1l-wodd harm or severe disru ption. u sually to gain access to his or h er financial information or to frame him or h er for a crime. C le. to cause physic. fen cing. and tra nsport processes. T h us. An exa mple of a huma n mistake is tailg:1ting. Protecting i11tel/ecttwl property is a vital issu e for people who make th eir l ivelihood in knowledge fields .ling th e information . but it does use up valuable system resources. worms. making th ese devices easier a nd m ore valuable t o steal.. badges. Hisktransference. T he pe rpetrator dema nds paym ent for not stca.S 1n11111ary IIII!~ I). such as by purchasing insurance . Discuss the ten types of deliberate attacks. More sophisticated physical controls include pressure sensors. guards. The ten types of <icliberate <l ltacks m e: Espionage or tres(JC/ss occurs when an unauth orized individual attempts to gain illegal access to organizational information . It typically is not as malicious as viruses. you are pwctic ing risk acceptance. you may decid e not to insm c it. A SCADA attack attempts to compromise such a system in order to cause damage to tlhe rea 1-world processes that the system controls. Sabotage <llld vandalism are deliberate acts that involve defa cing an organiza tion's Web site. and p rovide a n example of each one in the context of owning a home . Today. and moti on detectors. gates. and absorbs any damages that occur. particularly via th e Internet. Theft of equip ment and info rmation is becoming a la. you practice risk limitation by putting in an alarm system o r cutting down weak h·ees near your house. and pro vide a n e x a m ple o f each o n e . for returning stolen information. With both cyberterrorism and cyberwarfare. th is is a bnd idea. attackers use a target's computer systems.ger problem beca u se computing devices and storage devices are becoming smaller yet more powerful with vastly in creased storage. Physical controls prevent unauthorized individuals from gaining access to a company's facilities. usually to carry out a pol itica l agenda .rJy. and alarm systems. or < lc tua lly steals. Define t h e t hree ris k m it igati o n strategies. doors. 4 . ]. As a homeown er. Iden t ify th e three m a jo r types of con t rols that organizatio n s can use to protect t he ir info rmation r esources. th ese attacks are typic ally profit-driven and Web-based. p hysica l. Comm on physical controls include walls. The three risk mitigation stra tegi~s are: Hisk acceptance. Identity theft is the deliberate assumption of another person 's identity. or Trojan horses. 5 . . information from n company. temperature sensors. Supervisory control and data acquisition (SCADA) refers to a large-seal e. possibly causing the organization to lose its image and experience a loss of confid ence by its custom ers. continues operating with no controls. If you own a home. 3 . where th e organization limits the r isk by implem enting controls that minimize the impa ct of tl1reats. or for agreeing not to disclose the informati on . The vast m ajority of hom eowners pr. where th e organization transfers th e risk by using oth er means to compensate for the loss. Software attacks occur when ma licious softwa re penetrates an organization's computer system ..

with the aim of overloading its resources. or damage tha t can result if a threat compromises an infom1a tion resource. Communications (11C twork) controls secure the movement of data across ne tworks. po!Jtically motivated attack against information . communications controls (also network controls) Controls that deal with the movement of data across n etworks. te networking (VPN). Authorization is generally based on least privilege. and Internet surfing activities. :lllthorizalion A process that determines which actions. :odwarc Alien software designed to help pop-up advertisements appear on your screen . After the person is authenticated (iden tified). or privileges the person has. loss. known only to the attac ker. that allows the attacker to access the system without ha. exposure The harm. software. currently the !Jfc of the creator plus 70 years.e. cop yright A grant that pro\·ides the c reator of intellectual property with ownership of it for a specified period of time.·idua ls from using infom1ation resources and are con cem ed with use r identification. firewall A system (either hardware. \ccess controls restric-t umruthorizcd individuals from using information to go through any security procedures. bac k door Typically a password. Comm unica tions controls consist of firewa lls.. distributed denial-of-service (DDoS) attack A denial-ofservice attack tha t sends a Hood of dat:1 packets from many compromised computers simulta neously. whi telisting and blacklisting. m1ti-malware systems (anti. such as your company's n etwork. or a combination of both) that prC\·enls a specific type of information from moving between untrusted networks.a ted between an organization·s internal n etwork and an cxtemal network. nudit An examination of information systems. based on verified identity.-:ufilfc \Var in which a country's information systems could be para lyzed from a massi.·e attac k by destructive software. temporarily or more or less permanently.·ioral characteristics. their inputs. and vulnerability management systems. and processing. and data that results in violence agai nst noncombatant targets by subna tional groups o r clandestine agents. biom etrics T he scien ce and technology of authentication (i. and private networks. and othe r malicious software. denial-of-sen. An example is biometrics. digital certificate An e lectronic document attached to a file certi~·ing that this file is from the orga nization it claims to be from and has not been mod1fied from its o riginal format or content. based on his or he r verified identity. [ C ha p te r Glossary ] access controls Controls that restrict unauthorized incJi. employee mo nitoring systems Systems that monitor employees' computers. usually the lntcmet. wom1s. outputs. Authorization determines which actions. These controls im·oke two major functions: authentication and authorization. computer programs. cybcrtcnori>~n Can be defined as a premeditated. 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. blacklisting A process in which a company identifies certain types of softwme that are not allowed to run in the company C11\-iTOllll1Cllt. en cryption. e-mail activities.·inJS software ) Software packages that attempt to identify and eliminate vimses. Authentication confirms the identity of the person requiring access. demilitarized zon e (DMZ) A separa te organir. cybcn. .ce attac k A cyber attack in which an attacker sends a A ood of data packets to the tJrget computer. :111thcntication i\ process that determines th e identity of the person requiTing access. establishing the identity of an individua l) by measuring the subject's physiologic or beha. virtual priv:. alien software Clandestine software that is installed on your computer through duplicitous methods. or privileges the person has. encryption The process of converting an original message into a form that cannot be read by anrone except the intended receiver. secure socket layer (SSL). rights. cybcrcrimc lllegal activities executed on the Internet. anti-malware systems. controls Defense mechanisms (also called countenne<tsures). such as the Internet. cookie Small amounts of information that Web sites store on your computer. righ ts. computer systems.····~l~ H~iJI C ll \I''I'ER -t lnfo nnation Sccnril) . the next step is authorization .ational local area network that is loc.

or destruction . tunnel ing A process th at encrypts each data packet to be sent and places each encrypted packet um de another pa cket. and compares the probable costs of each being compromised with the costs of protec ling it.·irtual pri. sec ure socket la}er (SS I. es timates the probabil ity that c<J ch asset might be compromised. and copyn ght laws. warm site A site that provides many of the sa me se rvices and options of the hot site. d1sruphon. such as a business plan . hot sites A fully configured com puter fa cility. and absorbs < 111Y damages th:1t occur. spamwarc Alien so ftwa re th<1t uses yo ur compute r as a launch platform for spamme rs. logic bo m bs Segme nts of compute r code embedded within an orga niza tion's existing computer programs. currently 20 years. whitclisting A process in whic h a co mpany identifies acceptable software and pcm1its it to run . sec urity The d egree of protection against crim ina l activity. piracy Copying a softwa re progr:nn (other than freewa re. wonns Destru ctive programs tha t replicate th emselves wi thout requiring another program to pro.Jise id entity and then uses it for som e fraud informat ion sccmi~ Protechng an organization's information and mformation systems from unauth orized access. danger. and eith er prevents anything else from running or lets new softwa re run in a quarantined environment until the compa ny can ve ri ~· its va lidity. . a nd a pri.) (also known as tran sport layer sec urity) An e ncryption stand ard used for secure transactions such as c re<lit card pmchases and onlme banking.) " ithout making pa}m ent to the owner. communications lin ks. co ntinues to ope mte with no controls. with all information resources and services. social engin eering G etti ng around sec un ty S}~ te ms by tricking computer users inside a comp.1 ny into reveali ng sens itive information or ga ining unauthorized access privileges.C loaptcr Clossary llll(~ I21JII. demo software. malw:~re Ma lic ious so ftwa re suc h as viruses and worms. that is a company secret and is n ot based on pu bl ic inform ation . tha t dupl ica tes your company's com puting resources and provid es near real-tim e recovery of IT operations. spyware Al ien softwa re lh~ t c'm record yo ur keystrokes and /or capture your passwords. a public key ate key. privac) The n ght to be left alone and to be free of unreasonable personal intrus1 on. 1 ·isk anal)s is The process by whi ch an organization assesses the v. risk limihltion A stra tegy in which th e organization limits its risk by implementing controls that mi nimize the impact of a threat.\ process m which th e organization tranlr fers the risk by using oth er means to compensate for a loss. ''ulnembil ity The possibili ty that an information resource will be harmed by a threat. . and/or loss.·ate n ct\\ork (\ 'P'\' ) A private network that uses a public network ( usu ally the Internet) to securely connect users by using encryption . risk mitigation A process whereby th e organization takes concrete actions against risks. public-ke) encryp t ion (also ca lled (lsymmetric encryption) A type of e ncryption that uses two different keys. such as implem enting controls an d de. patent. which is protected under trade secret. and minim izes th e im pa ct of th reats. and phy-sical pla nt operatio1 1s. physical controls Controls that restrict unauth orized indi. p11tent A doc ument th<1t grants th e holder exclusive rig hts on an invention or process for a specified period of time.·iduals from gaining access to a company's computer fucilities.lhons. threat Any danger to whic h an information resource may be exposed. damage.·id e a sa fe environm ent for replication . use. l e:~st pri vil ege A princip le that users be gra nted the privilege for some acti. such as by purchasing insurance. phishing nt'lack An atta ck that uses deception to fraudulently acquire sensitil'e personal informa ti on by masquera ding as an offi cial-looking e-mail. in an effort to red uce risk to manageable levels. but docs not includ e the co mpany's appl ications. privilege A collection of related computer S}"Stem operations that can be performed by users of the system . spam Unsolic ited e-mail.1tc combination of characters that only the use r should know. ide ntity theft C nm e in which som eon e uses the personal information of others to create a f. tmde secret Intell ectua l work.1luc of e01ch asse t be ing protected. controls.•elopi ng a disaster recovery plan . network controls (see communi c:~tions controls) pt~ssword A priv.•ity on ly if there is a justi fiable need to grant th is a uthorization. risk managem ent A process that id entities. risk transference . disclosure.·iruses l\ lalicious software that can attach itself to (or ''infect'') \\ner of the progmm other compu ter programs without the O be ing aware of the infection. risk :~cccptan cc A strategy in which the organization accepts the potentia I risk. transport layer security (TLS) (see secure soc ket Ia) er) trap doors (see back door) Trojan horse A software program containing a hidden function that presents a securi ty risk. etc. modi fica bon. intellectual propc~ The mtangible prope~· created by individuals or corpor.• ri sk The like lihood that a threa t will occ ur.

Why are authe nhcahon and authonz. Because th ere is no such thing as perfect security (i.1l fcc of $25.rcombustcrs.1tion security be a prime concern to man. Inc. "· W hen are security measures that a company implements sufficien t to comply with its obligations? b.oce of work? Do these m easures seem to be elfecti.ol~ns. Fmd out what the organiZJtion docs. resolving this question can significantly .ot the cboly prob.1tt.. Why are fede ral aulhonbes so worned about SCADA attacks? [ Problem-So lving Activities ] 1. Describe t he sec urity breach at B)'s Wholesale C lub.1t )'Our umverslty Jnd/or pl. Is there any way for a company to know if its security measures . Each team should download a product and discuss its pros and co ns fo r the class. June 16.Jc l w.1c l clue to tedm ology prob• \\'.111 annu. how? • Discuss Sony's response to the hack. Learn abo ut e-ma.lTC used . Tne chance that your compute r eente n\ ill be damaged during such a quake is 5 percent If the cente r IS d amaged. Why . Software piracv is a i(lobal problem.htm. AgreementContaining Consent Order" at H ww.{tc.J scams and \\'eb site scams.0 molloon a.\nalyze the offer. tcms 'o n dncr. 5.nod. [ Te am A ssig nme nts ] 1 . 6.1tion <ecunty Ill an organization with msunn. 0·+2 3160.o lem~ Jt Som . FTC File No.comlpiracyl. or a combmahon of both? Pro\ 1de spec1fic examples to support \'OUT anS\\ CI' • \\'lue h Son} controh f. low Octobe r 15. . pcworlcl. i\s~umc th.1boloty of a ma jor earthquake in Los Angcle. e? \\'h. Search th e site for ''Nationa I S trategy to Secure Cyberspa ce" and wri te a o ·eport on their agenda and accomplish m en ts to date. the estimated damage to the computer cente r '"II be $-1.bsa.1tion Network hack that occurred 111 Apnl 20 11 • \\11. Each team sh ould obtain current statistics on one of the top five consumer compbint categories and prepare a • Describe the cia 1mgcs tlut Sony incurred from the hack. 8. Why •~ c r~s-bordcr cvbcrcnmc expanding r. Find the devices they make that can be used to control access into inform~tion system s.ulcd ' • Could the hJck h. Be sure to take a look at all the comments posted about this article. and discuss "hethcr to .okul..gol'!dhspublic ( Department of Homeland Security). Report yom findings.allfrustnelworks..wSt. '"th the problem better than others? 7. .) 4. Enter wwll>. 2 . "WhyTechnology Isn 't the Answer to Better Security. Comp.~h. Discuss "hy the S.m.uH\\ Cr (llmt Rc. there is always more that you ca n do).oster than oth ers? Are any categories more pr eva lent in certain parts of the world? 2. Read " In the Matter ofB)'s Wholesale C lub.{fc. Visit """"·dhs.1t 1f a lugher b ·el of authentication were omplcme ntcd? Would ot he worth 1!.1 hom e 5.ubancs-Oxlcy Act is ha.1tc the e~pected loss 111 dollars.1ffect cost. Access the following Web sites: W\vw.od Kim •. 3.11 hpe of .Jccept 11 3.000 . 4 . Wh at and other vendors of biometrics.1hon 'ccuritv. o s 0. Read the article: "The Security Tools You Need" at www.govlopa/2005/06/bjswholesale.o l issue? A business issue? Both? S upport \'Our .1ct on onform. 2005. Why should mfonn.. Are any categories growing f. b.ore ~omputcr sy. What can mldowu lo<tcfslcolfect io n/collid. h secunt\ . Enkr ""'"' .abon important to e-commerce? 7.u ound the world work together to figh t consum er fr.1 gcment problem s at Son)'.o gcment? 3. A critical proble m is assessing how far a company is legally obligated to go in order to secure persona l data .l\ c hccn prl\ ented ? If so.govlsenfi.cio. Prepare a list of products and major capabilities of each vendor. m.orJl :mel '"'w.1 tcehnoc.micr0$0{t.u c mform.el to learn m ore about how law enforcement agencies . 1525!files. \VhJt t\'J>CS of uw r . and discuss how B)'s can b ett er defend itself against ha ckers an d legal liabil ity.•ing an imp.opidly? Discuss possible solutions. C.e.ohon .oble? 6.C IL\1''1'1+:1 { 4 l ufo1111:1tiou St:cnrity Discussi o n Q uesti o ns 1 . html. Access Hww.1re sufficient? Can you devise a m ethod for any organization to determine if its security measures :1rc sufficie nt? 2 .org.o s it? s the succt>\ of the . 2008.1tc the Son) Pl.miz:otion~ do to llllh!+lle thos problem ? Are some orgJI11 7Alho n' dc.mthcnhc. o r would 1t decrease produc tI\ 1t\? 9.C/0 (H~vw. An msurance agent 1 s willing to msure your facility for .07 percent. the o·e~1so n for this agreement? Id entify some of th e causes of the sec urity breach.

1 m ajor o ne. • About a third of the hospitals in Rhode Island had to postpo ne d eclive surgeries . l~1tc on April 2~. 2010. l . • At Illinois State Uni1•ersity in N o rm. These raprd updates can cause securrty vendors to make mistakes in therr qualitr contro l procedures. . because recovery required users to reinstall svc-host.• plaine<!. ·n.rrc to minimize their e-<posurc lime to new malware threats. BeBer~:.1 t k 3 . •MCJ\ft lssn<> ~ lx.1lrcro us software :rnd then quarantined it.> pJgc cont..!coveri~~~: from McAfee PC Problem: i\ISNBC.1r>«l PC 1\leiiOO. Sh ould M cAfee h:.1bility as well.1-. ·~lcAf<e Apologire> The Solution Because vimrally all the affected personal c-omputers were unable to connect to a nehvo rk. .1pid updates to th eir anlr\iru s >ofl\\ . state police officers \\ere instructed to shut < lo\\11 the computers m the rr patrol cars . and burld sec:uritr measures into thcrr spreadsheet that c urrently maintains i\ (ember rnfo rmation .1-.a" virus.1tional Scrence Fo und. TheApril 21. W h at sh ould organizations do to prevenl su ch problems in the futuro? Sou~QS. Antivirm ve ndo rs ha. S.r nlr1 rrus program from sec urity vendor l\lcAfee (wiVII'.rfc i\·l ode.1 li~t of frequently asked questions (FAQ) con temins. 2010 updtll'e was intended to detec-t :111d destroy a minor th.'\ ful' l~ uby'.com) rdentified .Jirl} ~s~trr.. Qu estions I..lcAfce pbced . . the update actually deleted the file.uncd . C ~izcr. The Results McAfee took two days (until April 23.JIIo n m Arlmgton. for C rippling I'C• "ith U pd. I\ lost large l\lcAfee customers had their computers up and mnn rng rn two days o r · less. what? Support your nnswer. F-us PCs. 2010) to post . l\lcAfcc's hom<. this process became much more difficult if the affected computers could n o t recognize thei r own USB drives. 2010: A !Jng>lty-Hughes. I ntercstingly.rom.1t l\kAfcc would rmprove rls <" MSNBC. t\pl1122.1 document on rts Web srtc thJt specrfied the necessary recovery steps. Of course. "McAfee Program Coes Be~t. Coonpiled from G.~tc cu~tomers on a daily basis.. Chon. 2010.\pril 13. Adding to th ese problems. [ Interactive Case ] Developing Information Security Measures for Ruby's Club Co to the Ruby's Club link at the S tudent Companion web site o r \Vrle) PLUS fo r information about your current rnte mship :mrg nmenl. 1010.rd.·n: ZD..~ m e ino perable. and schools around the world became tr. the compute~ crashed and rebooted repeated ly.1s technicians tried to fi.exe.dfcc-ted. th e "\ \132/wec-orl..l lio ns arc pu shing fo r m ore r. lost computer access. April 2Z.d. ll1c following d.rt h." The &onomic Timn.. l ufm1na t iou St.lub -~~~~~p~··· [ Closi ng Case Who Is Minding th e Security Store? ] The Problem O n April 21. corporate IT personnel had to manually fix each machine. In some cases. ( lntcrcstmgly.we done nnything: differe ntly? If so. i(<izer. D iscuss McAfee's ha ndling of the update disaster. !\lost of these computers lost all network cap.1 semrauto mated tool th.April 2l.. 1010.ce prt>Sident of support and cu1lomcr \Cn rcc. McAfee's policy is to update its corpor.. a number of small busincssc\ th:r t· did not have rf' departmen ts Wer ~ stil l trying IO fix th eir· com pu ters several days later. the problem • The . 1010.{ stop hcJiing emergen cy-room PJhenb \\ho we re no t cxpen cnc-m g trJUI11JS. o rg.1ppened to McAfee.1flc r c nt enng Windo \\ s' S.1 lrnk to J blog post by l\lcAfcc'~ B. up the del i\'ery of therr software updates in an attempt to m. computers in companies." PC ll'a /d. Illinois. • In Kentucky." Conpuk. '"ll1e ~lcAfee Update Mess E. perhaps modern orga nizatio ns arc som ewhat l'o blame for this problem.rnn procc~~es t o see that thrs problem drdnot reoccur. a process that could be don e m o re easily by walking a Aash drive from one crippled computer to the next. th e updJte incorrectly idcntrticd the cri tic-al ''svc-host <:xc" file in \Vindo ws XP SeniC'e to be run on affec-ted co mputers .·c urity ~ l c<~SIIIt. 2010..1ppcd 111 a cvcle o f repeated ly rebooting the mse lves after .JS i\kAfee's executh·e .: ( .svchost. mccr{ c c.r) the company made a\·aibblc ." ZD. which apparently is what h. th e upd.c repcrcnssio m wert• widcsprc. Bad E.rom. Howe l cr·.rrrv l\lcPhc rson that attempted to minimize the issue.h1tuactivc Ca~c: Dudopin e. Reboots PCs.·. make suggestrons fo r R uby's infonnation sccuril)· S)Stem . ·n.akr o n \\'cd nesdd). som e computers becam e unnble to recognize their own US B drives.JI~. Apr il 22. lc Pherson W. Compu te rs running \Vindows XP Service Pa ck 3 in combinaf'io n wi~h McAfee VirusScan 8.April22. \\'hen users applied the 1\kAfee update and then rebooted the ir compute~.111 .. "MeA(. 1te elisalte r on it~ \\'e h site. Today. br Hooed XP SP> Pes. "Some Still R. 2010.7 wer ·t• . dozens of computers in the College of Bu\ inc~s bee-.exe".Jtch the pace of ne\\· malware develo pment br hackers. .. Yrrgima. ond Apology.·e responded to these pressures by speedin!. April 22. hospitals. a \Vrndows personal computer will not boot (start up) correcdy.. \ 'f:r. "M<'Afee A11livirus Prognm Goe. Admib ' Inadequate Quality Con lrol C.VIT. problem hrrn ed o ut to be . \Vithout . no t its CEO) l\ lc Phcrwn plcds. • .JS m. 1-lowcv~r..1 no rmal \ Vindows fi le as a virus. You will investigate sec:urrl) policies at other clubs.

Chapter Data and Knowledge Management .

a me six problems that ca n be minimized by using the database apprm1 ch.. Discuss at least one main advantage ~nd one main disadvnntnge of relational databases. and describe the steps in the knowledge management system cycle. Demonstrate h ow to interpret relationships depicted in an entity-relationsh ip diagram./rainer :> Database Management Systems Data \Varehouses and Data M<1 rts • Student PowerPoi nts for note taking • Interactive Case: Ruby's Club Assignments • Complete glossary WileyPlus All of the above and • E-book • 1\lini-lccture b. Demonstrate the use of a multidimensional model to store and analyze data.g.· author for each chapter sectio~ • Practice quizzes • Flash Cmds for vocabulary review • Additional "What's in IT for Me?" cases • Video inten·iews with managers • Lab fVI:mual for Microsoft O fli ce 2010 • H01v-to Animations for l icrosoft Office 2010 Wl1at's lnM T For ACCT e.\PTER OUTLINE ] [ WEB RESOURCES] Identify three common challenges in managing data.. MKT 7 POM Analyze data for FIN Use data for Internal Investment decisions HR Use employee dala for performance evaluauons MIS Provide infrastructure to store firm"s data Cost justify firm's databases Use customer data to plan marl<etlng campaigns qualny conlrol . and describe one way organiz< ltions can add ress each challenge using data governance. 1\lanaging Data The Database Approach Student Companion Site wile com/col•.[ LEARNI"\G OBJECTIVES ] [ CH. List two main advantages of using knowledge management. Identify the six basic characteristics of data warehouses. and expb in the advantages of data warehouses and data marts to organizations.

5 petabytes of data (1 petabyte equals 1. feeding tts databases and data wate houses. and even indi vidual customers. and SAP together have spent more than $15 billion to purchase software firms specializ ing in data managem ent and business intell igence (discussed in C hapter 12). an ywhe re in th e Consider these examples: ~2~ \Va lmatt processes m 01e than 1 million customet ttansactions evety holll .000 employees world wide. discovered that 7 pe rcent of its customers . O racle. F'ina lly." and they have coined the te rm "B ig Data" to describe th e superabund ance of data available today. that is. At the sa me time. Best Bu y (www. Data scientists combine the skills of softwa re programmers. muc h more cbta than can be stored or analyzed . the first steps in m anaging Big D ata were to integrate infom1ation stored and isolated in th e functional areas (called in{ornwtion silos) into a database em~ron­ m ent and th en to develop data warehouses to serve as decision-making tools. Switzerland . IBI'vl. which at e estimated to contain more than 2. The coll ider generates 40 terabytes of data every second . the sheer volumes of data are m aking them increasingly inaccess ibl e. accelerate them a !most to the speed of light. There are 5 collision detectors at the collid er. i'vl ic rosoft. that is. Afte r completing those efforts. For exa m ple. In recent years. total mg hundreds of terabytes of data. Big Data makes it poss ible to do many things not previously possible. The Results T he wa y information is m anaged tou ches all areas of life. the availability of abundant data enables companies to cate r to sm all ni che markets. the data scientist. ensuring data security and protecting privacy are becoming m ore difficult as ( I) the amount of data multiplies and (2) the data are shared more wid ely around th e world . Big Data is crea ting nume rous problems. opening six business intelligence centers with 4. smash them together. otganizations and individuals must contend with an unimaginablv vast amount of data that is g10wing ever mote taptdly. F'irst. new flows of info rmation throug h chann els su ch as the teleg raph and tele ph one supported mass production.000 ttill ion bytes. IT Solutions For many orga niza tions.•••IJF~f~jl C II A P' I'I. IBM alone invested $12 bill ion from 2006 through 20 10. m aking sense of th eir proliferating data . ln fa ct.:R 5 Data and Knowledge M anagemc nt [ Big Data] The Problem I • • • n today's infOJ mation<entered envi10nment. Fo urth . the amount of dtgital data is incteasing by a factot ~ ~~ of 10 eve ty five yeats. F'ifth. At the turn of th e twentieth century. ii'"A' jl' # • T he job of the Large Hadron Co llide r at CERN. Second. and then take pichtres of the carry it. a retailer. saved in a standard format that computers can read . E urope's A kl ISh k particle physics laboratory near Ceneva. and storytellers/artists to extract valuable "nuggets of information" hidd en in mountains of data.1bytes). F'a cebook contains m ote than 40 bill ion photographs. and to tra ck c rime. to prevent disease. Toda y. the amount of available data has exceeded rhe tota l amount of <Wailable storage spa ce. with 150 million sensors. ln addition. the quantity of data is outpac ing the abili ty of networks .particularly the Internet. companies are turning to a new type of professional. for exa mple. org<mizations turned their attention to the business of data and information m am gem ent. beginning in 2007. each snapping 40 million pictures pe r second. Scientists ha ve labeled the present era the " Industrial Revolution of Data. T hird. I • ~ 11 7~ ~ • ' •• . indi viduals are swamped with data. which complica tes rather than facilitates decision making. however. 01 te t. and the gap continues to widen . to spot business trends m ore rapidl y and accurately. statisticians. only 5 percent of the data is structured. is to nna 11yu · >meneva utterstoc · take tiny particles of

Insurance companies effectively analyze data to spot suspicious claims. and materials were obsolete or duplicated. Consider these examples: • • • C redit card companies m onitor every purc hase and ca n accurately id entify fraudulent ones. · oata. Inforwhen these data are managed properly. they become in( mation and knowledge are valuable organizational resources that can provid e a competitive Sources: Compiled from D. in the healthc. \~le are accumu lating data and information at a frenzied pa ce from such diverse sources as company documents. Nestl e overhauled its databases. "The Promise and Peril of Big Data. "'Big Data . Th e oil industry exa mines se ismic data before drilling new August 1 8. Mo bile-ph one companies analyze subscribers' calling patterns to detem1ine whether most of the subscribers' frequent contacts are using a rival network. . Mori:>:>n. technological. phone m essages. ZOIO. CJO Insight. 1010. podcasts. e-mails. To address this situation. videocasts (think of YouTube). address books.000 suppliers. Consider Nestle. the compan y's U. B ollier. • Anal}iics at Work: Smarter Decisions. and about one-third of th e rem ainder were ina cc urate or incomplete. comprise the largest component of this dig ital information . "'Business Analytics: Tuming IP into Opportunity. Henschen.NC. access ing. storing. T his problem becomes even more pronounced when you consider the vast increases in the amount of data that organizations ca pture and store. o~g. R www. Nestle sells more than 100. Some industries have led the way in gathering and exploiting data.000 products in 200 countries. captured. lnfonnationWeek." AMD White Paper. T he opening case describes the numerous problems ca used by Big Data.accessed Ji e bruary 19. Davenport. McCa fferty.It's Not Just forCoogle An~more. B <tler esults. J. D. and R. w'lvl"'. H<nschen. IIIJFlF!IIII • • S uccess stories of effective data management in organizations a bound . To deal with the growth and the diverse nature of dig ital data . analyzing.'171ll Economist. and radio frequency id enti- fica tion (RF'ID) tags and other wireless sensors (discussed in Chapter 8). Images captured by billions of devices around the th e amount of digital information created. New sources of data and information include bl 2010. organizations must employ sophisticated techniques for information managem ent. What We Learned From This Case " Big Data" represents a vety rea I problem that every business fu ces.that is. \Veb pages. customers. using rules de rived by analyz ing billions of tr<msacti ons. Data Evel}where. Information technologies and system s support organizations in managing . 2010. orga nizing. D espite th ese impressive numbers. for exa mple . "\Vl1at's At Stake in the Big Data R evolution?" lnfonnation\Veek.CAS I~ accounted for 4 3 perce nt of its sal es. from digita I came ras and camera phones to m edical scanne rs and security ca meras. "The Big O. W'WitJ". the company was not using its huge buying power effectively. because its databases had severe problem s. N unziata. Roughly half of th e company's9 million records of vend ors. omwtion and then knowledge. 2010. large~cale e fforts to computerize health records have encountered bureaucratic. If that rival network is offering an attractive prom otion that might cause that subscriber to defect. As noted in C hapter I . In contra st to th ese success stories. We are awash in dat1. 2010. acquiring. Similarly. T. saving $30 million per year. stock trad es. and interpreting -data. F'or just one ingredient. August/. 2011. November 9. ope ration was able to use fewer suppliers. so it reorganized its sto res to concentrate on th ose custom ers' needs."' Harwzrd Business Press. Januaty I. severa I good results. Between 2006 and 20 I 0. credit card swipes.S." and organizations will have to find ever more crea ti ve solutions to manage industry. using 550. and a few poor results. the solutions that orga niza tions are employing to manage these data. and ethi ca l problems. D. Retailers effectively ana lyze customer h·ansactions to tailor promoti ons. D. 2010. digital \~deo surveillance. CIO Imight. then the company ca n offer him or her an incentive to sta y.ta Era: How Data Strategy Will Change. law enforcem ent and intelligence agencies' databases are not parti cularl y well integrated despite years of effort." The Aopen Institute. rebruaty 15. and replicated each year add ed about 18 million times as much information as currently ex ists in all the books ever written.Ilestle. va nilla . however. there by improving the quali ty of its data . 2010. which we have to manage and make sense of. August 17. '1'he Big Data Conundrum. and radiology scans. memos. T he important idea to realize here is that Big Data will continue to ge t ''bigger. Harris.

Once this process was finished. Thio chapter will examine th e proceoses whereby data are trnmfo rmed first into inform ation and then into knowledge.. T o coordinate these c1ctivities.fllemaker. But. and control the day-to-day operations of Crabby Bill's.m :>ge m ent will result in long wa it times an d unhi!ppy custom ers. In many cases. w hen m odern information systems m ake access to that information quick and easy. accessed May 22. data management consisted of paper receipts In file cabinets. Consequently. th ey u se a tool called entity-relationship (ER) modeling. Fo r example. 1l1is is especially true today. . Big Datil is certil inly a probl em fo r hu ge o rg.mizi! lio ns. Is are comfo rtable m aking o r justifying business decisions that are not based on solid information. these p rofessionals can access th ese data themselves and analyze them according to th eir n eeds. ena bled by information technology. Luis turned to a database software product called FlleMaker Pro (www. captures and stores kn owledge in forms that a II organizationa I employees can access and apply. we have technology tha t formats data in a way thtlt managers and analysts can easily understand .. These data have allowed Luis to better advantage.crabbybUis." C learly. This tool crea tes a model of how users view a business activity. thereby creating the flexible. T he result is useful information. Over the years. A restaurant docs n ot h ave to insb ll an expensive ERP system (discussed in Cha pte r 10) to provid e su ch info rmation . Luis used FlleMaker Pro to query his databases and see his data In ways he had never seen It before. For exa mple. then you can evaluate whether the developers have cap tured your business activity correctly. Knowledge management. Luis needed a solution to enable the multiple databases to share information quickly and seamlessly. existing databases can be connected and a simple software package (such 'lS F ile Ma ker Pro) ca n be used to access tha t info rm<Jtion . and poo r t able m. Few b usiness profession. For example. \1/hen you und erst and how to create and interpre t an ER m odel. accounting. What are some disadvantages of the multip le database approach (other than the d isadvantages mentioned In this case)? Source: Compiled from www.1 Crabby Bill's between the databases. These Incompatible databases make pla nning and coordination between the multiple restaurants very diffi cult. data and knowledge mam1gem ent are vital to m odern orga niz. In those d ays. Then.tuemaker. when database developers in the finn's !VIIS group b uild a database. Luis had to detenmlne the re latio nships Questions 1. However.1 shows. This means that Luis Campuzano (Chief Financial and Technical Officer) has a very d ifficult time accessing and using the restaurants' data. coordinate. The Integrated databases provid e Luis with m ore than 4 million table records to query. even sm. Why did Crabby Bill's develop multiple databases for their data? Ale there any advantages In this approach? Support your answer. Over 30 years ago Crabby Bill's began as a sing le restaurant.IIIIJ'l§~ · ·· C ll i\1''1'1•:1 { 5 Data ami Knuwlcclgc ~ l uuagcmcut G about [small] business 5. T he structure and content of your organization's database depends on how users (you ) look at your business activit ies. T he problem for m<1ny sm<J II businesses is no t gathering d. Executives can th en ap ply their experience to use this information to address a business problem. He even wrote a program to better utilize thlelr seat ing space based on the informatio n he was a ble to find In h is now Integrated and accessible databases. During that time. powerful ''learning organization . 2. Crabby Bill's grew to a chain of nine restaurants In the Ta mpa/St. poor inventory managem ent w ill result in overstocked o r understocked shelves. Resta urants must be hig hly coordinated businesses due to th e shelf life o f much of their inventory. why sh ould you learn a bout them ? Th e reason is that you w ill have an importa nt ro le in the development of database applications. as IT's About lSm:1ll] Busin ess 5. and so on). The problem Is that these databases do 111ot communicate with each other.. the programmer wrote the necessary computer code to a llow the mu~lple databases to communicate.tions. thereby producing it is having that data in an access ible fo rmat so that it will be useful.. and a third. Flo rida area. www. I! o rgil nizil lions can have problems with their d~1ta. 2011. a mnnager needs tim ely information . Crabby Bill's developed multiple databases to keep up with the different types o f data they use (Inventory. He constantly has to copy and paste from o ne database to another to Integrate the data In a spreadsheet where he can manipulate It to find useful information. programmer for the solutio n he needed.1ta. using a variety of tools.

compl ete. In addition .•nt to get database designs right the first time . in contrast .1 Mamogi ug Data IIJ•~·~ · ···· Keep in mind that decisions about data last longer. government reports. similar projects. who will quickly move on to their next projects. and experiences). are much harder t o undo. Also. commercia I databases. After the data are stored in your orga nization's databases. then the equipm ent can be replaced re lati. understanding relational databa ses will with d< help you work with database develop ers in defining a new database or suggesting imprmrem ents t o an existing one. This chapter begins by examining the multiple problem s involved in managing data and the database approach that organizations use to solve those problems. when you know how data are stored in tables. accessible. You should become familiar with data warehouses b ecause they are inva luable decision-making tools. O f CO\II'Se. corporate databases and company documents). you will likely research your firm's kn owledge base to identify factors that contributed to the success of previous .J wan·chouscs an d dato m<nts . Managing data in organiz<~tions is difficult for many reasons. First. than decisions n bout hard wa re or software.< lpid ly. opinions. and external sources (for example." D atabase develope rs enjoy responding to specifi c. You will then see how database managem ent systems enable organiza tions to access and use the data stored in th e data bases. you st11dy dat. relevant. 5. timely. then you know what types of data yo11 have av.1ys painlessly or inexpensively. This is why it is so import. Regarding rebtional databases. The Difficulties of Managing Data Because data are processed in several stages and oftren in several pbces.111d how l·o usc th em for d ecision making. your familiarity lta wa rehouses will serve the same purpose. there are frequently problems and difficulties.must be kept for a long time. < of aCC]uiring. ln that case. when you are assigne d a n ew project. they must be accessible to u sers in " form that helps users m ake decisions. " I wish I could get this infonnation from the data base.1 Managing Data IT applications re<juire data. personal database using a software product such as Microsoft Access. though not a!w. 'f'he chapter finishes by taking a look at knowledge managem ent. and n ew data are added J. and have a broader impact. personal sources (for example. Clickstream data are produ ced by visitors and custom ers when . It is one thing to say to a data base d eveloper. knowledgeable requests fi·om users! In addition. as you see below. Another problem is that data ar e obtained from multiple sources: internal sources (for example. formats. If decisions concerning hardware arc wrong. m e. in the form of clickstream data. you will want to know at least tl1e basics of the pmduct. you might want to create a sm all. These data are frequently stored in num erous servers and locations and in differe nt computing systems. Database design constrains wha t the organization can do with its data for a long time. Data also are downloaded from th e Vveb. '' If you could add this column of data to Table A and this oth er column of data to Table B.and you will be playing a key role in these designs. keepi ng. These data should be of high quality. the process curate. For example. You will a!so make extensive use of your organization's knowledge base to perform your job. Next. databases. and human and computer languages. If software decisions turn out to be incorrect.1 sily. Much historical data-data that include time as a variable.~ibblc for analysis and d1 ecision making.:CTION 5. and not the database p rogmmmers. to support millions of custom ers. consistent. pe rsonal thoughts.•ely e. large retailers such as Walmart have to manage petabytes of data.1ning they should be acl ll d concise.' but quite a~nother to say. then I could get th is infom1ation from the database. Unfortunately.SI. data are also scattered through out organizations and are coll ected by many individuals using different m ethods and devices. the amount of data increases expon entially with time. O rganizations accomplish this objective by developing data warehouses. and corporate VJeb sites). th ey ca n be modifi ed. Database decisions. and m<maging data is becoming in crc<lsingly diffiicult. For example. Remember that th e busin ess users will be stuck with'' b<1d de11<1base design.

legal requirements relating to data differ among countrtes as well as industries. and useful for the people . and so on Data are also sub1ect to data rot. data degr.1 are handled in a certain. That is.1111]5~(~~~ C l l. employee. a nd syn chronize a consistent. ''endor. Sarbanes-Oxlcy mandates that (I ) public companies eV<~Iua te and disclose the effectiveness of the ir int·crnal financi. aggrega te. modern or~.l~. and evaluate the transaction data. . These d~ta provide a trail of th e n<crs' activiti es in the Web site.111d (2) independent auditors for these companies confirm tJm disclosure ' ll1c l.1t dat. which are generated an d captured by operational system s.1Silr jeopardized.1l co ntm ls . cnsto mcJS move to new .m entire orgamzah on It 111volves a formal set ofbusmess processes . and they change frequently. over time.crnancc is an approa ch to m. customer relationship management. Data security. i\ laster data management is a process that spans a11 o f an organization's business processes and applications.ttions hm·e de. Sarba nes Oxley require companies to nccounl' for how information io being managed within their organizations. yet they arc e. F'urther. collecting. C ompounding this problem is the fact that finding the mac hines needed to . and othe mform. prod uct. employees are h ired or fired. In addition. lmmtd1ty. For exa mple. Inconsistent data prevent a company from developing a unifi ed view of core busin ess infonnation .ctcs dcs1 gned to emure th.1de over time. ne\\ products are developed. If U1c1r compames lack SJttsf. from the m om ent it enters an organization until it is outdated and deleted . part m1mber 12H. In contrast.·eloped information systems for specific business processes.m. sales territories. Another problem arises from the fact that. .bmry o f e1ght-track IJpcs h. and integrity arc c ritical. For example. inclnding user h ch.mel pol.m . <A·et llllll. unk>s \ O U com e r! the tapes to a modern medmm such as a DVD. The objective is to make information av. let's look at an ex. exchange. accurate. It provides companies with the ability to store. J!OI" cx. th e marketing function might maintain information on c ustomers.\1''1'1'1< o. companies go outofbusiness or are bought.1 ( ross . ll1is me. the orliamzallon folio"~ unambiguous rules for C I"Os personally responsible for these disclosures. handling. This situation produces inconsistent data in the ente rprise.1i !able. maintain. and timely "single version of th e truth " for the compa ny's master data . fed eral regulation s-most significantly. that span all o f the enterprise's information e\posure to ltght can ca use phySJcal problems w1th storage m ed1a an<lthus make tt dtfficult to access the data . ou (Mary Jones) purTo clarify th is difference. and so on-a cross the organizati on and its various information S}~tems. such as custom e r. quality. 1\'laster data are a set of core data . finan ces. suc h M transaction processing. m s that a concerning custom ers.1 tcm1 tlut refers J>rtmanl~ to proble ms wtth the media on \\htch the data me stored . thereby creating repetition and conAicts across an organization.s that duplicates data within the billing or customer service functions. D:ot:o :oml "'""'ledge l\ luuagc111cut th ey visi t a Web site and click on hyper! inks (described in C h.1d pro ble ms. master data involve multiple transactions and arc used to categorize. products. tmnsparcnt. CI~Os .lS become rc btl\d~ worth bs. Trcmsctctioll data.tddr~ses or change their names.1ycrs . and protecting its inform.Jtton. describe the activiH cs. from Bill Roberts at Best . well-defined fashion. the n these executl\ es could be held personally responSible and face prosecution l o address these m}TI. Let's take a closer look at this p rachce Data Governance D ata go. Two other factors complicat e data management Pirst.JVior J n d hro\\ smg patterns.1mplc. It is importont to distinguish between m aster data and transaction data .1pte r 6).1cl pl.tccess the data can be difficult.1llon . it is almost 1mposs1blc to find e1~ht-tr.tlso hold:. supply chain management. and mat·ket. of the business. compani es expand into new countrtcs. Y chase one Samsung 42-inch plasma television . and geographic location. organiz. O ne strategy for implem enting data govcmancc is m:1stcr data managem ent.m1ple of a transaction .lllthorizcd to access it.m'"·•hons Jre turn111g to data governance. or tnmsactions.thm·.nmnorc .lctory data management policies and fraud or a security breach occurs. tcmpu. Information systems that specifically support these processes impose unique requ irem ents on data.

each application has a specific data file related to it that contains all the data records needed by the application. Buy. "42-inch plasma television." Along with data govern. In addition . the silo effect). . respectively." "'pnrchase price. 1 illustra tes a un iversity dataibase. Note that university applications from the Registrar's office. Therefore. (You will study databa se mamgem ent system s later in this chapter. orga nizat ions use the da tabase approilch to effi cien tly and effecou turn your nttention to th e dah1base approac-h in th e n ext section . 2011. 20 11. tively manage th eir dnta.provides all users with access to all the data. Compare and contrast master data and transactional data. hut n ot in th e others." "store. E.m cc." and "August 20. :111cl your instructors maintain grade dat a on th eir person al computers. Define data governance.rity: Because data are "put in on e place" in databases. the trcmsaction cbta would be. such os file management systems. so th at all applications are able to access the sam e data . the ma ster data are "product sold. which were organized in J dJta file. Data independence: Applicati ons and data are not linked to each other. Over time. • • Figure 5. imagine a sih~ation where m ost of your information is stored in your u niversity's ccnlr<1l data base. Identify and explain the major difficulties involved in managing1data. eac-h with an associated. database systems maximize 1ihe following strengths: • Data secu. th e athl etics department has separ:.JJ~~ 1 . on August 20." "Samsung. hut a club to whic h you bel ong h<lS its own files .te files for student-a thl etes." "Best Buy. and provide an example of each one.Jx." and "date.the database m anagem ent system ." " 1234. Y before you go on. 3 . organizations developed numerous applicati ons.) Data integrify: Data m eet certain con straints. Thus. orga nizations managed their data in a file mcmagemenfenvironmenl. in a file m anagem ent en vironment." vVhen specifi c vJ iues a re appli ed to the master data. yom address might b e upda l·cd correctly in on e file. 3pplication·spccifi c data file.1ch application required its own data. Therefore. As an illustration . for $2000. elinnin:•tes many prob le ms that arose from previous meth ods of storing and accessing data.." "salesperson. (You will learn about information security in C hapter 4. U sing cb t. This environment evolved because organizations typically began automating on e application at a time.SI• :CTION 5. th ese syste ms grew independ ently from one another (again. and the Athletics de partment access data through the data base m anagem ent system . Data iso/ati011: A pplications cannot nccess data associated with other applications.2 The Database Approach From the tim e of the first computer apph cations in business (mid-1 950s) until th e early 1970s. DCIICI incomistmq: Various versions of the dat:1 do not agrec. For example." "part num bc·r. Databases are arranged so that one set of software programs . this type of arrangem en t lends itself to inconsistencies and inaccuracies. the Accounting depa rtment.) T h is system minimizes the fo l!owi1 1g problems: • • • Data redundancy: T he sam e data are stored in many places. Clearly." "Bill Roberts." "$2000. without overa ll planning. If you m ove. a tmnsa c-tion is represented . there is a poten tial for losing a lot of data at on ce.2 'l'loc Database Appruac lo IIIJ'~£111. 'l11 erefore. 5. but not in the oth ers. such as no alphabetic cha racters in a Social Security number field. databases have extremely high security m easures in place to deter mistakes and attacks. In this example." "vendor. your name could be misspelled in on e of these files.

or an identifi cation number is called a field. A bit (/Jinary digit) represents the small est unit of data a computer ca n process. A g ro up of eight bils. A database can contain vast amoun ts of data . You will then see how dab bases are desig ned. a student's name in a university's computer files would appear in the ''name" field.1 Database management system. you w ill become famil ia r with th e data hierarchy. A byte can be a lette r. . and her or his Socia I Security number would appea r in the ''Social Sccmity numbcr" Univers ity Database File j Faculty student I I Byte Field Record I Field I Name: ~John Jones John Jones MIS I K ~ Name: KeltyRalnGr Protessor ~ Position: I Byte ~ Major: MIS ~Kelty RaiMr ~ Professor p I Bit I Bit M 0 0 1001010 10011 01 1001011 1010000 FIGURE 5.2).rtabase. a number. they are arranged in a hierarchy. In the n ext section. The Data Hierarchy Data are organized in a hiemrchy that begino with bits and proceecb all the way t o databaoeo (see Figure 5.IIIIJ'I\~ : 11 C II A I' 'J'I-:1{ 5 Data aud Kn<>wlcdgc ~ l uuagcmcut Registrar's office c ourse listings data course enrollment data Student registration data Accounting department Student tuition data Student fee data Student payment data I - Course listings Course enrollment Student registration Database management system Student tuition Student tees Student payments Athletic teams Student athletes Athletics department AthleUc team dat a Student-athlete data __j FIGURE 5. or a sym bol. represents a single character. a sm3ll group of words. 2 Hierarchy of data in d. To make these da ta m ore understandable and useful. For example. ca lled a byte. A logical grouping of c haracters into a word. The term ''bin<Jry" m ean s tlwt a bit C"ml consist only of " 0 or a I.

and its symbol is placed on the outside of t he relationship line .ltabase containing a person's ph otogmph .nnple. you will be able to easily adapt to any other version . updated. the C"ourses token . Entities can typic~lly be identified in th e u ser's work en vironment. A key to designing an effective database is th e data m odel. place.) ln som e cases. your Social Security number se rved as the primary key for your student record. A record gene rally describes an entity. or a producta bout which an organization maintains inform~tion. closest to the entity. the student's major would be a second ary key if a user W <mted to find all stud ents in a particular major fieild of study. the stud ent C"ourse files could be g rouped with files on studen ts' personal !histories and financia l backgrounds to create a student data base. An instance of an entity is a specific. stud ent identification number. A logiC"a l grouping of re lated reC"ords is call ed a file or a table. There are many approaches to ER diagramming. wit h other fi elds gi. locating a particular record requires the use of second:.~ database must be organized so that users can keys. For example. :md utilize the data they n eed. and relationsh ips. you wil l examine how mode rn organizations design their databases. a nd the grad e-comprise a record. The good news is that if you are familiar witlh on e version ofER diagramming. an employee. ER diagrams cons ist of entities. (Note: In the past. because many students can have the same major. consisting of course number. its price.~ng th e song's title. Modality refers to the minimum number of times an instance of on e e ntity can be associa ted with an instance of th e related entit'y. and the Apple iTunes Store. student major. D esigners plan and c reate the database through a process called entity-relationship modeling. Secondary keys are other fields that h ave some identifying information but typically do n ot id entify the file with com plete acctm1 cy. T he attributes for each entity are l isted. A relationship has a n am e. Relationships illustrate an association between two entities. if our entity was a stud ent. For security to a secure facility. unique representation oft he en tity. using an entity-re btionship (ER) dia~'l"am . stud ent adc!ress. Every record in a file must contain at least one fi eld that uniquely identifi es that record so that it can be retrieved. however. would constitute a data file for that course. A data m odel is ~ diagram that represents the entities in th e d<1tab~se and the relationships am ong th em . M odality can be l or 0. university would be a unique student number. I"or ex. Now that you understand how data are mn nged in a d. In ~ddition to text and numbers. but there are others. IIEJi~QD · 1111 fi eld. It sh ould not be th e primary key. in whic h a song is a field in a rec-ord . or event. and th e primary key is underlined. You will study on e particular appro ach here. the records from a p~rticular course. This identifi er field is called the primary key. A logical group ing ofrebted fields-s uch as the stm lent's na m e. an instan ce of the en tity ST UDENT wou ld be 11 specific studen t. Cardinality refers to the maximum number of times an instance of one entity can be associ~ ted with an instance of the related entity. . the primary key in a stud ent record in a U. then entity ~ttr:ibutes would be student name. ·n. Cardinality can be l or Many. e focus will be specifi cally on entity-relationship (E R) modeling and n ormalization procedures. For example. Entities are pictured in boxes. thi ng. li" o r example. Exa mp les includ e a mo tor vehicle departm ent's li censing cl. analyze.1tabasc. the d<1te. Using t-h e sam e ex. which is a verb. and its symbol is placed on the inside of the relationship lin e. fields can also cont~ in images and any other type of multimedi a.S.SI•:CT IO N 5. attributes. and the album it is part of. An e ntity is . A logic<ll grouping of rd atcd fil es constitu tes a datab~se.. Ca rdinality and modality are the indicators of the business rules in a relationship. person . this practice has been discontinued.such as a custom er. ~fie ld containi ng a voice sample to authorize . and so on . E ntity-Relatiumhip \lodding. and relationships are displayed in diamonds.2 Tloc Database llppruacl. and sorted. however.. Designing the Database To be valuabl e.~mple. Each characteristic or quality of a pa rticubr entity is call ed ~n attribute. For example. professor. and stud ents' grad es.

I\'C . CLASS entity class.. ·n. one-lo·m(lli)' (! :M).. such as fee p. . and PROFESSOR .3 Cardinalitp nd modality symbols. (\Ve assume that each course at Ulis university g ro upcdm cntit) cl:t ' isc• In o ur cx. that is. An ul. In a one-to-one(/ :/) relationship. . Clrdln8illy ---1111 ~1 ~~\ . CLASS.1nd th~1 . which are attributes that Jre unique to that instance.1 class is the representatio n of a particular entity.e -nbly .1ho r~gesk·r th~ er c. S tudents regestcr fo r cou rses.mccs can be identified with StudentldentificationNumber.1rkm. Examples of attributes for C LASS arc ClassNa111e.\ IIT . PARKJ C PER.s There .) Note that the rela ti onsh ip line on t he PARKINC PERtvJIT side shows zero o r o ne. a singlc-entil)• m stancc of o ne I}'JX' is related to a singleentil)• instance of ano ther type. a particular STUDENT (James Smythe. th en he o r she will not need a parking ind icates that a stud ent can have a maximum of one pe<mit and a minimum of zero perm its. liT cnhl\ cl. as md1cated in Fig ure 5. as in F igure 5. examples of attributes for STUDENr are StudentName and StudentAddrcoo. STUDEN"I~PARKI NC PERf\ liT as a 1:1 rcbtJo nship.1s one profcs~or-no te "m ll.tl1ty S}1llhol~.m Is ncedl d fo r o ther applicalio ns. that is.+a and 5. These identifiers arc underlined on ER diagrams. and many-to-many.m entity is something that can be identified in th e users' wo rk e nvironment. a car dinality of 1 and a modla1ity of 0. Figure S.~yments.He c. As defined earlie r.lfl rcl.. C/assTimc. (Remember that relationships are no ted by deamo nds o n J< : R deagrams. O n the STUDENT side of the re lationship. a particular cb ss (76890) is an instance of the FIGURE 6.--e-n-tily-.e n h. th e relationsh ip line on the PROFESSOR side shows one and o nly o n e. (Clearly.St::mce of an entil)· ----+1<EI~. . In our example.) The nu mber of entities in a relatio nship constitutes the degree of the rebho mlup Rcl. and PROFESSOR are enhl} cldsses. STUDENT. Therefore. The relationsh ip li ne on the C LASS side sh ows o ne o r many. 145-89-7 123) is an Mandatory Many Optional Many instance of the STU D ENT entity class: a particular parking pem1it (91778) is an instance of the PARKINC PERM IT enti~· class. PARKING PERM IT instances can be identified with Penni/Number.'1 of . · n.\1''1'1'1< o.1tc DcpJrtmc nt of 1\lo to r Vehicles Ent1bes are associated w1th o ne ano the r 111 rcl. why do we need the PARKING PERf\ liT entity class? The reason is that the P:\RKI C PER}. C L. \\hlc h can mclude many entities. oneto-many. p.4.3 il lustrates the cardinality .+a present<. PARKI 'C PER~ IIT. Examples of attribut·cs for PROFESSOR arc l'ro{cssorName .md Pro{cMorDcpartmcnl.1 unl\cr"ty.11le d biiiGI)' rclattOnship. but docs not need to have to have one. C L>\SS instances can be id entified with ClassNumber. The rcbtionsh ip means th. th e relatio nship line on the STUDENT sid e shows o ne and o nly o ne. Entity instances have identifiers (primary keys). a cardinality of I and a modality of I .ebo nsheps o ne-to-one.•gr. C o nsider student r-. Examples of attributes fo r PARKING PERf\ liT are St~tdcntldcntificationNwnbcr and CmType.4a. if a student docs no t h~1ve a car.1 rege strJIIon Jt .) Why is Studentldenhficaho nNumber an attnbutc o f bo th the STUDENT and PARKING PE~\ IIT entil)' classes? That is. STUDENT inst. but each cou rse can have on ly on e professo r. This relation~hip means that a professor can h ave on e or m o re courses.1t a bludcnt t:.lllonsheps.uc entitles. 1 mple. and ClassP/ace.1 g11e n t1pe .un. that is. and a pmlicubr professor (Margaret W ilson . Car<lnallly l~nhll<. a cardinality of 1 and a m odality of 1. STUDE ' three ~pc\ o f ben. and PROFESSOR instances ca n be identified with Profe~orldentificationNumber. The second type of relationship.4 b. on ly one pmking permit ca n be assign ed to o ne student. 115-6 5-7632) is an instance of th e PROFESSOR entity class. l'igm cs 5.4b display Jn entity-rebtionship di. is represented by the C LASSPROFESSOR relationship in Figure mod.1rkmg p erm it.lllllfEJ~ ··· C ll.\SS.lleo nsheps be tween two items . that is. D:ot:o :oml KoooHd cdgc l\ luuagc111c ut next to th e cae ·dieulity symboL Figme 5. Fo r ex.11s foe cxte nul hnh to thl ~t. a cardinality of I\ !any and a modality of I . T1u1s. p. puemts In tim Monde!OI"f S ingle Optional Single example.

is rep resented by t he STUDENTCLA. that is. The third type of relationship. Attributes. a nd a course can have one or more stud ents. M Entitles Can 1:M Relationships A professor can have many classes. Student ~ Parking Permit ' M 1:1 Can have M:M A class can have many students. "!his M:l'vl relationship m eans tha t a stude nt can have o ne or m ore courses.SI• :CTION >. many· fo -m<lll)' (M:M) . a ca rdinality of Many and a m odality of I . . Note that the reb tionsh ip line o n the STUDENT side shows one o r more. Professor (a) ER diagram STUDENT Student ldentlftcatlon Number Student Name Student Address PARKING PERMIT Penni! Number Student Identification Number Car Type Keyfleld CLASS Class Number Class Name Class Time Class Place PROFESSOR Professor ldenlincaUon Number Proletsor Name Professor Department (b) Entitles. and Identifiers FIGURE 5.4 Entity-relationship diagram model. A student can have many classes. ).o ba. a cardina lity o f Many and a m od ality of l. Can have lllf~£111. the relationship line of the CLA. A parking permit can have only 1 student. . Class Key A class can have only 1 professor. Furthe r.4a . tha t is.SS side sh ows one o r m ore.c i\ppruado A student can have only 1 parking permit.SS relationship in Figure 5.2 Tloc Dat:.

usua lly called a flat file -that contains all of the records and attributes. and Ben Vlilson. )on e Lee.especially accounting and linoncial data-traditionolly were organized into sim ple tables consisting of columns and rows. Each of these t:1 bles contains records. T he relational d:ot:~hase m odel is based on th e concept of two-dim ensional tables. T his process und erscores th e importance of taking all users into account when designing organi zationa l databases. and attributes. managing secur ity and user access. the hierarch ical and network models-a re the responsibility of th e MIS F unction and are not used by organizational employees. O ther database m odels-for example. What is a data model? 2. Popular examples of rebtional datalx1ses are Microsoft® Access and O racl e. delete. a database managem ent system (DBMS) is a set of programs that prO\~ de users with tools to . Because large-scal e databases may be composed of many interrelated tabl es. John Jones. Instead. Attributes of the entity are stu. m odi fy. Despite these fe<ltures. What is an entity? An attribute? 5. What is a primary key? A secondary key? 3 . Stella Z ubnicki. T he uniqueness of the primary key tells th e DBI'VIS which records are joined with others in related tables. a relational d:1tabc1sc is usually designed with a number of related tables. O f course.llll!f~l'~JI C ll i\1' '1'1. but we focu s on the relational da tabase model because it is popular . Su ch a design wou ld entail far too much d. Juan Rodriguez. gmde point managem ent systems. your university's data base m ainta ins much m ore data on you than our example indicates. before you go on. In addition .lta redundan cy. this m odel has som e disadvantages. Tables allow people to compare information quickly by row or column . . however.3 Database Management Systerns As you saw earlier.1lled students. Notice that all entities an d relationships in our example are labeled in te rms th at users ca n und ersta nd. items arc easy to retrieve by finding t he point of intersection of. In fact . Now that you understand how a <lata base is designed.1dd. it probably keeps hundreds of attributes on each student.JJ~1 1. and analyze data stored in o ne location . The rows are the records on Sally Adams..mel easy to use. access.:1{ 5 Data ami Knuwlcclgc i\ lunagcnoc nt Entity-relationship modeling is va luable bec<1use it allows database d esigners to commnni C<ltc with users th roughout the orga nization to ensure th at all possible entities and the relationships am ong t hem m e represented. An organization can access the data by using query and reporting tools that are part of the DBMS or by using applica tion programs specifically written to access the cbta.. DBIV!Ss also provid e the m echanisms for maintaining the integrity of stored data . they must be carefully managed . particubr row and column . Consid er th e re lational database example about stud ents diagrammed in Figure 5. which are listed in columns. T his feature allows users great Aexibility in th e va riety of queries th ey can make.5. Because data bases and DBMSs are essential to all areas of business. the overall design can be complex and therefore have slow search and access times.d ent name. which are listed in rows. A relational database generally is not on e big table . Kevin Durh am. T here are a number of different database architectures. ' n1e table contains data about the entity c. and gwduation delle. and recovering infonnation if the system fails. you ca n tum your attention to datab. T hese related t ables can be joined when they contain common columns. The Relational Database Model l'vlost business dat~. undergraduate major.

An oth er way to fi nd information in a database is to use query by example (QBF.1gine that a univers ity wants to know the nam es of students who will graduate cum bude -but not magna or summa cum laud e. Th e SQL query would return John Jo nes and Jmn R odriguez. data dictionaries provid e . the data dictionary defines th e appropriate format fo r entering the data into th e data base. Typical key words are SELECT (to specify a desire d attribute). and va lid values. T h e university IS st.laooa!.5 Student database example.m SQL sM em cn t ·ade Point Average su c h as: SE LI~CT S tud ent Name. dates). WIIERE C o > 3.1 ff would query th e stud en t relati onal database with . !'ROM Stud ent Da tabase.S J•:CTI ON 5. Th e data dictionary provid es information on each attribute. im. and which busin ess functions. Conducting queries in this man ner is simpler than keying in SQL commands.CIIoc nt Systcuos IIEEf. alphanumeric. whether it is a key or part of a key. SQ L allows people to perform co mpli ca ted searches by using rel atively simple statem ents or key words. Data Didionary Wh en a relationa l m odel is created. such as its name. and reports use the attribute. To understand how SQL works. Data dictionaries can also specify how often the attribute should be updated. Data dictionaries provide many advantages to the organiz<1tion . and WHERE (to specify conditions to apply in the query). the user fills out a grid or template.).in May 2012.60. St·ruc tmc d que ry language (SQ L) is the m ost popular qu ery bnguagc used for this purpose. also known as a form. Users can construct a query quickly and easily by using drag-and-drop features in a DBMS su ch as M icrosoft Access.. to construct a sample or description of the data he or she wamts.:ll:lgt•:-. In QBE. they reduce the chances tha t the sam e attribute will b e used in different applications under a different name. Because they provide na mes and standard definiti ons for all attributes. forms. Requ esting in fo rm<> tion is th e m ost commonly performed d<> t<Jbase operation.40 and G rade Po int Average < 3. U ut·n l. the type of data expected (e.c~~~··· FIGURE 5 .. In a ddition. applications. numeric.g.3 Dahobasc 1 \. FRO{V/ (to specify the tab!~ to be used).:lll!. why it is n eeded in the database.

and how many of each pa rt.7a.. you want to eliminate repeating groups to create normalized ta bles. and CUSTO. PAR. (T he O RDER . S UPY PLIE R. T hese m ultiple rows for an O rde r are called repealing groups. to fully n ormalize th e data in this example. As an example of normalization. consider the first column in Figure 5.) But.7a) and ORDEREDPARTS :md PART (Figure 5. m aximum dat<l integrity.ess (Hon Nonnllllzed Relotbn.llll!f~&~ · ·· C ll i\1''1'1•:1 { 5 Data ami Knuwlcclgc ~ l uuagcmcnt organiza tions with an inventory of th eir data resources.6). SUPPLIER. When data are 1/0I'IIICiiized. as well as the name and address of each S UPPLI ER.lhlb<•se to its m ost stream lined form for minirmm1 red~mdancy. This column contains multiple entries for each O rder -four rows for O rder ll .8. Each of these relations describes a single en tity. tJ Micr03of1 At. PART. SUPPLIER. T here cc111 be ma ny PARTS in an O RDER. illustrated in Figure 5.7b). In this exam ple. consid er an autom otive repair garage. are in a particular ord er (see Figure 5.6 (labeled Order). Figure 5. and price of each PA RT needed to complete the O RDER. In a n onnorm alized relation cal!led ORDER (see Figure 5. <Jnd CUSTOMER arc entities. called ORDERED-P ARTS. This process Norm:1hzatwn. T he n ormalization process. six rows for O rd er 12.6 also h as multiple entities: ORDE R. breaks down the relation O RDE R into sma ller relations: ORDE R. ou m ight think that four entiti es would m ean four n ormalized tables.c. you must create an extra table. For a relati onal dc 1tabase managem ent system to be effective. each O RDE R would have to repeat the name. attributes in the bble depend only on th e primary key. and so on.T.1rs need to be rep<1 ired . Normt~liz:~tion is a m ethod for redu cing a reh1tional cl.tlly scru tinized to eliminate redundant da ta elem ents. This table indicates which parts.7b. For example. This business takes orders fro m customc1 ·s whose c. enabling th em to manage those resources m ore effectively. . T his relation contains repeating groups and describes multiple entities. th e data must be careli.'v/ER \. each containing only one entity. a nd C UST OME R tables are displayed in Figure 5. but each PA RT can com e from only one S UPPLIER.Vhen you normalize the data. c 111d optima l processing performa nce. O HDER. and CUSTOMER (F igure 5.6 Nonnormalized relation . description. SUPPLIER. Ttlble) ~~~ FIGURE 5 .7b). and the PART table is displayed in Figure 5.

(• ) Order. (b) O rdered Parts. 415 75 225 I:Q 175 495 17 15 17 15 15 2t 15 19 Roor bu'llptr RQar wnd•h: eki SED Roof. Part._15 __ WindshoeldWif\25 17 (b) FIGURE 5 .ojil Hood Lofl sode porel Rocblc. Customer. Supplier. ...p•n• Tool~ R ghl lldt paot I:Q lr.S I~CTI ON 5.<l 65 15 15 17 Trunk I·~ ---.&1 Groll Hood l.7 Smaller relationships broken down from the nonnormal relations.3 !J Microsoft Atc~s Daho b•se 1\lanagem c:-nt Spt cms ll[lf~f~···· ~ ~~ Chromt tUICOJ Frons Vwin~~tti 59J 19 Gas c•p ____.

O rder 'Iota!. lYfl" •qM. The n ormalized rebtions can produce the order in the following n1anner (see Figure 5. Further .8). because da1<1bases typically process data in real time (or near real time). The S UPPLIER relation provides the Supp lier Name and Supplier Address to O RDER.8). However. Delivery Date. • • • • Th e O RDER rebti on provides the O rder Number (the p rima1 y key). However. • • • • • Databases in Action It is safe to say that almost all organizations have one or m ore databases.:1{ 5 Data ami Knuwlcclgc i\ lunagcnoc nt FIGURE 5. Unit Price. For example. and C ustom er Number. T herefore. The PART relation supplies th e P. O rgan izations im plem ent databases to manage their data efficiently and effectively.8). T he O RDERii:D-PARTS relation suppli es th e N umber of P<li'IS information to ORDER.8).8). th e Part N umbe r component of th e prima o y key provides a link to the PART rebtion (the link numbered 2 in Figure 5.8 How nonm1lized rel<ltions produce the order. IT's About Business 5. and it eliminates repeating groups. consider an ord er at the automobile repair shop. not all databases turn o ut successfully. th ere are num erous in teresting database applicati ons. with poor results.unrCJ~ t. T he C ustom er Number in O RDER providles a link to the CUSTOMER relation (the link numbered 4 in Figure 5. T he prinmy key of the ORDER relation (O rder Number) provid es a link to the ORDERED-PARTS relation (the link numbered I in Figure 5.2 illustrates how the Mexican government mandated a nation wid e database.ll't Description . T he CUSTOME R relation supplies the C ustom er Name and Custom er Address to ORDER.~ • • ! )( 0 Which order belongs to which customer is con ceptually simpler. The Supplier Number in the PART relation provides a link to the SUPPLIER relation (th e link numbered 3 in Figm e 5.•••llf~J~~~~ C ll i\1' '1'1. and Supplier Nu mber to O RDER.. The prima ry key of the O RDERED-PARTS relation is a composite key that consists of O rd er Number and Part Number.1tc. O rder D. it is n ot practica l .

Questions 1. May 14. o rg anizatio ns h :1ve d evel oped data w:n ch o uscs and c bta marts. a separate entity. a Scream. 68 million cell pho nes were regist ered at the e nd of 201o.4 Data Warclwmcs and Daho 1\ lart. Booth. You will le arn about data wareh ouses in th e n ext secti on . dates of b irth.4 D ata ' Varehouses and Data Marts Today. By April 201 o. numbers. April 26. the newspaper El Universal sent a reporter to the b lack m arket bazaar in Mexico City known as Teplto. Lacy. The government's goals were laudable. the m ost successful companies . In which extortiOnists phone victims to claim-falsely-that a spouse or a child has just been kidnapped. addresses. Miller.1re those that can respond quickly and flexibly to market changes and opportunities. " Mexico: A Pho ne Call. but 17 million remain unlisted. handguns. " Mexico Tries to Tackle 'Virtual Kidnapping'. . 2010. for example. 2010: M. many Mexicans mocked the government. A lthough the government presented this plan as a strategy to protect citizens. April 23.000.11n ple. prominent politicians. In 2010 the Mexican government ordered all the owners of cell pho nes In the cour1try to register their registry database is completely useless. The fake kidnapping calls are often accompanied by the mutfled sound of someone whimpering In fear or pleading for help. Let's look at an ex.JJ~t 1. It generated a mass protest. These protests have continued despite threats of service interruption. w." CBS News. and 70 cell phones from Inmates. By elimInating cellular an onymity. before you go on. What are the advantages and disadvantages of relational databases? 2. a person could buy the complete data set for every registered voter In Mexico-names. December 11. the mobile.000 mobile phones were registered to President Felipe Calder6n. If yo u were a government official.' hot-Informations. After all. What types of problems did the cell pho ne database experience? Why did It experience these proble ms? 2. Miller. to allow users access to the dat. and because the data they d id submit could not be authenticat ed. Accord ing to the Mexican Federal Telecommunicatio ns Commission . The government planned to put all this Information Into a massive database. and law enforce ment officials. In a raid on a state prison In Jallsco. authorities seized assaun rifles. 2010.1bases. Because so many Mexicans have declined to give their personal Information . and a Plea for Help. 2010. The vendors In Tepito claimed that their best customers Included organized crime fig ures and pollee agents. 'Wary Mexicans Shun Cell- phone Database Meant to Bolster Security." The New York Times. blogspot. What are the benefits of data dictionaries? 3. IIEEfN~···· G L essons [about business] 5. M. ~~* To combat organized crime. and Social Security numbers. They assume that any personallnform~tlnn th<>y g lvA to th<> gnvArnm<>nt w ill flow Into thA h• nrls of the very criminals whom the new law see ks to foil. "Exploiting Real Fears with 'VIrtual Kldnapplngs'. Millions of Mexicans are refusing to submit their personal data because they simply do n ot trust their government. 5. which ena ble users to access data for decision making. he found th at for $ 12. They then demand Instant payment. 2008. registering their mobile phones under the names of celebrities. and addresses. A k ey to this r esponse is th e effective and efficient u se of data ancl information by analysts and managers. Mexican prisons frequently serve as call centers for the extortio nists. by w ire transfer or access to a bank account.' The Washington Post. There.2 A Database for Cell Phone Owners in Mexico As the government triad to convince cltl zens to register their cell pho nes. Describe how structured q uery lang ua ge works. The cha llen ge is to provide users w ith access to corporate data so they can analyze the data to make better decisio ns. the cb 1<1 will change wh i le th e user is looking at them l l o over com e this pr obl em . driver's licenses. M. how would you protect your citizens who registered for the database? Sourr:es: Complied from "Virtual KkJnapplng-Be Careful. more than 5. In May 2010.S I •:CTION 5. w ho operate In complicity with guards who provide phones and reportedly take a commission. As acts of protest. the authorities promised to combat the growing problem of virtual• Global Post. Its future remains uncertain.

Describing Data Warehouses and Data Marts In general. A data warehouse is a re pository of histo rical data that are organized by subject to support decision makers in the orgmnization. where business transactions ore p rocessed online as soon as they occur. a wa reho use or mart can store years of data. if she needed to know the trend in the profit mmgins o n used books over the last I 0 years. o r QBF. Unlike transactiona l systems. they are used plimarily by large companies. but thro ugh IT-controlled load processes rath er than by users. I lowe ver. data wareho uses < l11d cbta marts. technologies. <md accounts receivabl e. ·ganiza tional d<Jtabases nrc o riented toward Use online analytica l processing.a11iza lioll 01 a st1aleg. Fourth . ana lyze. and the extra processing is eliminated because data already in the dat:a wa reh ouse are not updated. T hat is. Because data wa rehouses are so expensive. g ro ups that need a single o r a few Bl <~pplic<~tions require only a data mart rather than a data warehouse. Data are collected from multiple systems and are integrated around subjects. o1 handling transactions. and region) . scaled-down version of a data wa reh ouse that is design ed for the enduser 11eeJs ill a SJ ll >JII o1 g. data b:1 ses use onli11e tramaction f>rocessillg (O LTP) . and qu ery data .i<. You will learn abo ut th ese tools in C hapter 12. Nonvolatile. transactiona I databases are desig ned to access a single record at a time. Third . 1l1erefore. th ey support local ~·a ther th<m central control by confening power o n the using g roup . Companies are using a variety of tools with data warehouses and data marts to make it easier and faster for users to access. whic h maintain only recent data (such as for the last day. she COl1ld o btain that informati on fro m her database. Second . using SQI. TI1is arrangem ent is different from transactiona l systems. This u pda ting 1 ·eq uires extra processing. Fo r example. inventory control. whe re data are organized by business process. Wareh ouses and marts are updated.llll!f!J~ : II C ll i\1' '1'1. meaning that only IT professionals can change o r update the data . and lo ng-term relationships. A data mart is a low-cost. This exa mple illustrates se1•eral reasons wh y organizations are buildi ng data wa rehouses and/or data rn arts. Data warehouses and data marts are nonvobtile. wh ich arc desig ne d to support decision makers r. th e booksto re's data bases ha ve th e necessary informa ti on to < m swer the manager's query. Typically. which is critical for h end analysis. In contra st . but this inform:1tion is not orgnnized in a way that makes it easy for her to find what she n eeds. Further. business intelligen ce is a broad category of applications. such as order entry. Da ta arc o rg<mizcd by subject (fo r exampl e. As you will see in C hapter 12. week.t-\P) involves the analysis of accumulated data by end users. accessing. Time variant. o r m onth). Typically. the organization 's databases are designed to process mill ions of transactions per day. Data marts can be impleme nted more quickly than data warehouses.: busi11 ess ullit (SBU) o1 · a J ep<~1l111t!11 l ill a h11ge o rganization . custo m er data can be extracted from interna l (and externa I) system s and integ rated around a custom er identifier to create a comprehensive view of the customer. Consequently.:1{ 5 Data ami Knuwlcclgc i\ lunagcnoc nt If the manager of a local bookstore wanted to know the profit margin o n used books at her sto re. produ ct. use online analytical processing. Integrated. deviations from tre nds. . and processes fo r gathering. The basic characteristics of data wareho uses and data marts include : Organized by bus iness dimens ion or s ubject. price ~eve!. Da ta wa reho uses and dnta marts me rendo nly.1thcr than OLTP. storing. by custom er.. which are critical to a successful Internet-based business operation . Dat a wareho uses are design ed to access large groups of rebted records. she would have a very difficult query to construct in eith er program. complicated queries might take a long time to answer and also mig ht·degrade th e perfo rmance of th e d<1tabases. transa ctio nal databases are design ed to be upd< ltcd. vend or. ll1e objectives are speed and effi ciency. often in less th <m 90 < b ys. and analyzing data to h elp business users make better decisions. Data warehouses and data marts maintain h istorical data. data warehouses and data marts support business intelligence (B I) applications. Compani es need historica l data to detect trends. Online analytical processing (O L. First. the warehouse o r mart refl ects history.

9 illustrates a generic data warehouse/data mart environment. Ifyou look ahead briefly to F 1 gure 5. \J Url·e ::-. The da ta SOURCE SYSTEMS DATA INTEGRATION STORING DATA USERS FIGURE 5. and time period.. This analysis is intu iti. and 2011 . Da ta integration techn ology and processes that are needed to prepare the data for use. . this pain leads to informa tion requirements. Different tools and applications for the variety of users (you will learn about these tools and applications in Chapter 12). Diffe rent architectures for stormg data in a n orgamza tion's data warehouse or data marts. data warehouses and marts store data in a multidimensional structure. Users can .4 Data Ware h ouses and D•t• Marts lll]f~AD · 1111 Multidimensional. and th e time period dimension is composed of 2009. In contrast.. (i.. Let's drill dO\m into the component parts. which consists of more than two dimensions. busmess need) that motivates the development of Bl capabilities in a finn. and Central. Recall that relational databases store cbta in two-dimensional tables.1 warehouse fmmewolk. The data in data warehouses and marts are organized by business dimensions.S I•:CTION 5. da ta quality. \\'or king b.ew and analyze data from the perspective of these business dimensions.~kill!>.·e because the dimensions are defined in business terms tha t users can eas1ly understand. ll1ese subjects represent the edges of the data cube. which are subjects such as product. A common representation for th is structure is the data cube. Figure 5.9 Oat. and source system data requiremen ts. 131 applica tions.. 20 10.1ckwards.e. and washers. and gO\·ernan ce processes must be in place to ensure that the warehouse or mart meets its purposes.11 for an example of a data cube. A Generic Data Warehouse Environment The environment for data wa rehouses and marts includes the following: • • • • • Source systems that provide data to the warehouse or mart. screws. the geographic area dimension is composed of East. geographic area. you will see that the product dimension is composed of nuts. West. There is typically some "organizationa l pain . 1\·letadata. bolts.

\• demographic data).10a. l O FIGURE 5. O rga nizations ha ve access to a variety of source systems: operational/transactional systems.: < :::a I 110 (b) Nuts Scre~s Bots Washers 2010 ~East West 50 60 40 70 80 Scre~s 90 120 140 20 10 30 CentraI 100 Nuts (c) Bois Washers 2009 .10 Relational databases. and Central-for the previous three years. 2010.s Botts Washers 2 20 g.llll~f~l~tll C II AP' I'I. The current t rend is to include more types of data (e. hierarchical) .•~---. and 20 ] ]. requiremen ts may involve only a single source system .. To differentiate between relational databases and mu ltidim ensional data warehouses and marts. A common source for the data in data warehouses is the compan y's operationa I databases.ll.R 5 Data and Knowledge Manageme nt (a) 2009 Product Nuts Nuts Region East West Central East West central East West Central East West Central Sales 50 60 100 40 70 80 90 120 140 20 10 30 (b) 20 10 Product Nuts Region East West Central East West Central East West Central East West Central Sales 60 70 110 50 80 90 100 130 150 30 20 40 (c) 2011 Product Nuts Region East West Central East West Central East West Central East West Central Sales 70 80 120 60 90 100 110 140 160 40 30 50 I Nuts Screws Screws Screws Boks I I I Nuts Nuts Screws Screws Screws Bolts I I I Nuts Nuts Screws Screws Screws Bolts I I I I Boks Botts Washers Washers Washers I I I Bolts Bolts Washers Washers Washers I I I I Bolts Bons Washers Washers Washers I I FIGURE 5.g. as in the case of an enterprisewid e data warehouse. screws. IBI\.1.East.. third -pa rty data (e .111is matrix a yo u represents sales dimensioned by products and regions and year. these data would be represented by a three-dimensional matr ix (or data cube). Veb site data . as in the case of a data mart. which can be relational databases.2009. th ese sales data would appear like Figures 5.11 Data cube.g. O ra cle) and store data in different formats (e.. East 70 80 60 90 110 140 40 30 ::::a East West Central 50 60 100 40 70 80 90 120 140 20 10 30 (a) I 120 100 160 50 Nuts Scre~s Bois Washers 2011 60 70 50 80 90 100 130 150 30 20 40 / 20 11 East Nuts Screv.. These source syste ms often use different software p<l ckages (e. In a multidimensional database. West. and washers. as displayed in Figure 5. and c. bolts. relational. b. suppose your company ha s four products-nuts. and m ore .g.g. customer enterprise resource planning (ERP) systems. Notice that in Fig ure ) .. sensing data from RF'ID tags). or hundreds of source systems.that have been sold in three territories . ln a relational database.

and are poorly documented .t Warehouses and Data Marts IIIJ£~fllll can see sales only for 2009. b. 1Ob and 5. and c displa y the equivalence between th ese relational and multidimensional data bases. l'vlany source systems that have been in use for years contain "bad data" .4 Dat. data-profiling softwa re should Product Nuts Region East West Central East West Central East West Central East West Central Sal es FIGURE 5. As a result. 12a. Figures 5.12 Equivalence between relational and multidi· mensional <l1ta bases. l0c. Sales for 20 lO and 2011 are presented in Figures 5. missing or incorrect data . 50 60 100 40 70 80 90 120 140 20 10 30 2009 Central West I Nuts I Nuts Screws Screws Screws Bolts I I East 50 40 90 20 60 70 120 10 I I Bolts Bolts Washers washers Washers 100 Nuts 80 Screws 140 Bolts 30 Washers I (a) 2009 Product Nuts Region East West Central East West Central East West Central East West Central Sales 60 70 110 50 80 90 100 130 150 30 20 40 20 10 West I Nuts Nuts Screws Screws Screws Bolts I I I East 60 50 100 30 70 80 130 20 I I Bolts Bolts Washers Washers Washers I I Central 110 90 150 40 (b) 20 10 Nuts Screws Bolts Washers Product Nuts Region East West Central East West Central East West Central East West Central Sal es 70 80 120 60 90 100 11 0 140 160 40 West I Nuts Nuts Screws Screws Screws Bolts I I I East 70 60 11 0 40 80 90 140 30 I I Bolts Bolts Washers Washers Washers I I 20 11 Central 120 10 0 160 50 (c) 2011 Nuts Screws Bolts Washers 30 50 . respectively.for example.S I\CT IO 5.

T he systems for these touchpoints . it might require format c hanges to the dab . but the term data integration is increasingly being used because of the growing number of ways that source system data can be as an example. Data [ntegr:ttion. say.. M~my companies have moved to rea !-tim e (bta warehousing where dab are m oved.1t< their warehouses. in some cases. For example. As th e data are integrated. D11 ta-c:-le. and load them into a data mart or warehouse. Instead. direct contact. Another architecture is indepe11dent data marts. such as in marketing or finance. Most companies ultima tely use commerci<~l software.IIII!Flf~jl C ll i\1''1'1':1{ 5 Data and Knuwlcclgc ~ l uuagcmcnt be used at the beginning of a data warehousing project to evaluate the data .th e numerous ways th at organizations interact with customers. it is necessary to integrate th e data From the va rious source systems in a data mart or warehouse. are daily sales figures adequate.g. such as <>mail. without data marts. Data-profiling software has many capabilities. ide ntifying possible prim:1ry keys. T he p eriod oftime during which new data are load ed into the wa rehouse o r m art is known 1 in as th e ''load window. For example. Unfortunately. they may have inconsistent data de finitions (su ch as whether a particular . Al though they typica lly m eet the needs of a small organi zation or a department in a large organization.. In these cases th e organiza ti on shou ld select the best system as the source. For exa mple.msing softwa re may be used to "clean up" th e data.. Storing the Data There a re <1 vari ety of possible architectures to store d ecision-support data.e. so that queries c. Th is is a very application-centric approach to storing data. th e level of detail) the data need to be. T11is is the approach taken with customer data to create a 360-degree view of all interactions with customers (discussed in C hapter ll). SQL queries) or by comm ercial data-integration softw<1re. for the sa m e custome r) . to map and schedule the m ovem ent of the d<1ta to the t mget (e. T his softwa re m<1kes it relatively easy to specify the appropriate tables and attributes in the source system s. within 15 minutes of a purchase at Walmart. t his process is often call ed ETL. For exam ple. bank online.1ibble for a nalysis. or are data at the individual ln msacti on level needed? The convenlional wisdom is th at data :1 re best st ored al" h ighly gmnubr level because th ey are likely to be requested at some point.. and use othe r services. E LT rath er than ETL). Data integration can involve other kinds of transfor mations. Data extraction can be performed by hand-written code (e.g. 1 n usc th e summaries rath er th11n recadcubte th em each time. For example.. the details of the s<1 le have been stored in a wa reh ouse and me av. use an ATM. column 3 = column I + column 2) are calculated. on salcs figures. and then transform ed (i. C ustom ers may go to a branch. and ultimately to load th e d<1ta. t o m<1ke the required transformations. th ey do not take an enter prisewid e approach to data managem ent. take out a C<H loan. and th e teleph one-are typically sep ~Hate. For example. various units create in depend ent data marts through out the organization ." This wind ow is getting smaller as companies demand ever fresher d.. transform them. th e Web. Oth cT issliCS rebtcd to source systems must be addressed. and revealing how derived va lues (e. wh ich store data for a singl e or a few applications.g.g. s uch as providing statistics on missing data . a data mmt or warehouse). u sing data-integration p rocesses.g.e. In order to ana lyze and fully und erstand how customers are using th e b~mk. such as a custom er identification number.. Subject area database specialists (e. It is necessary to extract data from source systems. as opposed to 0 and 1 or M and F. in which the data in th e wa rehou se are accessed by all users and are the single version of the tmth . O rganizations must also decide how granubr (i. The m ost comm on arch itecture is one central enterprise data warehouse. Independent data marts are not very effective in large organizations. loaded into a mart or warehouse. these marts often contain inconsistent data . Limited thoug ht is given as to how the data might be used for oth er applications and throughout the organization . Aggregations may be perform ed. th e data are extracted. Consequently. data from different systems may be integrated around a comm on key. they are also transform ed to make them m ore useful. from source system s to the warehouse or mart alm ost immedi<~tely.ost organizations use this approach . l'vl. such as eliminating duplicate records (e. such as using i\1/a/e and Female to denote gender . Organizations often have multiple syst ems th:~t contain the same cbta. ma rketing. L et's use a b. human resources) can also help in understanding and accessing the data in source systems.

inclu ding IT developers. long-term solu tion is to im prove the quality at th e source system level. m any of th e zip cod<:s were foun d to be 99999. meaning that they primarily create information for others. all oca te resources. In addition to storing vast amounts of data in warehou ses and marts. 'lo implemen t this strategy. format appropri. then the data will n ot be trusted and u ltimately will n ot be used. Finally. The stan dard strategy was simply to enter ·'99999. Data about data are refen ed to as m etadata. m odern organizations need to mainta in data about that data . To accomplish this goal. IT personnel n eed information about data sources. Although independent data marts are an organiza tional reality. analysts." A s hort-term solution to this problem was to condu ct the m arketing campaign using city an d state dat<l. database. They p rovide faster response tim es to queries .S I• :C'I'ION 5. S till anoth er data wa rehouse ar chitecture is the hub and spoke. Lessons FailuJ3s Usen. F'or < 111 organiZ<lti on to ensure tha tr Bl is meeting its needs. a nd ensure thc1 t th e business and Bl strategies are in alignm ent. O nce the data are stored in a data mart or wa reh ouse.o in . C ompanies with effective Bl governance oiten create a senio r-leve l committee m ade up of '~ce preside nts and directors wh o prioritize projects. . the data in the marts are still the single version o f the truth for decisionsupport purposes. Users' needs include data definitions.mel control B l activities. conside r the case of a large h otel chain that wanted to con duct targeted marketing prom otions using zip code data coll ected when guests check in. ' fnere are a large number of potential Bl users. ]ways entered. custome rs. a nd processes be in place. everything else we discussed constitutes creating Bl infrostructure. When the data were <111<1 lyzt?d. refresh sch edules.. IT developers .o nd tlpplications. suc h as a custom er address). larger co mpanies have inc reasingly m oved to data ware houses. Because the marts acq·u ire their da t:o from the central repositoo y.4 Data Warc l. table. T he long-term solution was to get mnagers had to the c lerks to en te r the actual zip codes. th e c le rks were not asking customers for their zip codes. If it is n ot.1in t. are in{onrwtion consumers who utilize infon11ation created by others. and h elp desk contact information. com mittees. it m ust practice govemance to pL~n . Both the IT personnel who operate and m anage the data wareh ouse and the users who a ccess the data sto red there need m etadata . These compani es a lso put together a middle-level committee that oversees th e v. Som e of these users are in{om w tion producers. At th is point the process of receiving business value from Bl begins. the ava ilable report/query t ools.nions projects in the Bl portfolio to ensure that they are being completed effectively and e fficien tly. ( !o\ern:lllCC From}t. I-Iow did th is h appcn? Obviously. and suppliers.lte for how th e cb bl will be used. T he quality of the data in the warehouse must be adequate to satisfy users' n eeds. 1\let::Jdata. which the clerks . individual is a pote ntia 1custom er or a current custom er) or use differe111t source systems (which may contain different da ta for the same item . information workers. m anagers and e"Xecutives.. front-line worke rs. and data usage measures. T his architecture stores da ta in a central cb ta wnrehouse while simultaneously m . report distribution information. including managers and executives. the owners of the data must take responsibj]ity for implem enting any necessary changes to both th e dat a and the data-collection system .. All of these committees require the collab oration and contributions of business and IT personnel. th ey can be accessed. Som e of th e data can b e improved through th e u se of data-clea nsing software. th e hotel o toke the responsib ility for cho nging the clerks' beha\·iors to m eet the company's needs.1in ing de pendent data marts that obta in their data from the central repository.mel analysts typically fall into th is category. To illustrate th is point. D:1ta Quality. Most organizations find that tine quality of th e d ata in source syst em s is poor and m ust be improved before the data can be st ored in the data warehouse. lower-level operational committees perfonn tasks such as creating data definitions and id entifYing and solving data p roblems. and column names. and regu cs mod Daho I\ hoots IIJE~k!JII. C ovema nce rccjui res that people. but the better. O th e:r users. but they n eeded to en ter some ''alue in ord er to com plete th e registration process. rn l e depen dent da ta m arts store the dat.

The company also used this Information to direct customers to new games based on their past behavior.. for example: 'Who stayed at least two or three times? " 'Who gamed and who didn't?" "How much did staying In a hotel affect a customer's gaming activity?" The results of these experiments revealed a counterintuitive Insight.' IBM Case Studies." PR Newslvire. The company bases Its competitive strategy on guest relationships created and enhanced by an atmosphere that anticipates guests' needs and exceeds their expectations. Louisiana. operates casinos and associated entertainment and lodging facilities In the United States and overseas. "Isle of Capri Casinos Makes a Sure Bet.isleofcapricasinos. The Isle then added slot machine data to the warehouse. \VIVIV. Mlsslsslppl. Further. Two factors make this strategy possible: a company culture focused on making every guest experience enjoyable. Further. 201O. 2011. the Isle's headquarters were located In Biloxi. Including offers of a free night In a hotel.. November 2. the following year Hurricane Katrina hit the U. th e Isle turned Its attention once again to Implementing the warehouse. one of the largest publicly traded gaming companies In North America. the firm managed Its customer relationship management efforts with a piecemeal direct mall program located In th e casino management system housed at each property. Isle of Capri properties have some 2 mIilion visitors each year.'' Sloan Management A company spokesperson noted that a player who .as well as a property In the Caribbean. this approach did not provide company employees with a complete view of the customer.S. Why was it necessary for The Isle of Capri Casinos to develop a data warehouse? 2. The corporate marketing team can now obtain information and configure campaigns In half the time It took under the old system. The company operates 15 casinos In six states . Can you think of any add ltlonal ways in whlch The Isle can take advantage of ~s data warehouse? Provide specific exampl es. The Isle of Capri faces a marketing challenge because It serves a diverse and geographically dlspersed clientele. In 2006." The goal was for the data warehouse to boost both direct mall and e-mail marketing campaigns. The new system became operational In 2007.Mississippi. Th e Isle of Capri Casinos (www. and a data platform that enables the company's employees to understand their clientele. target Its promotions more precisely.'' Teradata Magazine. February 21. The Isle also Incorporated data concerning Its hotels and slot machines. These data helped the company to determine where high-value players pr~ fer the machines to be located. marketers segmented customers based on the frequency of their visits. W\VIV. With Its data warehouse In place. they play more frequently than hotel guests who live farther away. . As a result. Unfortunately.• • •IJ£~@~·II C II AP'I'I. both the team and the lndlvldual properties can track the results of campaigns more effect ively and even be alerted lmm ~ dlately when a customer redeems a coupon. 2011. Describe the variety of benefits that The Isle realized from Its data warehouse. It then generates Insights by experimenting with a series of segmentations. Missouri. and Florida .isleotcapricaslnos. The company needed to segment customers while at the same time maintaining and bullding an overall brand Image. 400 gaming tables. Gulf Coast.000 slot machines.teradata. The company plans to closely track play activity on slots to enhance Its knowledge of Its customers. Sources: Compiled from L Brockaw.3 The Data Warehouse at the Isle of Capri Casinos visits four times a month requires a much less aggressive Incentive package than one who comes only once a month. 1. The company used this market Intelligence to send out precisely targeted offers that motivated people to visit the casinos and to spend more when they visited. "Harrah's Entertainment. 11. The company began to implement a data warehouse In 2004. which In turn became a factor In determining the number and value of offers the customers received. the company occasionally experienced difficulties recognlzlng regular customers at one property who were well known at another property. no. 3. the casino moved from a system where just a few marketing professionals analyzed data and produced reports. The company shlfted Its focus to recovery efforts. Overall. • oata Warehouse Assessment Services Leads Ameristar Casinos to Select Taradata. 3. the Isle could qulckly and easily Identify a key market and then segment that market. v. March 3. •1n Experiments We Trust: From Intuit to Harrah's Casinos. The company labels guests by th e number of days they stay at a hotel. The properties have a total of roughly hotel rooms. However. 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 Isle utilized this information to develop marketing campaigns that successfully encouraged local customers to stay overnight. Questions 1. Inc . Iowa. Colorado. and 35 restaurants. For example. The Isle then expanded the focus of its data warehousing effort. and It relocated Its headquarters In St. At that time. accessed February 18. Customers who live close to a casino and do not need to stay overnight spend more money when they stay In the hotel.R 5 Data and Knowledge M anagemcnt 8 [about business] 5. 2011. Historically. For example. Louis. 2011. to a system where multiple business users can explore and make sense of the company's wealth of data. and adjust the floor In each casino to optimize revenue and profit.

Intellectual capital (or intellectual assets) is another term for knowledge . relevant. knowledge. usuall y in an unstructured and O racle (www. In the infom1ation technology context. they are dispersed in e-mail. IT's a bout Business 5. Describe the characteristics of a data warehouse. As you learned in C hapter l . must exist in a format that ca n be exchanged among persons. D espite their many benefi ts. Instead. Moreover.JJ~~ 1. information is organized or processed data that are timely and accurate. What are three possible architectures for data warehouses and data marts in an organization? 5. ese bene fits can improve business knowledge. incorporating data from obsolete mainframe systems can be difficult and expensive. \~'hen you register. however. and they did not ensure that knowledge was shared and dispersed in a way that benefited the overall organ ization.ncr. electronic text documents.SI ~CTIO 5. people in one department might be reluctant to share data with oth er departments.5 Knowledge Management As you have seen throughout the book. T his arrangement m<1kes it extremely difficult for companies to access and integrate this knowledge. were not knowledge is information in action. End users can conduct extensive analys is with data in ways that ma y not ha ve been possible before. knowledge is distinct from data and information . a bulletin listing all the courses offe red by your unive rsity during one sem ester would be considered data. and presentati ons on individual computers. Concepts and Definitions Knowledge management (~!) is a process that helps organizations manipulate important knowledge that is part of the organization's mem ory. T he result frequentl y is less-effecti ve dec ision making. Differentiate between data warehouses and data marts. m easurements. For a m ore detailed discussion . visit the Data Wa rehouse Institute (www. data ware houses do have problems. and streamline business processes. Your schedule would be consid ered .3 dem onstrates th e bene fits of data wa rehousing at The Isle of C apri Cas inos. Knowledge is information that is contextual. For an organization to be successful. th ey ca n be very expensi\•e to build and to maintain. Simply put. ·n. Successful managers have al ways used intellectual assets and recognized their value. Finally. 3. before you go on. data and information are critically important organizational assets. First. You ca n read client success stories and case studies at the \~leb sites of vend ors such as NCR Corp. To illuslTate with an example. industry ana lysts estimate that m ost of a company's knowledge assets are not housed in re lational databases. yo u process the data from th e bull etin to crea te your schedule for the semester. (www. enhance customer sen•ice and satisfaction. End users can obtain a consolid ated \~ew of organizational data . Knowledge. Second. Knowledge is a vital asset as well. as a form of capital . and use{ttl. facilitate decision making. These efforts. provi de competiti ve advantage. and sh1tistics. spreadsheets. it must be able to grow.5 Knowledge Managem e nt IIIJFaP~IIII Companies have reported hundreds of successful data-wa rehousing applications. In addition . The bene fits of data warehousing includ e: • • • End users can access needed data quickly and easily via Web browsers because these data are located in one place. data are a collection of facts.

products.IIII~E~ !~ iJI C ll \I''I'ER . Finally. and expedite knowledge mam1gemen t within a single finn and among mu ltiple firms.ISs are intended to help an orga nization cope with turno\·er. organizations must create a knowledge management culture that rewards employees who add their expertise to the knowledge base. !\lost importa ntly. skill sets. Taci t knowledge is generally imprecise and costly to transfer. Historically. Second. and technical knowledge. At the same time. know-how. companies must be willing to im-est in the resources needed to carry out these opera lions. In an organization. The organization can then use this knowledge to train new account managers. explicit knowledge is the knowledge that has been codified (documented ) in a form that can be distributed to others or transfom1ed into a process o r a stra tegy. and the IT infrastructure. it m1ght be diffic ult for the salesperson to put into \\Tiling. Here you will focus on th e distinction between explic it knowledge and tacit knowledge. because it is unstructured. intranets. goals. To encourage this behavior. I. storing. Enhan ced access to best-practice knowledge improves the organization's o\·erall performance. core competenci es of the enterprise. databases. there are challenges to implementing effective Ki\ISs.4 describes a new 1)-pe of on line knowledge management system called Quora. enhance. your desired social schedu le. extranets. employees must be willing to sha re their personaI tacit knowledge. ln fact. strategies. however.-elopment. and old. and reporting explicit knowledge. in contrast to explicit knowledge.\ ISs) refer to the use of modem information techn ologies-the Internet. A salesperson who has worked with particular custo mers over time and h:1s come to know their needs very well would possess syste matize. managing.the most effective and efficient ways of domg things . Other benefits include impro. re ports. There are numerous theories and models that classify d1fferent I)-pes of knowledge. In an organization.·ed customer service. TIHS knowledge is typ ically not recorded. more efficient product de.p]icit knowledge consists of policies. IT s About Busin ess 5. as well as th e organization's prevailing values. trade secrets. understanding. Finally. e>.plk ·md l ·tnt . It IS a lso highly personal. Kno\\1edgc management systems (K. account managers can make available their tacit knowledge abou t how best to handle large accounts. insights. the knowledge base must be continually maintained and updated. 1t is difficult to formalize or codify. management informa tion systems have focused on caph1ring. The implica tion is that knowledge has strong experien tial and rcA ectivc clemen ts that distinguish it from information in a given context. rational. KJ\.readily availabl e to a "-ide range of employees. First.NI0\1 ). It also includes the organizational culture. and improved employee morale and retention. This awareness is contextual and rcle\'a nt (to developing an optimal schedule of classes). tacit knowledge consists of an organization's experiences. In other words. Organizations can rea lize many benefits with Kt\ISs. Unlike information . yom major.·e tacit knowledge. D"t" a nd Kno" lcdgc \ lan:u. Organizations now realize they need to integrate explicit and tacit knowledge 111 formal informa tion systems. as well as useful (it ca n lead to changes in your schedule). tac it knowk-dgc is the cumubth·e store of subjective or experientia I learning. proced ural guides. and downsizing by making the expert1se of the organization's hum<1n ca pital widely accessible . and cha racteristics of different faculty members could be construed as knowledge.crnc nt information. because it can affect the way you build yom schedule. they make best p ractices.. lgl' Explic it kno" ledge dea ls w1th more objecti"e. rapid change. knowledge ca n be exercised to solve a proble m. outdated knowledge must be deleted. F'or example. New lmowledge must be added. Awareness of your work schedule. Knowledge Management Systems The goal of knowledge management is to help an organization make the most effective use of th e knowledge it possesses. which reAects the past and present experiences of the organizatio n's people and processes. and learning. In contrast. exp ertise. . A set of mstructions on how to process a job appli cation that is documented m a firm's human resources policr manual is an example of explicit knowledge.

2. Real names are mandatory. by contrast. and the replies tend to be guesswork offered by people with absolutely no knowledge of the has amazing breadth and scope.accessed May 19. You can also vote "up" answers that you think are helpful and vote "down" Ihose that are not. Provide examples of how Quora can fill In tne gaps In Its knowledge gathering efforts. could a Quora-type ~nowledge management system be used Inside an organizatlcn? Why or why not? Support your answer. Lowman. there are vast areas of knowledge and experience that are still not online. As of that date Quora had not yet earned any revenue. "Why is Quora Exploding?" Forbes. M. the newcomers pushed up other users' answers that were ott th e point and not helpful. On the other end of the "knowledge" spectrum.Adam D'Angelo and Charlie Cheever. you can begin with the page -framed as a question-about getting started on Ouora. though. 2011 : M. so there Is a heavy social cost to acting th e fool. experiential. corrected. which helps when asking about a personal health Issue. •w hat Does Ouo ra Know?" Forbes. Questions 1. hopes to occupy. but their Idiosyncratic style has left their Insights largely difficult to search. knowledge as possible. for example. if Quora c"n fu~lll Its visiongetting experts to engage In conversation and thus generate searchable and authoritative answers to thousands of questionsthen It may someday grab more page views than Wlkipedla by filling in the gaps that no encyclopedia can address. Permitting users to vote an answer up or down helps to push hlgh-quality responses to the top and to push down (If not off the page ent irely) frivolous and poorly conceived posts. The large gap betv11een the two approaches .com.Is the or years. "Ninety percent of th e Information people have Is still In their heads and not on the Web. February 1. Goodson. In Quora's community. the site was flooded with so many new members . Ouora's goal is to capture as much of its members' subjective. "The Mystery Behind Quora. 2011. and follow will show up In your feed.4 Building a Comprehensive Picture of the World has a button that allows users to deem an answer "not helpful" . or you can choose topics to follow so that the Web site can begin serving up queries more suited to your Interests. attracts more than 50 million users In the United States each month. That way.SEC TIO 5. Siegle r. On Quora's Web site. the Q&A Web site created by Yahoo! In 2005. January 11 . you car begin by sifting through random questions that are displayed in the center of th e screen. By creating an environment In whloh members can post and answer questions as well as rate the quality of other users' answers. limited to verifiable fa~ts about discrete nouns. TheOuora site Bostlnnovation. too. Inherent knowledge will construct a comprehensive picture of the world.5 Kno wledge 1\'lanagcm c nt lll!fJi···· G [about business] 5.000 people were visiting the site each month. F blogs have occupied this space. 2011. encourages answers that are thorough and In depth.' TechCrunch. Ouora does allow anonymous posts. Another problem Is that there are large gaps In Quora's knowledge areas.were looking for areas of online behavior In Which consumer demand was well documented but existing solut1 ons were lacking. For example. or responding about your own experience as a fellow sufferer. . Q. can be extensively reworded . You can also start following people.a signal to the Ouora team or to one of the site's 100-plus volunteers that perhaps they should consider deleting lt. by mld-2011 approximately 200. Compare and contrast Quora to an orgar lzatlon's knowledge management system. The one major criticism of Quora that h<s emerged involves declining quality. the most valued rasponses reflect your honest Intelligence and wisdom. let alone searchable. but there is only so much that any encyclopedia. However. the questions they ask. Many Intern et searches are framed as questions. Web sites such as Face book and T witter allow people to descrl be their lives and make personal observations. On such networks. S. April 26. All of your activity shows up In your feed. or tacit. which would be expected given that the site has been in existence only since 2009. Quora has brilliant entries for high-tech startups but almost no entries for Hollywood. Even worse. Rlvlin. Or. Much of the conversation on the Internet takes place In short bursts. everything you write In a uora can be trimmed. In contrast to Facebook. you can find questions that other visitors have already posed.the objective (Merriam-Webster) and the subjective (social networks) .a 500 percent Increase In just one month-that at one point half of Ouora's users had been on the site for two weeks or less. For exampie.quos. can capture within the entirety of human knowledge. it is difficult to separate the Informed opinion from pure speculation. • asserts one expert. Quora's "old hands" complained that the newcomers posed stupid questions. Both D'Angelo and Cheever acknowledge that the average quality of answers on Quora has declined significantly. or otherv~~l se ed ited by one of the site's rigorous volunteers. At any rate. this site cannot satisfy most searches because the questions are often silly. Quora. The co-founders of Quora . 2011. "Quora Sig nups Exploded In Late December. consider that the Merriam-Webster online dictionary (wwwmerrlamwebster. November 18. 2011. The Quora commun lty hopes to attract so many users that their subjective. At the start of 2011 . At the top of the page Is a large search bar.' Two decades after the invention of the World Wide Web. Volunteers often send answers back to their authors marked up with suggested edits. IV\V\V. Questions. January 5. "Does Ouora Really Have All the Answers?'' Wired. Sources: Compiled from G. Ouora Is building a searchable repository of Information while also shaping a community. A prime example Is Web sites devoted to answering questions. 2010. Yahoo! Answers. hJwever. Hardy. Using keywords. However. area that Quora (www quora.

Knowledge is created as people determine new ways of doing things or develop know-how. 2. to obtain finan cia l data on organization s in their industry. 1l1e reason the system is cyclical is th~t knowledge is dynamically refined over time. cn. CafJture /moll'ledge. . N ew knowledge must be identified as valuabl e and be represented in a reasonable way. 3. Som etimes extern~] knowledge is brought in. What's In IT For Me? For the Finance Major Financial managers make extensive use of computerized databases that are external to th e organization . is is where tacit qualities (human insights) must be ca ptured along with explicit facts. 13 The knowledge management system cycle. To accomplish this objective. such as CompuStat or Dow Jon es.13). and provide examples of each type. C reate /wow/edge. New knowledge must be placed in context so that it is actionable. 5. 3.e cycle works as follows: l . if you work for a large CPA company that providles managem ent services or sells kn owledge. They can use th ese data to dete rmine if their organization m eets industry b enchmarks in return on investm ent. cash managem ent. . In addition. you will m ost likely use some of your company's best practices that are stored in a iknowledge base. Useful knowl edge must then be stored in a reasonable format in a knowl edge repository so that oth er m embers of th e organization can access it. Mauage lw. 4. ( \ A functioning KM S follows ~ cycle that consists of six steps (see Figure 5. For the Accounting Major T he accounting function is intimately concerned with keeping tr:~ck of an orga nization's transactions and inte rnal controls. knowledge must be reviewed reguhuly to verify that it is relevant and accurate. Like a library. What is knowledge management? 2. Compare and contrast tacit knowledge and explicit knowledge. 6. Accountants also p lay a role in cost-justifying the c reation of a knowledge base and then auditing its cost-effectiven ess.owledge.. the knowledge must be keptr current. Databases help a ccountants manage th e flood of data in today's organizations so that th ey ca n keep th eir firms in compliance with the standards imposed by Sarbanes-Oxil ey. en. before you go on. anywhere an d anytime. and other financial ratios. FIGURE 5.l.~t 1.IIII!Fll~ : ll C llr\ I' 'J'I-:1{ 5 Data and Kn<>wlcdgc ~ l unagcmcnt The Knowledge Management System Cycle Knowledge Captur :. T he knowledge in < 111 effective KtviS is never fin alized becm1sc th e environment ch ~nges and knowledge mus t be updated to re flect these changes. Refine /mow/edge. Store lmowledge. Dissemina te /wow/edge. Modem databases enable accountants to perform these functions m ore effectively. Identify and describe the six steps In the knowledge management system cycle.. Knowl edge must be made available in a useful format to anyone in the organization who needs it.

race. and manage an y disc rimination grievances or lawsuits brought aga inst the fim1. and after-sale use and maintenance of the product. the vast majority of information and knowledge concerns c ustomers. maintaining. logistics. Human reso urces personnel access these data to provide reports to government agencies reg<Hding compliance with federal equal opportunity guidelines. Databases help th ese manage rs compl y with the law's standards. Marketing manage rs regularly use an organization's knowledge base. customer purchases) to plan targeted marketing campaigns and to eva luate th e success of previous campaign s. and performance evaluations. In many databases and knowledge bases. M IS database administrators standardize d<lta names by using the data dictionary. . including gender. • •• For the Production/Operations Management Major Production/operations personnel access organizational data to determine optimum inventory levels for parts in a production process. and other functions is very va lua ble. For the MIS Major The l'v11S function manages the organization's data as well as the databases. !-Iuman resources rnan<lgers also need to use a knowledge base frequently to find out how past cases were handled . Consistency in how employees are treated not only is important. but it protects the co mpany against lega l actions. production irregularities. This process ensures that all users und erstand which data are stored in the database. Da tabase personnel also help users access needed data and help them generate reports with query tools.5 Knowledge Managem e nt IIEJEDPD•1111 Financial managers. and marketing. Innovative ideas are necessary for improving operati ons and can be supported by knowledge management. age. who produce the organization 's financia l status reports are also closely involved with Sarbanes-Oxley.raluate hiring practices. and using the knowledge system so metimes is the responsibility of the I-IR deparbnent. Also. F'ina lly. Knowledge about customers ca n make th e difference between success and failure . review salary structures. Knowledge management is extremely important for running complex operati ons. Fi1111s also maintain data concerning the quality of finished products as well as quali ty issues regarding incoming raw materials. current and past job descriptions. training for building. For the Human Resources Management Major Organizations keep extensive data on employees. and often th ey participate in its creation .SI ~CTIO 5. I-IR managers also use these data to e. The employees can u se th e databases for help in selecting the optimal mix among these critical choices. Databases help I-IR managers provide assistance to all employees as companies turn over more and more decisions about health care and retirement planning to the employees themselves. shipping and logistics. the HR deparb11ent might be responsible for compensating employees who contribute their knowledge to the knowledge base. maintenance. products. sales. For the Marketing Major Databases help marketing managers access data from the organization 's marketing transactions (for exa mple. Past producti on data enable ))OM personnel to determine the optimum configuration for assembly lines. T he accumulated knowledge regarding scheduling.

4 for a demonstrati on of interpret ing relationships in an ER dia gram . and data across busin ess processes in an organization . • D ata wareh ouses and data marts are nonvola tile-no one ca n change or update th e data . th ey include time as a variable). by custom er. Nonvolatility means that th e wareh ouse or mart reflects history. and timely "sin gle version of the truth" for the company's core master data. Master data managem ent consistently manages dab gathered from across an organization.u ehouse or m art uses a multidimensional data structure.ese data are fre quently stored in nume rous servers and locations and in different computing systems. • Information systems that support particular business processes impose unique requireme nts on data. tables. and human and computer la nguages. price level. data long-term rela tionships. In . Identify the s ix basic characteristics of data warehouses. and synchronize a consistent.. One strategy for implem enting da ta governance is master data ma nagem ent. • Data warehouses and dab marts maintain histo rical data (i. product. ll owcver. • D ata warehouses and data marts use online a nalytical processing (OLAP). deviations. Ide ntify three common cha lle nges in managing data. Demonstrate how to interpret relationships depicted in an entityrelationship diagram. the ana lyses performed by users are intuitive because the dimensions are bbclcd in business terms.. T he bc 1sic chm·acteristics of data warehouses and cbta marts include: • Data are organized by subject (for example. custom er data may be extra cted from internal (and external) system s and integrated aro und a customer id entifier to create a compre hensive view of the customer. 2. an d region). 3. Master data management provid es companies with the ability to store. maintain . and e xplain the a dvantages of data warehouses and data marts to organizatio n s . 3 and 5. . See Figures 5. • Typically the data w.. • D a ta are coll ected from multiple system s an d are integrated around subjects. Relational databases enable people to compare information quickly by row or column.ddilion. 'n1 e database approach minimizes the following p roblems: data redundancy. data secmity. exchange. ·n. and data independence. users can retrieve items by finding th e point of intersection of o p~rticubr row and colu mn. For example . • Da ta com e from multiple som ces. data from multiple sources. Historical data are needed to detect trends. . comm on challenges in managing data are: • D< lta are scattered through out organiza tions and arc coll ected by m any individuals using various m eth ods and devices. data isolation. which is c riti cal for trend anal)~is. accurate.e. databases. formats. ·n. 4. which results in repe tition and conflicts across an organization . data inconsisten cy. making the overall d esign complex with slow search and :1 5. A data wa reh ouse or mart may store years of data . Discuss at least one main advantage and one main disadvantage of re lational databases. OLAP allows users to "drive" th eir own data analyses and to examine data in unique ways to improve job p erformance. la rg~sca le relational dah1b< 1ses can be composed of ma ny interrelated ccess times. and describe one way organizations can address each challenge using data governance. As a result. Name s ix problems that can be minimized by using the database approach.lllll§~~~~·· C ll i\1''1'1•:1 { 5 Data ami Knuwlcclgc ~ l uuagcmcnt [ Summary ] 1. which invol ves th e analysis of accumulated data by end users.

and dissemim1le knowledge. m aximum data integrity. nmm:•liz:ltion A m eth od for analyzing and reducing a relatio n al database to its m ost stream lin ed fo rm for minimum redundancy. select. accurate. m ore e fficient prod uct developm ent. 5.11 . intellectual c:•pital (intellectual assets) Other term s fo r knowledge. query by example (QBE ) Database l anguage that en ables th e user to fill o ut a g rid (fo rm) to construct a sample o r descript ion of the data wanted. business functions. e ntity A person . and the individuals.C haptco · C lo<>:ory Ill§!] ·fill. enhance. em ployee.o . transfer. [ Chapter G lossary ] a ttribute Each characteristic or quality describing a particular entity. m:1 st cr cbta A set of core cbta. knowledge managem ent (KM) A proc ess that helps organizations identifY. place. ~nd 5. refine knowledge. primary key T he ide ntifier field or a !tribute that uniquely id en tities a record.oreho use A repository of historical data that are organized by subject to support decision m akers in the organization. and synch ro nize a consistent . List two main advantages of us ing knowledge management. and tech nica I types of knowI edge. thing. applic~tions. data characteristics that use the data elem ents. 7 . O ther bene fits of knowledge m anagement include improved customer service.lO:o .1sers' activities when they visit a Web site. explicit knowledge The m ore ob jective. and to ma ke these practices readily available to a wide range of em ployees. . bit A binary digit. A functioning KfviS follows a cycle that consistli of six steps: create knowledge. mct:•data Da ta about dat a. cbt:o m ode l D efin ition of the war that data in a DBMS are conceptually stmclured. onaint"in. . geographic location . recm·d A g rouping of logica llr related fields. a 0 o r a 1. byte A group of e ight bits that representli a single chara cter. or a complete nu mber.and interfi rm knowledge m anagement. disseminate. mast er data managem ent A process that p rovides companies with the abil ity to sto re. a n d describe the ste ps in the knowledge m a nage m e nt system cycle . and best processing perform ance. d:ot:o m a rl A low-cost. dn t:o d iction:ory Collectio n of defi nitions of data e lem entli. such as customer. and <1pply infor mation ~nd expe rtise that are part of th e org~nization's m em ory and that typica lly reside with in the organization in an unstructured manner. :ond c. exchange. multidimensional ~Lructure T he manner in which clat. or event about which infonn ation is n1aintainecl in a record. See F ig ures 5. manage knowledge. that is. e ntity-relation ship (ER) m ode ling T he process of d esigning a database by o rganizing data entities to be used and identifYing the relationships amo ng them . b. and so o n th at span th e e nterprise info rma tion systems. G.'Sing pattem s by m o nitoring 1. clickstream data Data collected about user beh avior and b rov.Jt provides access to a database. instance A particu lar en tity within an e ntity class. data w. the most e ffective and efficient ways of doing things.11'e structured in a dat a wareho use so th at th ey can be analyzed by differ ent views o r perspectives.mel c. e ntity classes A grouping of entities of a given type. or in a stra tegic business unit (S BU) or department in a la rge organization . and reports that use the cb ta cl ements. organize. datab:ose m anagem ent system (DB1'viS) T he softwa o ·e prog r<'m (or g roup of progmms) th. scaled-d own version of a dab1 wareh o use desig ned fo r the end-user needs in a small orga nizati on. database A g ro up of logically related files that stores data and the associa lions among them. Demonstrate the use of a multidimensional model to stor e and analyze da ta. vendo r. identifier An attribute that identifies an entity instan ce. best practices T he most effective and efficient ways to do things. e ntity-relation ship (ER) diagram Document tha t sb ows data entities and attributes and relationships among them . which a re called dimensions. ration al. file A grouping of logically related records. and tim ely "sing le \'ersion of the h'uth " for the company's core master data. Org~niza tions can use knowledge m~n~gemcnt to develop best pw ctices. prod uct. d nt:o goven o:oncc An approach to managing information across an entire organization. store knowledge. and improved employee mor<1 lc and ret-ention . field A g rouping of logically related chara cters into a word. capture knowledge. b. knowk·dge m:onagcm ent system s (KJ\II Ss) Informa tion technologies used to systematize. 1 2~ . a sm all g roup of words. and expedite intra.

Each appoinbllent is scheduled with exactly one doctor. desc ription . A bill ca n be Jutstanding. 8 . produ ct purchased. tacit knowledge The cumulative store of subjecti ve or experientia I lea rning. m ailing address. O ne appointment is home. An insurance company ca n have many patients carry their policies. The business rules of this system are the following: A doctor ca n be scheduled for many . or do you ha ve to request paper applications that you must complete and return? 5. but typicall y does not id enti fy the file with complete accuracy. Explain why it is important to capture and manage kn owledge.IIII~G~ · ?.com). Enter the vVeb site of the Ca rb1er C roup (>~nvw. number of uni how? Do the sites require a fee for the information they offer? Would demo<mted to start graphic infotmation be useful to you if you W a new business? If so. Syba se (www. Do th e sites differ in the types of demographic informati on they offe r? If so. 6 . If they are insured. Access the \• Veb sites of severa 1real estate companies. You also wish to record custome r name. Calculate your personal dig ital footprint at www. www. and one bill can be paid off over time by several payments.dice. What is master data managem ent? What does it have to do with high-quality data? 4 . T he Internet contains many We b sites that provide inform ation on financial aid resources for students. com ). secondary key An id entifier field or attribute that has some id enti fying information . and find severa 1 jo b descriptions for a database administrator. [ Problem-Solvi ng A ctiv ities ] 1.R 5 Data and Knowledge M anagemc nt relational database model Da ta m odel based on th e simple concept of tables in ord er to ca pitalize on characteristics of rows and columns of data. You scheduled with exactly one p. and billing address. Find the sites that (l ) take you through a step-by-step process for buyi ng a hom e. 1 ges of relational databases. unit price. One payment is applied to e:c1ctly one bill. Access several of these sites to see what they offer. A patient can schedule one or more appoinhnents. An appointment must generate exactly one bill. 5 . m eaning that it has not been paid at all . D ra w an e ntity-relati onship diagram for a sm all retail store. Explain why master data managem ent is so important in companies that have multiple data sources. Prepare a report on the state of the art.mOll$/er.. Are th e descripti ons s imibr? What are th e sa lari es offered in th ese pos itions? 2 . 7. unit price. [ Disc ussi o n Q uesti ons ] 1. sybase.~~~ C II A P' I'I. (3) provide mor~age and interest rate calculators. Examine their resea rch studies pe rtaining to data managem ent.1tient. but a single payment is made by only one Do you have to register to access the information? Can you apply for financial aid on the sites. Yo u wish to keep track of the product nam e. D raw the enti ty-relationship diagram for this patient appointment system . and (4) offer financing for your must trac k each transaction (sale) in te rms of the date. 2 . .orctcle. and O racle (www. F'o r ]n lients who carry insurance. includ ing \. Explain the difficulties involved in managing data . Access the We b sites of IBM (Mvw. (2) provid e virtual reality tours of hom es in your price range and loca tion .Ve b conn ections. they can carry insurance with only one insurance company. Access various employment Web sites (for exampl e. 9. ic is highly personal and hard to formalize .com and ). tabl e A grouping of logically related records. and a bill is generated by only one appointment. Access several of th ese sites. tax. and total amount of the sale .com/ cligital_ universe. sb·uctured query language (SQL) Popular relational data base language that enables users to perform complica ted searches with relatively simple instructions. Some patients are insured by an insurance company. and th e number of item s of th at produc t so ld to each c ustom er. how and why? 4 .emc. Compare and contra st tac it knowledge and explicit kn owledge. Do the sites require that you register to access th eir services? C an you request that an e-m ail be sent to you when properties in which you might be interested becom e a\'<l ilable? 3 . 7 .gmtner. 'vith each single insurance payment made by exactly one insurance company. O ne patient can m ake many pa yments. but m ay not have any appointmen ts scheduled at all. the insurance company 'villmake payments. What are th e problems associated with poor-qua lity data? 3 . and trace the capabilities of th eir latest data management products. Descri be the adva ntc 6 . It is possible to find m an y Web sites that provide demographic information .

1te ." 'll!e Wo•llingtoll lb>t.[ Te am A ssig nme nts ] 1.ll~ "V on1 odo S•lcl to P•vSISO ~lillion f<>r Stoke In Sou~m: Compiled The Res ults Over tim e.•~re.m ·'l. The cornp." Fo. . 2011 . C.1ttrilmtc. Macke. coolm~ sy~tcms .1ch tc.'" Bfoombtrg Bu•int.1t.1ta modd for a pet store to mclude: • C u. "lk1l Estate hll'e slinG Is All the Rage Aga in . the fedcr.1t1on ther provide. 2009. <~ccessed February 26.1l govcrnmLnt. th e dem ographics of a n eighborhood in Atbnta that a retailer might be consid ering.1ck from the real estate commumtv m the \V. [ Interactive Case ] Analyzing Customer Data for Ruby's Club Co to the Ruby's C lub link at the Studen t Companion web site or \VileyPLUS for information . commerCial real estate brokers d1d not want the buying or selling process to be transparent Brokers soon leamed.1 ch enhl) C reate r. Janua1)' 4..1t mfonn.1t.. and banks. E. from D. CoStar experienced a surge in purchasing from big b.1ses th. T h is informa- tion did not exist until CoStar execut·ed its d<~tabase strategy.:~l e l".Clol. 20 10.:cd <oftware to reduce research time from hours to <ccond s.oostar. D1agra m the relationship between the entities you have lde ntificcl 2 ..l lcs cbt. "Commercial Re.1r resc. "Dill a Strategy Propels CoStar Croup. \~ww. 20 10: "CoSiilf #! ))on the Best 200 Sm<1l1 Este~te..11e the roorn . tom cr d. Andrew Florance fo unding the C o Star C roup.1lues.1 • Product data • Emplop:e d.1shington. • ullh. F'("bruary 25.mks.1t.rn opuJIIons S unply put.. 11le service grew rapidly.1ting . the founde r of the CoStar Croup (www.m) 's team concluded that green properties. and rea l estate listings. [ Closing Ca se CoStar Thrives with Database Strategy ] The Problem In the 1980s.un "'II se lect . ~mel lnstitulion. myriad public records.1 I hs t.nycrs and sellers to search much more productively for relevant infonnation on commercial properties.1ck in the 1r dat~ ?011 . By su bscril::r ing to the service. and create an enhty-relahonsh1p dwgram for the·ed 111 the green building rno1em ent.1t.uWetk."' Forbes.:lahomh1ps bel\1een the cnh he\. You r assignmen t will i nclude working w it h customer data in a spreadshee t and prepa ring it for use within a database. RecentI)'. In !. () C .1ttnhute~ th. igo. October 14.1 • Vendor dal.1 d.. Pebrt"'f)' ! )..1t the Web Sl tes must tr.l.1ho nshrps...Rtsu rg~ net Needs Corpo r. r ea I estate agen ts.c.. clien ts can o btain such inform ation as the vacancy rate in St. ho\\'e~·er. Septe111bcr I J.for examp With m ore than 80. CoStar faced pushb.1b.1bo nt your current internsh ip assign me nt. or the Inte rnet 1\lo1 '1 e Database (ll'<w.roup>.1rget aud1 e nce consisted of blllldmg O\\Tiers. V. Such a compib ttion shonld enable real estate professionals as well as potent inl eventuall)· in every city Ill "h1ch the compJn~ hcg. Questions I D = n be tht proble ms in tht commereul roal ffi ate marl:t t th•tl«< to The Solution Andrew Florance. C oSt ar also provides com preh ensive informa tion on th e revenues gen ernted by buil dings as we ll as th e buildings' asset v.111d with hghts that . He developed dJt.• C reate .lllnvcstors. name the rd. C oSt ar evolved into the largest commercia I l Park A\'enue.1 • Financial d. t.1ta on commercml bmldmgs around the world lntcreshngl\'. iCo (•v-. CoStar's val uable data resource proved to be especially useful ofter the rea l estate market colb psed in the m id-2000s and mmcf3 were d esperate to sell or refinance their commercial properties.xp:mslon to Continue. I' Lery. CoS t.ltmg commercial rea l estate data 111 the W.Hc her~ h.·) for c. cosl<lr.i<llllli. CoStar's core bus iness is to gather and comp1lc huge . that the data could help them get better deals. 2011.mtomahc. 11<1)11« .1 compilation of all th ese different types o f da ta.m onl ine da t~ba~e suc h as AO L tll us1 c {lrttp:llmusic. What:the comm ercial real estate indusby needed was .com). (four or mor.1 • Bu1ldmg dat~ • Other data (spec1~·) • s.Should You Cash In?" Foro.w. cre. . and rental rates for small buildings in Scotland. real estate information firm in the United Stales. ' Discuss the reasoJU why tht ffiablishtd coonmen:ial real estate b rokers felt that th e CoStar C roup wo• • competitive threat.11·e become uwo l.. builchngs with highlr effic1 e nt he. Florance's cb tabases expande d to include details on properties in all 50 states and overseas.unounb of on-the-ground d. data o n comm ercial prop erties were scattered among guidebooks on sales and leasing activity.m com entronJ! bmldmgs. d.000 cl ien ts.l ei. Explore these Wd>' itcs to sec " h.mel the .tOn area .retam muc h more ofthe 1r 1alue th.1lly ~hut ofT " hen people bc~. List the entitles .

Chapter Networks .

Differentiate between the Internet and the 'v\'orld Wide Web. nnd explain how th<lt application supports business hmctions. and discuss the main ad.\PTER OUTLINE ] [ WEB RESOURCES] Define the term computer netv"ork. Describe the differences among the three types of wireline communica tions media. and describe the most common methods for accessing the Internet. Gs • !VIini-lecture by author for each chapter section • Practice quizzes • Flash Cmds for \'Ocnbulary review • Additional "What's in IT for Me?" cases • \'ideo inten ·iews with managers • Lab Manual for Microsoft O ffi ce 2010 • HO\\'-tOAnimations for l icrosoft Office 2010 Wl1at's lnM T For ACCT e..·antages of each 6 6 \\11at Is a Computer Network? Network Fundamentals The Internet and the \Vorld Wide Web Net\\'ork Applications Student Companion Site wile com/col•.[ LEARNI"\G OBJECTIVES ] [ CH./rainer • Student PowcrPoints for note taki ng • Interactive Case: Ruby's Club Assignments • Complete glossmy Wiley Plus All of the nbo.·c and • E-book twc. Identify six major categories of network applications.·antages a nd disad. and compare and contrast the two major types of networks. MKT 7 POM Collaborate project team FIN Integrate inte rnal and Industry HR Deliver onUne ualnlng to employees M IS Implement and manage firm's networks Colaborate with external audttors Coordinate actlvities of sales force financial data .g.. provide an eJmmple of each .

the explosion of streaming vid eo and mobile technologies is beginning to cause problems. To compound this problem ." That bet may not be as safe as it seem s. th e carriers' business models break down in d fee. there are n ow m ore than 50 million smart phone users in the United an d Com cast (niiVw. Und er the current system . analysts expect the revenue per m egabit to fall from 43 cents in 2010 to just 2 cents in 2014.b• ho contrast to power and wa tcr bi lls. which makes network-m onitoring equipment. Cisco Systems (www. At the same time. consumers can send !-kilobyte e-mails or W iltch th e latest 3D -gigabyte m ovie on their IJrge-screcn televisions for the sa me monthly broadb. traffic will increase by 27 percent annually. som e of this traffi c had to be rerouted through Comcast's cables to reach the company's subscribers. lntem et innovati on. to 64 exabytes (I exabyte is I million terabytes) a m onth. Network neutrality is the con cept that Internet service pro.~ders (ISPs) must allow custom ers equal access to content and applications.alt.sandvine.IJ C t/lix.lllllG~\aill C lli\I'Tim 6 Nt:h. T he exchange between the two companies gets to the heart of th e problem : Even if the technology is up to the task of sh ipping huge amounts of data. Those figm es translate into a far lower rchtrn on investm and Com cast in bte November 2010. 'T'h c carders can fii nd ways to in crc01sc th eir capa city. Ultimately. m eaning that carriers will h. The result was a sudden surge in Level 3's will grow by 5 pe rcen t per yea r through 2020. which operates Internet backbone n etworks. NetAix's 16 million subscribe 1s sll eam so many m ovies that the company now . M arket rese<Jrcher lnfonetics (www. Comcast replied that it had n o obligation to bea r the load for free.e. lnfonetics's worstcase scenario is that Internet ba ckbone carriers will cease upgrading their technologies. T he issue is as much a bout econ omics as technology.iuniper. there is n o m eter to monitor high-bandwidth{onetics. Using thjs math.1nd entertainm ent pro.bout NetA ix (www.comcasl. m edia items such as high-de finition mo\~es are magnitudes greater in size. Consider the problem that developed between Level 3 Communications (www. Alth ough th e steady progress of communications technologies has l ed to bandwid th highlights this "revenue-per-bit" problem. Level 3 accused Comcast of charging custom ers exorbitant rates to carry the additional traffic. l'vloreover. a consensus has em erged that a financial crunch is coming . The report predicts that In tern et revenues for ca rriers such as AT&T (www. As traffic soars. it's that technology will make bandwidth faster and cheaper. struck a deal with NetAix to help speed delive1 y of its sb·eaming videos. A Net Neutrality Solution O ne possible solution is net conten ds that Cisco's nu mbers may be conserva tive. In a widely cited estimate. more than 90 percent of Internet tr<~ffic will consist of vid eo. leaving consumers with slow connections and hinderin. by 2014.IShutterstock "TRAFFIC WEB that m eets demand in 2011. as the com pany moves from a DVD-deliveJyservice to an on-dem. many of whom stream vid eo content to th eir phones. Although few industry analysts expect carrie rs to stop investing in new capacity. bttt it will be difficult for them to reap any benefits in terms of revenue. according to San d~ne (www. regardless of . Level 3. no one is sure how to pay for it.we to increase their investments by 20 p ercent per year just to keep up with dem and . He replied: " If th ere's anything you'd want to bet on. T he Internet was built to transmit content such as e-mails and \·V eb pages.1ccotmts for 20 percent of aII Intern et traffi c du ring the typical Am erica n evening. In contrast. when th e total invesh1 1ent n eeded exceeds revenue growth .com) predicted tha t Internet traffic will triple by 2014.~d A study from Juniper Networks (www.urks [The Network The Problem N eurrality Wars] A na lysts 'n e bullish . Th e CEO of NetAix was asked wheth er th e lntem et's infrastructure can withstand the strain as hi s streaming business expa nds.

from "unre:Jsonnblc discrimination" against Web traffic. 2011. "Web Plan Is OividingComp<mies-. j>lans that clip usage at 0. 2010. which frequently are used for piracy and illegal sharing of copyrighted materials. 2010."CNN Mone)'. "'FCC Approves Compromise Net Neutrality Rules. ' n. meaning that In ternet backbone carriers must treat all traffi c equa lly on a lirst-com c. In April 2010.rrent (www.S. .accessed fvlay 3. December 6-12. the compa ny slowed down tnmsmission of Bi(IC. Instea d. propon ents of n etwork neutrality are petitioning Congress to regulate the industry to prevent network providers from adopting strategies like those ofCom cast."' Network World. For example. They nbo n:Jsert thnt n ne utrnl ne two rk e ncourages everyon e to innovnte with o ut pern1ission fr om the ph one and cable C'ompanies o r oth er authorities. Bur!O\'r'S. May 6.but n ot m obile broadband providers. U. 2010. 2011. ''Net Neutrality 20 11: \Vhat Storms May Come. wi reless n etworks have a lready m oved in the direction of these plans.d fi le sharing of copyrighted materia l wns consuming 50 percent of its network Ct1pacity. th e Fed eral Communications Commission ( FCC) ruled t hat C om cast had to stop slowing cl own peer-to-peer traffic . Cor b in. "T he Stmggle fo r What We A lready Have.September4. the battle over network neutrality continues unabated. C. Yerizon filed a lega l appeal challenging th e FCC's authority to enforce these new rules. 20 1 0~ P. In fact. ISPs point to the huge amount of bandwidth th at transmitting pirated conte nt of copyrighted materials over the Internet requires. Aug ust 11 . particu larly the Internet. w• ww. forcing m obile c onsumers to choose between two 1th. The n etwork neuhality battle is important not only for organizations. however.." The New Yolk Tim. C . What We Learned from This Case T h e opening c<1se illustrates the critical importance of n e tworks. they want to be able to charge differentiated pri ces based on th e am ount of bandwidth consumed by th e content being delivered over th e Internet.. In June 2010.."TheNew York Times. but for you as well .In response. competitiveness by decreasing innovation and discouraging capital expenditures for new network technologies. As of mid-2011 . In 2008. ISPs w ill be unable to han dle the exploding d emand for Intern et and wireless data transmission. have n ever expe rienced limits on the am ount of da ta they upload and download. Ante. "'\Viii V ideo Kill the Intemet. "'F CC \Veb Rules Create Pushback. for exam ple. December 30.2 gigabytes and 2 gigabytes per m 01 D espite th e court ruling of April 2010. a federal appeals court ruled in favor of Com cast. K. Nevertheless. Com cast then filed a lawsuit challenging the FCC's authority to enforce network neutrality. declaring that the FCC did not have the authority to regulate how an ISP man ages its network. M iller. prohibiting broadband p roviders from blocking customer access to legal Web content. th e Internet was neutral. The Results Most analysts expect that the heaviest d~ ta consumers cvcnl11a lly will have to pay m ore. T his ruling favored diffe rentiated pricing of transmissions over the Inte rnet and was a blow to net n euh· files. respectively. ."' lmemet Nelt>'S.. Comcast (the United States' second brgcst IS P) rcpo•'l'ccl in 20 10 th<1t illeg. such as access to competing low-cost senrices like Skype and Von age.CAS t·: ••otu ·rlll• the source or nature of th e content. AT&T discontinued its a 11-you-can-use $30 a month data pb n. l bo?"' Bbomberg BusinessWeek.. ISPs contend that m andating n et n eutrality will hind er U. In tl1is scenario. ZOl 0. T hey argue that the risk of censorsh ip increases whe n network providers can selectively block or slow access to certain conte nt. Schatz and S. Further. 2010. however. to organizations and individua ls. A. which kind of Internet u ser are you? Sourres: L. January 21. T e lecommunications and cable compa ni es are not in favor of n et n eutra lity.comrast. Nocera. Meanwhile .ey believe that diffe ren tiated pricing is th e m ost equ itabl e m e thod to fim1nce n ecessary investm ents in th eir n etwork infn1structures.S. The Wall Stn?et founwl. the FCC appi'Oved network n eutrality rules. Segall. Cro~-s. and th at the neutral Internet has h elped create many n ew busin esses. 'n1e n ew ru~es would bar wi reline-based broadband provid ers. first-serve basi~. In Janu:1ry 20 11. m ost like ly in the form of tiered pricing pbns. Am erictm s. on December 2 1. December 21. To bolster their argument in favor of clifferentiated pricing. 2010. As of mid-2011. ''Verizon Challenges FCC Net Neutrality Rules.bittorre11l.

the computer on your desk would be m erely an other productivityenhan cement tool . Their Intention was to Inspire people to donate video games to children's hospitals so that children In long-term care could enjoy them. the total had more than doubled to $600. it is necessary for surviva1. R. and documen ts.penny-arcade. from marketing. Mike and Jerry ultimately decided to utilize Internet-based technologies to get the word out. Networks support n ew ways of doing business. computer applications. tnms your computer into <1n am:~zingly effective tool for accessing informa tion from thousa nds of sources. "Child's Play Garners Char~y Makes Giving Even More Fun." Tech Republic. 2011. 2. In Its first year. just as the typewriter once was. www. "Child's Play Charity-Garners Give Back. they used their for-profit business. First. having an Internet strategy is no longer just a source of co mpetitive advantage. Fi rst. 1 recounts a case in which networks h elped a small business grow rapidly. they knew that many gamers are good people. By 2005 . the program raised more than $250..1 Child's Play Charity Child 's Play Charity 11as been w ildly successful.created by the participatIng hosp~ als. Second. Sources: Compiled from R. and data across the organization and among different organizations.:1{ 6 Nt:h.f. < . ITs About [Small] Business 6.25 November 24. Con1pute r n etworks are essential to tnode rn organizations. many children In long-term hospital care are enjoying their favorite computer games! MIKe KrahuiiK and Jerry HoiKins were tired of the negative press surrounding video games. computers do not work in isolation in m odern organizations. Explain why networks were essential forM ike and Jerry to grow their business. N. The best part of this p lan was that Mike and Jerry did not have to create any of these technologies. Their plan Included potential PayPal donations and an Amazon Wishlist . accessed May 11.dval1tagcs.have all enormous impa ct on our lives. They just were not sure how best to communicate their Idea to ~he public.and will continue to tra nsform. T hird. th is exchange can take pbce over any distance and over n etworks of any size. wW\v.11111§~!~ : 11 C ll i\1' '1'1. thereby m a king both you and yom o rga niza tion more productive. to human resources m anagem ent. have ing. they simply employed existing Information systems to connect with a very broad customer base. th e Intern et and private intranets. networks in general. Questions 1.provides comp<mies with a number of very signifi ca nt . to supply chain managem ent. both professiona lly and personal ly. Propose a charitable organization (or function) that you could set up at your university. innovation. networks make it possible for geographi ca lly dispersed employees and work groups to share m d creative insights. for all fo r n1any re asons. Nash. Rather. 1l1e power of n etworks. In fa ct. First.. More Importantly.networks located within a single organization. networks enable compa nies to share h en getting rid o f network neutrality will m ost likely impact your wallet! T here are three fundam ental points about network computing you n eed to know.) If you downloa d and upload many large fi les. childsp/aychanty. Donation s since the beginning of the program have totaled almost $9 milli on. health care).urks G about [small] business 6. however.000 In cash and game donations. 2011 . Regardless of the type of organization (profit/not-for-profit. e way we do busin ess. (See Problem-Solving Activity il l at th e end of this chapter. high-definition movies. This sharing encourages team work. fin<~ncial se1 transformed .for exa mple. January 3. 2010.where donors could simply purchase the requested ~em s as a donation. to customer service. ci litated by telccommnnications tec 1ther. In 2003 they decided to start a nonprofit company called Child's Play Charity (www. and explain how you would use networks to make It a success. to communicate with their customer base. Penny-Arcade (www.penf1j-arcade. and In 2010 It exceeded $2. large/small . n et- worked computer systems enable organizations to be more fl exibl e so they can adapt to rapidly changing business conditions. ideas. and the Internet in p<Hticular. particularly the Idea that all gamers were a little crazy. T hird. So. Without n etwo rks. globa l/l ocal) or industry (manufactur-vices. they constantly exchange data with one another. As gamers themselves. In th is exchange of data ." Intel Inside Scoop. Wu.

why do you need to be familiar with n etwor:ks? T he simple fact is that if you operate your own business or work in a business. cell phon es. prin ters) via communications m edin so tl1at da ta ~mel information cnn be lr. Rcc. it is stated in bits per second . l WI oat I• a C u onpukr Network? llll(~ · @D • 1111 m ore efficient and effective interactions.·es: speed. Finally. To cover long dist ances. . Figure 6. . the yom custom ers.mel coll eagues. system that conn ects computers . local area networks (L. all of which connect via a sharedl cable. ranging from small to worldwide. To keep up with th is in credibly fast pace. Broadband refers to network transmission capacities ranging from approximately l mill ion bits per second (m egabits/s) to as much as 20 m egabits/s with fiberto-the-home (discussed later in this chap ter). Every device in the LAN h as a 11etwork interface card (NIC) that . such as digita l subscriber line (DSL) and cable to your hom es and dorms. u sually within the same building. O rganizations generally can h ave any two of these three. ll of these technologies will be con n ected via networks to enable you to communicate. n esses. A knowledge of networking is an essential component of modern business literacy. T hey include (from smalles~ to largest) personal area n etworks (PANs) . ' l11e chapter concludes by showing you the many network applica tions ava ilable to individ tds and org. You no doubt are familiar with certain types of broadband connections. PANs are short-range networks .. n etworks represent a compromise among three objecti.1mong them . A third possible combination of the three b·ade-offs is fast.1 ' Vhat Is a Cotnputer Network? A computer network is. th ei1 C learly. wide area networks (\~tANs)..I\Ns). business partners. a server.msm itted . You will learn about wireless PANs in C hapter 8.I\Ns and \VANs in size. You will need to communicate rapidly with l bout 1990. you will n eed to us e computers. n etworks are a critical link between busi· business parb1ers. or chea p communication.typically a few m eters. Voice and data commun ication networks are continually becoming faster . Most LI\Ns today use Ethernet (discussed later in this ch apte r). Networking and the Internet are the foundation for commerce in the twenty-first century. WANs typica lly cover la rge geographic areas . l'vlANs f. DSL and cable fall within the range of transmission capacities m ention ed above and thus are defined as broadband conn ections. Local Area Networks Regardless of their si ze..S l• :<:'I 'ION ll. !vlANs are relatively large computer networks that cover a metropolitan area. There are various types of computer networks.alm ost real time. colb bora te. e-mail. m etropolitan area n etworks (!vLI\Ns).m d the Internet.used for communication am ong devices close to one person. Bandwidth refers to the transmission ca pacity of a network.and ch ea per. th eir bandwidth is increasing .111 that one impo~'lant objective of this book is to help you become an inform e<IIISer of inform ation systems.unci oth er devices (e. But.ll between L. however. Today. you ca nnot function without n etworks. organizations can have fast communication . so that every device on the n etwork can com m unicate with every oth er device.mizations. if they are willing to accept slower speeds. suppli ers. ne tworks are essential tools for modern businesses. and cost. PANs can be wi red or wire less. You then study network fundamen tals and foll ow by tmning your attention to the basics of the Internet and th e Worl d Wide Web. that is. if they are willing to pay for it. and th eir custom ers. 1 illustrates an Ethernet LAN that consists of four computers.g. A local area netwmk (LAN) connects two or more de\~ces in a limited geographical region. the pace of business is much faster. ch eap communica tion with distance limitations. and m obile devices. T his is the idea behind local area networks. 6. Until < would have used the postal system or tel eph one system with voice or fax capabilities for busin ess communication . em ployees. Furth can span th e entire pbnet. . dist ance. what n etworks help you do . You begin this chapter by learning wh at a computer network is and identifying the various types of networks.that is. and a printer. and compete on a globu l scal e.

·e LAN large capacity. they usc wide area networks. fiber-optic cables. across se. . Befo re that time. or across a wide area network such as the Internet." \\'ide area networks (\\:. This medium is typically unshielded twisted-pair wire (U'll') . WANs typica lly connect multiple L\Ns.IIIIIt.2 Enterprise network. Note that the enterprise network in the figure has a backbone network.I\Ns and may ha.·e multiple W.\Ns have a file server or networ-k sener. and Rnance LAN Mark.ANs.\ 1\ls) are networks that cm·er large geograph ic areas. which are interconnected to form an enterprise network. WANs gen erally arc provided by common ca rriers such as telephone companies and the international networks of Embedded g lobal communications services providers. wha t we call a wide area network today was called simply a "network. C orporate ba ckbone n etworks are high-speed central n etworks to which multiple smaller .Ns. I• CII C llr\ PTER 6 t"ch. and th ey typically combine multiple c hanEmbedded ne ls (for example. A ruuler rs" eurJ IIIILI!Uca- LAN Human Resources LAN tions processor that routes messages from a LAN to the Internet. Figure 6. Enterprise Networks Accountilg Marufacturing LAN Embedded LAN LAN Embedded LAN FIGURE 6. Interestingly. l11c Internet is ~n example of a WAN.A.2 displays a model of enterprise computing. T he sen·er 1}-prcally contarns various software and d~t a for the ne twork.·eral connected l.1 Ethemetlocal area network.etilg satellite).orks FIGURE 6. Computer Computer Server S hared cable Computer Computer N/C ~ Printer allows the device to physically connect to the LAN's com munications m edium. LAN LAN \VANs :rlsu c u rrl:Ji rr Embedded ro ute". microwave. It also houses the G\N's network operating system. the term wide area network did not even exist until local area networks appeared. WANs ha.\]though it is not required. which manages the server and routes and ma nages communications on the network. Organizations today have multiple l. Wide Area Networks When businesses have to transmit and recei"c data beyond the confines of the G\N. many l.

2 networks (such as LANs and smalle r \VANs) connect.l 6. representing a series of bits (Os and Is). The section concludes by gl\ing you a look at transm ission techn ologies.JJ~ 1. This qua hty allows digita I signals to convey information in a binary form that can be interpreted by computers.SI~C'I'IO. amplitude and {rcquei!C)'. Y ou will then distinguish between analog and digital signals and el. Analog signals have two parameters. Figure 6. Describe an enterprise network. What is the d tfference between LANs and WANs? 3 . Th e modem FIGURE 6.3 illustrates both am1log and digital signals. What are the primary business reasons for using networks? 2. (Sources: Fancy/ Image Source. and the types of network processing.-. (Th e word ''modem'' is a controchon of modulator-demodulator. In contrast. you willleam the basics of how networks actua lly operate. th e louder the sound . The h igher the waves (or am plitude).) Analog Signa l CNave Signa ls) Digital Signal (Stream of Bits) .p lain how modems enable computer networks to ''translate" between th em. The function of modem s is to convert digital signals to analog signals . I nc. 6. all sounds.•es. ne twork protocols.3 An:1log and digital signals.including the human mice. Analog and Digital Signals Networks transmit infom1ation with two basic types of signals. analog and digital.2 N etwork Fundame nh1ls In this section. tr:l\·eling to the ea rs in the form of waves..) ~lodems are used in pmrs. the more closely packed the wa. Nch•ork Fu n dam enta ls llllk~~···· before you go on. which enable computers in a network to transmit and receive data. An alog sign als are continuous waves that transmit information by altering the characteristics of the waves. ~ledia Bakery. For ex<lmple . You follow by studying wireline communications media.are analog. digita l sig nals arc discrete pulses that are eith er on or off.a process called modulation-and analog signa ls to digital signals-a process called demodulatio11. The LANs are ca lled embedded LANs because they con nect to the backbone \• VAl\. @ Zoonnr/Dmitl)' Rukhle/Age Fotostock America. the higher the fre<]ucncy or pi tch.

Widely available. cable speeds can decrease significantly during those times. T hat is. At the Jeceiving end. Difficult to tap (good security). radio.. Twisted -pair wire and coaxial cables are made of copper. Higher bandwidth than twisted-pair. discussed later in this chapter) modems operate on the same lines as voice telephones and dial-up m odem s. tvlost providers offer bandwidth between 1 and 6 Mbps (million bits per second) for download s (from the Interne t to yom computer) and between 128 and 768 Kbps (thousand bits per second) for uploads . DSL modems always maintain a connection. and DSL modems.4) . Cable or wireline media use physical wires cr ca bles to tr<msmit data and information . The U. Twisted-pair wire consists of strands of copper wire tw isted in pairs (see Figure 6.•••IJP~f~jl C II APTI. called communications channels. DSL (digital subscr iber line. for exa mple. those used for cable TV. Cable m odem speeds vary widely. Table 6. that information must be converted into an analog wave pattern by a dial-up modem . cable m odem s. another mod em converts the ana log signal ba ck to digital signals for the receiving computer. S pecifi cally. Cable modems are m odem s that operate over coaxia l cable." In this section yo u will stud y the three wireline channels. T\. Difficult to work with (difficult to splice). sa tellite. Relatively inexpensive.:R 6 ctworks at the sending end converts a computer's digital information to analog signals for transmission over analog lines.S. T he key to mobile communicati ons in toda y's rapidl y moving society is data transmissions over electromagn etic m edia . Unobt rusive. T he alternative is communication over broadcast or wireless media. Advantages and Disadvantages of Wireline Communications Channels Table Channel Twisted-pair wire Advantages Inexpensive. Easy to work with. cable. public telephon e system was originally designed as an analog network to carry voice signals or sounds in an analog wave format. Very high bandwidth. The re are three types of modems: di<1l-up modems. Disadvantages Slow (low bandwidth). Subject to interference. r!iJey offer broadband access to the Internet or co rporate intra nets. 6. Easily tapped ~ow-to-medium security). Twisted-P:}if \\'ire. However. These pathways. are comprised of two types of media: cable (twisted-pair wire. so an Internet connection is immediately available.1 Coaxial cable Fiber-optic cable . such as telephone lines. Cable m cdem services share bandwidth among subscribers in a locality. when large numbers of your neighbors access the Interne t at the same time. and infrared). You will become familiar with wireless media in C hapter 8. Somewhat difficult to work with. Dial-up m odem s have transmiss ion speeds of up to 56 Kbps.isted-pair wire is the preva lent form of communications wiring. Relatively expensive and inflexible. It is relativelY inexpensive to purchase. the same cable line connects to many households. and easy to work with. Communications Media and Channels Communicating data from one location to another requires some form of pathway or m edium. it is relatively slow for transmitting dat< e "airwaves. Easily tapped (low security). 1 summarizes the ad vantages and disad.. it is subject to interference from oth er electrica l sources. it also has some significant disadvantages . Less susceptible to electromagnetic interference. it is used for almost all business telephone wiring.. and fiber-optic cable) and broadcast (microwave. wide ly a. In order for this type of circuit to ca rry digital inf01mation.•antages of eac h of these channels. and fiber-optic cable is made of glass. iJable. Therefore.

6 Two views of fiber-optic ca ble.5 Two views of coaxial cable. and th ey provide greater securi ty irom interference and tapping.mtl y small er and lighter than traditional cable m edia.. Fibt•r O ptics. For these reasons. FIGURE 6 .4 T"isted-pair wire. FIGURE 6. whereas twisted-pair \vire and coaxial cable connect the backbone to individua l devices o n th e network. it is commonl y used to carry high-speed data tr·a ffic as we ll as television signals (thus the term cable TV). coaxial cable is mo re expensive and m ore difficult to work with 6. a coating that prevents the light fro m leaking o ut of the Cross-section view How coaxial cable looKs to us FIGURE 6. optical fiber had reached data transmission rates of more than 50 trillion bits (terabits) per second in laboratory experiments. (Sources: Phillip Hayson!Photo Research- ers. The fiber-optic cable is surro unded by cladding. Coaxia l cabl e (Fig ure 6. Fiber-o ptic cabl es (Fig ure 6.St•:CT IO and it can be easily tapped by unintended receivers for ga ining unauthorized access to data. It is also somewhat inAexible. than twisted-pair wire. F iber-o ptic ca bles are signific. Chris Knapton/Photo Researchers) Cross-section view How fiber-optic cable looKs to us . It is much less susceptible to elec trical interference than is twisted-pair wire. © airborne77-Fotolia . You explore these technologies in this section.5) consists of insulated copper wire.6) consist of tho usands of very thin filaments of glass fibers that transmit info nna tion via light pulses gen erated by lase rs. (Sources: GIPhotoStock!Photo Researchers. As of 20 ll . Fiber-optic cable is typically used as the backbone for a network. T hey also ca n transmit far mo re data. and it can carry muc h more data. (Source: deepspacedave/ Shutterstock) Transmission Technologies A number of telecommunications technologies enable users to transmit high-volume data qu ickly and accurately over any type of network.2 Network Fundam enta ls ll[lil<"1<~~~··· Coa.ial Cable. However.

1 76 Mbps. equival ent to 24 channels)./36 Mbps. Digital subscriber lines (D S L) provid e high-speed transmission of digi tal data from homes and businesses over existing te lephone lines. deli vering. Asynchronous transfer mode (ATM) networks allow users to access almost unlimited bandwidth on demand. AT1vl requires fiber-optic cable and is therefore 2 1 percent more expensive than DSL. T he base rate is 5 1. Network Protocols Computing devices that are connected to the network must access and share th e network to transmit and receive data. they are reassembled into th e original message. When the packets reach their destination.5 g igabits (billions of bits) per second. Ethernet. DSL sen~ce is typically available only within 18.52 1 Vlbps. onl y those pa ckets need to be resent.544 M bps. These circuits includ e T l (1. or 3 times the rate of OC-l.000 feet of the provider's central office. T2 (6. they are broken down into small. T he Intern et Protocol ( IP) is responsible for disassembling. A common LAN protocol is Ethernet. S)1lchronous optical n etwork (SO ET) is an interfa ce standard design ed to carry large volumes of traffi c over relatively long distances using fiber-optic lines. equivalent to 4 . l11 ese devices are often referred to as " nodes" of the network . and reassembling the data during twnsmission . T his set of rules and procedures that gove rn transmission across a network is a protocol. packets ca n be dynamically ("on the A y") rerouted around that path.the send er's Internet Protocol (lP) address. T he transmiss ion tec hnology that breaks up blocks of data into packets is ca lled packet switching. if a path in the network is ve1 y busy or is broken . Why do organizations use packet switching? T he 1min reason is to achieve reliab le end -toend message twnsmission over sometimes unreliabl e netwo rks that may ha ve transient (shortacting) or persistent (long-acting) faults. Because the existing lines are ana log and the transmiss ion is digital. . and hig her r2tes are direct multipl es of the base rate. In this section you will learn a bout two major protocols: Ethern et and TCP/IP. a process p u will see next. It is important to note that packet-switc hing networks are reliable and fault tolerant. where the network provid es data transmission speeds of 10 gigabits (10 bi llion bits) per second. Each pa cket carries the informati on that will help it reac h its destinati on . (2) it sequences the transfer of pa ckets. if one or more pac kets do not reach the receiving computer. vid eo. C urrent ATM systems can transmit up to 2. th e intended receiver's IP address. T3 (44. Each pa cket travels ind ependentl y across th e network and can be routed through different paths in the network. and T 4 (274. Most large corporations use 10-g igabit Etherne t. Also. The TCP performs three basic functiJns: ( I ) It manages the moveme nt of packets (discussed below) between computers by establishing a connection between the computers.84 Mbps (OC-1). DSL systems must includ e modems.032 channels). all of which are multiples of the basic 64 Kbps used to transport a single voice call . equivalent to 672 channels). TCP/IP uses a suite of protocols. TransJnission Control Protocol/Internet Protocol. 't:Carrier System.•••IJP~®~ · II C II APTI. the number of packets in this message. As\nchronous Tr:msfer l\'1ode. SONET defines optica l line rates. DSLs offer band width from 128 Kbps to 3 M bps. equivalent to 96 channels). They work togeth er by adhering to a common set of rules that enable them to communica te with one another. known as optical ca rrier (OC) signals. The T-ca rrier system is a digital tra nsmission system that defines circuits that ope rate at different mtes. fixed bundles of data ca lled pe1ckets. Before data are transmitted over the Internet. In addition. T he Tr:msmiss ion Control Protocolllntem et Protocol (TCP/1P) is the protocol of the Internet. and voice transmiss ions on a single communications line . F'or example.:R 6 ctworks Digital Sub~cribcr Line. and (3) ic acknowledges the packets that have bee n transmitted. l 00-giga bit Eth emet is becoming the standard . OC-3 runs at l 55. ATM provides support for data. O n the downsid e. S) nchronou~ O ptica 1 Network. F'or example. the main ones being the Transmission Control Protocol (TCP) and th e Internet Protocol (IP).3 12 Mbps. However. and the cumber of this particular pa cket within the message.

8 illustrates a message being sent from New York C ity to Los Angeles over a packet-switching network .7). which can be any networking technology. This layer includ es TCP and other protocols. Note that the different colored pac kets travel by different routes to reach their destinati on in Los Angeles. Let's look at <111 exa mple of pa cket-switc hing across the Inte rn et. where they are reassembled into th e complete m essage . Chicago IP 1 1 P 2 1 P31 P.7 The four layers of the TCP/IP reference model.t1 Ps1 Psl Message IP1 1 P21 P31 P41 PsiPsl Message (reassembled) FIGURE 6 . the network interface layer places packets on. and packaging data packets. . 1l1e application layer enables client applica tion programs to access the othe r layers. TCPIIP is very popubr with business organizations due to its reliabili ty and the ease with which it ca n support intranets and related functions. routing. 1l1e transport layer provides the application layer with communication and packet services. which defines how messages are formulated and how they are interpreted by their receivers. TCP/IP enables users to send data across som etimes unreliable networks with the assurance that the data will arrive in un corrupted form. Finally.8 Packet switching. After the data reach the receiving computer. they tra vel up th e layers. TCP/IP functions in four b yers (see Figure 6. Data sent from one compute r to another proceed downwa rd through all four la yers. (Source: Dabroost!Shutterstock. O ne of these application protocols is the hypertext h·ansfer p rotocol (H"ITP).SI•:CT IO 6. the network medium. T he Internet layer is responsible for addressing. beginning with th e sending computer's appl ic<1tion layer and going through its network interface la yer. Figure 6. and receives them from. Two computers using TCP/IP can communicate even if they use different hardware and software. and it defines the protocols that applications use to exchange data.2 Network Fundamenta ls ll[lil'"~~~··· t: F IGURE 6 .) Email: Sending a Message via Sl'v!PT (S imple Mail ll·ansfer E ma il: Message received Application Packets reordered and replaced (if lost) Packets routed through internal network to desired IP address Rece ipt of packets Protocol) Break Message into packets and determine order Ass ign sending and receiving rP addresses and apply to each packet Oetem1ine path across network/ Internet to intended destination Transport Internet Network Interfa ce T11e packets use the TCP/IP protocol to cany their data . The lntem et Protocol (IP) is one of the protocols in this layer.

1tion performs the bulk of its processing or application/ data storage on suitably powerful servers that can be accessed by less powerful client mac hines. free. suc h as 1\I ic rosoft Sha rePoinl Workspace (http://of/icc. One example of this category is from th e se:n•Pr. There are three basic types of peer-to-peer processing (see Figure 6. ll1us. such as a Microsoft O ffice application. 1 u tinr• C lie nt/ser\'er comput ing lin ks two or more computers in C ltent ·r l'T C •t 1 an arrangement in wh1ch some machines.comlen-usis/l(lrepoint-workspacel). (at clients have lnrge storage and processing power and therefore ca n run local programs. BitTorrent (www... r:l ie nt rPC}IlP. thin clients may have no local storage and limited processing power.•(•r-t< FIGURE 6. The. .ssl.ds :1pplir:1tinns.cts as both a chent and a server. T hese applications are from open-source projects and can be down loaded at no cost. not just data and \Veb pages.9). Pt. ll:> digitallifc/ Alamy Limited.microso{ Th is product provid es P2P collaborative applications that use buddy lists to establish a con nection and allow real-time collaboration with in the appl ication.. provide computing sernces for user PCs. r ·r Pre mg.) p !i~WI 113pster -~"' A ll the mus''.9 File-sharing Web site. Usually.IIIII~ "' ~ijij C IIAPTER 6 ~ctworks Types of Network Processing Organizations typically use m ultiple computer systems across the firm. whir.~~ou ~ · ·- ••ant· Arw waY you wes-. Distributed processing divides processing work among two or more computers.bittorrent.berkelcy. called cl ients. The second form of peer-1 <>-peer is real-time.thin" cl ients As discussed in Technology Guide I. peer-t<>-peer fil e-sharing application that is able to simplify the problem of sharing brge Iiles by dividing them into tiny pieces. E<Jch compu ter can access (as assigned for secu ri ty or mtegrity purposes) a ll files on all othe r com puters. ebb. A well-kn0\\11 application of this type is SETI@home (http:llsetiathome. (Source. \ specia I type of cl ientlserver processing is peer-to-peer processing. T his category is c haracterized by natural-language searches of millions of peer systems. C lient/server computing is an open-source. person-to-person colb boration . they must depend on the network to run applications.. an to the ideas o f "fat" clients and . In contrast. if the network is dmm . It enables users to discover other users. A com mon type of distributed processing is client/server processing.. For this reason they are of little value when the network is not fu nctioning. The tlmd peer-to-peer category IS advanced search and file sh:1ring.h :1ds nn tl1f~se rP- quests by "serving" the desired commodity. Peer-to-peer (P2 P) processing is a type of clien t/server distributed processing where each computer . ca lled servers. o r prCK'e!i:s. This process enables computers in different locations to communicate with one another via telecommunications links. The first accesses unused C PU power among n etworked computers.

exchange m ess.:CTION 6.S I. the Inte rnet en ~bles people to J ccess data in other organ izc tions and to communicate.S. 4. The senders. military person1ges. 3. In contrast. databases.a process call ed sw<lrll!ing. the cost of its operation is shared among hundreds of thousands of nodes. collaborate. sec www. sma 11 fee if they wish to register th eir nam es." BitTorre nt addresses two of the biggest problems of fil e sharing: ( l ) Downloading lt once. Its purpose was to test the feasib ility of a WAN over which researchers. at n o c harge to the senders. Extranets offer limi ted accessibility to th e intra nets of participating cornpanies 1 3S \vel1 as necessary interorganizationa1 cotntnunicatio ns. An intr:onct is a network that uses lntem et p rotocols so that users can take advant::Jge of familiar applications and work habits. and mainframes. communica lion . to its destination. and exchange in formation seam lessly around th e world. Compare and contrast the three wireline communications channels. B iH'orrent eliminates the bottlen eck by enabling all users to share little pieces of a file at the same time . an extranei connects pa rts of the intra nets of different organizations. 6. The computers and organizational n odes on the Internet can be of different types and makes. T'he project began in 1969 as th e AR. They are widely used in the areas of business-to-busin ess (BZB) electronic commerce (see C hapter 7) and supply chain manageme nt (SCM. before you go on. For the Internet. of course. O rganizations must pay. The primary n etworlc connectiom and telecommunicati ons lines that link the nodes are re fe rred to as th e backbone. Participating computer systems include smart phones. This m eans that th e m ore popubr the content. Instead. and collaboration inside an organization . educators. T he program prevents leeching because users must upl oad a file while th ey download it.PAnet. and (2) som e people leech. and transfer files. regardless of the source. T oday. see Chapter ll). No central agen cy manages the Internet.JJ~ 1. lntranets support discovery (eCJsy and inexpensive browsing and search ). The organizations 3re obliged to m ove any data or info rmation that enters their organization al network. n el . fi le < down lo~d content but refuse to share. or "torrents. and they need to have their own h ardwa re and softw<11 re to operate their internal n etworks. Describe the various technologies that enable users to send high-volume data over any network. T hey are connected to one anoth er by data commu nications l ines of diffe rent speeds. including Differentiate between client/server computing and peer-to-peer processing. the backbon e is a fiber-optic n etwork that is oper. and plays a role in the daily routine of almost 2 billion people. Deparh11ent of Defe nse.inlnmaljoumal.. quickly and inexpensively. Thu s. 2. explained in C hapter 4).. . pay the te lephone bills fo r using either the hackbone or regular telephone lines.lled primarily by large telecommunica ti ons compani es. T h us. the m ore efficiently it zips over a network. m eaning they bogs down when many people access. and govcmment agencies could share data . Describe the Ethernet and TCP/IP protocols. Th e lntcm ct gre1v out of an experimc ntJl project of th e Advanced RcseJrch Pro ject Agency (ARPA) of the U. fi'o r th e numerous uses of intra nets. In addition. LANs. lAs J network of n etworks.3 The Internet and the '''odd Wide 'Veb The Internet ("the N et") is a global WAN that connects approximately I m illion organizational computer networks in m ore than 200 coun tri es on all continents. lntem et t echnologies 11 re bei ng used both within and among org~nizJtions.3 The lntcnoc tarul tl1<· World Wide Web IIIJ:I• 3ii!JII. the cost for any one organization is small. PCs. th e Inte rnet has becom e a necessity for m ode rn hnsinesses. it enables business partners to communicate securely over the Internet using virtual priV<lte networks (VPNs.

FIGURE 6 . The lP address consists of numbers. or h Accessing the Internet There are several ways to access th e Internet. ( 1 lliH'l h lf4 \ I. ( • llH'l tJ 1<4 ' I > 111 Ot lml \ n in You can also access the In ternet by opening an account with an Inte rnet service in four parts. NAPs are exchange points for Internet traffi c.nel ). 128. Table 6. and easier.2 su mmarizes the various m eans that you can use to connect to the Internet.62.10 shows a sch ematic of the Internet.eartMin k. yon can se. lnt' twt. T his sy>tem initially was restricted to new residential developments. Juno (www. NAPs are key compone nts of the Internet bac kbone.ju no. You can a !so log onto the Inte rn et from your home or on the road. Figure 6. access IIWw.netzero. (Source: © Mark StayliStockphoto) . \ddres~. tha t distinguishes it from all other computers. usmg either wireline or w1reless connections. and fi ber-to-the-h ome (FTTH) is growing rapidly.····~P~1~ : 11 C I I. You ca n :1 ccess a Web site by typing this number in the address bar of your browser. >till r It :Ill The re have been several attempts to make access to the Internet the bro\\11 dots where the whi te links meet are the NAPs. To fi nd a localiSP. The white links at the top of the figu re represent the Internet backbone. Accessing th e Inte rnet from smart phones an d iPads is com mon. Earth link (w11w.91. tern1inals known as Internet kiosks have been located in public places like libraries and airports (and even in convenience stores in some countries) for use by people who do not ha.thelist. as do co mputer companies such as M icrosoft.10 Internet (backbone in white).aol. They detem1ine how tr:1ffic is rou ted. called th e Internet Protocol (I P) A campus or company backbone con nects all of the \'arious LANs and servers in the organization to the 1l1ere.\I' T ER 6 N ch. In addition . To use th is se rvice you n eed a modem and standard com munications software. many tel ephone provide rs and cable com pnnies sell Internet access. faster. 'lll tht. you can access the Internet via you r orga nization 's LA.lFch by your te lephone area code for an ISP that services your area. From your place of work or your university. the IP address of one com puter might be 135. ISPs connect to on e another through network access points (l'\APs).·e their om1 computers. but it is rapidly spreading. an d NetZero (www. An lntemet service provider (ISP) is a com pany th at offcrli Internet connections for a fee. F'o r exam ple. F'o r example. FTT1-I involves connecting fiber-optic cable directly to i ndivid ual h omes. Each com puter on the Internet has an assigned address. Large lSPs include Am erica O nline (n~<w. se parated by dots.

The Internet Corporati on for Assig ned Names (ICANN) (www. For example. Domain names consist of multiple parts that are read from rig ht to" (for academic) where the U. Broadband access via telephone companies. especially ".S. meaning that there are 2128 possibilities for distinct IP the United Kingdom uses ·'.3 The Interne t and the World Wide We b ll[li"~ ~·~~··· Internet Connection Methods Service Dial-up DSL Cable Modem Description Still used in the United States where broadband is not available. 1Pv4. which is an unimag inably large number. F'or exa mple. the co untry name or designator is the TLD. and "software" is the name of the particular ma chine (computer) within th e compan y to which the message is being sent. there are two IP addressing schemes. and WiMAX will increase the use of broadband wireless. For has been developed. Access over your cable TV coaxial cable. T he righh11ost part of an Internet name is its top-level domain (fLD) . In oth er co" and ". Because the numeric lP addresses are difficult to remember." where the U. Without that coordination we wo uld not ha ve one global Internet. l'vloreover. Table 6 •2 Satellite Wireless Fiber to t he Home C urrently." .org) coordinates these unique addresses throughout th e world. I P addresses must be unique so that computers on the Internet know where to find one another. most computers ha ve names as well. Expensive and usually only placed in new housing developments.294. " it" for Italy. At th e time that 1Pv4 was developed. Popular U. is the most wide ly used.S.128. such as smart phones.62. " ibm" is the name of the compa ny ( IBM).S. which are derived from a system called the domain n ame system (D NS). The first scheme. "de" stands for Germany. the re were not as many computers that needed addresses as the re are today. or 4. 1Pv6. consider th e domain name so{tware.91) is an 1Pv4 address.icann. eve ry country decid es for itself wheth er to use TLDs. separated by will accommodate the rapidly increasing number of devices that need IP addresses. TLDs are: com edu mil gov org commercial sites educational sites military government sites civilian government sites organizations To finish our domain name indic<lte that this is a commercial si te. countries that use TLDs do not necessarily follow the U. 1Pv6." In contrast. uses ". meaning that there are 232 possibilities for IP addresses. a new IP <Jddressing scheme.295 distinct addresses. Note that the IP address in the preceding paragraph ( 135. The letters "com" in software. Access where cable and DSL are not available.S I(CT ION many other non-U. Very convenient. IP addresses using 1Pv6 consist of 128 bits. and "ru" for Russia . \\leb sites use U. Can have degraded performance if many neighbors are accessing the Int ernet at once. TLDs. ICANN accredits certain companies called registrars to register these names. In essence. I P addresses using 1Pv4 consist of 32 bits. uses ". which is replacing 1Pv4.

IIIIIta!I!J•II C ll i\1' '1'1.:1{ 6 Nt:h,urks
The Future of the Internet
Consumer demand for content delivered over th e lntcm et is incrc,1sing at 60 percent per yem. In 2010, monthly tr~ffic ~cross th e Internet tota led roughly 8 exabytes ( l exabyte is equiv~lent to 50,000 years of DVD-quality data). Many experts are now concerned that Internet users will experience brownouts due to three factors ( 1) the increasing number of people who work onlin e, (2) th e soaring populari ty of Web sites such as Y ouTube tlwt rcCJll ire hlrge amounts of bandwidth , and (3) the tremendous dem and for high-definition television delivered over the Internet. T hese brownouts will lead to complllters going offline for several minutes at a time. Researchers assert that if Internet band width is not improved rapidly, then within a few years (sec chaptcr-openi111g case) th e lntcm ct will be able to f11n ction only <lt a much reduced speed. Even today, th e Internet sometim e~ is too slow for data-intensive applications such as fullm otion video files (m ovies) or brge m edical files (X-rays) . ln addition, the fnternet is unrelia ble and is not secure. As a result, lnternet2 has been developed by m ore than 200 U.S. universities in collaboration with industry and government. Internet~ develops an d deploys advanced network applications such as remote medical diagnosis, digital libraries, distance education, online simulation , and virtual laboratories. lnternet2 is designed to be fa st, always on, everywhere, natural, intelligent, easy, and trusted. lnternet2 is not a separate physical network from the Internet. For m ore detail, see W1Hv.intemet2.ed!i..

The World Wide Web
Ma ny people equate the Internet with the Wo rld Wide Web. However, they are n ot the same thing. The Internet functions as a transport m echanism, whereas the \Vorld \~fide V/eb is an

application that uses those transport functions. Other applications, such as e-mail, also run on
the Internet. Th e World Wide Web (the Web, WWW, or W3) is a system of universally accepted standards for storing, retrieving, formatting, and displaying information via a client/server architecture. The Web handles all types of digital information , including text, hype rmedia , graphics, and sound. It uses graphic< ll user interfa ces (C U ls), so it is very easy to navigiltc. O rganiza tions that wish to offer information th rough th e Web must establish a home page, which is a text and graphical screen display that usually welcomes the use r and provides basic information on th e organization that has established the page. In m ost c"ses, th e hom e page will lead users to oth er pages. All of th e pages of a particul;n comp;m y or individual arc collectively known as a Web site. Most Web pa ges provid e a way to co ntnct th e organiza tion or the individual. The person in charge of an organiza tion 's Web site is its 'Nebmaster. ( Note: Webmaster is not gender-specific.) 1Ccess " \• V eb site, the user must specif y a uniform rcsonrec locator ( URL), which points To < to the address of a specifi c resource on th e Web . For instan ce, the URL for tv1icrosof\· is "http:// ''. Recall that HTI'P standls for hypertext transport protocol. 'T'he remaining letters in this URL- indicate the domain na me that id entifies the Web server that stores the Web site. Users acce« th e \Veb primarily through sofhMa re applicat ions called browser<. Browsers provide a graphical front end that enables users to point-and-click their way across the \.Yeb, a process called surfing. \Veb browsers beca me '~ m eans of universal access because th ey deliver the same interface on any o perating system und er which they run . As you will see in IT's About Business 6.2, companies are pouring resources into their browsers.

before you go on.JJ~1
1. Describe the various ways that you can connect to the Internet. 2. Identify the parts of an Internet address.
3. What are the functions of browsers?
4. Describe the difference between the Internet and the World Wide Web.

SECTI O N 6.4 Network A pplicatiou'



[about business]
6.2 Browser Competition Heats Up
comes Installed on every Mac. Microsoft adopted the same policy with IE, but the company was charged with antitrust violations. Presumably, Apple gets away with Its policy because Its market share Is so much smaller. Safari Is also available In a Windows version. Ano ther excellent browser Is Mozllla Flrefox (www.mozllla. coml en-US!flretoxlfxl), a descendant of Netscape. Maintained by an ope~n -source community, Flrefox Is the most commonly used browser behind the marKet-leading Microsoft IE. It Is available for Windows, Macs, and Unux systems. Flrefox benefits from a welldeveloped application base that Includes thousands of add-ons for everything from speeding up YouTube downloads to StumbleUpon, which helps users discover and share Web sites that match their Interests. Opera (, created by the Norwegian company Opera Software, Is also a good choice for a browser. Like Flrefox, It Is available In Windows, Mac, and Llnux versions. Finally, there Is the market leader, Microsoft Internet Explorer. In mld-2011 , Microsoft released IE 9 (, which contains many enhancements, Including addnlonal security features. Microsoft has promised that IE 9 w ill run faster than the previous version. As o f April 2011 , usage statistics for the major browsers were as follow s: Microsoft IE Mozllla Flrefox Google Chrom e Apple Safari Opera 55. 1 percent 21.6 percent 11.9 percent 7.2 percent 3.3 percent

Companies are Investing Increasing am ounts of resources In browsers, the programs for accessing c.ontent on the Web. The credit for this trend, one that Is good for consumers, goes to lwo parties. The first Is Google, whose big plans for Its Chrome (www. google.comlcnrome) browser have forced Microsoft to pay fresh attention to Its own browser, Internet Exp lorer (IE). Microsoft had all but stopped efforts to enhance IE after winning the last browser war, defeating Netscape. The European Union (EU) also played a role In this process. Starting In March 2010, the EU required companies that manufacture personal computers to offer customers who buy new computers In Europe more freedom to choose. Under this plan, part of an antnru st settlement with Microsoft, purchasers will be presented with a screen at startup that lists a dozen browsers In random order, all of wh lch are free. Users can download any of these browsers and start roaming the Web. Regardless of which browser users select, however, they should take Into consideration Issues of security and privacy. Every com pany brags about its security features, but the term "secure browser" Is questionable at best. Further, privacy Is not much more dependable. All browsers offer " private'' or " Incognito" modes, but for the most part such settlnQs only prevent people who might look at your computer from seeing the Web sites you have browsed. They do not stop those sites from keeping records of your visits. Users should also keep In mind why companies distribute their browsers for free. Chrome, for Instance, Is a key part of Google's stra tegy to make computer users comfortab le with cloud computIng (discussed In Technology Guide 3). The objective Is to convince users to spend less money and time on programs they have to license from software companies (e.g., Microsoft) In favor of data and services such as Google Docs, whic h reside on servers and storage systems on the Internet. In this way, Chrome- available In versions for Windows, Mac, and Llnux- makes users dependent on Google's own ad-driven services. But for Google's strategy to work, Chrome must be a good browser. In fact, Chrome Is fast and es up little space on users' hard drives. taK Mac users should have no problem choosing a browser. Apple's own1 browser, Safari (, Is excellent, and It

Questions 1. Given that all browsers are free, what features d o the major
brow ser com pan les l ocus on to gain com petltlve advantage?

2. Whic h browser do you usa? Why? Provide reasons for why you
use this particular browser.

Sources: Complied from ' Internet Browser Software Review." T opT enRevlews, May, 201 1; R. Jaroslovsl<y, • Browser Wars: The Sequel.' Bloomberg Business Week, March 8, 2010.

6.4 Network Applications
Now that you have a working kn owledge of what networks are and how you can access them , the key question is: How do businesses use n etworks to improve their operations? This section addresses th at question . S tated in gene ral terms, networks support businesses and other orga nizations in all types of functions. This section will explore numerous network applications, including discovery, communication, collaboration, e-leaming and distance learning, '~rtual universities, and telecommuting.

IIIII(f!faJI C ll i\1' '1'1.:1{ 6 Nch,urks
T hese applications, however, are m erely a sampling of the many network appli cations curren tly ava ih1ble to users. F.ven i f these appli ca tions formed an exhaustive list today, they would not necessarily do so tomorrow, when something new may be deve loped. Ji'urther, pbcing network applications in categor ies is diffi cult, because there will always be b ord erline cases. For example, th e difference between chat room s (in th e comm unications category) and teleconferen ce (in the collabor<1 tion categoty) is only one of degree.

T he lnte m et enables users t·o ~ccess information located in cbt;tbases all over the world. By browsing and sea rching cl ;1ta sources on th e Web. users c;m ;1pply th e Internet's discovery ca pabili ty to e~reas ranging from ed ucation , to government services, to enterbinmelflt, to commerce. Alth ough having access to a II this information is a grea t benefit, it is critically important to realize that there is no quo lity assura nce for information on the \• Veb. The \• Veb is truly democratic in that anyone can post informati on to it. 'T11 erefore, the fundamental rule about infom1ation on the \~eb is: User, beware! In addition , the Web's m ajor strength -the vast stores of information it contains-also presents a m ajor chall enge. The amount of information otn th e 'Neb can be overwhelming, and it doubles approximately each year. As a result, navig<1ting through the \ 'Veb and gaining access to necessary information are becoming more and m ore diffi cult. To accomplish these tasks, people increasingly are using search engin es, directories, and portals.

Search Engines and !\letasearch F ngincs.

A searc h engine is a computer program that searc hes for specific information by key words and then reports the results. A search engine m aintains on index of billions of Web pages. It uses thot ind ex to find pages t hat match a set of user-sp ecified keywords. Such indexes are created and updated by webcmwlers, which are computer programs that browse the 'Neb and create a copy of all visited pages. Search engines then ind ex these pages to provide fast searches. In mid-ZO 10, three se.H ch engines accounted for almost a II se.Hches in th e United States: Coogle (, 65.5 percent), Yahoo! (, 16.8 percent), and Microsoft Network (now called Bing,, 11.8 percent. In addition, an inc redibl e number of oth er search engines are quite useful, many of which perform very speci fic searches (see www.readwritelveb.comlarchives/top_IOO_altemalive_seclrch _engines.p hp.) The leading search engine in C hina is Baidu , with 64 percent of the C hinese market. F'or an even m ore th orough sea rch, you can use a m etasearch engine. Mcbse~rch engines search several engines at once and then integrat e the findings to answer users' queries. Exa mples are Surf-wax (,·, Metacrawler (www., l'vlamma (wtVIv.mawm( , KmtOO (, and Dogpil e ( Figure 6. 1] illustrates th e Ka rtOO home pa,ge. O ne interesting search engine, Q wiki, provides vi deos as your search results. IT's About Business 6.3 explains how Qwiki works.

FIGURE 6.11 The KartOO
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6.4 Network Applk ations



[about business]
6.3 Informative Videos on the Fly
local weather and traffic reports and annources the user's daily schedule. In fact, thinKing of OwiK IIn terms of search may not be exactly correct. The company envisions itself as the creator of a new media fonmat, a platform that eventually will be used for generating multimedia content from whatever source the user directs it to, be it an online profile or a restaurant review. Qu estions 1. Describe the advantages of OwiKI over conventional search and metasearch engines. 2. Does OwiKI have a competitive advantage over conventional search and metasearch engines? Why cr why not? Provide examples to support your answer.
Sources: Compiled fro m "Vision Ouest.' Forbes Departures, May 23, 2011; T. Gero n, "Owiki Launches iPad App w ith Locatio n F~c us ," Forbes, April 20, 2011; A . Diana, •owiki Launches Multimedia Search Engine," InformationWeek, January 25, 2011; WIV\, accessed May 17, 2011.

Enter "Buenos Aires" into the search bar on the OwiK I Web site (www. qwll<, and a video appears on your screen. It first zooms In on a map of the city as a voice describes Its location. Then, lrfonmatlon and graphics appear that Illustrate the statistics on the cltys population and density, and a series of photos and videos stream across the screen as the narrator discusses the city's main attractions. Launched in January 2011 , QwiKI offers videos on 3 mIIlion of the Internet's most popular topics. Pulling Information from WIKIpedIa and other sources, OwiKI's algorithm complies each video, Including the Information and graphics, In real time. In ot~er words, OwiKI produces a search result In multimedia form. Research studIes as well as anecdotal evidence Indicate that presenting Information In a multimedia format Increases recall rates. OwiK I'sgoalls to turn information Into an experience. Search is not the on1y use envisioned for OwiKI's te~hn ol ogy, however. A future goal is personalization. For example, the company is developing a custom alarm clocK function that provides

Not only is there a huge amount of information on the Internet, but it is written in many different languages. How, then, do you <J ccess this information ? The answer is that you use an automatic tra.nslation of \~feb pages. Such t ranslation is ava ilable to and from all ma jor languages, and its quality is improving with time . Some major translation products are Altavista ( and Coogle ( (see Figure 6. 12), as well as products and se n~ces ;JVaib ble at Trades ( . Should companies invest the ir tim e < 111d resou rces to m ake their Web sites accessible in multiple languages? T he answer is an e mphatic yes. In fact, multilingual \Ve b sites are now a compe titive necessity because of the global nature of the bus iness environment. Companies increas ingly are looking outside the ir hom e markets to grow revenues and attract new custom ers. At a time when companies are disseminating information around the world , getting th<J t info rmation co rrect is essential. It is not en ough for companies to translate \Ve b content. T hey also must localize that content and be sensitive to the needs of th e people in local ma rke ts. To reach 80 percent of the worl d's Internet users, a \Veb site needs to support a minimum of 10 languages: Engl ish, C hinese, S panish, Japanese, Cennan , Korean , F'r ench , Italian , Russia n, anci Portuguese. At 20 cents and m ore per word, transla tion services are expensive . Compan ies supporting 10 languages can spend $200,000 annually to localize information and anothe r $50,000 to maintain the \~leb sites. T ranslation budgets for major multinational companies can run in the mi ll ions of dolbrs. Ma ny large companies use Sysb·a n SA. (www.systranso{ ) for high-qua lity ma chine t ranslation services.

Public<ltion of Materialm Fort·ign Language:..

Porta ls. Most organizations and th eir managers encounter information overload . Inform ation is scattered across numerous documents, e-m ail messages, and databases at different locations and systems. Finding relev:mt and acc urate infcnn ation is often time consuming and ma y require users to access multiple systems.

····~~~®~··· C II APTI.:R 6
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O ne solution to this problem is to use po rtals. A portal is a Web-based, personalized gateway to information and knowledge that provides releva nt info m1ation from diffe rent IT systems and the Internet using achr,m ced sea rch and ind exing tec hniques . After reading the next secti on, you will be able to disting uish am ong fo ur types of portals: comme rcial, affini ty, corporate, and industrywide. Commerc ial (public) portals are the m ost popular portals on the Internet. T hey are intended for broad and diverse audiences, and they offer fairl y routine content, som e of it in rea l time (fo r exa mple, a stock ticker). Examples are Lycos ( and M icrosoft Network (wMv.msn .com). In contrast, affinity po rtals offer a single point of entry to an entire community of affiliated interests, suc h as a ho bby g ro up or a political party. Yo ur university m ost likely has an affini ty portal fo r its alumni. F ig ure 6.13 displays the affini ty po rtal for the University of West Georg ia . O ther examples of affinity po rtals are '·" and As the ir name suggests, corporate portals offer a personalized, single point of access through a \Veb browser to critical business info rmatio n located inside and o u ts ide an o rga niza tion . T hese po rtals are also known as enterprise portals, in{omwtion portals, and enterprise in{onnation portals. In addition to making it easier to find needed info rmatio n, corporate po rtals offer c usto mers and employees self-service oppo rtunities. W hereas corpo rate po rtals are associated with a single company, industrywide p o•'t:•lsserve entire industries. An exa mple is T ruckNet (www.truck.uet), a portal fo r the trucking industry and the trucking community, inc luding professional drivers, owne r/operators, and trucking companies (see Fig ure 6.14). T ruck Net provid es drive rs with personalized Web-based e-mail, m ies in the United S tates and C anada, and access to applicatio ns to leading trucking comp< access to the D rivers Round Table, a fo rum where drivers ca n discuss issues of interest. T he portal also provides a large database of trucking jobs and general info rmatio n related to the

trucking industry.
T hese four types of portals are differentiated by the audiences they serve. Ano ther type, th e m obile portal, is disting uished by its technology. Mobil e po rtals are po rtals that are accessible fro m mo bile devices . S ig nifica ntly, any of th e fo ur po rtals just disc ussed ca n be accessed by m obile devices. Mobile devices are typicall y wireless, so they will be presented in detail in C hapter 8.

T he second ma jor category of network applica tions is communicatio n. T here are many types of communicatio n technologies, including e-m ail , call centers, c hat roo ms, and voice. Yo u



etwork Applic,.tions


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learn about each one in this section . Y ou will see anoth er type of communication , bl ogging, in C hapter 9.

Electronic J\l:1il. Electronic mail (e-mail ) is the largest-volume application running over
the Internet. Studies have found that almost all companies conduct business transactions via e-mail, and the vast m<l jority confirm that e-mail is tied to their mea ns of generating revenue. In fac t, for many users, e-mail has all but replaced the telephone. Effective personalized custome r contact is becoming an important aspect of We b-based customer support. Suc h sen~ce is provid ed throug h Web.basecl call centers, also known as customer care centers. For example, if you need to contac t a softwa re vend or for technica l support, you usuall y will communicate with the vend or's \¥eb.based call

\\'eb-Based Call Centers.

FIGURE 6.14 TruckNet portaL

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center, u sing e-mail, a telephone conversation , or a simultaneous voicei'Neb session. 'Nebbased C<l ll centers arc sometimes located in foreign countries Sllch as India . S uch offshoring is an important issue for U.S. comp•mics. For sever,,] rea sons, some U.S. companies are m oving their c<JII center operations back to the United St ates. First, they feel that they have less control over th eir call cente r operations. Th ey must depend o n th e vendor com pany, ensuring that it can uph old their standards, such as q1wlity of service. Sccond, language difficllltics c;m occur. 1nies that manage sensitive inform ation ca n run th e risk of bre;Jching custom er T hird. comp• confid entiali ty. l"inally, the vendor company's call center representatives typ ically work with many co mpanies. As a result, they may n ot deliver the same level of customer services that you require.

l•:ll'dromc C h:Jt Room~ Electro11ic chat refers to an arrangem ent whe reby participants exchange conversational m essages in real tim e. A chat room is a virtua I meeting place where m any people (in fact, anyon e) com e to "ga b." C h at programs allow you to send messages to people who are connected to th e sam e channel of communica tion at the same time. Anyone can join in the conversation. Messages are displayed on your screen as they ar rive, even if you are in the middle of typing a m essage. T here are two major types o f chat programs. The first type is a Web-based chat program, which allows you to send m essages to Internet users by visiting a \Veb chat site (for example, The second type is an e-mail-based (text-only) program called fntem et Relay Chat (/RC) . A busin ess can use IRC to interact with customers, provide online
expe rts' Z~nswers to questions, and so on.

Voice Communic:~tion. \ 'Vh en people need to communicate with one another from a disbnce, they use the telephone m ore frequently than any other communication device. VJith the plain old teleph one sen~ce (POTS), every call ope ned up ,, dedicated circ uit for the duration of the call. A dedicated circuit connects you to the person with whom you are talking and is devoted only to your cal l. In contrast, as you saw ea rlier in th e chapter, th e Internet divides data into packets, which traverse the Internet in ranclom ord er and are reassembled at th eir destinati on. With lntcm ct telephony, .,]so known as Voice m •cr lntc m e t Pm tocol or Vo i P, phone calls are treated as just another kind of dab . T hat is, your analog voice signa ls are digitized, sectione<l into packets, and then sent over th e Internet. In the past, to utilize Vo iP, you needed a computer with a sound card and a microphone. Today, however. you do not need specia l ·. phones or headsets for your com pute1 Vo iP ca n reduce your monthly phon e bills. However, packet switching can cause gorbled communica ti ons. For ex. 1 mple, if the packets of a m essage arrive out of order, that is not a problem when you are sending an e-m;1il or twnsmitting a ph oto. Incorrectly rc;l ssembl ing the packets o f a voice m essage, however, can garble th e message. Fortunately, this is less of a problem than in the ]X lst , because Vo iP soft:ware continues to improve, and typica l communications links are much faster. So, alth ough Vo iP is not perfect, it is re;1 dy for prime time. Skypc ( ) provides several VoiP services for free: voice and video ca lls to users
who also have Skype, instant m essaging, s hort n1essage service, voice mai1 , on e-to-one and

group chats, and conferen ce c" lls with up to nine people (see Figure 6. 15). As of m id-2010, the m ost current version of Skype for v\lindows was version 5.5. Skype 5.5 offers full-screen, high-defin ition video calling; SJ.:ype Access (to access Wil"i hotspots); call transfer to a Sk y pe contact o n a m obile or land line; improved qua lity of ca lis; and ease of use. In addition, it offers other functions for which users pay. !"or example, SkypeOut all ows you to make calls to landline phon es and m obile phones. Skypeln provides a nu m ber that your friends can call from any phone, a nd you pick up the call in Skype. Vonage ( ) also provides VoiP services, but for a fee (approximately $25 per m onth). With Vonage you make and receive calls through your existing h om e phone and broadband Internet connection. Your phone actually connects to Von age rath er than an actual phone compa ny. T he person wh om you are call ing does n ot need to have Vo nage or even an Internet connection.

S I(CI'I ON 6.-4 :'\' e twork Applications


F IGURE 6.15 Sl)'pe ).5 interface.

ltuftecl C :nmumca JOBS. ln the past, organizational networks for wired and wireless data, voice communications, and videoconferencing operated independently, and the IT department managed eacll network separately. This arrangement increased costs and reduced produch\ lly. Unified communications (UC)simplifiesand integrates all formsofcommunications- \·oice, voice mail, Fa~. chat, e-mail, instant messaging, short mcss;Jge service. presence (location) sen;ces, and videoconfcrencing - on a common hardware and software pbtfonn. Presence ser\ices enable users to know where their intended recipients are and if they are available, in real time. UC unifies all forms of lluman and computer communications mto a common user experience. For example, UC allows an individual to receive a \'oice mail message and then read it in his or her e-mail in box. ln another exa mple, UC enables users to seamlessly colbborate with another person on :1 project, regardless of wllcre the users are located. One user could < [Urckly locate the other user br accessing an interactive directory, determine if th at user were available, engage in a text messaging session, and then CSCJ late the session to a voice call, or even a ' ·ideo call. all in rea l time.

The third major category of n etwork applications is collaboration. An important feature of modern organizations is that people colla borate to perform work. Collaboration refers to efforts by two or more entities- that is, ind ividuals, teams, groups, or organizations- who work together to accomplish certain tasks. T he tem1 work group refers specifically to two or more individuals who act together to perform some task. \\'orkflow is the mm·ement of information as it flows through the sequence of steps that make up an organization's work procedures. \VorkAow management makes it possible to pass documents. information, and tasks from one participant to another in a way that is gm·emed by the organization's rules or procedures. \Vorkflow systems are tools for automating business processes. If group members are in different locations, they constitute a virtual group (team). Virtual groups conduct virtual meetings: that is. they '"meet'" electronically. Virtual collaboration



(ore-collaboration) refers to the use of digital technologtes tha t enable organizations or individuals to collaborati,·ely plan, design, develop, manage, and research products. services, and innov,1tive applic•1tions. O rg•mizational employees frequently collaborate virnmlly with one another. In addition, organizations collaborate virtually with customers, suppliers, and other business partners to improve productivity and competitiveness. One type of collaboration is crowdsourci11g, which refers to outsourcing a task to an undefined, genera lly large group of people in the form of an open call. Let's look at some examples of crow<lsourcing on college campuses. • Crowclsourcing help desks: IT h elp desks are a necessary seT\~ce on college campuses because studen ts de pend on their computers and Internet access to complete their sc hool work and attend class on line. At India na Untversity at Bloomington, n ew IT help desks use crowdsourcing to alleviate the cost and pressure of ha,ing to answer so many calls. Students and professors post their IT problems on an online forum, where other students and amateu r IT experts answer them. Recruitment: In 2010, Champlain College in Vermont instituted a C hamplain For Reel program, inviting students to share the ir experiences at the school and how they ben efited from thetr time in schoo l vb You Tube videos. T he Y ouTube channel serves to recruit prospecth·e students and even updates alu mm o n campus and community events. Scitable ( combines social networking and academic collaboration. Through crowdsourcing. sl\tdcn ts, professors, and scie ntists discuss pro blems, find so lutions, ~nd swap resources ~ncl journals. A free stte, Scitable lets each indtvid td user turn to crowdsourcing for answers while helping others as well. The Great Stm/1ower Project: Gretchen Le Bnhn. an associate biology professor at San fi'ranctsco State University, needed help" tth h er studtes of honeybees, but she had limtted grant mon ey. So, she contacted gardening groups around the country. T hrough th is crowdsourcing stra tegy. LeBuhn u ltima tely created a n etwork of more than 25,000 gardeners and schools to assist wtth her research. She then sent these partictpants seeds for pb nts that attract bees. In return, the participants recorded the honeybees' ~sits and acti,•ity for her on her Web site.

Co llaboration can be synclnonous, meaning that all team members meet at the same time. Teams may also collaborate asynchronously when team members cann ot meet at the same ttme. Virtual teams, "hose members are located throughout the world, typically must colla borate asynchronously. Y.uious software products are a\·ailable to support all types of collaboration. Amo ng the most prommen t :ne r-.!tcrosoft Share Point Workspace, Coogle Docs. IBM Lotus Quickr. and Jive. In general, these products provide online collaboration capabilities, workgroup e-mail, distributed databases, bulletin whiteboards, electronic text editi ng, document management, workA ow capabilities, msta nt virtual meetings. application sharing. mstant messaging. consensus building, voting, ranking, and various application de,·elopment tools. These prod ucts also provide varying degrees of content control. W ikis, Coogle Docs. :'vlicrosoft Sha rePoint \\'orkspace, and Jive pro,~de for shared content "~th version management, whereas r-.licrosoft SharePoint \Vorkspace and lBi\.1 Lotus Quickr offer •·ersion control. Products with version management track changes to documen ts and provide featu res to accommodate multiple people working on the same document at th e same time. In contrast. \·ersion-control sy-stems pro,·ide each team member with an accoun t that includes a set of permissions. Shared documents are located in shared directories. Docu ment directories are often set up so that users must check out documents before they can edit them. \Vhen one team member checks out a document, no other member can access it. Once the document has been checked in, it becomes available to other members. In the following sections you will review the major collaboration software products. You then sh ift your attention to two tools that support collaboration - electronic teleconferencing and '~deoconferencing.

crews. whic h allows orga nizations to control users' access based on their organiza tional role. 1e leconferencing is the use of electronic communication techn ology that enables two or more people at different locations to hold a simultaneous conference. The software reduced both the vol ume of large attachments sent through e-mail and the impact of those e-ma ils on the system. project teams were able to work more effi ciently. the projects become incredibly complex. and blogs to all ow people to share content with version management. The oldest and simplest is a telephone conference call. a Web site where runners track th eir miles and calories burned using a sensor in their shoes. Nike expanded its forum to include a section where runners cou ld meet and challenge one another to races. Since that time. Jll\1 r hi\ tlld IBt\l's Loh. security IC\· pilots.SECTION 6. from the airport authority. Coogle Docs allows multiple users to open.comllotmlqtlickr) product pro\idcs shared content with version control in the form of documen t directories with check-in and check-out features based on user pri. and other collaborabon tools for managing projects and oth er content. discussion forums.ts Quic kr (IV\o w. and two-and-one-half hours. In addition. ' de{ault. \'ia discussion rooms. Nike originally used C learspace Community to run a technical support forum on Nike Plus (http:// nikenmning. Coogle Do~. the 135 general managers at the a irli ne's domestic airports fill out a 16-page form online. The general managers have to specify how they would ma nage d elays of an Jive's (ll"~v. Web-based word processor. or other criteria. member blogs. SharePoint supports document directories and has features tha t enable users to create and manage smveys. two hours. CFE deployed Quickr with its centralized document libranes and version control. Construction projects require many parties to collaborate effectively. team membership. interest. To eliminate these proble ms. <md presenta tion application. Quickr provides online te<1rn spaces whe re m embers can share and collaborate by utilizing team calendars. uses vVeb collaboration and communication tools suc h as fo ru ) newest product. Continental responded by impleme nting a SharePoint system tha t puts va rious aspects of Aight operations-aircraft status. Ek·ctronic Teleconferencing . ll1 e company was using e-mail to share documents with suppliers and clients. spreadsheet. The company soon noticed that runners were also using the forum to meet other athletes. member \Veb sites.i leges.ji>·eso{tware. and customer care. has put the collaboration tools of Quickr to good use.microso{t. share. and to-do lists.. CFE needed to tap its best resomces for its projects. In response. blogs. When these projects are conducted on a globa l scale and the parhes are scattered throughout the is a free. participants in one location cann ot see graphs. C learspace. O ne company that has used SharePoint effectively is Continental Airlines. People in the cente r can use the da shboard to find information about delays quickly a nd to communicate w. but this process resulted in version-control errors and security vulnerabilities. The biggest disadvantage of conference calls is that they do n ot allow the participants to communicate face to face. calendars. The Sharepoint system includ es a dashboard for Continental's centralized system operations center. There are sC\·eral types of to the site who did not own the Nike Plus sensor ended up buying the product. where se\·eral people talk to one another from multiple locations. 4{) percent of . and pictures at other locations. As a result. crews. It e nables users to create and edt! docum ents online while collaborating with oth er .mspx) provides shared con tent with version control. regardless of wh e re those resources were loca ted.mel numbers o f airport workers. charts. It also has a rigorous permissions structure . Th e fom1 includes the names .on the same page. and workAow. to the person who drives the stairs. C oogle Docs (http:lldocs. and edit documents at th e same time.~ N ch•mk Application' lllll~iti~ · 1111 \ hno ft Sh:nC'Pt 1t i\licrosoft's SharePoint product (wllw. to planes waiting on the runway. pi lots. When new federal regula tions regarding long runway delays went into effect. Compagnie d 'Enterprises (CFE). and dispatchers to decide what to do to mitigate any delays. wikts. discussion forums. one of Belgium's b rgest construction companies.comlnikeO!l!plnikepluii/en_US ). For example. Using the system. wikis.

metlife. T he insurance giant Metl. pictures. New York. Conferees call! also trans1 nit data alon g with voice and video. enables participants to seamlessly share data. (Source: PRNews Foto/' and Polycom 's I-lOX ( ~~>ww. w!1ich allows them to wm·k on documents together and to exchange computer files. participants in one location can see participants. a private equity firm. Fim n cia l and consulting firms are quickly adopting telepresen ce system s.urks FIGURE 6. has 40 tcleprcscnce room s around t he world. telepresence is helping th e company m eet its ''green initiative" goal of reducing its carbon emissions by 20 percent.:1{ 6 Nch. and presentations at other locations. called telepresence. • International law firm DLI\ Piper's (www. and it is expanding th e system to other offices nationally and internationally. Telepresen ce systems" !so ha ve advan ced audio capabilities that le t everyone til lk at once without c:mccling out any voices.p. organizations are increasingly turning to video te lecon- ferencing.m l meetings as teleprescnce confe rences and relying on at least two attorneys pe r week to use teleprese nce rather than travel . In a videoconference. is using telepresen ce in three dedicated confe rence rooms in Chicago.000 per month.ife has experien ced a direct cost savings as well as better em ployee time efficiency. The firm realizes these s<1 vings by resch ed uling half of their in-person' C isco's' IelePresence 3000 (\VII"'· telepresen ce system saves the company approximiltely $ 1 million per year in travel c osts :mel lost productivily. Further. <1 nd D eloitl'e & Touche has 12 tc lcpresen cc rooms.ife (www. or Making it possible for globally based attorneys to work closely together via tel epresen ce helps drive hom e the r eality that the firm has offi ces all over the world and therefore sh ould have an internationa l focus. For exa mple. lle wlettPac brei's 1 -b l0 system ("'VIV. • .com). on e MetLife executive n oted th at wh en th e company uses telepresence for m eetings. employees who n orm ally wou ld n ot be asked to tra\·el to headqua rters now have the opportunity to make presentations and get valuable exposure to company executives./NewsCom. The latest version of videoconferen cing. Let's look :1t two other organizations that usc telepresencc systems. For cxomple. graphics1 and anin1ation by e lectronic means.dlapiper.J.000 for" room. the Blackstone Croup (www. and New Jersey. Metl. Several companies arc offe ring high-end telcprescnce syste use massive high-definition screens up to eight feet wide to show people si tting around conference tables (see Figure 6. with network m'magem ent fees r:mging up to $18.IIIIJiilDtll C ll i\ 1''1'1. lnc . Te lcprcsence systems can cost up to $400. 16). Interestingly. This benefit of telepresence cannot be quantified in teJm s of dollars and cents.po/ycom.) To O'lerconle these shortco mings. voice.16 Telepresence System. documents.

Ho rn. more than twice as many as In 2000. . 2010. AP courses can be expensive for high schools to offer because they often have tewer students than other classes. online discussions.) refers to . 2011.aventaleamlng. a New Classroom Is Online. Budget problems In some Ohio and Maryland schools have generated talk of AP cutbacks. c-learning is a p. online students take the AP exam In school like other students. December 16.flvs. July 12. It cnn t:1 ke pbce insid e classrooms ns a support to colwentiona l tenching. Online wh~eboards enable teachers to draw lecture notes or show solutions to problems. VIrtual AP courses are becoming available through online schools In 27 states.m ce learning arc not th e same thing.4 Network A pplicati""' lilliil···· E-Learning and Distance Learning !':-le arning and clist. For all of these reasons. and the Florida VIrtual School (www. such as when stud ents work on the vVeb during class.SECTI ON 6.cernent (AP) classes online . th e Web provides a multim e dia interactive environment for self-study. In these c. and/or Instant messaging.advancedacademics.v.apexleaming. meanln g that both approaches appear to be equally effective. Questions 1. in which all coursework is done online and cb sses do not meet face-to-face. " Education As We Know It Is Finished Forever . 201 1: M. Some school districts In upstate New YorK are considering eliminating almost all AP courses. After com pleting the AP course. For students In states and districts facing budget cuts. Christensen and M. aboratlve Web learning situntion in which teachers nnd students do not meet www." The WaH Street Journal. A record 2 m illlon high school students took AP exams In May 2011 . ww. Walsh. Extend your answer here to completing entire degree programs online. Adding to this AP classes are under pressure In several states. when they need it. officials are predicting decreases In AP classes. August 11. Identity and discuss the disadvantages ot taking online AP Sources: Compiled from S. "For AP Students. According to the College Board (www. " Higher Education in the Digital Age.advancooacademlcs. net. which frequently Involve volatile chemicals. 201 0." illustwtes how high sch ool stud ents are using e-learning and dist ance lenrning to take advanced pb. T. C. and file asslgllments or exams online.oollegeboard." Forbes. Distance learning (D I. anywh ere. • [about business] 6. Web-enabled systems make knowledge accessible to th ose who need it. Students can conduct some physics and biology lab exercises at home using A rapidly Increasing number of high school students are taking advanced placement (AP) classes In an attempt to reduce college tuition costs and obtain an edge In the college admissions process.collegeboard.~ Forbes. Aventa Learning (www. In Michigan. Provide specific examples of disadvantages that are not mentioned In the case. maKIng lit difficult to justify Keeping them while teachers are being laid off and sports and arts programs that serve more students are being cut back. colleges and un iversities award college credit to high school students who pass the AP program's rigorous subject-matter tests. Todny. Students practice skills and problems through Inter active quizzes or www. W\Vw. Apply your thoughts In Question t to college education by dlscus5lng the advantages and disadvantages of taking college courses online. However. Online courses require students to log on.aventafeaming. phone. IT'~ About Business 6.1scs. c-lcarning and DL can be useful for both formal educati on and corporate lra in ing. tlhe nonprofit organization that oversees AP courses and testing.4 Online AP Classes Are Big Business obstacle pertains specifically to science courses. most online chemistry students have to travel to supervlsed labs to perform experiments. Another lab kits and supplies. Students can also enroll directly In online AP classes for a fee through private companies that offer these classes directly. 2. complete exercises or where fund ing for 2012 may be cut by 10 percent. 1 \-lcmning refers to lenrning supported by th e Web. approximately 90 percent of u.s. and they complete group projects on coll" One potential drawback for students Is that taking an AP course online requIres advanced time-management skills. 3. "Mo re Interaction in Online Courses Isn't Always Better. read materials. anytim e. 2010. accessed April 11 .flvs. online AP courses are becoming an lncrea5lngl"y popular option. Fo r this reason. ww. and t eachers are available by e-mail. After you answer Questions 1 and 2. some schools also pay the $87 fee for a student to take an AP exam. apexleamlng. particularly chemist ry. speculate on the future of online universities. that require students to perform laboratory experiments. And the bottom line? The College Board claims there are no significant differences In average test scores between students from traditional AP courses and those taKin g online AP courses. Horn. Shellenbarger. and scholarships are available for some st udents Who cannot a fford the fees. However. Examples of these companies are Advanced Academics (www. It also cnn take place in virtual classrooms. Apex Learning (www.nt of distan ce lea but they do ovcrbp. April 20. for example. Online AP courses permit students to click on a current lesson.

whi ch m eans that more people can be trained within a given timeframe. such as the University of P hoenix (www. and lack of socialization . onlin e materia ls can deliver up-to-date content that is of hig h qun lity (created by content expe rts) and consistent (presented th e sa me exibility to leam at any pla ce. they m ay miss the fa ce-to-face interaction with instructors. e-lcnrning hns som e dr:1 wbacks. employers. This g roup of highly prized workers is now able to work anywh ere and anytime. the majo r re increased fee lings of iso lation . 1l1e major disad vantages t o employers are difficulti es in supervising work a nd potential data security problems. no workplace visib ility. l'vlany existing universities offer on line edu ca tion of som e form . In ad dition. For empl oyees. students must be computer literate. telecommuting employees often have difficulties "tr·aining" th eir families to lmd erstand that th ey nrc at work even tho ug h they are physic<1 lly at ho me. add value to traditional learning in h igher education. Ad•·anced e-learning suppo rt environments. and at way every time). E-lcaming usually docs n ot repla ce the cb ss1 ·oom setting. Employer benefits include increased productivity. Telecommuting Knowledge workers are being called the dislribtded workforce. What Is telecommuting? Do you think you would like to telecommute? Why or why not? . Distributed worke rs are th ose who h ave n o permanent office at th eir companies. and powerful laptop computers and computing devices. via the Internet. R. in <1irpo rt lo unges o r client conference rooms. 2. Despite these benefits. ubiquito us broadband communications links (wireline and wireless).:1{ 6 Nch. such as Blackboard (www. at any time. F. 5. and society.nllilics h ave to und erst and that they sho uld not disturb the telecommuter lor anything that they would not ha ve disturbed h im or her abou t in a "real" office. 4.1th er. lhc benefits inc lude reduced stress and improved fm11ily life.phoenix. telecommuting also h:1s some potential dis:1dvantages. In corporate braining centers that use e-leaming. ll owevcr. the po tential fo r sl ower prom otions. F inally. Differentiate between e-learning and distance learning. extrem ely long commutes to work. Also. lower pay (in disadvmtages :1 som e cases). o r digital no mads. assessing students' work can be problematic because instructors really do not know who completed the assig nm ents. rising gasoline prices. Telecommuting hJS a numbe r of potential advantages fo r employees. It a Iso give~ studen ts the A their own pnce. it cnh< m ccs it by taking advantage of new content and delivery technologies. 'l o begin with. all o nline. For employees. Describe virtual universities. Fo r example. In addition. shtm/). 1l1is system reduces tn1ining costs ns wcll ns the expense of renting fa cility SJXI CC. preferring to work at hom e ). and the ability to attra ct employees wh o don't live within commuting distance. offer th ousands of courses and dozens of degrees to students worldwide. O ther universities offer limited on line courses and degrees but use innovative teaching m ethods and multimedia support in the b·aditio na l classroom . Ca lifornia Virtual Campus (www. Identify the bus iness conditions t hat have made videoconferenclng more important 3. learning time genera lly is sh Virtual Universities Virtual universities are online universities in which st udents take classes from hom e o r at an off-site location . Some niv. the ability to retain skilled employees. · n 1c g rowth of the distribute d workforce is driven by globa li~a li a process called telecommuting. possible loss of fringe benefits. telecommuting offers employment opportunities for houseb ound people such as single paren ts and persons with disabilities.cvc.urks Th ere are many benefi ts to e-leaming. and th e University of :Ma1 yb nd (www. Discuss the network applications that you st udied in this section and the tools and technologies that support each. 1.blackboard. or o n a high school st< 1dium bleacher.IIIIJili'~~~ C ll i\1' '1'1.

and industry data obtained via the Internet. provid e all users with an "eye to the world " and the ability to com pute. For the Human Resou rces Management Major Human resources pe rsonnel use portals and intranets to publish co rporate p olicy manuals. For exa mple. Human resources depa rb11ents use intra nets to offer employees health ca re. Virtua l teaming allows experts physically locate d in different c ities to work on projects as though they were in the same office. orga niza tions have access to experts at remote locations without having to duplicate that expe rtise in multiple areas of th e firm. F inancial ana lysts use two types of data in the model: historical transaction data from corporate databases via the intranet. the number of hours spent on each project by individual employees. promotion. opens a completely new marke ting channel for many industr·ies. T he fvllS function is responsible for keeping all organizational networks up and running all the time. anywhere. Sales personnel access corporate portals via the intranet to discover updates on pricing. and collaborate anytime. M IS perso nnel. This '~ew contains th e current costs charged to each project. and an anal ysis of how actual costs compare to projected costs. purc has ing. and service to se r\~ce. Th e Internet. therefore. IT For For the Marketing Major l'vlarketing managers use corporate intranets and porta ls to coordinate the actnvities of th e sales force. and training classes. financial services firms can use the vVeb for marketing and to provide services. savings. For the MIS Major As important as the networking tec hnology infrastructure is.4 ctwork Applications lll]f~f~·· For the Accounting Major Accounting personnel use corporate intranets and portals to consolidate transaction data from legacy systems to )XO\~de an overall view of internal pro jects.~ding the development tea m with three-dimensional models and animation . particularly the Web. Me? For the Production/Operations Man agement Major Com pa nies are using intranets and portals to speed product development by pro. produc t to produc t. and information dispensation should occur appears to va • y from industry to industry. communica te. Just how adve rtising. customer information . and information about competitors. and it also ca n be the communications platform for supporting geographically dispersed work teams. Sales staff also ca n download and customize presentation s for their customers. T he Internet also is a grea t source of cutting-edge information for POM managers. rebates. Extranets are also proving valuable as communication forma ts for joint researc h and des ign efforts among companies. accounting pe rsonnel use Internet access to government and professional Web sites to stay informed on legal and oth er changes affecting their profession . job postings. and benefit plans. Ma ny com panies deliver on line training obtained from the Internet to employees through their intr·anets. it is invisible to users (unless something goes wrong).S I~CTI O 6. Finall y. . as well as the opportunity to take competency tests online . company telephone directories. All team members ca n access th e models for faster exploration of ideas and enhanced feedbac k. accessed via intranets. Corporate porta ls. What's In For the Fin ance Major Co rporate intra nets and portals ca n provide a model to evaluate the risks of a p~o ject or an invesbnent. In addition. enable managers to ca refully supervise th eir inventories as well as rea l-time production on assembl y lines. T he Internet supports worldwid e recruiting efforts.

'The V. and portals. and blogs. Define the term computer n etwork. voice communicati ons. Th e two m a jor types o f networks are local area networks (LI\Ns) and wide area nel'works (WANs).'orld Wide '-Neb is 11 system th c 1t stores. fonmts. Twist ed-pair wire. Describe the diffe rences among the three types of wireline communications media. sotell ite. Differentiate between the Interne t and the World Wide W e b. T hey also can tr·ansmit far more data. directories.urks [ Summary ] 1. . Fiber-optic cables are significantly smaller and l ighter than tradition al cable m edia . and/or process it. colleagues. Fiber optic cable often io used ao the backbone for a n etwork. provide an example of each. widely available.e In ternet is a global n etwork of computer n etworks. Discovery tools enable business users to efficiently find needed information. In contrast. ·n. and describe the most common methods for accessing the Internet. it is relatively sl ow for transmitting data. E-l earning provides tools for business users to enable their lifelong learning. It is also som ewhat inflexible. chat rooms. Coaxial cable consists of insulated copper wire. business partners. :md dispbys information accessible through" browser. WI\Ns encompass a broad geographical area and usually are com posed of multiple communications m edia. 3. th e m ost prevalent form of communica tions wiring. It is much less susceptible to electrical interference th an is twisted-pair wire. and they provide greater oecurity from interference and tapping. l-1owever. Discove ry tools include senrch engines. 4. call centers. • Discol'ery involves hrowsing and infonmtion re trieval. business partners. or companies) who work together to accomplish tasks. 2.IIIIJiZ~~ · ·· C ll i\1' '1'1. and fiber to the hom e. However. Collaboration tools enable business users to collabora te with colleagues. and it can easily be tappe d by unintend ed receivers. using a comm on communica- tions protocol. it is subject to interference from oth er e lectrical sources. download it. • E-leaming refers to learning supported by the VIe b . • Networks provide fast. Methods for connecting to the Internet include dial-up. consists of strands of copper wire t wisted in pairs. Identify six major categories of network applications. Communica tions tools provid e business users with a seamless interface am ong team m embers.:1{ 6 Nch. coaxial cable is m ore expensive and more difficult to wor'k with than twisted-pai r wire. DSL. and it can carry much m ore data. and compare and contrast the two major types of networks. and provides users the ability to vi ew information in databases. and custom ers. and custom ers. T C P/ lP. It is re latively inexpensive to purch ase. Collaboration is en abled by workflow system s. LI\Ns encompass a limited geographic area and usually are composed of one communica tions m edium. '~a e-mail. retri eves. A computer network is a system that conn ects computers via communications m edia so that data and infonna tion c an be tnm smittcd among them . wirel ess. whereas twisted-pair w ire an d coaxial cable connect the backbone to individ m1l devices o n the network. cable m odem. Distance learning refers to any learning situation in which teachers and students do not m eet face-to-face. • Collaboration refers to m utual efforts by two or more entities (individ!uals. and explain how that application supports bus iness functions. Fiber-optic cables consist of thousands of very thin filament of glass fib ers that transmit information via light pulses generated by lasers. groups. and discuss the main advantages and disadvantages of each type. in expensive comnwniwtions. and easy to work with.

th at transmit informati on vi<1 light pn lses ge nerated by lasers. Yirtualun iveo ·siti<:s make it possible for students to obt~ in degr('es while working fu ll time. a sync hrono us h·ansfer m ode (AT 1Vl) Data transmission techn ology that uses packet switching and allows for alm ost unlimited bandwidth on dem an d. composed of interconn ected multipl e LANs and WANs. bro:odcast media (:~lso called wireless med i:o) Communications channels that use electromagn etic media (the ·'airwaves") to transmit cl:l ta. distance learni ng (DL) Learning situations in which teachers and stud ents do n ot m eet face-to-face. surrounded by clad ding. digita I datatransmission technology using exist ing analog telephone lines. used to ca rry high-speed data traffic and telev. defin es how m essages are formulated and transmitted . th~t use any of the services provided by servers. separated by dots. c :oblc m edia (also c. file server (also called n etwork server) A com puter that contains va rious softwa re and data fil es for a local area n etwork. . commerci"l (public) pmtal A Web site that offers fairly rollltine content for diverse audiences. that conveys information in a binary form . fiber-optic c.miza tions. c hat room A virtual meeting pla ce where groups of regulars come to "gab" electr onically. analog signals Continuous waves that transmit information by altering the ampli tude and frequency of the waves.11vbacks. dig ital subscri. [ Chapter Glossa ry ] affinity portal A Web site that offers a single point of en try t o an entire community of affiliated interests. with many ben efits and soon e dr. searnlessly.t<len ts ta ke classes from home or at an off-site loca lion . • Telecommuting is the process whe re knowledge workers are able to work <mywhere and anytim e. distributed processing Network ar chitecture that divides processing work be tween two or m ore computers. Telecommuting provides flexibili ty for employees. sisting of multiple parts. d omain name system (DNS) T h e system administe red by th e Internet C orporation for Assign ed Nam es (IC AN N) that assigns names to each site on the Internet. hrowsers Softw~re appli cations through which users primcuily access the Web. can be clone insid e tradition al classrooms or in '~rtua l classrooms. dig ital signals A discrete pulse. thus increasin g th eir va lue to their firms.oblcs A communications m edium consisting of thousands of very thin filaments of glass fibers. stated in bits per second. governme nt 1 agencies. corporate portal A Web site that provides a single p oint o f access to criti cal business informa tion located insid e and outside of an organization . e-leaming Learning supported by th e Web. cxh·anc t A n etwork that connects parts of th e inl'ranel:s of different org. via th e Internet. and inexpensively. d on1ain nan1es 'TI1e n atne assign ed to an Interne t site. which are translated from right to left. and schools around th e world.C hapter· C:lo~'""Y lll]i~l~ ' 1111 • \ 'irtual universifies are onlin e universities in which sh. client/server computing Form of distributed processing in l ch ines (servers) perform computing functions wh ich som e m< fo r end-user PCs (eli en ts). clients C omputers. computer n etwork A system that connects computes and other devices via communications m edia so that dat a and info rmation can be transmitted among them . indush ywide portal A Web-base d ga teway to information and knowledge for an en tire industry. quickly.sion signals. e nterprise network A network. collaboration Mutual efforts by two or more individuals who perform activities in orde r to accomplish certain bsks. con- b:ondwidth The tra n smission capa city of a n etwork. such as users' persona l computers. Ethernet A co mmon local area n etwork protocol. en compassing an organization . offers customization only at the user interface.1lkd wirc linc m cd ia) Com munications l ta Jnd c hmm els that use physical wires or cables to tnmsmit d< information . hypertcd transport protocol (HTfP) 1l1e communications standard used to transfer pages across th e VI!\• Vv\1 portion of the Internet. either on or off. The l ntem et ("the Net") T h e ma ssive n etwork that connects c01n puter n ehvorks of businesses organizations.ber lines (DSL) A high-<>peed. and contains the n etwork operating system . broadband A transmission speed ranging from approximately one m egabit per second u p to several terabits per second . coaxial cahle Insulated copper wire. b:ockbone n etworks High-speed central n etworks to whic h multiple smaller networks (such as LANs and smaller \• VANs) connect. communications c hannels Pathway for communicating data fr om one location to another. linked together in a network.

in spec ial workplaces. metasearch eng ine A computer program that sea rches several engines at once and integrates the findings of the various search eng ines to answer queries posted by users. digital librar ies. Internet teleph ony (Voice over Internet Protocol or VoiP) l11e use of the Internet as the transmission medium for telephone calls.llll~f~ l~iJI C II APTI. genera lly provid ed by common carriers. n etwork server (see file setver) packet switching The transmission technology that breaks up blocks of text into packets. instant messaging. WWW. and reassembling pa ckets over the Internet. teleconferencing The use of electronic communication that allows two or m ore people at different locati ons to have a simultaneous conference. all of which are multiples of the b. and innova tive information systems and electronic commerce applications. Transmission Control J>rotocolllntern et Protocol ( l'CP/ IP) A fi le transfer protocol that can send la rge files of information across sometimes unreliable networks with assurance that the data will arrive uncorrupted. and communications. deli vering. protocol The set of ru les and procedures governing transmission across a network. World Wide Web (the Web. Internet Protocol (I P) address An assigned address that uniquely identifies a computer on the Internet. allows the integration of transmiss ions from multiple vendors. mobile pottal A Web site that is accessible from mob ile devices. at the customer's premises. wireless media (sre broadcast media) wireline media (see cable med ia) work group Two or more indi viduals who act together to perform some task. unifi ed communications (UC) Hardware and software platform that simplifies and integrates all forms of communications. Internet Protocol (I P) A set of rules responsible for disassembling. syn chron ous optical n etwork (SONET) An inte rface standard for transporting dig ita l signals over fiber-optic lines. and vid eoconferencing . servers A computer that provides access to va ri ous network services. T-carrier system A digital transmission system that defines circuits that operate at different rates. and virtual labor<1tories. n etwork access points (NAJ)s) Computers that act as exchange points for Internet b·affic and determine how traffic is routed . usually usi ng a computer linked to their place of employment. videoconference A virtual meeting in which participants in one loca tion can see and hear participants at other loca tions and ca n share dat2 and graphics by electronic mea ns. a building). making each computer both a client and a server. or \V3) A system of universally accepted standards for storing. using advanced search and indexing tec hniques. workilow T he movement of information as it Aows through the sequence of steps that make up an organiza tion's work procedu res. loca tion. and resea rch products. across several connected LA. all of th e Web pages of a pa rticular company or individual. it uses the transport iunctions of th e Internet. twisted -pair wire A communica tions medium consisting of strands of copper wire twisted together in pai rs. e-mail. via the Internet. virtual uni versities O n lin e univers ities from which stude nts take cla sses from ho me o r an off-site loca ti on. wide area networks (WA s) A network. retrieving. data.N to th e Interne t. .:R 6 ctworks lnternet2 A new. Voice over Internet Protocol (Vo l P. so that every user device on the network can communicate with eve1 y other device. manage.Ns. route r A communications processor that routes messages from a LA. modem Device that converts signals from analog to digita l and vice versa. see Internet teleph ony) Web site Collectively.across an orga niza tion. virtual group (team ) A work group whose members are in different locations and who meet electronica lly. peer-to-peer (P2P) process ing A type of client/server distributed processing that a llows two or more computers to pool their reso urces. distance edu ca tion . uniform resource loc:1tor (URL) The set ofletters that identifies the address of a specific resource on the Web.tsic 64 Kbps used to transport a single voice call.•anced network <'pplications such as remote medical diagnos is. local area network (LAN) A network that connects communications devices in a limited geographical region (for example. services. search engine A computer program that searches for speci fic information by key words and reports the results. formatting. virtual collaborati on The u se of digital technolog ies that enab le orga nizations or indi viduals to collaboratively plan. online simulation. on either a permanent or temporary basis. Internet sen·ice provider (ISJ>) Companies that provid e Internet conn ections for a fee.voice. p ortal A Web-ba sed personalized ga teway to information and ·ovides information from dispa rate informaknowledge that p• tion systems and the Internet. develop. and displa ying information via a client/server architecture. that covers a wid e geographic area. f<1 ster teleco mmunications network that deploys ad. such as printing. telecommuting A work arrangement whereby employees work at home. or while traveling. des ign. inb·a net A priva te network that uses Internet softwa re and TCPIIP protocols. or across a wid e area n etwork such as th e Internet.

10. Access this articl e from 'l'hc Atlantic: " Is C oogle Making mtic. H ow much will it initially cost to register your domain name? f-low much will it cost to mainh1in that n ame in the future? 9.. Estimated cost of the vacation (travel. Assume you ore talki ng with som eone who has no knowledge of information technology.)? D o you think that a high school student who is thinking of attending your university would feel th e same way? 13. Explain how the products can !be used to support knowledge workers and m< m agers.t are the implications of BitTorrent for the music industry? Fo1 · the m otion picture industry? md cons of P2P nelworks.: w h e. g. 4 . ::~ "rno m1:::1r ' lnte. Describe the purtpose of each one.h~rn. shopping.ith ~r to ohbin one: n r to re:n f':· w or a "power" Internet user. flow :1re th e network applicatio ns of com>ntmication . audio. Compare and contrast the pw ducts. Vv'h at are the impl icntions of having fiber-optic 2.icann. d. D iscuss the pros c S hould the Internet be regulated? If so. keep it very s imple. Access the \• Veb site for that agency or com pany to learn the process that you must use. Major tourist attractions and recre ational facilities. ). S uch information includes. Access and learn m ore about this importa n t organization. surf the Web to find out the size of a l)vical Y ouTube file . Prepare < 1 report. Access http://ipv6. 14 . • Which top-level domain will you use and why? 6 . telepresen ce system collaboration related? D o communication tools also support collabo ration? C ive examples. the doma in n< • Explain the process for registering a dom ain name. Geographical location and weather conditions at the time of your trip.~in for the T L D tha t you selected. such as S ETI@hom e. lodging .).goog le. Calculate how much bandwidth you consume when usin g the Internet every day. (In other words. [ Problem-Solvi ng Ac tiv ities ] 1.:1nd contr:.1tio n (P. Access the \~1eb site of your university. Access www. Ke lly Rain er).iccllm. Country regulations regarding th e entrance of your dog. D o the same for Microsoft Exc hange.thwtlc C oogle m aking us stupid? Sup]port your answe r.:tiviti(:s lll]i~~~··· [ Di sc ussio n Questi o n s ] 1. Differenti<lte between telepresence products and videoconferen cing produ cts. 4. 8 . Explnin how th e Internet works.riaa. and identify which ones you would like to and www. I ist the m ajor ca pabilities of Lotus Notes/D omino. local tours.cow/cloc/200807/google). Shopping. by whom? Discuss th e pros and cons of delivering this text over the lntem ct. e. You plan to take a two-week vaca tion in Australia this year. which you would like to take with you.bout more advantages of I Pv6.r y n n :1re. Access Coogle vid eos (or YouT\tbc) and se<Hch for ''Cisco l'\llagic. 6..ine. Access the Web site of the Recording Industry Association of America (wuw . the following: a.rnt>t n. and what is the size of each? (Yom e-mail program may have e-mail file size information . From your own experience or from the vendor's information. CoJ Tlp3re . Travel mrangements (airlin es..the. f. What is the name of that agency or company? 7 . o and learn 3 . C ar ren t al. and video files you transmit or receive on a typical day. I· lnform.1gP. Discuss what you find there . C ompare and contra st C oogle S ites (www. Using the Internet. W hat else do you think you . approximate fares). Visit th e Web sites of compa nies th. 3. Access several P'2P applications.1st it \:vith current 5. accurate. Cil ble t o everyon e's home? Wh. 5. 12. \ Vhat impa ct does network neutrality have on you as a "normal" user? As a ''power" user? 2 . How m<my e-mails do you send daily. When you have calculated your daily Internet ns. Which site would you use to create your own We b site? E xplain your ch oice. but is not limited to.ltion on th e count·ry's hmguage and cul ture. one).com/ sites) and M icrosoft Office Live (www." T his video shows C isco's n ext-gene ration telep resence syste 1n. Alternatives for accommodation (within a mod erate budget) and food. b.) How many music and video clips do you download (or upload) da ily. l1otdd rese.1t manuf. You W<1nt to set up your own 'vVeb site using your nam e fo r nm : (for ex~mple.) 7 . cl e. h. Is Us Stupid ?" (11Mw. D oes the \~1eb site provide high-quality information (right .n ch before going to Australia? 9. L P:1sspnrt infon11 .org and obtain the n am e of an < 1gency or company that ca n register a dom. and what is the size of each? If you view YouTube often. etc. Add up the numbe r of e-mail. food. clear. find infm111ati on that will h elp you plan th e trip. etc.1clm c teleprescncc p rodu cts for th e Internet.Problclu·Sulvi••g 1\c.<:e.liveo(/ice.r c.

In 2009. In Octobe r 2009. or Coogle Earth .lrly 2009. and bac kground c hecks for Coogle employees with access to LA.colll) or Coogle ( www. Los Angeles n eeded archiving and disaster-recovery capabiliti es to safeguard information . online worl d built and owned by its resident~. downloading music files). T he system did not work on some m obile devices. Have each m ember visit the 'We b site of the product and obtain information about it.urks regarding copyright infringem ent (that is. whenever they need it. and efficient communi cation solutions. To achieve this objective. Research the companies involved in Internet telephony (VoiP). the city's information technology ( 1'1 ') agency. which must m eet Ca lifornia D epartment of Justice security requirem ents. O ne city The Solution In August 2009. [ Closi ng Case Th e City o f Los A ngeles Turn s t o Goog le Apps ] The Problem The C ity of Los Angeles (wMv. it also posed certain security concerns. th e city h ad an aging e-ma il system . [s the paragraph that you fi rst entered the sa me as the one you are looking at now? W hy or why not? Support your answer. Los Angeles faced a pressing need to modernize its IT appl ications. Comp~ re t heir offerings as to price. I low do you feel about th e RIAA's efforts to stop music downlo::~ds? O eb:1te this issue from your point of view and from the RIAA's point of view. tnmsportation. 18. Access some of the <lltcrnative searc h engines <ll http:!/ "'"''"· readwriteweh. wou ld fundamentally ch ange t he way the cily works .com) is a three-dimensional ..25 million contrac t that would move c ity employees to Coogle Apps by Jun e 30. or Quickr). h~s m ore th~n 30. contended that alth ough Coogle Apps would save the city money.alt<lvista. In addition to e-mail. SharePoint.PD. The key issue behind th e delay was security concerns by th e Los Angeles Police Department (LAPO).com/Af)ps!Busilless). 2. Compare the resul ts on breadth (number of results fo und) and precision (results are what you were looking for). rmd many others. Jive. Assign each group m ember to a collaboration product (e. fire. responsible for m anaging enterprise IT applications. Access tlhe Altavista (http:llb<tbel(tsh. Present each product to th e class. Second Life (www.000 employees and 44 different depa rtments-pol icc. the United States' second-largest city. W hich company is the m ost a ttra ctive to you ? Which might be the most attractive for a brge company? 16. Sea rch for the same terms on several of the alternative search engines and on Coogle.googlc. com larch ivesltop_I 00_ cJitcmati vc_ setlrclz_engines.{ 6 Nt:h. She argued th< l l the ability to get whatever information the city needs. Sh e Further noted that in a finm1 cia l crisis it was diffi cult to find technology solutions that would save m oney without requiring a significant capital outlay. the city had to decide whether to upgrade its current M icrosoft system or switch to Coogle Apps. 15. Each group will collaborate on writing a report on its product using Coogle Docs. Pbtial. As a group. Until e. When you see th e tmnslated pa1 French. Access Second Life. However. In particular. and city IT employees had to enforce inbox space quotas that city employees found limiting. th e LAPD expressed con cerns about the system's data en cryptio n . Th e city u ltimately agreed that Coogle Apps would provide the m ost feature-rich. prepare a comparative table of the major similarities and differen ces among the p roducts. learn about it. L eam about the thousa nds of people who ~re nwking "1 ·eal world" m oney from operations in Second Life. the segregation of city data from othe r data maintaine d by Coogle.PD information .org). [ Team Ass ig nments ] 1. on whatever device they need it. and select French-toE nglish. copy it into th e text box.g. T}l)C in a paragraph in I•:nglish and select F.nglish·agraph in to-French . and crea te your own avatar to explore this world .•••lli~l~:ll C ll i\1' '1'1. the Los Angeles city council unanimously approved a $7. Residents of Second Life are avatars created by real-world people. ease of instalbtion. The LA. th e chief information officer of Los Angeles made her case for why the city should adopt Coogle Apps . necessary<lge _tools) transb lion ]XIges. Compare and contrast these products as to features and ease-of-use.php. (ww•v. Each team will pick on e of the following: YourS treet. Coogle Docs.lacity. faced a $400 million deficit. the implem entati on was delayed . cost-effective.2010. < m el so on. This functionality was particularly important in an area prone to earthquakes. 17.m d enhance productivity.secondli(e.

August 20. 2010.lacity.000 of the 30. july 26. The remaining 13. Describe the major reasons that helped the C IO of Los Angeles decide to use Google Apps rathe r than to upgrade the city's existing Microsoft system.Wm f or 30.000 city workers would migrate to Coogle Apps. 2009.· ww. Berridge. E. TI1e Inquirer. October 27. 2010. . 2.mspmentor. 2010.~ng to Coogle Apps has freed up nearl y 100 servers that were previously used for the city's old e-mail system.. LA. 2010. and Microsoft's Watch ful" PC World. [ Interactive Case ] Analyzing Network Opportunities for Ruby's Club Co to th e Ruby's C lub link at th e Stude nt Companion web site or WileyPLUS for information a bout your current internship assignment. Los Angeles Ht Speed Bumps on Move to Cloud. "Los Angeles Snubs Microsoft for Coogle. accessed March 2. the Los Angeles CIO made two key points. C. Karneka. Cloud' Wins $7. S. Weinberger. E. Rao.. The LA. Bradley.>\ngeles Times. "'"''"·WJdgetel/. Second. D. CNET but not the other Coogle Apps. "Los Angeles Adopts Coogle E-Mail Sy.PD employees who had been using Coogle Apps on~ pilot basis had experienced delays in receiving th eir e-m~il. "Los Angeles Gets Its Coogle Apps Groove.. April 29. 2010. Mills.' Los Angeles Times.Interac tive Co:•se: Analyzing d work Opportunities for Ruby's C lub lll]f~1!D' 1111 councilman ca utioned that sensitive police investig~tions could be compromised if dahl unde r Coogle's control were somehow exposed. The Results Los Angeles officials decided that 17. W hat were the reasons that delayed the city's implementation of G oogle Apps? What was the C IO's response to these issues? Sources: J.Ivla y 3. lnjomwtionWeek. Coogle Apps is saving Los Angeles $5. Sarno. April 30. "Coogle Apps Project Delays Highlight Cloud Security Concerns. "Los Angeles Bureaucrats Question the Transition to Coogle Ap~. A. Guynn and D. In addition . mo. july 2). October 28.PD is a 24/7 operati on that relies on e-mail and Blackberry notifications for publi c-sa fety-related incidents across the city.000 workers in the police deparb11ent and the city attorney's office initially used onl y C mail.2 Mill ion Los Angeles Contract.. Ultimately. and dela ys are not acceptable." """'"·Publi<Tadio. . Acknowledging th ese concerns. M.2010. www. Los Angeles found that Coogle's system availability was 99.5 million over 5 yea rs by enabling the city to shift resources currently d edic~ted to e-mail to other purposes.· Clabu01. "'Coogle: Good Enough for Covemment \\'b rk. july 27. "Coogle Apps Migration: City of Los Angeles R eality Check. Th ey also had to offer an encryption option in whic h city officials held the enctyption key. she stated that Los Angeles owned its data . july 26. Diaz. she maint~ined that Coogle's security was better than the city's Microsoft system. 2010. "Coogle. 2010. March 29.. freeing up these servers produced ~n unanticipated benefit-it lowered the city's electrical bills by hundreds of thousa nds of dollars. such as auto-acknowledgement of receipt. 2009.000 City Employees. Questi ons 1. not Coogle. Coogle had to provid e ~dditionallevels of background checks for people authorized to access the data." WNet."' Los . First. For exa mple. Your ass ignment will entail wo rking with data <>bout how Ruby's ne twork can create a be tter experience for the ir custome rs. L. "Coogle Apps Has 50 Million Users . "Coogle's 'Ca. the C IO's comments and hard wo rk by Coogle employees changed th e attitud e of the c ity council from skepticism to c~utious acceptance of th e contract with Coogle . 2011.9 pe rcent and Coogle's service levels for respon se in the event of an issue we re excellent. Huh. '""'w. T. 2009. Interestingly. Coogle had to add other functions to its e-mail service. Further. To meet the securi ty requirements for these two deparb11ents. "CoogleCily of Los Angeles Deal

Chapter E-Business and E-Commerce .

C2C./rainer • Student PowerPoints for note taking • Interactive Case: Ruby's Club Assignments • Complete glossmy Wiley Plus All of the nbo. provide a specific example of each one. and state how you ha. and offer a specific example of B2B and G2 B.·c and • E-book Gs • !VIini-lecture by author for each chapter section • Practice quizzes • Flash Cmds for vocabulary review • Additional "What's in IT for Me?" cases • \'ideo inten·iews with managers • Lab Manual for Microsoft O ffi ce 2010 • J-10\v-to Animations for licrosoft Office 20 10 Wl1at'slnM T For ACCT transactions e. Describe the four types of electronic payments.·e used or would use each service. provide specific personal examples of how you ha. and mobile commerce.g. Illustrate the ethical and legal issues relating to electronic commerce with two specific examp les of each issue. and describe how rou would respond or re::act to the four examples you ha. Describe the th ree business models for business-to-business elech·onic commerce. and provide a specific exam ple of each model.·e used or cou ld use B2C. G2C.·e provided. Overview of E-Busincss and E-Commerce Business-to-Consumer (B2C) Electronic Commerce Business-to-Business (B2B) Electronic Commerce Electronic Papnents Ethical and Legal Issues in E-Busincss Student Companio n Site wile com/col•.. MKT 7 POM Transttlon from push to puK model FIN Trade securities onUne HR Manage e<•OI"IV'nen:el legal issues M IS Provide IT Infrastructure for ~omme rce Audtt e<ommerce M anage firm's virtual marketplace .\PTER OUTLINE ] [ WEB RESOURCES] Describe the six common types of electronic commerce..( LEARNI"\G OBJECTIVES ] [ CH. Discuss the five online services of busi ness-to-consumer electronic commerce. and explain whether you wou ld use each type. provide a speci fie example of each service.

l nis process caused shmes of som e prominent companies such as Procter & Gamble and Acccn tm e to tmd e <tt as low as a penny per shn re.S. (A futures contract is an crash bec-ame known as the Flash Crash. Inc.. the stub quotes were th e only offers from buyers. They imm ed iately began to sell these stocks aggressively.) Normally. will buy the stock at t hat price. exchange. T he primaty .1 ibble offer to buy is a pen ny-priced stub quote. T he only buy orders originate d from automated system s. [n recent years.000 times in 14 seconds. traded on an ©Simon Belcher/. and when th e only av. stock ma rket expel'ienced :1 crash in which the Dow Jones Industrial Aver. A mu tual fund's computer program began selling $4. nam ely. offers to buy stocks at prices so low that th e purchasers are un likely to be the only buyers of that stock. The Results T he ci rcuit brea kers are in pla ce.particularly commodities or sh ares of stock.010 . Securit ies and Exchange Commission (SEC) responded to the crash by instituting circuit b . whether the circuit breakers can prevent any future Flash C rash. In most cases th e same contm cts moved back and forth between the mu tua l funds and the 1-1 FT's in microseconds. ena cting a small tax on each equity tr3de.>\ge Fotostock America. the SEC expand ed the circuit breakers to includ e a broad er range of stocks. Some of the tax revenues could be used to enhance the SEC's monitoring efforts. however .eakers. In all this frenzied h·ading. however. M any of the contracts sold by the algorithm were purchased by high-fr equency trad ers ( l-IFTs). In this respect. by definition. only 200 contracts were achtally bough t or sold. creating a " hot potato" effect. 2010.which halt tra ding in a stock for five m inutes if its price m oves by 10 percent or m ore in a five-m inute period . The algorithm was programmed to execute the trad e "without regard to price or a fixed price. In th is case. only to recover those losses within minutes. the m arket was alre ady un cle•· pressure as a result of a massive debt cl"isis in G reece. but to be delivered and pa id for later. however.~l ue. It was the second-brgest point swing.IIIIII:lf~JI C ll i\ 1''1'1•:1 {7 I•:." which m eans that it continued to sell even as prices dropped rapidly. 1 billion offutures contracts. a market order. The l-I FT programs detected that th ey h ad amassed excessive ''long" positions. After a short time. and raise billions of dollars in revenue for the fed era 1 government. a sale of this size would take place over as many as 5 hours. where contracts changed hands 27. however. automated b·ading systems follow their algorithms regardless of the outcome.000 contracts on th e market in 20 minutes. ' n. No one knows. the sell algorithm installed on the mutual fund's computer placed 75. the market has grown exponentially faster and more diverse. th e U. A Stopgap Solution T he U. T hat day.1.on all stocks in the S & P 500 stock ind ex.5 points-on an intracb y basis in the history of Dow Jon es. Significm1tly.14 points-a nd th e biggest one-<lay point decl ine-998.Uusiucss aud 10:-Cummc •·c c [The Flash Crash ] The Business Problem 0 n May 6. Lawmakers are proposing an other possible solution . to buy or sell assets . which were submitting orders known as stub quotes. an automated sale of a b rge block of futures touched off a chain reaction of events.Jge lost almost 9 percent of ills total v. slow the market's overall pace. T hen. huma n involvem ent probably would have prevented these ab~tmlly low prices. computerized traders who buy and sell at high speed and account for a large percentage of overall trading in today's markets. mea ning that they purchased stock with the expectation that its price would rise. During th e A ash e1 ·ash. which in turn caused the mutual funds' algori rhm to accelerate selling. S uch a tax wou ld likely discourage som e high-frequency b·ading. but the Flash C rash raises a larger question about the stock market. The l-I FT and mutu<'l fund programs traded contracts back and forth .

IT's About Business 7.1. J."' ComJ>t~terworld. "'Lnne $. 2010. the Flash Crash Is No Flash in the Pan. T his diversity has made stock twding chea per.. wh ich benefits both institutionaJl and individtd investors.Jture of competition . 20 10.already distracted by the ma jor ch allenge of reforming Wall S treet in the wake o f t he broacle1 · credit crisis of 2008wi ll shrug off the F b sh C rash as an .. to inc rease m arket share. regard less of where you work.Yall Street's comp uter models tend to fail when unpredictable disasters overlap. Patterson and T. Macbride. October l . · ·tne Machines That Ale the Mark€'!. In that case. Patteoon. S. Schaefer. e-comm erce provides unpara ll el ed opportunities for companies to expand world wide at a sm all cost.2 shows how 01 small compa ny can u til ize e-commc rce to gai n a competitive edge in the marke tp lace. A major danger is that regulators. May 20. Spicer. T he chapter-opening case showed you that e-commerce h"s fundame nta lly altered the nature of competition in the futures and stock m arkets. October l." Forbes. 2010.g the F'lash Crash. computer servers run by companies aro un d the world. defined as the nu mber of potential custom ers to whom the company can market its products. and 1 narket interact.1 Billion Sale Led to 'Flash Cm sh' in May."' T11e Ne. it also has m ade it more difficu lt to ensure an orderly m arket. •·tne Truth About the Flash Cr. envision yourself performing th e a ctivities discussed in your fun ctional area. from advertising to paying bills. October 15. . meaning tha t Aash cn1 shcs c. "Exchanges Point Fingers 01~ Human • tands."' Forbes. also known as e-commerce (EC). Another m ajor impact of electronic commerce has been to rem ove many of the barriers that pre. E." 11~e New Y 01~ Times. Tl>e \\&1/ Street foumal. May 9. Me-aridn.. "Special Report. E-commerce offers ama zing opportunities for· you to open your own business by developing an e-comm erce Web site.m 11-w ppen ag<1 in. "'~ting the rvtachines Decide. 2010.1sh. Electronic com m erce affects organ izations in many significant ways. 20 11. This m eans that.lh en you read tl1e W hat's in IT for Me? feature at the end of the chapter. rather. "How the "Flash Crash' Echoed Black Monday. and to reduce costs. May 10. \ \·}.1 sh ows how on e person used e-commerce to start an extremely su ccessful business. "Did a Big Bet He lp Trigger'Biad: Swdn' Stock Swoon?"' Tf~e Walf Street /oumal. "llegulalor> Vow to Fn1d Way ID Stop Rapid Dives. 2010. What We Learned from This Case A profound change in the m odern world of business is the em ergence of electronic commerce. T his knowledge will m ake you m ore valuable t·o yom organiza tion an d will ena ble you to quickly contribute toe-commerce applications in yom functional area. E-commerce is transforming all business functional areas and their fundamental tasks.l\· lay 10. C lobally. Harri~ "How to Prevent Another Tmding Panic. m any sm all busin esses now can operate and compete in m arket spaces once dominated by l arger companies. July I 3.. but. Its impact is so widespread that it is affecting alm ost every organization. Coing further. Unfortum1tely.~ously kept entrepreneurs from starting their own busin esses.1ffect the firm's strategy and busin ess m odel. L. Mehla . October 1. 2010. Lucch€'1ti. new business models. "Flash Crash Update. First .t~ YC\J'k Times. due to the developm ent of new online companies. 2010.1be rration requiring no fun damental reth·i nking of how n1an n1nchine. politicians. Recall your study o f competitive strategies in Chapter 2.. Despite all the advantages of e-commerce. particularly th e impact of the Interne t on Porter's five forces. Source" Compiled from E. N." Tl>e \\&II S treet faun"t( May 17. V. C. 2010. S. In fact. IT's About [Sm all] Business 7. and th e diversity o f EC -related p roducts and services. A. You lea rned that the Internet ca n both endanger a nd enhance a company's position in a given industry. May 12. L. Bowley."' Forbes. 2010. Lambert." Bloomberg Business\\\>ek. it increases an organization 's reach. 2010. with its broad reach. P atterson. Latur icella. By utilizing electronic commerce.<\sset Meltdo\\11 Is a Real Possibility. disaster if the process is not properly mon itoJ You need to have a working knowledge of electronic commerce because you r organization a !m ost certainly will employe-commerce applications th at . and industry leaders. S. your organization likely is p racticing electronic commerce." The Wall St~<et foumal. \ Vhy the Multi.11. Elcch·onic comiTllcrcc <1lso is dr<Jstic011ly ciHlnging the n. an unde rstanding of electronic commerce is even m ore essentia l for you because e-commerce. ''Dissectin.CAS t• : 111]!~:5~1111 venue for stock b·ading is no longer theN ew York Stock Exch~ nge. 2010." 17w Wall StiWI /ounwl. October I. 1 Th e bottom l ine? \. " Regulators Blc nneComputer Algorithm for Stock tvlarket 'FI<~sh Crash~. E. 2010." Reu. the Flash C rash dem onstr< ltes tha t relying on computers (<1nd thus on c-commerce) can lead to •ed by humans.S. March Z. will probably be critical for your business to survive and thrive. you may decide to become < ln entrepreneur and start your own business.

the company Installed a small device on top of • each machine that communicates with headquarters via a cellular connection. It Is becomIng prohlblllvaly axpenslva for Traat America to monitor vQildlng machines by driving to each machine's location. 2011: L Westbrook. net}. called Scrolls.1 Minecraft earning $350." Bloomberg Bus/nessWeek. accessed April 21. a gaming Web site. 2. www. found a better solution: e-buslness. the no-frills video game that has sold close to 2 million copies. 2011. All the fun. The goal-to the extent there Is oneIs to avoid being eaten l7y monsters that come out after dark." The Kansas Oty Star. Consequently. Treat Mlerlca determhed that it essentially needed only a few simple pieces of Information on each machine." The Escapist Magazine. Treat America Food Services fllttp:lltreatamertca. Is th is competitive advantage sustainable for any length of t ime? Why or why not? Support your answer. for example." He and seven employees split their time between continuing to develop Minecraft and workhg on a new video game. among other things. unlike IPhone bestsellers such as Angry Birds.. Provide1\-. gravel.a minimal cost considering how mu ch money the system saves customers In theft and fuel.Comme rcc G about [small] business 7.llllli~ :G~ · ·· C IIAPTER 7 E-Busincssanci i•:. Further . This number Is even more Impressive When you consider that Persson has not spent any money to market Mlnecraft. accessed April 19. and whether the door has been opened after bushess hours.000 per day. he was selling about 7. 1Tinecra~. 2 . which sells It for about $21 . the attached device automatically alerted the customer and the pollee that the door was open after hours. however. E-buslness refers to performing any "normal" business activity with the assistance of computer-based lnformanon systems and networks. Doctors' offices.2 Vending Goes Online The company's efforts paid off. Sources: Compled from 'The lmprobabl& RISe o f Mlnecraft.mojang. Is. Whether the machi"le has been moved. As an added benefit.000 Per Day. WHh gas prices rapidly Increasing. Persson wrote the M lnecraft program In 2009 as a side p roject while working on his day job at Klng. or even If someone has broken Into II. when thieves broke Into a vending machine. and other organizations contract with Treat America to provide vending services to their customers and employees. Provide two specific examples of disadvantages that Persson could encounter by using electronic commerce. Web-Based Systems.' One source stated that by late 2010 Mlnecraft was Questions 1. and clay to build elaborate caves. This online feature costs Treat America's c ustomers approx imately $ 150 per machine per year. Persson founded a gaming company called Mojang (www.:> examples of how the tectnology added to the vendIng machines gives Treat America a competitive advantage. "Vending Machines Go High-Tech wtth Wireless.000 copies on an average day.17. however. G [about business] 7. www. Sources: Co""led from J. M lnecratt places users Inside a vast landscape. Many of the firm's competitors have srnply raised prices. In one Phoenix Treat America's c ustomers now use less gas because they can check Inventory online without having to drlva to aach machln9 to chAck quantiiiAs and to restock. September 28. In addition. a vendhg machine company. As Persson observed: "Once (sales) got up to 15 copies a day. The problem Is that Treat America'S vending machines are unmanned most of the time. IPads. several employees quit when they could no longer steal from t11e vendIng and Android phones that will be available In late 2011. lies In ushg square blocks of mater1als like dirt. 2011. By the end of January 2010. the amount of product hventory remaining. In March 2010 the Independent Games Festival awarded Mlnecraft Its grand pr1ze. Questions 1. . Mojang Is creating versions of Minecraft for !Phones. Smith. 2010. Mlnecraft has not benefitted from the distribution muscle of Apple or any other company. The company has no Idea how much money or product Is In each machine. Swedish for •gadget. These versions will be sold through third-party app stores such as Apple's ll\.m/necraft. "Minecraft Makes $350. and fortresses. Markus Persson Is the lone developer of Mlnecraft (www. The only place to buy Mlnecraft Is Persson's Web site. colleges. April 11. http:// troatamerica. April10. Treat America. Pollee caught the culprits In action and arrested them. Provide two specific examples of how electronic commerce enabled Persson'S business to be so successful. In a New Orleans store. The device reports the amOUlt of money In the machine at any given minute. that was enough for me to have a salary. In late 2010. hospitals. The game Is played through a Web

7.) Th erefore.mel parti<1l EC. you must consid er how the site will generate and retain traffic. . we use th e term "electronic commerce" to denote both pure . in pure EC all dimensions are digital. yet ca rry out their primary business in the physical world . the product can be either physical or digita l. (You may also see th e term "bricks-andmortar. E-commerce n ow is so well established that people generally expect all companies to offer this service in some form . buying an e-book from Amazon . and th en you become familiar with pure and partia l elech·onic comme rce. In addition to the buying and selling of goods and services. Next.1 Overview of E-Business and E-Comrnerce An y entrepreneur or company that dec id es to practice electronic commerce must develop a strategy to do so effectively. and transfer are digital. although bought and paid for dig itally. Y ou conclude by examining severa l legal and ethical issues that have arisen as a result of the rapid growth of e< ommerce." You will encounter both terms. T he point here is that. including the Internet.SECTION 7. The appropriate Web site for achieving each goal will be somewhat different. Th ere are se\'eral reasons for employing We b sites: • • • • To sell goods and se rvices To induce people to visit a ph ysical location To reduce operational and transaction costs To enhance your reputation A Web site can accomplish any and all of these goals. com is pure EC beca use the product itself as well as its delivery. e-busi ness also refers to servicing custome rs. both dimensions are physica I. it is difficult to accomplish all of them at the same time.-commerce. and performing electronic transactions within an orga nization . when you are considering electronic commerce. clicks-and-mortar orga nizations are examples of partial EC. which are the ways in whic h businesses and people buy and sell over th e Internet. In traditional commerce. Purely phys ical orga nizations are referred to as bri ck-a nd-mortar organizations.-commerce. (A common alternative to the term "clicks-and-mortar" is "clicks-and-bricks. T his concept ca n relate to both the product or service be ing so ld and the delivery agent or intermediary. In is partial EC beca use the merchandise. collaborating with business parb1ers. and th e delivery agent ca n be eith er ph ysical or digital. business-to-business (B2B). services. Definitions and Concepts El ectronic commerce (EC or e-commerce) describes the process of buying. as well as a host of other issues. In othe r words.-business and e. Unless a company (or you) has substantial resources. W hen setting up your 'Neb site. keeping the strategy of the organization or entrepreneur in mind will give you a good idea as to the type of We b site to use. The degree of digitization is the extent to which the commerce has been tr. This secti on examines the basics of e. business-to-employee (B2E). you focus on e. is physically delivered by F'ed Ex or UPS. £ -business is a somewhat broade r concept. First.m sformed from physical to digital. C licks-andmortar organizations are those that conduct some e-commerce activities.1 Ovcm cw o f !~-Business and !~-Commerce IIIII:~f~llll In th is chapter yo u will discover the major applications of e-business. transferring. or exchang ing products. Th e first step is to de termine exactly why you want to do business over the Internet using a Web site. consumer-to-consumer (C2C). Electronic commerce ca n take several forms depending on the degree of digitizati on involved. sell ing.-commerce mechanisms.") In contrast. To avoid confusion . Y ou then take a look at the va rious types of electroni c commerce. and you will be able to identi fy the services necessary for its support Y ou then will stud y the major types of electronic commerce: business-to< onsumer (B2C). Companies engaged onl y in EC are consid ered virtual (or pure-play) organiza tions. or information via computer networks. pa yment. however. The section conclud es by considering the benefits and limitations of e. and govemment-to-citizen (C2C).com or a software product from Buy. All other com binations that inducle a mix of digital and physical dimensions are considered pmtial EC (but not pure EC). Purchasing a shirt at \Val mart O nl ine or a book from Ama zon. these two concepts are defined.

and ticket> to c• enls on the corporate intra net. Tni• wider audience gre.11lom. • Busincss-to-cmplo)<.) T he major categories of onlin e cb ssifi ed ads arc similar to those found in pr:int ads: vehicles.mlt.g. < B2E.CZC. Y Business-to-busin ess (B2B) In B2B trans. both the sellers and the buyers are busin~s organizations TI1e vast m. 1\lobile commerce (m -commerce) The term m-commerce refers to e-co mmerce that is conducted entirely in a wireless enviro nment.Jue of cxp. Class ified ads arc av<libble through most Internet service providers (AOL. etc.trc o~.1ls d cctromc.1ph1e rc.·emment-toin pnrticular to deliver inf citizcn or C2C EC) ~nd to busmc~s p. www. emplorees can buy discounted insurance.•cmmclll-to-busincss or C2B EC). 'C (1321 •:) ln B2F . pets.Jbon and sen·1ccs to 1b cmplo)ces.1ge their benefits and to take trammg classes electrom cally.tll) Fin.craigslist. mdlvJduals. • In dozens of countries. real estate.'\. E-governm ent is also an efficien t way of conducting business lTansactions with citizen s and businesses and within th e governments 1hemsclves.lllon m cs EC •nlern. For example. Simibrly. C2B EC and BZB EC arc similar conceptua lly. T he major strategies for conducting CZC on the Internet are auctions and classified ads. in which governments transfer benefits. i\n example is using cell phones to shop over the Internet.mel ~ef\ ltC\ . you \\ill mel you "ill lc. bter in this section . but you would not buv firewood from som eone at ~uch Consumer-to-consumer (C2C) In CZC (also calle d "custome r-to-custom. d irectly to recipients' bank accounts.mel the bu} ers are ou learn about B2C elcctromc commerce m Secllon 7. usu.1tly increases both the suppl) of good~ .1ndcd gcogr. .Jctions. employm ent. usually with an overlay of government procurem ent regubtions. E-govern m ent makes government m ore efficient and effective . CZB EC is much like B2B EC.lll cd go..000 miles away from you .~hoo!. E-go•·emment E-~overnment is the use of Internet technology in general and e-commerce o rmation and publ1 c scl\ 1 ccs to citi1. at some po rb Is (Y. and from Internet directories and online ne•.com.·c electronic corpo rate stores that sell the company·~ product~ to 1ts employ~cs. It is unportant to note that the . • • .lil) to pro\lde mform. However. • • B u.l lllplc.ttly on" hat 1 s bemg bou~ht or sold.1udiencc.1IIm\ employe~ to man. C onsumers can select general sites such as www. nun) comp. especially in the delivery of puhlic services..1 d1stancc. In addition.11ly at. Craigslist (II• Internet-based classified ads have one b1 g advantage O \'Cr lrachtiona! types of classified ads: They provide access to an inte In addihon .Types of E-Commerce E-commerce can be conducted bcl\\ ccn . deta il.1 riou~ p. In this section. B2C EC).com provides software to crea te online C2C reverse auction commun ities as just one offering from its broad product line. d1scotml. etc.umcr (B2C) In B2C.llld \upphcr~ (c.lJonh of EC "olumc IS of tillS h-pe Y ou sec BZB electronic comme rce m Secllon 7 l Figure I S also •llustrJ!t's B2ll ck ctromc commerce. the functions of G2C EC are con ceptua lly different from anything that exists in the private sector (e.un ••bout three of them . a company that sel ls software and services that help individuals and organizations cond uct th eir own auctions. narrow their searches. . identify the six common types o f e-commerce.mel <1111011~ v. and e-govemment. An example of CZC electronic commerce is electroni c ben efits ). That is. You the n consid er BZC and BZB in separate sections because they are very complex. th~ w ile" . They also c an order supplies and matcn .). in which buyers solicit bids from se llers. compan1cs . 1mcs ha. ro~•might bur software from a company located I . Fo r <. an indindual sells products or sen·ices to othe r indhiduals. tickets. MSN. and travel. many individuals are conducting their own auctions. !\l ost auctions are conducted by intermediaries like eBay (").llllt. such as Socbl Security and pension payments..cns (called go. trave l packages. (You wil l learn about reverse auctions. CZC e-commerce on auctio n sit·es IS exploding.1th cr than ~1 is the largest online classified ad provider.11 tnc" .lt h depends gre.m org.).•II)'... th e number of pote ntial buyers. You will learn about m-commerce 111 Chapter 8.utics. Many of these sites eont01in searc h engines that h elp shoppers Ww.

go to the vendor's site.egreetings. Coogle managers point to the huge number of purchases that follow successful Web searches as well as to the abandon ed shopping carts th at immediately follow a nonproductive search. Online direct marketing E -Commerce Business Models EC Model ~ . An intermed iary (for example. Customers use the Internet to self-configure products or services. 01 1e of the biggest changes has been th e growing importance of search. Customers must accept the offer in a short time. Rec eivers send information about your product to their friends. etc. Busi nt·ss and I • From Coogle's perspective. conducting offers deep price discounts.. Can allow for product or service customization (www. 1 summar izes th e major EC business mode ls.1 Description Manufacturers or retailers sell directly to customers. which can be used to purchase other needed items (www. Uses B2B with a reverse auction mechanism. but gaining ground in other types of EC ( Com panies run auctions of various types on the E-Commerce and Search 1l1e development of e-commerce h~s proceeded in compares providers and shows the lowest www. Very efficient for d igital products and services.CmmnCI'Cf.priceline.' IIEJ:I: ]fJI··· Each of the above types of EC is executed in one or more business models. Intermediary administers online exchange of surplus products and/or company receives "po ints" for its They were replaced with systems that tri ed to anticipate customer n eeds and accclera!e ch eckout.bbu. including access to certain information.1nds initially were kept distinct and then were awkward ly merged. Very popular in C2C. Table 7. Electronic tendering system Name-your-own-price Find-the-best-price Affil iate marketing Viral marketing Group purchasing (a-coops) Online auctions Product euetomi2ation Electronic marketplaces and exchanges Bartering online Deep discounters Membership . 1 ()v(. SeUers then price them and fulfill them quickly (build-to-order) (www. Only members can use the services provided. Table 7. and lower transaction costs) in electronic marketplaces (private or public).. Businesses request quotes from suppliers.. Initial e-comrn erce efforts consisted of flash y brochure sites. As evidence. (www. Small buyers aggregat e demand to get a large volume. then the vendor pays commissions t o partners. Cus tomers specify a need.'rvicw of I< . an intemnediary (for example. Transactions are conducted efficiently (more information to buyers and tries to match a provider. Customers decide how much they are willing t o pay. Appeals t o customers who consider only price in their purchasing decisions. Vendors ask partners to place logos (or banners) on partner's site. A business m o<lel is the method by wh ich a comp~ny generates revenue to sustain illielf. Com pany (for example. or they may lose the deal. with rudimentary shopping carts and checkout systems. The group than conducts tendering or negotiates a low price. O ffiine and o nl in e br.SI•:C'I'I()N 7. www.ebay. If customers click on the logo. though . www.

also known as a C\'bcml(t/1 or e-mail. For An electronic storefront is a Web site th.1lls. An auction is a competitive process in which either a seller solicits consecuti"e bids from buyers or a buyer solicits bid s from sellers. they are a\-::ubble on CD-ROAI and the Internet. In addition . and retrie.1ta.1 pra<luct or a scf\·icc. is a collect•on of ind" idu. Customers benefit by being able to access a vast number of products and services. 111cludmg Ama:wn. e-storefronts. and society as e-commerce has. Usually. virtua l ma rket space on th e \ Veb where m any buyers and m any sellers can cond li Ct e-commerce and e-business activities. Electronic auctions (e-auctions) generally in crease re\'enu es for sell ers by broadening th e customer base and shorte ning the cycle time of the au ction. usu.~ng information. eBay. the lowcst-pnce b1dder wins the auction l11e re.11or compJ mt'S. Merchants will pour continuous ~li'11Ch11'Ccl feeds of d. E-comme rce benefits organizations by making national and international markets more accessible and by lowering the costs of processing. one buyer.ersc auction IS the most common .ugc corpor. Electronic m arketplaces are associated with B2B electronic commerce. and a presentation function. Both sellers and buyers can be individuals or businesses.l). fi:.00 m.u~h t ngincs such as Coogle. th ~rd-p.1t represents .1iJcrs will post tremendous <~mounts of additional details.·ef)1hing else being C<(lhll.1uchon model for IMg< pmch. 'Ine supphers stud}' the RFQ and then submit bids electronically.1ses (111 terms of e1ther quanhties or pnce).Jllon. T he re are two major types of auctions: forward and reverse. The major benefit to socie ty is the ability to easily and . Electronic catalogs consist of a product database. more and Dellauction.Coogle is confident that in the future re t. the bcst-kn0\\11 tlmd-p. You l e~rn about electronic marketplaces in Section 7. The h ighest bidder wins the items. Buyers gen erally benefit from e-auctions because they can bargain for lower ucti on at a physicalloc. offu'> hundreds of thousands of d11Terent items m several type~ of .uty s1te. Th e popular auction site e Bay.~dua l consumers and corporations alike can pJrticipate in auctions. the compan) 's onlme database. ersc :1uctions. or a third parl).3. Coogle currently is using C oogle Base.1l shop\ under o ne Internet address.Jil. directory and search capabilities. around the dock.2.m -. prices. daily inventory.ll~.ide considerable sa\'111~ for the bu)er Auctions can be conducted from the sellers slle. ~m. 'l11ey are the backbone o f m ost e-<:ommerce is a forward auction In rc. th ey don't have to travel to an :1 T he Internet provides an efficient infrastruc ture for cond ucting au ction s at lower administrative costs and with many m ore involved sellers :mel buyers.. '!11e prin1Jry characteristic of auctions is that prices are determined dynamically by competitive bidding. which may pro.lllchons. le or on . to work on this process. the bu\er's s1te. and buyers bid continuously for them.11l) . An electronic benefits to organiza tions. Benefits and Limitations of E-Commerce Few innovations in hum an history have provided as m. sellers place items at sites for auction. OH'r. an d hours of oper. '(Od. 1'he RF'Q ' !11e buyer posts a request for quot.s site.1tion-into pubhc ~c. electroniC auchons. individuals. Electronic storefronts and electronic malls are closely associated with B2C electronic commerce.111ts to buy . and e-marketplaces Catalogs have been pnnted on p<~pcr for gcner. offer onlme auctions. howt'\er.1tion ( RFQ) on 1ts Web s1 provides detailed information on the demecl purchJse.incl udin~ product listings.•hon~ frequent!) use tl11s approach.1 smgle store.lllons. lndi. Forward auctions are auctions that sellers use as a channel to many potential buyers.111 org.lrt) s1te.1 tion . distributing. You study each one in more detail in Section 7. w. Major E-Commerce Mechani<~ms There are many mechanisms through wh1ch businesses and customers can buy and sell on the Internet The most widely used are electronic CJt.lnll. This process would allow customers to access much more specific and relevant search results. Co\'emmcnb Jncl l. An electronic m arket:pbce (e-mm ketpbcc) is a centra l.

Like any mail-order shopping experi ence. telecommunications ba ndwidth often is insnfficicnt. Define a-commerce.~ 1. in les. EC also offers a wide r variety of products and services. Electronic Storefronts and Malls For several generations..2 Business-to-Consumer (B2C) Electronic Commerce BZB EC is much la rger than B2C EC by volume.2 130J>i m·s. that ha ve restricted its growth and accephmce. and lacks a critical mass of selle rs and buyers.developed countries.!. N on tcchnological limitations include th e perceptions that EC is insecure. D espite a II th ese benefi ts.!·: t•:CT IO N 7. especially the technological ones. This section addresses the prima1y issues in B2C EC. but B2C EC is m ore complex. and developing conntrics. Each order must be p rocessed quickly and efficiently. . Further.tu-Cuusouuc r (B2C) l •:lc~h·uuic Cou11uc o ·c c l l !J:PD •1111 con ven iently deliver information. T he reason is that B2C involves a large number of buyers making mill ions of diverse transactions per day w ith a relatively small number of sellers. including unique item s. usu ally design ed around an electronic catalog format and/or auctions . and you get an idea of th e complexity of B2C EC. whe reas B2C complexities tend to be m ore technical and volume related. 2 . Also. Differentiate amonQI B2C. customers also access online services. O ne major technological limitation is th e lack of universally accepted security standards. Define a. Multiply this simpl e example by millions. Identify some benefits and limitations of e -commerce. You will examin e these two topics in detail. securities trading. the limita tions. has unresolved legal iss ues. this section concludes with a look at online advertising. As time passes. and distinguish it from a. often at lower prices.~si on sh opping c hannels. 4. Electro nic retailing (e-tail ing) is the direct sa le of products and services through electronic storefronts or electronic malls. 7 days a week. e-comm erce enables you to buy from hom e 24 hours a cl ay. T he refore. B2B. Finally. In addition to purchasing products over the 'Neb. but Am azon must manage that transaction as if that custom er were its most important one .. has attracted millions of customers. returns must be managed. 7. an d later from tele. will diminish or be overcome. within seconds. such as banking. You begin by studying the two basic m echanisms that custom ers utilize to a1ccess companies on the 'Neb: electroni c storefronts and el ectronic malls . they can easily locate and compare . T h erefore. shopping online offers an alternative to catalog and television shopping. As an illustration. However. and products to people in cities. In addition . Each custom er's purchase is re latively small. consider Amazon. Overa ll. The complexity of BZC EC creates two major challenges for sellers: chan nel conflict and order fu lfi llm ent.mel accessing th e We b is expensive. EC has som e limitations. In addition. 3 . and the products m ust he shipped to th e customer in a timely manner. before you go on. Discuss forward and reverse auctions. and travel. both t echnological and n on technological. shoppers ca n access very detailed supplem entary product information . 5 . Today. an o nline retailer that offers thousands of produ cts to its cu stom ers. job searching. C2C. services.government. B2B complexities tend to be m ore business related . hom e shopping from ca talogs. th e next section covers several online services. and B2E electronic m ral areas. compani es engaged in BZC EC must ·'get the word out" to prospective customers.

Finally.. Net-a-Porter Is an Interactive shopping fashion magazine that fJUllll~lt!l" 52 W!l!lkts llf oollorl" l ~llrtlllrtl """'' Y""' Itt "UUillllrt Ill ns designer clothes sales operations. In 2009. an electronic storefront is a G [about business] 7. as well as discount luxury flash sales Web sites such as Gilt Groupe (www. Third. Major luxury goods companies such as Rlchemont (www. "What's a Dress Wo and have turned their attention to electronic commerce. these companies have democratized fashion. Despite the proli fer:ttion of e-bnsinesses. Montblanc (www. have forced executives In the well-known luxury brands to rethink the benefits of online sales. "Gilt Groupe Founders: The Most exclusive.a-Porter to compete w ith other companies that operate flash sales of high-end merchandise. Recognizing that shoppers are increasingly willing to buy very expensive products over the Web. Let's use the Gilt Groupe to Illustrate how flash sales Web sites operate. 2010. Swiss luxury goods maker Rlchemont purchased Net-a-Porter. Net-a-Porter launched a sister Web site.3 Luxury Goods Turn toE-Commerce Gilt sends an e-mail to Its nearly 3 million members. Competitors Include Gilt. Van Cleer & Arpels ( estimates that the $5 billion online luxury market grew by 20 percent In 2009. and 2010." Fast Company.•••llt~·I~tll C ll i\1''1'1•:1 {7 I• the big luxury brands are making digital retailing a higher priority.rualala. which offers discounted designer clothes.:unn11 ~r r. and Donna Karan ( The company Is planning to double Its operation In the United States and to open a new distribution center In Southeast added retail sales to their Web sites In 2010.3 answers this question . November "Richemont erful People In Fashion?" Forbes. com (www. Web site that represents a single store. Rue La La. selling $1 .jlmmychoo. Sonne. Shortly before noon. P to Buy Net-a-Porter. "Luxury Goes Digital: Fashion House Richemont Embraces E-Commerce." The Wall Street Journal. alerting them of the day's sales. April2. com) and Yoox (www.rpels. Rlcl1emont Is making a commitment to Increasing ns presence In the online luxury marKet. rtchemont. 2010. ch/oe. Burberry (www. giving consumers everywhere access to the most exclusive brands at Insider prices that shoppers could formerly get only In New York City. Rice. Baln & Company (www. Uusin css and 10:-CuHnnCI'c c competitors' products and prices. As n oted earlier. Lee.mel retailers (e. Manufacturers (e. Rlchemont Is the owner of brands such as Cartier (www. L.vancleef-e.a ch has its own nnifo rm reso~trce locator (UHL). ror example. 2010. This move enables Net. In tact. . Provide two specific examples of luxury shoppers' requirements that a Web sit e could not To provide this guiding hand.marcjacobs. . What features are provided by online luxury retailers that overcome the problems you mentioned In Question #1? Sources: Compiled from R. It makes sense that we do an IncreasIng amount of shopping on the Internet. and LVMH Mo!lt Hennessy Louts Vut·tton (www. O thers are new bu sinesses started by entrepreneurs who discovered a niche on the We b (e. ).gllt. Restaurant. A. or lntem et address . frenzied New York City samplesale experience online to a mass audience. As we work more and more ho urs. these llrms have changed the way we shop. Gilt has forced luxury brands to embrace the Internet. The Gilt Groupe operates an Invitation-only Web site. unlike the better-known Electromc Storefronts. Burberry now offers select p ieces from Its runway presentations for a limited time on Its Web site just ho urs after ns Fashion Week show.aneri. eleGlrunlc www. Two popular online shopping m echanism s are electronic storefronts and electronic ma and Rue La La (www. This process creates strong incentives to buy quickly. buyers ca n find h undreds of thousands of sellers. IT's About Business High-end retail Web sites such as Net-a-Porter (www. m:trrlely. questions have lingered about wheth er sell ing luxury goods onlin e would be su 2. T he Sh arper Image.baln.. Shoppers then have only 36 hou rs to snap up the limited number of deeply discounted designer clothes advertised in the·al stores snch as He rm es.. February 14." The New York Magazine.donnakaran. <l l which buyers can place orders.burberry.cartler. April also m e storefron ts.000 dresses online Is different from selling booKs and and Chlo~ (www. With this purchase.. which brings the real-life.g. Jimmy Choo (www. Hundreds of th ousands of electronic storefronts can be found on the Intern et. allowing smaller brand s that. Marc Jacobs (www. do not have large retail outlets to sell older merchandise at a discount.:e. and eBay ( Second. C ustomers want a guiding hand to replace the In-store salesperson and to signal which fashions are In style. F. Questions 1.g. First. The Gilt Groupe (and companies like It) has had an enormous Impact on how well-known luxury brands view electronic commerce. these companies have changed how the fashion Industry works. Finally. Som e electroni c storefronts are exten sions of phr. However. The end result for t he luxury goods market ? These firms are embracing the twenty-f irst-century model for luxury fashion

ca n be digitized and then delivered on line for additional sa~ngs.. you cannot buy anything. Selling books.. http://shopping. r. Not surprisingly. The basic idea of an electronic mall is th e sam e as th at of a regular shopping mall . fll ! ._r_ e.. . mo...... Younse an efectronic shop· ping cart to gather items from va ri ous vendors and then pay for t hem all together in a single t ransa ction.._.. www. known as re{errctl molls (for exam ple. ln contrast..~dual shops grouped under a single Internet address. ....a-u... --4 I ..msaction at the end . • •0\"1"• Wclr&al31542) ~f\1P!Cig"M\& n.._.!·:t•:C'I'IO N 7.._ . Th ere ore two types of cybcrmalls. . ·--· 10: .oo c. such as Yah oo!. In the second type of m all (for example. IFall Muat Heveo c -.a~-.bi11g.'llfto... Further reduction is difficu"lt to achieve because the products must be delivered physically. ~loot~ f'f!OilJct~.2 130J>iucs.. such as buying an airline ticket and purchasing stocks or insurance. often with considerable cost reduction.... computers.. - _. takes a commission from the se llers for this service. FIGURE 7.. E l('l'honic '\lalh Online Service Industries In addition to purchasing products..11 J ..m sferred from the mall to a participating storefront.. &~ ~ Jr._. .... ~. O nly a few products.. c-eo.. IIIIDidfCI. www.Ooogle •201t Oeaft Whereas an electronic storefront repr esents a single store.. ser. cust om ers can also access needed sen~ces ~a the Web . SMIII!j1001Wool c. on line delivery of sen~ces is g rowing very y Vlowud • S7 ~~o&Qr ~~~ ..lwn• Y .. ~· /l! l GFri'II'IILMCI fUMP'MfWMW . l'-!p -.. you can actually nu ke a purchase (see Figure 7.... you m ight shop at several pro~ de a one-stop shopping place th at offers a wide range of produ cts ond ~er~ces. includ es tens of thousands of p roducts from th ousands of vendors. PopularTIIIt- .. you Jrc tr. su ch as softwa re or music. Qe T. ''""" .-tu-Cuusumc r (B 2C) l• :lcch·uuic Comme rce I pi Go ogle product search 0MM'I!WtlaldMU. .... .-· --._~. but m~ke only one purch:1se tr. liUlJtWPIIMI\11191 It~ . also known as a cybermall or an e-ma/1. IWld!UY &....INillllMJ"'N .. For exa mple.. At th is type of ma ll .c:tlbe IWWID~ Ollal llllilll _ .... . eo.. 1)..tiOIJ\ no.. T he ma11 organ izer. is a collection of indi.. .. $2". th en. . ·R.. Instead. with millions of new custom ers being added each year.. "'*'"'-130 Goosl-e l-bN N~TM'Jari- p '*""'""'"" · ..OHt. A cybenm l l m ay inc lud e thollsands of vend ors. """'"''""' W1111 . and m ost oth er products on the Internet can reduce vendors' selling costs by 20 to 40 percent.j::M"MC..1 Electronic malls inclltde products from m ony vendors. hn th e first<KA... toys. 1v1icrosoft Shopping (n ow Bing shopping. an elc:ctmnic mall..~ces. can be delivered entirely through

.... ~ .. .. job matching. banks and companies such as it saves time and is con\'enient.. TradeCard is an international company that provides a secure m ethod for buyers and sellers to make digi tal payments anywh ere on the globe (see the demo at wMv.·e altemative to branch banking-for example.J hanks.. and (2) when the information that must be exchange-d is complex...:-Comme rcc One of the most pressing EC issues relating to onlin e services (as well as 111 marketmg tangible products) is disintern1ediation.....~U-~·---01-- .. ..]ue-added sen•ices not only are likely to survive. For banks. \Q } ...CT1a aancu I'OOLI •a&.I. @J ......... about 2 cents cost per transaction . This process IS called disintem1ed iat ion..... ~ ~ / ..\..-. . invokes c-onducting \'arious banking-ac-tivities from h ome. tra... also knmm as middlemen..Dt" ka )' t .._"""' T...lo.o.·s-..~ .. and (2) they perform value-added sen ices such as consulting.. trading of securities (stocks.....07 at a physic-a I branch It also enables ban ks to attract remote c ) (see Figure provide co1wersions of more than 160 currencies....t. and online ad\·"'.:. . t his function can be only partially automated.oa11da.. have two functions: ( I ) They provide information. • .--.. in c-onjundion with MasterCa rd . at a pla ce of business. ..2 First Internet Bank of Indiana. Intermediaries...-._. FIGURE 7...{irstib. which are dedic:1ted solely to In terne t transactions. c. In another exa mple.... In this section..·irtu:. Electronic banking..STOnNTU PRODC. performing \'aluc-added services requires expertise.' berbanL._ _. Thus. . you will exa mine some leading online service industries: banking.. or on the road instead of at a physica l bank location. . but may actually prosper. •~::...•el services..:::::::• .... H:Md.... The first function can be fully automated and m ost likely "·ill be assumed by e-marketplaces and portals that provide infonmtion for free.. When this occurs.. lntem<ltional ba nking and tl1e ability to handle tradmg in mulhple currencies are critic-al for mternational as with job searches.:. ll1e \Veb he lps th ese employees in two situati ons: ( I) when the num ber of participan ts IS e normous... . In addition to regubr banks \\'lth added onlme services. also known as cyberbanking... therefore.~ .IIIIIPlf~jl C llr\ PTER 7 E-Busincss and 1 .._. intermediaries who provide . bonds)..~iltiM!tHIOr • ..). .... . the intermedianes who perform only (or pnmarily) th1s function are hkely to be e liminated.. In c-ontrast.·ersus $1...J~... it offers an inexpensi.. (.tradecard.. ~~c....s. For customers. ~ -~ Mlflt)JJ31Jo....... Unlike the information function.... are emerging..... ._•ru..• . Transfers of e lectronic funds and electromc letters of credi t are important services in international banking.\NDA (wnw....•••~••~•-• c·!llhl!l§l!:l:a--• r .oc.. Electronic banking has capab11ities rangmg from l'"}ing bills to appl)'ing for a loan.•-to5MO. . --.... ~-Y-'-'UMNf _ . An example of a virtu a l bank is First Internet Bank of Indiana (1mw. An example of support for EC global trade is provided byTradeCard..2)...:.-21.

United Airlines offered < ro und trip from the United S tates to New Zeabnd in business class. . explore. In a variation of this process. contacts individuals by direct mail or telephon e and requires them to respond in order to make a pu rchase. offer only on line trading. and rent G H Companies that have jobs to offer advertise these openings on their \• Veb sites. dynamic. popups. For example.221 fare for a For example. direct-respo nse n1a rke ting. 1 $1.2 130J>iuc<>·tu-Cuusumc r (B2C) l• :lcch·uuic Comme rce llllQ~·S!JII.g. and C h. and tour companies. com. You then can approve or reject the transaction. Th e direct-response approach person alizes advertising <md marketing. In co ntrast. and oth er financia l instrument~. to place resu mes on various sites. Internet ads can be updated < my time at minimal cost and therefore can be kept curren t. Th e Internet is an ideal pbce to pbn. it can be expensive. www. these ads can reach \' ery large numbers o f potential buyers a! I over the world.!·: t•:C'I'I ON 7. com). governments must advertise job openings on the slow. O nline ·\ dvertismg. television.:. reserve hotel rooms. www. Online services :1 rc . ami O rbitz. Travelocity. investors con find a consid erable amount of information Amerflrade. Advertising is the practice of disseminating information in an attempt to inAucnce a buyer--sellc1 · trans. T he computer informs you of the current "ask" and "bid " prices. "lnousands of companies and governm ent agencies advertise ava ilable positions. and ineffective. or te le- marketing. Internet advertising redefines the ach•ertising T raditional advertising on TV or in newspapers is in1person aC o ne-\vay 111ass conllnunication . First. Internet ads can be interactive and targeted to specifi c interest groups and/or individua ls. bonds. accept resumes. and www.ciiii. It also can be extremely annoying to the W hy? Because it is cheaper than a full-service or discou nt .com ) from your personal comp11ter or your Internet-ena bled m obile device. rding specifi c comp:111i. At th e sam e time. rc. car rental agen cies. m ore than half of stock trad ers are already u sing the Internet fo:r that purpose.lction. Tr:tvcl Sen·ices. http://molley. a banner contains a short . Finally. and they search the bulletin boards of recruiting firms. You access Scottrade's vV eb site (www. and print ads.truecareers.ules Schwab. including E • T rade. In m any countries. hotels ( allows you to set a price yo u are will ing to pay for an airlin e ticket or h otel accommo m. Advertis ing Methods . Mvw.COIIl and www. Banners u e simply electronic billboards. In So uth Korea. Em. enter your account number and passwo1 ·d t o access your persona lized Web page.simplyhired. It then attempts to find a vendor th:1 t will m<~tch your price. m arket order. p rice l imit. and anange alm ost any tr·ip economically. over th e weekend of May 4-6. several well-known securities com m ). on the Web.u·keter. The m ost common onlin e advertising m ethods are ·ba nners. Pri or mutu:d funds in which to in vest (for example. they are generally ch eaper than or sell . and take applications via the Internet. l'he Online Job \brket Tn e Inte rnet offers a promising n ew environment for job seekers and for companies searching for hard-to-find In L1ct. O ne costly problem that e-commerce can ca use is "mistake fa res' in th e ai·r line industry. and e-ma il. Further.. howthe < 1Ctual price was higher. T)1)ically. and so on. 1nargin or cash. t hanks in p:nt to on line tra vel discussion groups. l'vl ost sites a !so offer a fare-tracker featu re that sends you e-mail m essages about low-cost Aights. let's say you have an account with Scottrade .com estimates that som e 40 mill ion peopl e in the United Stgtes Lise computers to trade stocks. however. It improves on traditional forms of advertising in a number of ways. and then click on " stock trading. O nline travel scrvicc3 allow you to purchase airlin e tickets.e online job market to reply online to e mploym ent ads. T h is price was in correct." Using a m enu. much as a broker would do over the teleph one.linkedin. 2007. Flll·ther. hundreds of tic kets had been Job seekers use th. large conventional travel agen cies. and interactive. m aking it media-rich. you enter the details of your order. Examples of comprehensive online travel services are l~xpcdia .scollwde. www.. Jso provid ed by all m ajor airl ine vacation services. 13y the time United noticed the misl:l ke and pu ll ed the f<1 ever. In addition. ( ) nline Sel:uritie~ Tradinr. and to use recruiting firms (for example.

they ore tra nsferred to the adve rtiser's home poge.50 an h our to view m essages while they do th eir norma l surfing.~ · ·· C ll i\1''1'1. Typi ca lly.25 to $0. . they can eas ily unsu bscribe at any tim e. A pop-under ad appears unde rneath the active wind ow. place th em in a customer database. you a lso see brief (oneline) summaries of recent n ews stories. and when the active window is closed.3).comscore. For have built c ustom er lists of millions of people wh o are happy to receive advertising m essages wh en ever tlhey are on the Web. A pop-up ad appea rs in front of the cmrent browser window. it might send you a banner targeted to match your interests. Spamming is the indiscriminate distributi on of el ectronic ads withol11 t the pe rmission of th e l'ecciver. consumers are asked to complete an electronic form that asks wh at they <1re interested in and requ ests pe rmission to send re lated ma rketing information. Pop-u p and pop-under ads are conta ined i n a new browser wind ow that is outomatically launched when you enter or exit a vV eb site. T hese custom ers aTe paid $0.1dvcrtisements vin e-mail. Banner (468 x 60) wo'•olool.1 vendor. but this feature must be used with caution because som e Web sites depend on pop-up capabilities to present content other than video c lips and . In one particularly interesting form of permission ma rketing. If you hover your mouse over on e of them. Express Paid Surveys. Bann er advertising is the m ost commonly used form of advertising on the Intern et (see Figure 7. the re is a potentia l for misuse of e-m ail then send . It is genera lly cost effective to implem ent. companies su ch as C lickdough . the ad appears. when you l og on to your Verizon e-ma il . For example. Blocking pop-ups would 111. As you have probably con cluded by now. Another drawback is that many viewers simply ign ore then1. It m ay even cont. and C<JshSurfers. some consumers receive a fl ood of unsolicited e-m<1il. A I ist of e-ma il add1 ·esses can be a very powerful too l because th e marketer can ta rget a group of people or even individua ls. Permission m arketing is the basis of many Internet marketing strategies. and it provides a better and quicker response rate tha n oth er adve rtising chann els. a pop-up window nppemo with an extended summary (a few paragraphs) of that story. Uusin css and 10:-CoHnnCI'c c FIGURE 7. Another example is th e WebCT Vista softwa re for on line instruction.3 Wh en customers cl ick onn banner ad . l\'l odern browsers let users block pop-up ads. . Sometimes. Permission marketing is also extremely important for market research (for exampl e. l\llany users strongly object to these ads. see the l'VIedia Metrix® suite at www. Users of this marketing service can ask to be notifie d of low fares from their hom etown or to their favorite destination s. 1\tukctc rs develop or purchase a list of e-ma il addresses.Vhen custom ers click on a banner. If the computer system knows who you are or what your profile is. millions of users periodically receive e-m ails from airlines such as American and South west.1 kc th e first of these two examples less useful an d would el imin"te importan t function:dity from th e second exa mple. Two important responses to spamming are permission marketing and vira l marketing. \.:1{ 7 I•:. A major disaclvantage of banners is that th ey can convey on ly limited information due to their small size. or spam. Permission marketing asks consum ers to give their permission to volunta rily accept online advertising and e-ma il. Unforluna telr. E-m ail is em erg ing as an Internet advertising and marketing channel. spa mming is becoming worse over tim e. which th ey consider intrusive. Significantly. consumers are offered incentives tto receive advertising. In fact. they arc transferred to 01e vendor's homepage. where discussion group posts appear in pop-up windows. A major ad vanbge of banners is that ther can be customized to the target audience.IIIIIQ~.!~g for you( text or gwphic<1l m essage th at promotes " product or .

F. H owever.e University places precisely targeted ads on Face book. This type of advertising takes several forms. Self-service advertising is advertising purchased without th e assistance of a sales representative. many companies are integrating their online and offline channels. m< m y c-tailers continue to fa ce serious issues that can restrict their growth . The right sorts of people view th e ads. wh ere they ca n interact with th e brand. Perhaps th e two 1 m jor issu es < HC chann e l conflict and ord e r fu lfi llm ent. ll1erefore. Impression-based advertising occurs when a company pu rchases a set amount of impressions. and impression-based ad vertising. For ex.~ties. and oth er < suggesting they "che(·k this out. nnd !lome Depot would mther have customers come to their stores. Th e advertising company pays the social n etworking site for premium ad placement that drives users to the fan page. Consi der the University of Phoenix.products. kn own as c hannel conflict. including sel fservice advertising. The strategy behind vir<1 l marl CCJlWintances keting is to h< w e pcoJPie forward messages to friends. that is. Online Advertis ing o n Socia l Ne two rks .~ties to the on line acti. Th e marketer releases only a few thousand copies. prices. brand advertising. 1 mple. although all three companies maintain e-commerce vV eb sites. ·n. can alienate th e distributors. Another potential source of conflict involves the logistics services provided by the offline acti.!·: t•:C'I'ION 7. will forward the program to many m ore thousands of potential C llstomers. IT's About Business 7 .'' F'or exampl e. this approach can increase expenses and reduce the synergy between the two organizational channels. C licks-and-mortar companies may face a con flict with their regular distributors when they sell directly to custom ers online. specials. Impression-based advertising is typically c heaper than click-through advertising. In this way. and s·ign u p for onl ine com ses.1ccbook is p. the advertising company pays on ly for m easurable resu lts. As a result." Bwnd cJdvertisi11g relies on la rge advertising campaigns that emphasize th e company's brand and uti lize special features like fan pages that are unique to Fa cebook an d other social n etworking sites. for ex. a process known as mult. an on line higher education company. where a comp<my pays only wh en someone clicks on its ad. Wnlmart. For example. Typica lly. their sites place m ore emphasis on p roviding information . with the expectation that th e recipients.4 illustrates how th e online chann el is causing proble ms for the Hong Kong Jockey C lub. vVith per(omumce-based advertisi11g. For exa mplc. h ow much m oney to spend on advertising. By eliminating th e expense of a sales representative. how should a company handle returns of items purchased on line? Some companies have comp letely separated the "clicks" (the online porti on of the organization) from th e "m orta r" or " bricks" (the traditi onal bricks-and-m ortar part of the organization ). a marketer can distribute a small gam e program embedded with a sponsor's e-mail that is easy to forw. click on them . in tum.ud. and stor e locationsth an on on!ine sales. p erfon11 <1nce-based advertising. a company that runs a brand advertising campaign o n a social networking site will create a fan page for free.1id only wh en custom ers actually enroll for cb sscs. An impression is a single instance of an ad appearing on a vVeb site. Facebook allows advertisers to target "Am ericans who are m arried or engaged and are avid flyfishers. 1 mple . using text ads rather than !banner ads makes self-service advertising easier for small businesses that do not have compelling graphical ads. Issues in E-Tailing D espite e-t< liling's inc reasing popularity. when so meone clicks on a company's ad and goes on to purchase som ething. C hanne l conflict has forced som e companies to avoid direct online sales. Lowe's. This situation . Self-service advertising enables compani es to carefully target very small groups.ic hanneling. Also. C hannel conflict can arise in areas such as pricing and resource allocation.2 130J>iuc<>·tu-Cuusumc r (B2C) l• :lcch·uuic Comme rce llllQ~ ·I~ · 1111 Viral marketing refers to onlin e "word-of-mouth" marketing. . f11mily m embers. a social networking company can offer smaller minimu m ad buys than would otherwise be p ractical or profitable. vin1 l marketing enables companies to build brand awareness :1t a minimal cost without having lo spmn m illions of unintereste d users. O nline adve rtising on social n etworks has become more successful over time.

they can offer more attractive odds. a system that lets tracK operators offer better odds because more money Is at stake. ei• ther in advonce. and handling the return of unwanted or defective products. Unauthorized booKmaKers taKe bets on Ho ng Kong horse races equal to som ewhere between 33 percent and 100 percent of the club's receipts. taking. The second major issue confronting e-commcrce is order fulfill ment. and the An<1 n t Rr~l'h Questions 1. business. enjoys a government. But the JocKey Clu b. and society In one of the world's richest cities. especially during th e holiday season . bribery scandals.{edex. because online betting Web sites pay neither Hong Kong taxes nor tracK expenses. "Scandal Hits Hong Kong's ExcluSive Jockey Club. eliminating any profit. clubs are at the center of high society.' The Wall St!llet Journal. accessed March 19. accounting for approximately 8 percent of the government's total revenues. The club. coll ecting the money from every cmtomer.000 full. and It employed almost 27. the club Is Hong Kong's single-largest taxpayer. For e-tailers. the H ong Kong JocKey Club (www. December 2. In return. has stood aparrt fro m the rest of the clubs as a moneymaKer. and It is part of the bargain strucK decades ago when the government legalized betting. For decades. For this reason.•••llt~·!~ijl C ll i\1''1'1•:1 { 7 I• :. February 21-27. and compensatio n to unhappy custom ers. e-tailers fa ced continuous proble ms in order fulfill The club claimed the remaining $2. In Hong Kong. delivering wr ong items.7 b illio n as revenue. Use specific examples to describe other measures that the Hong Ko ng Jockey Club might take to compete with online betting Web sites.4 Hong Kong's Jockey Club in a Race Further. In short. These problem s includ ed late deliveries. It is very difficult to accomplish these activities both effectively and efficiently in B2C. In addition to providing custom ers with the products they ordered and doing it on time. the JocKey Club has survived equine flu. To solve this problem. 2011.and part-time employees. Over the course of Its existence.7 b illion) to the government. or by individml biJI. by to see how returns are handled via Fed Ex. an exchange or return must be arranged.hlljc. the Jockey Club's overseas revenue would be taxed both at home and In the country where the bet was made.granted monopoly o n horse 1racing and lotteries.hkjc. The club's solid reputation as Hong Kong's only tracK operator col!lld help build Its online business because many gamblers may not trust unregulated Web sites. the Hong Kong government would have to consider a change In Its tax policy. Some 35 percent of the club's bets o n horse racing now come through Its Web site or mobile devices. if the customer is n ot ha ppy with a product. 2010. Any time a company sells directly to custom ers. the customer must receive assembly and operation instructions for a new appliance. Now thil c:luh mtJ't c:opA w ith Its hlg- gest challenge yet: the Internet. ammging for the packages to be delivered speedily to th e customer's doOI'. companies involved in B2C activities often experien ce difficulties in their supply c hains. established In 1884 under British rule. Uusincss and 10:-C<>Hnnc•·c c G [about business] 7. wh ich can create problem s for e-!Jil ers as well. Another option for the club to fight online booKmaKers Is to linK up with racing courses elsewhere to pool be ts. and It pa id 64 percent of this total ($1. For example. high delivery costs. the club's competitiveness Is at risK due to the Internet.) In the bte 1990s. That is one of the hig hest tax rates for the Industry. so authorities are powerless to go after them." Bloomberg Bus/nessWeok. a nonprofit organization. In Hong Kong. the Japanese occupation. according to estimat es by the club Itself. a growing share of the money wagered Is bypassing the club In favor of unauthorized betting Web sites. Oster. www. packing them . maKing It one of the largest private emp loyers In Hong Kong. (Visit www. ey Club customers In the year that ended in March 2010. The JocKey Clu b Is no stranger to the Internet. 2011: S. because a company h as to ship small packages to many cu stomers and do it quickly. In addition . Many of these sites are based In overseas locations such as the South Pacific Island of vanuatu and Curacao In the Caribbean. orders over the . it is involved in \carious order-fulfillment activities: Quickly finding the products to be shipped. order ful fillment also provid es all related customer services. What compet ~lve advantages does the Hong Kong Jockey Club already have In their competition with online betting Web sites? 2. the Race is Online. JocK bet approximately $15 billion. About 82 percent was returned to winning bettors as dividends and payouts. Sources: Compiled from " For Hong Kong's Jockey Club. c:olo n Ia I ruiA. The JocKey Club claims It spent another $ 193 millio n on has been at the peaK of politics. however. Although Its members still gather at the club's two tracKs to bet on the races.

You can choose the type of chip (for example. permission marketing. l11is model is stmibr to the B2C model in which the buyer is expected to come to th e seller's site. and place an order.JJ~~ 1. the lype of monitor (for and e lectronic exchanges. In < ).· II[EQ~ ·f!JII. 5 . or a retailer (for example. and other parh1crs Organizations ) allows you to customize the Jaguar you want. Describe electronic storefronts and malls. Identify the major issues relating to a-tailing. th e size of the hard drive (for example. view catalogs. Dell. Self-customization greatly reduces any misunderstandings conceming what customers want. its 1l1e key mechanisms in the sell-side model are electron ic catalogs that can be customized for each large buyer and forward auctions. Companies S\tch as Ariba (ll~<w. . the Jagua r Web site (www. Discuss various types of online services. you can determine the exac:t type of computer that you want. resellers. for example.3 Business-to-Business (B2B) Electronic Commerce In bllsiness to business (B2B) T he major ones <1re sell-side ma rketplaces. bigboxx. but th ey are fewer in number. ltanium 2). an d so on. 1\lany companies allow their customers to configure their orders onlin e. buy-side marketpbces. job searches. increase delivery speed. however. and travel services. organiza tions can use thtrd-pa rty auction sites. In the BZB sell-side marketplace. reduce selling and advertising expenditures. these companies have had order fu lfillment mechanisms in place for manr years. securities trading. The seller can be either a manufacturer (for example. and viral marketmg? 7. 4. a distributor (for exa mple. order fulfillment is less complicated in B2B. It is especially powerful for companies wi th superb reputations. Sell-Side Marketplaces In the sell-. to liquidate 1tems. organizations attempt to sell their products or sef\·tces to other organizations e lectronically from their own private e-marketplace Web site and/or from a thi rd-party Web site. For are h elping organ izations auction old assets and inventone-s.1mple. 1l1ere are se\"eral busin ess models for B2B applications. Th e sell-side model is used by hundreds of thousands of companies. I Bi\1). customers. wnnv.S I(C'"I" ION i~l B••~incss-tn-Consun1cr (B2B) l ~:lcctTonic Connnc rc<. before you go on. In addition to conducting auctions from their own \\'eb sites. clellauction.idc marketplace mode use auctions extensh·ely. 3 . the buyer is an orgamzation. mvw. The sell-side model is especially suitable to customization.•ering orders to customers' doors is the hard part. Sellers such as De ll Compu ter (11~vw. at Dell (~>ww. I terabyte). Internet is the easy part of B2C e-commerce DeJi. Similarly. What are spamming. cyberbanking.m use B2B to restructure their supply chains and th eir partner relationships. Discuss online advertising. suppliers.ariba. such as eBay. B2B comprises about 85 percent of EC volume. In contrast. and its benefits. and lower administrative costs. and it encourages businesses to fill orders more quickly. 22-inch flat screen). lnese transactions are mu ch larger.CIVnet. The seller uses EC to increase sales. the buyers and sellers are business organ izations. It CO\'ers a bro:td spech·um of applications that enable an enterprise to form electronic relationships with its distributors.

Once the partners make conbct.usa-lfc. paying for goods.IIIIIQI!: ~II C IIAPTER 7 E-Busincssanci i• m the chemtcal industry. For exa mple. n eeded services such as temporaty h elp or extra office space are tra ded on an "as-needed" basis. th ey can negotiate a . .com ) can find temporary labor by searching employers in its Employease r\ (••. that are needed for mainten ance . A maJOr method of buying goods and services in the buy-side model is the reverse auction. buyers and sellers me rely have to ""plug in'" in order to trade. and Alibaba (www. In functional exchanges. Public exchanges are open to all business o rg.JJ~ 1. "hen buyers pbce thctr com bined orders on a reverse auction.employease. T he goa l is to reduce both the costs of ite ms purc hased and the administrative expenses involved 111 purchasing horizontal.•M. Employease (. In addition. Electronic Exchanges Private exc hanges have one buyer and many sellers. J\larriott and Hyatt own a procurement consortium for the hotel industry. Vertical exchanges con nect buye rs and selle rs in a g iven industry. and making delivery arrangemen ts. such as safety glass used in automobile windshie lds and windows. Direct materials are inputs to the manufacturing p rocess. There are three basic types of public exchanges: vertical. . pa rticularly group purchasing. 11w w. ca lled public exchanges or jLtst excha nges. EC technology can shorten the purchasing cycle time. such as the United Sourcing Allian ce ( in th e paper industry.ltcrials as well as somcing (finding goods). Examples of vertical exchanges are wllw . Horizontal exchanges connect buyers and sellers across many industries and are used primarily for tv·J RO materials.worldbid. Indirect materials are ite ms. are independently owned by a th ird pa rty :mel connect many sell ers and many bu)·ers. com). and wMv. a te rm for a group of major players in an industry.lSing by usmg electronic support is re ferred to J S c-procu rement. and functional exchanges. Typically. the orders of small buyers are aggregated by a thirdpa rty vendor. Vertica l exchanges are frequently owned and man:tged by a consortium.mizations.papersile. horizontal exchanges. 1l1c vertica l e-marketpbces offer services that are particularly suited to the community thev serve. E-procurement uses reverse auctions. Public excha nge managers provide all the n ecessary information systems to the pJrticipants. Purch. Procurement includes purc hasing goods a nd m.·ate exch ange or to the private trading rooms provided by many publ ic exchanges to conduct their subsequent trading activities Some electronic exchanges de:~ I in direct materials.isleelasia. and functional . They frequ ently are owned and operated by a third C hevronTexaco owns an energy e-marketplace. multiple buyers combine their orders so that they constitu te a large volume and therefore attract more seller attention . such ~s office supplies. G lobal Sources (www. olume discount. For exa mp in th e plastics industry.. Organizations now use th e Interne t to accomplish all of these functions. ranging from payments to logistics. ww. Examples of horizontal exchanges are and operations (l'v!RO ). repairs. In group purchasing.C technology to streamline the purc hasing process. Briefty differentiate among vertical in the stee l industry. '""'" ·. before you go 2. In addition .Comme rcc Buy-Side Marketplaces The buy-side morketplacc is a model in which organizations attempt to buy need ed products or se rvices from other orgnnizntions e lectromca lly. they may mo\·e to a negotiating with suppliers. The buy-side model uses F.globalsources. and others in indirect materials.chemconnect. B2B public exchanges often a re the inih~l point for contacts between business partners. Thus. Briefiy differentiate between the sell-side marketplace and the buy-side marketplace. All three 1)1)CS offe r diversified support sen ices. E-marketpb ces.

veen financial msbtutions through electronic clearinghouses. e-checks carry a signature (in digital form) that can be verified (see "'"v. contrary to what many people believe. especially from another country. not e\·eryon e accepts credit cards or checks. This better method is electronic pa)ment systems.St•:CTION 7.-1 Electro nic l'•}"'cnts II[£Q~PJI··· 7. whether in the trad1tionalmanner or onlin e. MERCHANT 0 0 i y /o ' 0 Clearing house 0 Card issuer bank (server) Merchant's bank FIGURE 7. llcrc is how e-cred1t ca rds work (sec Figure 7. In most cases.·e credit cards or checking accounts. and e lectronic cash. Further. They are used primarily in B:ZB. Electronic p<~)111Cnt S)'skms enahle you to pay for goods and services electronically rath er than hy writing a ch eck or using cash . Paymen ts are an integra l part of doing business. CUSTOMER ____o _. • Step 1: \Vhen you buy a book from Amazon.) Electronic Credit Cards Electronic credit (e·<:reclit) cards allow customers to charge online payments to their credit card account. (The numbers 1. A customer who wishes to usc c-chccks first must es tablish a checking account with a bank.llel ). Properly signed and endorsed c-checks me exchanged bet-. This way. We now Ia kc a closer look at four types of electronic payment: electronic c hecks. electronic credit cards. it may be less secure for the buyer to use the telephon e or ma il to arrange or send for details.cccho. Finally.trorgroup. Electronic Checks Electronic checks (e-checks) are similar to regular paper checks. C ash cannot be used because there is no face-to-face contact hctween bu)·er and selle r.·ities. . These ca rds are used primarily in B2C and in shopping by small-to-medium enterpmcs (Si•. he or she e-mails an encrypted electronic check to the seller.4 Electronic Payments Impleme nting EC typically requires electromc payments. The seller deposits the check in a bank account. Then. and some buyers d o not ha. the information is safe while it is " tnwclmg" on the Internet to Amazon.4).authori.9 indicate the sequence of acti. For al l of these reasons.) Source: Drawn by E. and funds are transferred from the buyer's account into the seller's account. Like regular checks.:e. (See ~>>~w. Turban. for example. purchasing cards. when the customer buys a product or a service. than to complete a secured transach on on a computer.4 Howe-credit cards work. Traditional pa}ment systems typically have in\"Oived cash and/or and www. traditional payment systems are not effective for EC. your credit card information and purchase amount are encrypted in your browser. especially for B2B. a better way is needed to pay for goods and services in cyberspace.!Es).

mbers (see Figure 7. Rather . Many EC sell ers. This virtual number is good on ly Veb site where you make your purchase. much like reguhu credit C<Hds. Purchasing cards typically arc used for unplanned B2B purchases. Pmchasing car<Ds can be used on th e Internet.. Step 3: T he clearinghouse . The goal is to thwart crjminals by using a different..ud on th e \• number shows up on your bill ju st like any other purch ase. om ca rd issuer bank verifi es yom credit ca rd information and reports this to the Step 4: Y cl ea ringhouse. and som e buyers.000. smart cmds. (Source: M ike Clarke/AF'P/ Gettylmages/NewsCom) . 7: Your cmd issuer b< m k sends funds in the amount of the purchnse to Amazon's bnnk. Electronic cash (c-cash) appears in three major forms: stored-value m oney cards. In som e countries. Stored-\ aim· \ lnllt'\ C·ud\. and corporations gen erally limit th e amount per pm ch ase.) FIGURE 7 . Several major credit ca rd issuers are offering custom ers the option of shopping online with virtual. Purchasing Cards The B2B equival ent of electronic credit cards is purclwsing cards (see Figure 7..6). prefer el ectronic cash. Unlike credit ca rds. Step 9: Amazon's bank notifi es Ama zon of the funds credited to its account. Although storccl-v:olnc m oney c:ords resem ble credit cards. rand om ca rd numbe r every tim e you shop on line.. where it is decrypte d for verifi ca tion and authorization. it is not opened. 111e cards that you use to pay for photocopies in your 4000 000 000 000 §(ft I !'<SA I \.• Step 2: \ Vh en your information arrives at Amazon. Step Step • • • • • • • 6: Amazon reports a mccessful purchase and <1rnount to you. however. Step 8: Your card issuer bank notifies you (either electronically or in your monthly statem ent) of the debit on your credit card . th ey actually are a form o f e-cash .000 to $2. purchasing cards are the primary form of payment between companies. where credit is provided for 30 to 60 days (for free) before paym ent is made to the m erchant.5). FIGURE 7 . single-use credit card 1 w. An on line purchase m ade with a virtual c. usua lly $1.6 Purchasing card. cash remains th e most common mode of pa}ment in offline transacti ons.________ _ ______. payments made w ith purchasing cards are settl ed within a week. it is tra nsferred <llltomatically (in encrypted form ) to a clearinghouse.1sks the bank that issued you your credit card (th e card issuer bank) to verify your credit card information . Step 5: Th e clearinghouse re ports the result of the verification of your credit ca rd to Amazon. Electronic Cash D espite the growth of credit cards. and personto-person paym ents. 5 Example of virtual credit card.

. F irst. The recipi ent ca n th en credit the money fro m this account to eith e r a c redit ca rd or a bank account. Sn1e1rt c:ords are idea l for micropayme11/s. Now yo u're ready to send m oney to someone over the Internet. An attractive seciJirity feature of Pay Pal is th at you ha ve to put only e nough m on ey in th e a ccount to cover any upcoming tra nsactions. T rue smart cards contain a c hip thot can store a considerable amo unt of info r example.7 shows a New York City l'VIetro (subway and bus) card. O ne's Bank eMoneyMail. Figure 7. or sending a gift to a bmily m e mbe r. the amoLmt is reduced b y t he amount you spent. Person-to-person paym en ts can be used fo r a va riety o f purposes. and you specify the e-mail ad d ress o f the person to receive the m on ey. yo u select a service and o pe n up an accou nt. . FIGURE 7 .mo re than 100 li mes th" t of a stored-valu e m oney card (see Figure 7. Jue money card . There. Next. alo ng with the d olla r amount tha t you want t o send . Pe rson-to-pe rson p:oym c nts arc a fo rm of c-cash that e n- ah ies two individua Is. a nd for telephone calls are sto red-value m on ey ca rds. They are called "sto red-value" because they allow you to sto re a fixed amount of p repaid m oney and th e n spe nd it as n ecessary. W h en the recipie nt cl icks o n th e lin k. paying for an item purchased at an o n line auctio n. (Somce: © MARKA/Aiamy Limited) library.S I•:CT ION 7. Ba sically. he or sh e is t a ke n to t h e service . Althoug h some people refer to stored-value money cards as "sm ::nt cards.4 Electronic Payoncnh< lfE~ I•~ illl. Pt·r~on-to-Pcr~on P:t\'llll'llh.with your user name and password. AOL O ne of t he first companies to o ffer this service was PayP. roughly $ 1 pe r b·ansaction. such os sending m oney to stude n ts at college.. they will no t ha ve access to all o f your mon ey. tha t is. You access the service . you tra nsfe r funds from your credit card o r bank acco unt to your n ew account. (Source: © Clarence Holmes Photography/Alamy Limited) FIGURE 7 . Todny. you c•m usc th em <lS a credit card . Sm:Jrt C:1rds. T he e-mail contains a l ink back t o the service's Web site." they arc not really the same. this process e ntails c reating a use r n ame. The service then send s a n e-mail to the payee's e-mail address. J (a n eBny comp• Q uickCash. m y). for transportation.8). The refore. The service charges the pa yer a small amo unt. or a loya lty ca rd. selecting a pnssworc!. Smart cards Me frccl'oe ntly multipurpose. and providing the service with a c redit c:o rd o r bank account numbe r. if anyon e sho uld gain <1Ccess to your a ccount. the recipient is aske d to set up an account to wh ic h the m o ney that yo u sent will be cred ited!.8 Smart cards are frequently multipurpose. a nd We bCertifica te ~ 11 compe te with PayPal. Virtually a II o f these pe rson-t o-person pa)111en t services work in a simi lar way. whic h •ore sma ll paymen ts of a few dolbrs or less. Each time you use the card . a storcd v-.7 The New York C ity Metro card. a debit ca rd . PayPal . or an individua I and a b usiness to transfe r funds without using a c red it card.

. In response. pri vacy . In many cases the new standards are incorporated into law. Anothe r major privacy issue is tra cking. What are micropayments? 7. In one case.unica. O th er types of fraud includ e se lling bogus . Unfortunately. To begin with. e-business presents som e threats to privacy. Internet fraud has grown even faster than Internet use job loss. as well as broke rs and agents. In addition to co mpromising individual priv<1cy. Here you will lea rn about two basic issues. When buye rs and sellers do not know one another and cannot even see one another. individuals' activiti es on the Intern et can be tracked by cookies. Cookies store your tracking history on your personal computer's hard drive. During th e first few years of EC.11111a!J •f~JI C II APTI. by both sell ers and buyers. th e information provided might ha ve been true.5 Ethical and Legal Issues in E-Business Technolog ical inno\•ation often forces a society to reexamine and modify its ethica l any time you revisit a certain \~leb site. l11ese illega l actions ranged from creating a virtual bank that disa ppea red along with the investors' deposits to manipulating stock prices on th e Internet.:R 7 1 •:-Busincss and 1 •:-Comme rcc before you go on. are trea ted can raise ethical iss ues: How should the company handle the la yoffs? S hou ld companies be required to retrain employees for new positions? lf not. then. the server recognizes the cookie (see http://netinsight. List the various electronic payment mechanisms.JJ~~ 1. Which of these mechanisms are most often used for 626 payments? 2.ide this protection . discussed in C hapter 4. In the foll owing section . how should th e company compensate or oth erwise assist th e displa ced worke rs? Legal and Ethical Issues Specific to E-Commerce T here are man y legal issues that are related specifi ca lly toe-co mmerce. Stock prom oters specifica ll y target small inves tors who are l ured by th e promise of fast profits. Fraud on the Internet. T he manner in whic h these unneeded workers. the public witnessed many such crimes. F'or exampl e. there is a chance that dishonest people will commit fraud and other crimes. Stocks are on ly one o f many areas where swindl ers are active. It may be well as va rious legal issues arising from th e pr<> cti ce of e-business.privacy and job loss. espec ially e mpl oyees.coml). to protect the bu yers' identities. m ost electronic pa yment systems know who the buyers are . In oth er cases. but the promoters did not disclose that th ey were paid to talk up th e compani es. you will learn about two important ethical considerations. antivirus software pa ckages routinely search for potentially harmfu l cookies. stock promoters falsely spread positive rumors about the prospects of the companies they touted in ord er to boost th e stock price. you explore some of the major lega l issues that are specific toe-commerce. In this section . Businesses frequently use encryption to pro. the use of EC m ay eliminate the need for so me of a company's employees. fraudule nt activities on the Internet are increasing. By making it easier to store and transfer personal information. Ethical Issues Many of the ethical and global issues related to IT also apply toe-business. Au ctions also are especiall y conducive to fraud .

the Internet Corporation for Assigned Names and Numbers ( ICANN) (www. most states and localities collect taxes on business transactions conducted within their jurisdiction. state. Delta Air Lines had to settle for delta-airlines. T he Anti-Cybersquatting Consumer Protection Act (1999) permits trad emark owne rs in the United States to sue for dam ages in such cases. In general. privilege taxes. they use the domain names for only a few days to generate quick profits. For example.d been in business und er that name sin ce 1954 and therefore had a legitimate business interest in the domain name. I'axes and Other Fees. and loca l authorities now are scrambling to create some type of taxa tion policy for e-business. le ts registrars profit from the complex m on ey trail o f pa y-per-click advertising . In oiAine sa les. ICAN N implemented this policy to all ow an yon e who mistypes a domain name to return it without cost. Domain Names.5 Ethical and l. Several cases of disputed domain nam es are already in court. Domain names are assign ed by central nonprofit organizations that check for conflicts and possible infringement of twd emarks. O bviously. Consid e r the case of Delta Air regularly publishes examples of scams that are most likely to be spread via e-mail or to be found on the Web. Companies suc h as C hristian Dior. and even M icroso ft have had to fight or pa y to get the domain name that correspond s to the ir company's name .S. T he tasters th en jam these domains full of advertisements that come from Coogle and Yah oo!. exc ise taxes. T hese domain nam es frequentl y resembl e th ose of prominent compani es and organiza tions.m y or pe rso n ca n claim a domain name and then return it for a full re fund of the $6 registly fee. ICANN estab lish ed the "create gra ce peri od. gross-receipts taxes. In 2000. because Delta Faucet had purchased it first. value-add ed ta x.and in some cases. O thers contend that th e state in which the server is loca ted also should receive some of th e tax revenues. Du e to the g rowing use of e-mail . companies that sell goods and services over the Internet want customers to be able to find them easil until it bought the domain name from Delta Faucet. the more closely the domain name matches the company's name. and utili ty ta xes. Doma in tasters exploit this policy by claiming Internet domains fo r fi ve days at no cost. This probl em is particularly co mplex for interstate and international e-commerce. Federal. Deutsche Bank. Some practi ces that could be co nsidered cybersquatting. Delta Faucet h. A domain nam e is consid ered to be legal when th e person or business who owns the name has operated a legitimate business under that name for some period o f tim e.some of them over and over again .com . The U. are not illega l. Delta Faucet is now at deltafaucet. th ere is a question about where. VAT).org) . T he most obvious example is sales taxes.. known as domain tasting. Nike. Anothe r legal issue is competition over domain names. Cybersquatting refe rs to the pr< 1ctice of registering or using domain names for the purpose of profiting from the goodwill or the tn1demark that belongs to someone else. domain tasters register milli ons of domain names every day. In th e vast majority of cases. how should tax coll ection be controlled? .S EC TION 7.ti•~SiJIIII invesb11 ents and se tting up ph antom business opportunities. fr< m chise fees. financial c riminals n ow have access to man y more people. Cybersquatting. Federal Trad e Commission (FTC. Delta originall y co uld not obtain the Internet domain name delta. altho ug h they may well be unethical. whetherelech·oni c sellers should pay busin ess license ta xes. some people claim that the state in which the seller is located deserves the entire sales ta x (or in some countries. Because this process involves zero risk and 100 percent profit marg ins. Furthermore." a five-day peri od when a comp. In addition to the sales ta x.icctnn. T he practice can be traced back to the poli cies of the organization responsible for regulating Web names. www. Experts estimate that registran ts ultimately purchase less than 2 pe rcent of th e sites th ey sample . the eas ier the company is to locate.cgallssncs in ~~-Busi ness IIE:. Later in this secti on yo u will see some ways in which consum ers and sell ers can pro tec t th emselves from online fraud . O ne of these practices.ftc .

does n ot recognize state issues in EC. th e Uni ted St8 tes and &everal oth er countries had imposed a b::m on imposing "-1 sales tax o n bus iness conducted on the Internet. Billing . As of mid-20 11 .m y p eople mistaken ly believe th at once th ey purchase a piece of softwa re. Describe buyer protection and seller protection in EC. llnn nl·h"r linonr b l services are being reengineered due to EC.dl from C hapter 4 tha t inte llectua l property is protected by copyrig h t bws and ca nn ot be used freely. Discuss the major legal issues of EC.ture is the transiti on from a p hysica l to a virtua l marke tplace. S im ilarly. buyers were exempt from any tax on Intern et access. Many innovations already in place are changing the rules o f economic and financial incentives for financi. Protecting intelleclU!a l property righ ts in e-commerce is extrem ely diffi cult. List and explain some ethi. 3. they have th e right to share it with oth ers. ·" 'rlll'ili"'' onrl rnmmnrLi til'• morkd.IIIIJI~~$~11 C ll i\1' '1'1-:1{ 7 1':-Uu siu css and 1':-Commc rcc Legisbtive efforts to impose taxes on e-comm erce are opposed by an organization named the lnl emc/ Freedom Fighters. What's In IT For For the Fina nce Major Thr wnrlrl• nf h«nking.1 ym ents also arc accounting p. 2. and it may create a new framework for financing globa 1 trades. n ot to distribute it. For the Accounting Ma jor Accounting personnel are involved in several EC activities. copying material from Web sites without permission is a violatio n of copyright laws. So f. O nl ine banking. . building a cost-b enefit and cost-justification system to determine whi ch product s/ services to ta kc online and crcati ng a chargeback syste m me critic<1l to the success of~C. because it in volves hundreds of millions of people wh o h ave access to bi ll ions of Web pages in about 200 countries with differing copyrigh t laws. Cop~nght Rec. D esig ning th e ord ering system and its reblionship with invcntmy managem ent requires ~ccounting attention. what they have bought is the right to use th e software. O n line securities trading and its supporting infrastructure are growing more rapidly than any o ther EC activity.H. Perhaps i ts m ost obvious fe. as arc determining cost and profit a llocation . Me? For the Marke ting Majo r A major revolution in marketing. for example. Replacing paper documents with electronic means w ill affect many of the accountant's tasks.. before you go on. Th ese innovations will dramatically change the manner in which finance personn el operate. Finally.JJ~~ 1. however.d ana lysts and ma nagers. Public fina ncial information now is accessible in seconds.~ t righ t remains with th e copyright holder. th eir efforts have been successful. In fact. especially the auditing of EC activities and system s. T his point is significant bec:1use m. Th. and sales is taking place due to EC. In addition .

Suppliers cJn use extranets to monitor and repl enish inventories without the need for constant reorders. th e sellers and the boyers are businesses. Companies now can use external and internal networks to find and manage manufacturing operations in other countries much m ore easily. Th e direct prodl! cer-to-consu mer channel is e. th e \. HR personnel must be f<1mil iar with the m<1jor legal issues related to EC . For the P roduction / Operation s Ma nagem e nt Ma jo r EC is changing the manufacturing system from product-push mass production to order-pull mass customization. Finally. [n b!i$iness-to-business (B2B) electronic commerce. 1111 Equ~ lly important. becoming knowledgeable about new government o nline initiatives and onl ine training is critical. O n line marketing can b e a blessing to one company and a curse to anot her. the Internet and intr:mets help reduce cycle times. In business-to·employee (B2E) . Also. lVIany production/operations pro ble ms that have persisted for years. Ma rketing chnnnels are and sales < being co mbined. the fob of the progressive production/operations manager is closely tied in with e-coJ 11n1erce. Describe the s ix common types of e lectronic comme rce. Also. and reengineering of processes that involve suppliers and other business parh1ers. is the radic~l tr. For the Human Resources M a n agem e nt M ajor IIR m <1jo rs need to uncl erst<1nd the ne w labo r markets and th e impacts of ~~C on old bbor m~rkets. such as complex scheduling and excess inventorie s. In addition . For the MIS Ma jor The M IS function is responsible for providing the information technology infrastructure necess. In p<1 rti cular. this infrastructure includ es th e comp~ny's 11etworks.~ces also has implica tions for marke ting and sales. All in all. G2C . and extr:1 netli. m arketing and sales personnel are becoming the m ost critical success factor in many o rganiza tions. This change requires a robust supply chain.mel employm ent. are being solved rapidly with the use of Web t echnologies. intrane t:s. The l'vl!S functio n also is responsible fo r ensuring that el ectronic commerce transaction s are secure. th o ug h. pro vide s p ecific p erson al e xamples of h ow y o u have u sed o r could u se B2C. In cons!lmer-to-consumer (C2C) electronic commerce.mer (B2C) electronic commerce. ·n. an individ ua l sells products o r services to other individuals.e EC revolution is creating new products and markets and significantly altering existing ones. a nd m o bile comme r ce. thus reducing cost.xpancling rapid ly and is fundamentally changing the nature of custom er service. In bu$iness-to·cons!l. o r re-cr eated . info rmation support.H y for electroni c commerce to f11nction . and the buyers are individua ls. As the battle for custo1111ers intensifies.msfo rmation to one-on-o ne <1dvcrtising mel to custo mized and inte ractive 111< 11'keting . [ Sum mary ] 1. the sellers are organizati ons. ~. C 2C .Suum~:u·y IIJ~·~la . Digitization of products and ser. Also. el iminated .Veb is reengin eering procurement by helping companies concluct electronic bids for parts and subassemblies. and offe r a s pecific e x a mple of B2B a nd G2B. the HRM departm ent tm y use E C tools for such func tions as procuring office supplies.

E-govemment is the use of Internet technology in genera l and c-t"ommcrce in partk u lar to dcJi. www. employease. organizations attempt to sell their produ cts or services to other organizations e lectronically from their O \\n private e-marketpb ce Web s1te and/or from a third-party \Veb site Sellers such as Dell Computer (www. Electronic credit cards are used primarily in B2C and in shopping by small-to-medium and take applications via the Internet. w"~v. and rent cars. www. com. Electronic checks (e-checks) are similar to regular pa per checks. Vertica l exchanges connect buyers and sell ers in a given industry (e. They frequently are owned and operated by a third party.g. and arrange almost any trip econ omically 0 11line trarel sen•ices a llow you to purchase airli ne tickets. dynamic.plasticsnet. Public excha nges are open to all business o rganizations. such as e Bay.·ertise a\·ailable positions. 'the Internet is an ideal place to plan. \Ve lea\'e th e exa mples of each type to you.g.clell<luclion. The B2B equivalent of electronic credit cards is purchasit~g c<trds.•e.Connnc rcc electro nic commerce. 2. and business partn ers and suppliers (call ed gowrnment· \ lobile commerce refers to c-commcrcc tha t is conducted en tirely to-business or C2B EC). use sellside auctions extensiVely. In the sell-side m<lrketplace model. invokes conductin~ various banking acti. ·n1ousa nds of compa nies and government agencies ad. Describe the three business models for business-to-business electronic commer ce. organizations can use third-party auction sites. explore.g. They are used mostly in B2B. Discuss the five online services of business-to-consumer electronic commer ce. Describe the four types of electronic payments. provide a specific e xample of each service.IIIIJJ~ n~ iJI C ll \I''I'ER i E-Bmin css ami i•:. at a place of busin ess. In functional cxclwngc•. needed services such as tem porary h elp or extra office space are traded on an "as-needed~ basis (e. Worl dbid . in th e plasti cs industry). and functiona l. are called public exchanges. Online acl•·ertisi11g over the Web makes the advertising process med1a-rich . 3. Online job matc hing 0\'er th e \\'eb offers a promisin~ e nvironment fo r job seekers and for compames searching for hard-to-find employees. !\lost sites also offer a fare-tracker feature that sends you e-ma1lmessages about 1 ow-cost Aigh ts. and interacti.·er in formati on and publ ic services to citizens (called government-to-citizen or C2C EC).. and provide a specific example of e ach model. a lso known as cybcrba11ki11g. where credit is prO\·ided for 30 to 60 clays ( for free) before payment is made to . In acldihon to auctions from their own \Veb s1tes. or on th e roa d instead of at a physica l bank location. \\'e leave the examples to you. to liquidate items 'the buy-side m<lrketplace is a m odel in wh ich orgamzations attempt to buy needed products or services from other organizations electronically.·ities from h ome.:o11fal exchanges connect buyers and sellers across ma ny industries (e. an organization uses EC internally to provide information and services to its e mployees. ' the re are three basic types of public exchanges: vertica l. horizontal. and e xplain whether you would use each type.. in whic h there are many sellers and many buyers. Unl ike credit cards. Online securities trading involves buying and selling securiti es over the Web. accept resumes. Electronic credit (e-credit) cards allow customers to charge onlin e payments to their credit card account. reserve hotel 4 . and state how you have used or would use each service.worldbicl. Employease.. 1 in a wireless environment. or just exchanges. Elcctrollic ba11 ki11g. provide a s pecific example of each one.

business-to-consumer electronic commerce (B2C) Electronic commerce in which the sellers are organizations and the buyers are individuals. It may be n ecesS.000). and prices are determined dynamically by competitive bidding. Alth ough th ey resemble c redit cards.~ces to its employees. disintermediation Elimination ofintem1ediaries in electronic con1n1erce. To begin with. how should the company compensate or otherwise assist the displaced workers? We lea. business-to-employee electronic commerce (B2E) An organization that uses electronic commerce internally to provide information and ser. Person-to-person payments enable two individua ls or an individual and a busin ess to transfer funds without using a c redit ca rd. a business.~II~frJIIII the merc hant. or on the road instead of at a physical bank location . cyberbanking Variou s banking activities conducted electronically from home. therefore. e-goYemment The use of elech onic commerce to deliver information and public sen·ices to citizens. business-to-business electronic commerce (B2B) Elecb·onic commerce in which both the sellers and the buyers are business organ izations. to protect the buy-ers' identities with encryption . as well as brokers and agents. smart cards. [ Chapter Glossary ] auction A competith·e process in which either a seller solicIts consecuh' e bids from buyers or a buyer solicits b1ds from sellers.·alue money ca rd. the amount is reduced by the amount you spent. Smart cards contain a chip that can store a considerable amount of information. and describe how you would respond or react to the four examples you have provided. cybersquatting Registering domain names in the hope of selling them late r at a higher price. E-business presents some threa ts to privacy. the process.1 lly contain a short text or graphical message to promote a product or a vend or. slored-wrlue mo11ey cards allow y·ou to store a fixed amount of prepa id money and then spend it as necessary.'ih) appears in three major fonns: stored-value money cards. and those working in the public sector. Each time you use the ca rd . or a stored-. (e-c(l. 'tou can use them as a credi t card. Electronic ca"/. banners Electronic b.C ha pte r C lossary lfE:. and the amount per purchase generally is limited (usually $1. consumer-to-consu mer electronic commerce (C2C) Elecb·oni c commerce 111 whic h both the buyer and the seller arc indi\•iduals (n ot busin esses). most electron ic paymen t systems know who the buyers . The manner in which theloe unneeded workers. business partners. The use of EC may eliminate the need for some of a company's e mployees. Illustrate the e thical and legal issues relating to e lectronic commerce with two specific examples of each issue. and person-to-person payments. and suppliers of government entities. buy-side marketplace B2B model in which organizations buy n eeded products or sen ices from other organizations elccb·onieally. often through a reverse auction. business model The method by which a company gen era tes revenue to sustain itself.Jlboards. also known as e-lailing. are treated can raise ethical issues: How shou ld the company handle the layoffs? Should companies be required to retrain employees for new positions? If not.ue. brick-and-mortar organizati ons O rganizati ons in wh ich the product. which typic. and the delivery . Another major prh•acy issue is tracking. We leave the examples to you. c licks-and-mortar organizations Organizations that do business in both the phy"Sica I and digital dimensions."Jry.>gent arc all phys ical. c han nel conAict 1l1c alienation of existing distributors when a company decides to sell to customers directly online. Purchasing cards typically are used for unplanned B2B purchases. . especially emp loyees. 5. where individuals' activities on the Internet can be tracked by cookies. payme nts made with purchos ing cards are settled withm a week. a debit card. ·e your descriptions to you .000 to $2.

with its own Internet address. stored-value mon ey card A form of electronic cash on which a fixed am ount of prep<~id money is stored. permission m arke ting lvl ethod of m:1 rketing that asks consumers to give their permission to volun tarily accept online advertising and e-mail. Is the re a differen ce between the two practices? Support your answer. rather than writing a check or using cash . 6. . electronic retailing (e-tail<ng) T he direct sale of products and services through storefronts or electronic m alls. Which one(s) would you prefer and why? Wh y is order f ulfillment in B2C con sidered difficult? 8 .a tion. and entry is open to all. virh1al org:miz:otions O rganizations in whi ch the product. group purc hasing The aggrega tion of purchasing orders from m. multic h. smmt c>~rcl A card th at contains a microprocessor (chip) that enables the card to store a considerable am ount of infonnation (inclu ding stored funds) and to conduct processing. electronic paym e nt system s Computer-based systems that allow custom ers to pay for goods and services electronically. the amount is reduced each time the ca rd is used. D iscuss each practi ce in terms of its ethical nature and legality. sell-side m:nkctpbcc B2B m odel in which orgJnizations sell to other organizations from their own private e-marketplace and/or from a third-party site. 5. person-to-person paym ents A form of electronic cash that enables the transfer offu nds between two in diviclnals. <md conduct ing electronic tmnsnctions within an orgn nil. exchange (see public exchange) forward auctions An auction that sellers u se as a selling channel to many potential buyers. usua lly designed around an electronic ca talog format and/or auctions. mobile comme1 ·ce (m-eommerce) Electronic commerce conducted in a wireless envi ronment. electronic business (c-b usincss) A broad er definition of electronic commerce. virlu:~l bank A banking institution dcdic~ted solely to Internet transactions. spamming Indiscriminate distribution of e-nnail without the receiver's perm ission. electronic storefront T he 'Neb site of a single com pany. or exch anging products.m el the dielivery agent are all digital. and suppliers submit bids. it is frequ en tly own ed and operated by a third party. or information via com pu ter n etworks. without tihe use of a credit card . con ducting e-lea rning. seeks to buy a product or a service. D iscuss the reasom for EC failures. Which of 2. these lim itatio ns are likely to disappear? Wh y? D iscuss the reasons for having multiple EC business models.IIIIJI•~J~ :II C ll i\1' '1'1•:1 { 7 I•:. at which orders can be pla ced. induding the Intern et. public cxch:mge (or exchange) Electronic m arketpla ce in which th ere arc many sell ers and many buyers. electron ic mall A collection of individual shops under one Internet address. Should tvlr. also c<1 ll ed pur(!·play organizations. D iscuss the benefits to sellers and buyers of a B2B exchange. selling. in dividuals engage in cybersquatting so th at they can sell ~he dom ain n am es to companies expensively. e lectronic comme rce (e-commerce) T h e process of buying. including buying and selling of goods and services as well as servicing customers. Wh at are the m a jor ben efits of C2C el ectronic comm erce? D iscuss the va rious ways to pay on! ine in B2C. D iscuss th e major limitations of e-comm erce. . services.m y buyers so that a volume discount can be obtain ed.) 10. Coffee sell coffee m akers on! ine? (Hint: Take a look at the discussion of channel conflict in this chapter. rc\'ersc auction An auction in which one bu yer. pop-np ad An advertisement that is a utom:~Jtica lly launched by som e trigger and appears in front of the active window. 4. collaborating with b usiness pa rtners. companies engage in cybersquatting by registering dom ain names that are very similar to their competitors' dom ain names in o rder to generate traffic from peopl e who misspell 'Neb addresses. 9 .Uusiucss aud 10:-Cummc •·c c c-procm em cnt Purchasing by using electronic support. pop-under ad An adve rtisem ent that is auton1:1tically bunched by som e trigger and appears underneath the active window. In oth er cases. or between an i ndi. the high est bidder wins the item s.~d ual and a business. In som e cases. viral m m kct ing O n lin e word-of-m outh marketing. transferring . the lowest bidder wins. usua lly an organization. the process. 3. 7.mneling A process in which a company integrates its on line . electronic m:nketplace (e-marketplace) A virtual m arket space on the Web where many buyers and m any sellers conduct electronic bu siness activities.mel offlin e channels. D istinguish between business-to-business forward auctions and buyers' bids for RFQs. [ Discussi o n Q uesti o ns ] 1.

and so on. Poy atten tion to security level. D ecide which car yo11 wa nt to buy. Access five of these sites for information about new and used cars. Examin e its offerin gs.1y at AC . \Vhy is t he site so su ccessful? Could you start a compet ing site? \lv'hy or why n ot? 4 . 2. Ha ve team s investigat e how B2B pa:m e nts are m ade in global trad e.autobytel.sig•n•H. !low do th ese sites attra ct buyers? c. Prepare a re port comparing the two sites' offerings. Id entify at !e:1 st five different ways the site generates revenue. Access such si!cs as l"vw. W hat is NAC I-IA? vVhnt is its role? What is the ACH ? Wh o are the key participants in an AC H e-paym ent? Describe the "pilot" projects currently und erw. . and find :Jdditionnl vendors usinggoogle. a. www. Visit ww\. .com.:~t w»w.dimuollcl. and exan1ine their services to small and m edium-size enter-prises (SMEs). 3. W hat fe~tures do these sites use to educate buyers about gemstones? b. Prepare <1 list of all th e services the compnny provides.tem. Note diffe rences among the sites. Assign each team to one indusby E nter www. . 6 . speed.qllee11dom. Each team will find five real-world applications of the major business-to-business m odels listed in the chapter. ld entif}• the site's Identify its revenue model.'lt:a•u 1\:-. Vvhat information is most supportive of your decisionmaking process? \.esp11. cost. How do these sites increase custom ers' trust in online purch asing? d . 1 1 1 2. \~lhat customer service features do th ese sites provide? 1. www. Acces> wJvw. Play the gam e.smgww. Look at the site's private trading ro01n. Access '"'vw. ti(( Finally. and try some of them . which one gives you the you ask each site for the itinera1 best information and the best d eals? 7 .theknol. org) . W hat calcubtors are used there? \Vhat are the <1dvantages of this process as compa red with buying a compute r in a ph:~ical store? What are the dis"d'r. Id en tify the site's r evenue sources. H ow can such a site he lp a person wh o is making a purch ase? 3 .com. Suppose that you 4 .com . En ter wWlv. www.expedia.lmlpaymenl.trculecclrd. You ca n find information about cars at nume rous 'Neb Web site? [ Web A ct ivities ] 1. Explore th e site. IWciiCI. Compare these Vleb sites for ease of use and usefulness.Yrite a report about yom e~1)erien Compa re the vmious electronic paymen t methods. Register to " my cart" (no obligation). com.orbitz. collect infom1~tion from the vendors cited in the chapter.. Access ww w.) Examine the problems they solve or the opportunities they exploit.000 in a trading account every month . and relate your experiences with regard to information technology. go to ''desktops. Consid er instrumen ts such as electronic letters of credit and e-checks. wwlv. check Citicorp and som e Germa n and Japanese banks. and insumnce.pinpoi nl. Access www.minl.check{ree. \ • \ 'hen you have fin ished. You will be bankrolled with $100.travelocity.ovto{service. Research the case of www.. 6.mtages? 5 . healthcare n1anuf acturing reta~l. and w<" click on Results and see what your musi ca l tastes say abou t your personality. investigate what Visa and MasterCa rd are offering. pharmaceuticals and chemicals. 1-low is Nissa n (th e car company) reacting to th e www. If and lllli>IV. <1S well as your ba nk a ccount number? 10.kay~lk . Identify t·he site's revenue m ode l. E nter An indusb'y vertica I is a group of industries in the l(san1et~ Enter www. 11issctn. 2 . such as financial services insu rance.campus{ood. Access ww 1v. wMv. W hat type of e lectronic comnncrce is th is? I low does this We b site generate revenue? 7. and compare and contrast th eir product and service offerings.ediets. Conduct a stud y on selling diamonds and gems online. Access www.tlwigem. and convenien ce. Access 111\ VIV. Access th e Stock Market C ame Worldwide ('"'~w. \ Vrite a report.alilxlba. Access va rious h·avel sites su ch as www. Configure your car by going to the em m:ll1ufa clure1 r's Web site. and www. How accurate are the fi ndings about you ? [ Tea m A ssig nme nts ] hy to find the car . Is Uzi Nissan cybcrsqmrtting? W hy or why not? Support yom answer. Specifically. W h11t are t he risks of giving this Web site your credit and debit ca rd numbers. Also. and answer the musical taste and p erson ality survey.:••ts lfE~ I~~ PD · 1111 [ Problem-Solvi ng Ac ti v ities ] ~ re intere~ted in !buying a ." and configure a S}. (Tly success stories of vendors and EGrelated m agazines.

" I SO \ U \ tee . a C h inese onlin e retailer.oin<d a com petiti\ e acloantase by prO\'iding a sen 'ice for C honew <>'J'Or1en.-. 2010.." 8/oombtre Bu31o. customers. un like c Bay.=t Door ID C hina. el3. To reach th em . b} 2010. Cem1any.1. unsuccessful wh• n it purchased EachNeL ' eBay has g... She found e Ba1 . does no t cater much to consumers eB..lom.on.m td<. In 2010 . Z OtO . el3:~y now op erates a successful business in C hina . as well as som e hands-on activities that visually e" 'Pb in business concepts in th is chap te r.leuccul.oble competitiv" adl':lnlog<7 \\11)' or ""Y not7 Support your a nswer. Postal Sem ce.oob:Jo to Lmnch L ocal !)cat. c l3ay gave up and folded eBay Each Net into a joint venture· with ' 1om Online (m vw. Questions I Re<eorch the reasons (besides I he o ne listed in lhe c ase) why e Bay was The Solut io n Lessons Although e Bay is no longer lr)ing to challenge From}J. There vou will lind a n i nteracti. "eBay Pinck • Se.'t /Oumal. c B. Sourrn: Croopded frouo B. Cr~ck lhe Chiou l'uu Jel" """""'· februaoy crippled the business. •'P. B~gj:<sl Winne r in China in 201)1 &coomne=. but a combin:o tion of m anagem ent mistakes -for e:xample. and access C hapte r 7: E-13usiness and mto C hmJ For example. In 2010. ) Man~:~lindan." Forbes. "e8ay Finds Ill lord to ToppleAiib•b• In Chin•. does not charge commissions.tlon~. la unc hed a scrdce to provide a way for foreign buyers to tra ck thetr C hma purchases and also to allow sellers on the mainland to offer free he r $SO cockta il and rocb btll} ~" IllS drc\>lS. In 2005. September 9. Epslein. e Bay paid $ 150 million to purchase Each Taobao IS domm.\l'rd.1~ ~•" an opcnmg and quickl y mo.1 hut h.tck t\IJ. which. because she is looking to attract global custom ers. "!low eS. C roupon {Mow.1mountcd to ~2 ).mg to cxp.""'IX"' Inte ractiv e Lea rning Opening Up E-Wallets on Amazon.n 1 \ 1 m t one of m. at that time C hina's to p c-commerce Web site .tgcnts cate nng to C hmese sellers.y Failed in C hina.. the comp. h 1obao. The C hinese market is stmp ll' too \'Jst for a tw company to ignore.1 . 2010. has maint:tined its le.mtcs sccl. groupon com) ann ounced the launch of a Chinese verston of its group buying scn·ice. Transactions from C h inn and !long Kong on eBay and its PayPal un it :Jm ounted to $4 bill ion in 2010 . l:tob. Ep~eln . J sttc connechng sm all and tmd-size importers a nd exporte rs worldwide. B1 2010 the number of C hinese Internet users had eBay se. September 10. (.360buy. l'cbruaf)' H. )arnJaf)' 4. By 2006.[ Closin g Case eBay Find s a Way int o China ] The Problem g~O\\Il to -!'i7 2011: I. not giving enough power to local executives -and intense competition from loca l compet"itor l bobao ( www.t b. an instant m essaging operator that is 'Y TechC hin a's largest Internet company.. e BJ} m. -.•e simulation of the technologies ~sed for the electro nic wallets used by Amazon. Tang does not mind . Einhorn. ~n. Thetr stratcg} centers on sellers such as l a ng F' )Jn In 200. C.lll\ forctgn c-com mcrce c:omp.t\ ltttlc consumer rc. fum. nologies in\'ested S500 million in 360buy ( wHw.. E-commerce at Club IT C o to the C lub IT lonk on th e \Viii!VPLUS Web site to lind assignments that will as k you to help Club IT s owners leverage e-con1n1erce.lo." furl><-• . J. 2011. Russia's D igital SI.l). In 2003. C.. September tZ. on C:ronp-Buym~ 1\t-hllle. c-commc:rce in C hm.1ch o utside the counlr} i\ltbab. and South Ko rea.. Despite this success. 2011: II. .trc hed for segments of the C h inese electronic commerce market tha t \\ Cre not dominated bv Taobao's boss.. \l'• cxpo rkrs to eBay consumers located e nge lse\\ here. teaming up with Tencent Holdings ( C o to the lntcrc1ctivities section on the \\'ileyPLUS Web site. tollcthcr \\ tlh C hma Post a nd the U. \ prot IS-H.l<tobc!o. her sales totJied 5700. "elloy ChitiViJ4• 111s Chin<se Conqueror. Cluo. eBay later invested an additional $ 100 million in the opera tion. e l3ay continues to be con cem ed with Alibaba. -c. making C hina e Bay's lifth-brgest m arket behind th e United States. Alibaba launched a service called AliExpress that m akes it eas ier for C h inese-based companies to sell to consumers outside C hina. The Results Thanks to its new business m odel and exporters like Tang Fengyan . am i his i\ does have a plan for Failuf35 C hm.S. 2011. Is this • ""tain.·ed in The compan) no\\ h." mtx-.000 Although c l3. l:m~ sta rted her own dress business.1kcs the m ost sense fo r m C hu1.1 1l1c pbn IS to link C hinese e ntreprcne o m . that number had mcrcascd to ~i6 billton.ll medtum for ." Jhr \\all Stm. In 2010..l} has mmtmalpresence mside China.t C roup (Mo\1'<1/ibCI&/ com).

C all up and quiz the employees a bout the seller.back guarantees. C heck out the vendor with the local C hamber of Com m erce or Better Business Bureau (1~ww.Vorld (www. . Before purchasing. and Am azon . Wlvw.\'a /m art Online. wa rranties. Investigate how secure th e seller's site is by examining th e securi ty procedures and by reading the posted privacy policy.consumen vorlcl. Compare prices with those in regular stores. For man y types of Find out what yo ur rights are in case of a dispute.bbbonline. Ask friends what they know. Look for sea Is of authenticity such as 1l~USTe. Consult consumer protection agencies and the Nationa l Fwud Inform ation Center ( www. Disney O nline. C heck Consumer \.org). • Examine th e m is a useful resource. Find testimonia ls and endorsem en ts in communi ty sites and well-known bulletin boards. and som e catc h is probably involved.Inte ractive Case: Planning E-con1n1ercc Application s for Ruby's C lub lfEJDf···· HOW-TO APPENDIX Tips for Safe Electronic Shopping Look for reliable brand names at sites like ' . and service agreem en . m ake sure that the site is authentic by entering th e site directl y and not from an unverified link. You will evaluate opportunities for e-commerce at Ruby's and build a spreadsheet appli ca tion that will help Ruby's managers make decisions about e-commerce options. Too-low prices are too good to be true. [ Interactive Case ] Planning E-commerce Applications for Ruby's Club Co to the Ruby's C lu b link at the Stud ent Companion web site or W ileyPLUS for information about your current internship ass ignment.resellerrcttings. Search any unfamiliar sell ing site for the company's address and phone and fax ) for a listing of useful resources.

Chapter Wireless. Mobile Computing. and Mobile Commerce ~-- .

how each one can d<tmage n business. MKT 7 POM Increase prodUC1Mty In warehouses FIN Manage wireless payment systems HR Improved el"l'f)loyee communications M IS Provide firm's wireless lnfrastructure Count and aud'n inventory Manage locatio nbased advertising .( LEARNI"\G OBJECTIVES ] [ CH. Discuss the lil'e major m-commerce applications. and exph1in how businesses can use at least one technology employed by each type o f network.g. medium-range. :mel provide at least one example of how a business can utilize eac h one. and explain. and long-range networks. "·ith examples. Discuss the basic purposes of short-range. Deline petYasive computing. Wireless ' lechnologics Student Companion Site wile com/col•. and identi~· at least one advant<lge and one disadvantage of each type..\PTER OUTLINE ] [ WEB RESOURCES] Describe the four main types of wireless transm ission media. describe two technologies th at underlie this technology.. ldentil)• the four major threa ts to wireless networks./rainer Wireless Computer Networks and Internet Access • Student Power Points for note taki ng 1\lobile Computing and 1\lobile Commerce • Interactive Case: Ruby's Club Assignments • Complete glossmy 8 8 Pervasive Computing Wireless Security Wiley Plus All of the nbO\'C and • E-book Gs • !VIini-lecture by author for each chapter section • Practice quizzes • Flash Cmds for I'Ocnbulary review • Additional "What's in IT for Me?" cases • \'ideo inten·iews with managers • Lab Manual for Microsoft O ffi ce 2010 • I-I0\1'-to Animations for l icrosoft Office 2010 Wl1at'slnM T For ACCT e. and prol'ide a specific example of how each application can benefit a business.

whose goal is to becom e major players in the new paym ent system . are the retailers. In 2010.c [1l1e Battle for the The Problem Mobile Wallet] C ustomers tocb y arc in m ore of ll hurry tod:w than ever before. along with the banks that actually issue Slavoljub Pantelid the cards to custom ers. All three card issuers have mobile applicati ons: 1\llasterCard has MasterC ard PayPass. C redit card companies cbim that their m obile appl icati ons enable consum ers to make online paym en ts quickly. "In is process uses a contact-nrec technology c•1 ll ed ><car-/iclcl comm1wications (NFC). Before th ese companies make any money. Wide adoption of this technol ogy in the United States. in Au gust 2010. For example.g. and America n Express spen t n ea rly $3 billion to buy Internet-based payment processors. Consumers would interface with Isis through a mobile < lpp. ret~il­ ers ~re looking for sbrategies to speed up the checkout process and improve the overa ll customer experience.. by clicking on a Vis< l l ogo. and Verizon . Retailers would participate by offering targeted offers to loyal m embers through Isis. and perha ps playing a deciding role. aud J\'lubilc Cu•nml'l'(. In addition . T hese b usin esses want to maintain their traditional Shutterstock position at the center of any paym ent system and to continue to coll ect fees from m erchants. and Ba re-lays Bank (wnw.AT&T. which would g ive them access to multiple credit and debit accounts. credit card companies have been experime nting with wave-and-pay system s t hat use NFC-ena bl ed credit or de bit cards (e. three of the big four providers.disco. of course. O ne stmtegy is to rely on customers' sm artphones as n replacem ent for ~ll of th eir credit ~nd debit cards. and T-Mobile want to collect fees thro ugh control of th e pho nes them selves. a smartph one game could allow players to buy add-ons. AT&T.b(trclctys. ' lneir intention was to create :1 new paym ent network that en compassed credit card com panies and c:1rd-issuing banks.ud companies su ch as l'vhlsterC ard . T he stakes in this competition arc enormous becau se the sma ll fees gen e rated every time consum ers swipe th eir c:mls <ld<lup to tens of bill ions of dolbrs annually in the United States alone. T-Mobil e. are concerne d that a m obile system will bring h igh er fees. For ex. and American Express has Amex !VIobile.lllllDG~~·· C II AI)Tit:l( ~ \·\ 'irck ss. Apple and m obile carriers such as Verizon. without ha ving to repeatedly enter a card number and a billing add ress. Isis c reates a digital wallet into which custom ers of card-issuing banks can easily move their accounts. such as Coogle and PayPa l. MasterCard. is already being e mployed with millions of ph ones both in the United States and overse as. they are facing intense competition from techn ology companies. known as the m obile wallet. th e Visa Wave). however. 1o satisfy them ~nd keep their busin ess. T he strategy described in the preceding paragraph. !vlasterC arcl bought paym ent company DataCash C roup (www :datacash. meanwhile. would be passed along to custom ers. 1 is b eing hindered by a m::~for battle among large for $526 million. Visa has Visa Mobile. Visa. A Variety of Solutions i'vlobile phone caniers. Credit card issu ers. In 20 10. such as Starbucks.-ercarcl. t hat are developing proprieta ry mobile wallet formed a joint venture ca ll ed Isis. i\ lohill: C(nnpnting. su ch as new weapons or extra ammunition. a caterer might be able to e-m ail a bill with a . while product companies and brands could also offer discounts to customers wh o opt in. Adding to this competitive m ix are individual companies. which. Visa. In on e camp are the established credit c. In the middle.. In additi< m. but not Sprint-along with O isc-ove1 · (nww. Instead of swiping a plastic card at th e ch eckout counter. Consumer advocates. th ey n eed to sort out wha t role each wi ll pby and who will collect th e lucrative transaction fees from retailers. who have to install terminals that accept mobile paym ents. consumers m erely wave their phones :1 few in ches above a p~yment terminal. and Am eri can Express.

. ).zong. Bemard and C. "'Mobile Pa~ment.000 of its stores. January 4. Time. The iConcessionStand app is one of more than a thousand developed by entrepren eurs using PayPal X. Zeman. "'Pay Phone.CAS t•: IIE!J~I~ -····· button that a !lows a c lient to pay with one click.jspa). 2011. "'AT&T." Baseline Maga:d11e~ January 26.20. however. January 2-f. on iPhones. Custom ers can also use th e Sta. In January 20 II . Verizon \ Vireless and T-r\. «Starbucks Mobile Pay Nrnv in NYC. B. Je~nuary 18. fvtille r .com) to a nea rby food vendor. F'or example: \ Vhich are you m ore likely to have with you at any given m om en t-your phone or your physical wallet? Also.:1ton. just download the iConcessionStand (n~vw." CNNM011ey. P.S. What We Learned from This Case \Virelcss is a tem1 that describes telecommunications in wh ich electromagnetic waves. your phone can be password ""ll1e End of Cr Starbucl"'S: Buy a LaUe by \'laving Your Phone.. with PayPal funds. However. May 6.viping Is the Easy Part. Coogle !Lead Mobile Payment Rev." PC Magazine. 20 I J. H. T. Miller."' Forbes. T. iconcessit:mstand. 2010."' lnfOnnatkmWeek. 20 10. "'Is Your Next Credit Card Your Cell Phone?"' ABC News. which . such as Zong (www. 2011 . 2011. Both systems. D. 'l'<. 2011. however. f><lypal. edit Cards Is Coming. S. 0 . earns about 3 percent on each transaction. carry th e signal between communicating devices su ch as Sollrces: Compiled from R. or.iconcessio11stand. ""C. C. which they can load with c redit ca rds.olution?" lnfomw. 2011. Ellis.starbucks. 16. K. Zemen. T his is th e first major pay-by-phone initiative in the United States. lj. "Coogle S<ts Role in Mobile Payment. "Isis: Respect the Ca rri ers~ we-11 Be Key to NFC Success.. The Results T h e battle for the transaction fees from your m obile wa lle t is ongoing.." Forbes. and payers could authorize transactions simply by entering a mm1c and password. Pay by Phone. An alert pops up whe n th e order is ready. 201 1. Team. Shaughnessy. "'U. Janu<~ry 28. keep in mimi that if you lose your phon e. Side! and S. Kharif.te Pay-by-Phone System. Aamoth. and tlhe results will be several yea rs in arriving.s: Leave Wallets Horne. R. MacM illan~ 'l'uming Smartphones Into Cash Registers. Interestingly. Please. are de. announced that customers could use a bar-code app on their phones to buy coffee in almost 7. November 22. "'In the \ Vorks: A Coogle Mobile Pa]ment Service?" Bloomberg Busi11ess\\'€-ek. ''\Viii Apple. Custom ers can downloa d the free Starbucks C ard app and hold their phones in front of a scanne r at Starb ucks cash registers.ll' adva ntages. A Efrati and R. 2011 . find nearby stores.. 20 11. obopay. Pachal. Cr eengard.x. For exa 2011. if you are at the ballpark and you want to skip the long lines at the concession stand. January 25. Heussner. for Re<1l ·This Time. King.ent processors to handle purc hases m ad e with its sm mtphones. com) smartphone app . 201 1. }. Carriers Crea. .:1rd Companies Ale WOOing Programmers. Starbucks (www. November 22-28.rbucks app to check their balances. 'T he Race Is On to ft.ofarek. it c<Jn be loc~1 ted on a m ap and rem otely deCJctivated. April~. fvlarch 23. K.•te~ke NFC \Vireless CredH Card Dreams Come Tme (and \ Vin Market Share). a unit of eBay.. future m odels of the iPhon e that incorporate NFC may route payments through Apple's il\mcs store. T h e app lets sports fans order h ot dogs and cold beer fronn their mobile phones and pay by transferring mon ey from PayPal (www. Kim. l< "'ebm:uy 21. Side!. November edit Cards. software used by entrepren eurs to develop apps for PayPal.. rather than some form of wire or cable. S. 2011. Ciabum. Your physical wallet . November an d Obopay (www.a Squeeze PayPal's C rmm )ew<ls.jspa.<fobile Backpedal on IsiS' Joint Venture. 201 1.k.paypal. Th e company claims that it is willing to partner with payn. Raice. R. Eichenbaum. 201 1. January 26.'" Bloomberg Bush1e'S'S'\\Wk. and earn stars to qualify for free drinks.WW.~' l11{onncJtionWeek." Bloomberg Busine'S'S'Week. l\.com. 2010." B/oomOOg Busine'S'S'Week. Plus. February 2. E. PayPa l. D. "'\Veils Fargo to Employee. Coogle has its own paym ent S)'l>tem called Coogle Checkout (http:// ched'Otlf. "'A merican Express: and Vis. "S."' Computeno. P. would need access to the sma1tphone chips and to the m erchants' terminals. f\·1arch 28. "Banking Gets Mobile a·nd Social. T he m oney is subtracted from custom ers' Starbucks accounts. Galante and P. 2011. the poten tial for large revenue streams is real. 2011. lready h as 200 mill ion accounts tied to cred it cards.1yf>al has deve loped PayPa l X (https:l!wMv. Hamblen. e~ cce." The Wall Street Jounwl~ May 4. Both Coog le Checkout and Apple's iTunes coul d be turn ed into m obile wallets. because m obile wallets have cle. «NFC: What You Need to Know. "Pay By Phone Dialed Bad:." The New lbrk Times.0: Coogle CEO Sees Android Phones Replacing C r 2010. l\'1.'Orld. Tile Wall St1ret /ounwl. n ew technology startups. May 4. no t the phones themselves." 17te New York Times. httfl$:!/www. E.comlillclex.d111ology cOmJ> anies. 201 1.ssed April 28. 2011. November 16. In addition ." FierceWireless. but Coogle could n ot because it makes only Android smart-phone softwa re. January 4. cannot do these th•eloping applications to m ake online and m obile paym ents easier."' GigaOJvf. Apple could manufacture its own sma rtphon e chips. "'\ Veb 2. F"ebruary 1. Individual companies. '"Now at tion\\W.t. E."' Rzst Company.

In contrast. "Kogi Korean BBQ. MarK obtained access to all cellular networks and devices that accepted text messages. ""'ll\'lu hilc Comnol'l'cc G about [small] business 8. wireless connection between a m obile device a nd other computing environments. Sources: Compiled from "Kogi BBO-A Combination of Chipotle and Korean Food onWheels!" The Howler Online.1ctivities discussed in your functional area . ns exactly what it says: without wires. 2011 . Ge~ . mobile refers to som ething that changes its l ocation over time .o bile computing refers to a real-time. and pervasive computing. then. February 11 . By leveraging Twitter and mobile connectivity via smartphones. 2011 . Th e o pening case describes the intense corrnpctition <1 mong large and small companies for access to the 11:1st sums of m oney generated by mobile commerce. 2009. you need to learn about wireless computing no t only bec<1use you yourself will be using wireless applications. Som e wireless n etwo rks. For example. His Web site provides this Information ahead of time and even suggests locations where customers can sit down to enjoy the food. sm~rtph oncs. su ch as MiFi (discussed later in this chapter). Wireless technologies enable indi. Trucks. Proctica lly oil organizations use wireless compuHng. Simp ly put. Twitter or mobile communications. MarK's Korean BBQ tacos not only were a hit. The answer to MarK's dilemma was simply to tweet his location. As a result. MarK Manguera had a greal ldea. (You learn about Twitter In Chapter 9. He up:Jates his Twitter feed constantly. su ch as the Internet or an . you will be involved with custom ers via wireless transoction s.~duals and o rganizati ons to conduct m o bile computing. January 20. where otherwise they would stay Indoors. 1\lohilc Cmnpnting. a distin ction needs to be made between the terms wire less and m o bile. In these situations the solution is to use computers small enough to carry or wear th at can communicate via wireless networks. Wh en you read th e What's in IT fo r Me? section a t the end of this chapte r. Good communication would be critical to a successful operation. Before you continue.' as It Is Known In Los Angeles. but also because wireless compu ting is so impo rtant to m:my org:~niza­ tio ns. C lea rly. refers to the large crowds of people who congregate around the trucK. computers. The location and menu change dally. His story went viral-meaning that it spread rapidly. 1VI. Sound odd? MarK actually tooK this Idea one step further by planning to sell his concoction from a taco trucK liKe Ice cream! But how would he let people Know his location so they could find his tr·ucK and buy his tacos? The Korean Taco from a trucK concept Involves a number of variables. Provide specific examples of the advantages that mobile communications provided to Mark. accessed April 27. Which t echnology. and th e list goes on. O the He was even contacted by an entertainment company because his crowds create mini-street parties and have opened the doors to other entrepreneurs. a Taco Truck Brought to You by Tw~ter. Using Twitter to reach customers across mobile networKs. He thought that Korean barbeque would taste great on a taco. and Tweets? they are going. Th ere fore. In your fob. envision yourself per fo rming th e .1. We will define these terms h ere. J . Informing customers where his trucKs are and where Questions 1. as illustrated in IT's About [S mall] Business 8. Mark began to share his location and to ask others to forward rt. MarK now operates out of five trucKs and one bar. and so do the customers. th en discuss them in detail later in the chapter. Wireless m e.and It attracted a large number of followers. In m any situatio ns the traditional working environment that requires use rs to com e to a wired computer is either in effective o r inefficient. <1 nd iPads. microwave towers form fixed wir eless n etworks.IIII£Jllafll C ll i\1''1'1•:1{ !i Wireless. however.1 Tacos. with ana lyzing and developing m obile comm erce applications. It brings people out In neighborhoods. enables the other? Support your answer. his trucK draws between 300 and 800 people each time It parks.) Mark's family and friends began blogglng and tweeting about his tacos." The Los Angeles Times. but they gave birth to a cultural phenomenon. . The ability to communicate anytime and " nywhere provid es orga nizations with a stra tegic ad vantage by increasing productivity and speed and improving customer service. you likely will be assigned a company sm artphon e and a wireless computer. are also m obile. m obile commerce. 2. an und erstanding of wireless technology and mobile comme rce appl ications will make you m ore va luable to your organiza ti on. when you begin your career. http:!!kogJbbq. and w it h wireless security. are fixed. An understand ing of wireless technology can also help you st>1rt and grow your own business. "Kogl culture.

Som e com panies. repla cing or supplem enting wired c-omputing. furth er highl ighting th e importan ce of wireless to indlivi<hwls and their organiza tions. they can make productive use of time th at form erly was wasted (for example. Next. Modern sm<lrtphones provide capabilities that include cellular a calculator. Second.smartphones .1 'Vireless Technologies \~fireless technologies include both wire less devices. The latest version of cell ph ones. th e time spent commuting to work on public transportation).~tions. a digital ca mer<l for images and '~deo. a video player.also kno\\·n as m-commcrce. wireless sect1rity. have far greater imp" ct on human society than m ost of us realize.refers to e-commerce ( EC) transa ct ions that arc condu cted with 11mobilc device.. and Th ey can comnmnica tc wirelessly with th e Internet and other devices. not as digital cameras tha t can transmit wirelessly.! reasu11s. 1. a huge b:1lt le is underway to provide you with a m obile. satell ite. managers think of these devices as phones. an M P3 music-player. and particularly sma For ) predicts th at the voln me of mobil e Web traffic will double every year until 2013. inc luding all of the credit and debit cards you have in it Bill ion s of dollars are at stake.A. such as microwave.. T hi rd. O ne downside of smartphon es is that people can use them to copy and pass on con fidential information . You continue by examining wirel ess computer networks and wireless Internet access. ® ~ ' . l 11uiviuuah fi1 1U wirt:le" uevit:t:s ~UIIV t:llit:lll<111U pru tludi ve lu use fur sever. su ch as smartphones. Mobile commcr·cc. you turn your attention to pervasive computing and cone luci e the chapter by familiarizing yom self with a critical component of th e \v ireless environn1ent. text m esS<lging. instant messag ing. wireless techn ology enables working time to be scheduled around persona l and professional obliga tions. such as Samsung (www. which are made possible by wireless tec hnologies. m eans that virhw lly ever y object has processing power with wireless or wired conn ections to a globa1n etwork. nan1ely. Internet access with a full-function browser. New jamming devices are bei ng developed to counter the threat. You begin th e c hapter by learning about wireless devices and wireless transmission m edia .ics lfE~l~f!JII.s you saw in the opening case. and a QWERTY keyboard. also call ed ubiquito us computing. their work locJtions a1 ·e beco ming much m ore Aexible. an organizer. intra net. Fi1st. Th ey have sufficient computing power to perform produ ctive tasks. access to e-ma il and short message service (SMS) (sending and receiving short text m essages up to L60 ch aracters in len gth).mtages to users: • • • They are small en ough to easily carry or wear. \!Vi-Fi. 1 \Vi reins Tcdmolo.~ces from their premises altogether. and radio. and wireless trans- m ission media. Th ese technologies are f:undamentally changing the ways organizations operate.. and limitations o f mobile computing and mobile commerce are the m ain focus of this chapter. \!Vireless technologies and m obile commerce are spreading rapidly. cell phon es. <1 But regardless of their disadvantages. T he techno logies. Pervas ive comput·ing. Blu et ooth . would an executive at Intel want workers snapping pictures of colleagues with the company's secret new technology in the ba ckground? Unfortunately. C isco (www.S ECTI ON 8. T he following example demo nstrates how smartpltwnes can disrupt th e court system. an address book. 8. In fJ ct. globa l positioning system (C PS). have recognized the danger and have banned the de. applic. digita l vrollet and to en able you to get rid o f your physical wallet altogether.can cause problems despite all their advantages. ln e wireless infmstructure upon whi ch mobile computing is built may reshape the entire IT field. Wireless Devices vV ireless devices provid e three major adv. because people can take these devices with them . You then look at mobile computing and m obile commerce. as you can see in Table 8.

the extent of traffic jams. and routin ely warn jurors are not to communica te about a case with anyone before reaching a verdict. As you saw in the opening case. automobiles. have problems such as haphazard sound quality. ""'ll\'lu hilc Comnol'l'cc Do Not Underestimate the Power of Cell Phones! Table 8. cell phones played a critical role in the revolutions that erupted across the Middle East in 2011. rai sing serious questions about juror impartiality and the ability of judges to control is placing miniature cellular base stations. By mid-2009. and television. England. and overturned verdicts. To help solve these problems. faster than any other region. and many other items. credit cards. citing the jury foreman 's use of an iPhone to look up th e definition of "prud ent'' in an online dictionary. called femtocel/s. a Florida court overturn ed the manslaughter conviction of a man cha rged with killing his n eighbor. with a few clicks on th eir sma rtphones.•••E£~!~:11 C ll i\1''1'1•:1{ !i Wireless. As the chapter-opening case demonstrates. in every home or office that wants bett er reception. In September 20 I 0. As an example. with all their power. • And there is more to come! Cell phones. and travel time. As you read in the opening case about the "Arab Spring" in Chapter 1. appeals. there i s almost nothing in your wallet that you cannot put into your cell phone. Cell phones are the first telecommunications technology in history to have more users in the developing world -60 percent of all users-than in the developed nations. • Cell phones can heavily influence politics. there was one cell phone for every two humans on earth. pictures of spouses and children. each weighing two pounds. The consequen ces can be significant. • Your cell phone now can be your wallet. bicycle couriers monitor air pollution using cell phones equipped with global position technology. slow downloads. jurors. Cell phones have transformed the world faster than did electricity. cell phones have become the driving force behind many modernizing economies. and they rel ieve congestion on cell towers and cellular frequencies by creating extra capacity at very low cost. cell phone usage in Africa has been growing at 50 percent annually. cell phones are being used to transmit real-time traffic information. and annoying delays between speaking and being heard. a company called Picochip (www. and the low-power signal does not interfere with other frequencies. 1\lohilc Cmnpnting.1 • In January 1982.picochip. A Reuters legal ann lysis found that jurors' forays onto the Internet via sm artphones have resu lted in dozens of mistrials. c redit cards. the Nevada Supreme Court granted a n ew trial to a defendant . such as automobile speeds. The transmitter is cheap. the broadband connection is free (most houses and offices have existing idle broadband connections). jury boxes. were put into service in Washington. DC. however. the first 100 hand-held cell phones. • Cell phones have made an even bigger difference in less time in underdeveloped areas where land lines are scarce. Today. for example.S. Example Smartphones in Court Smartph on es are now present in U. • In the San Francisco Bay area. • Scientists at Purdue University want to network the United States with millions of cell phones equipped with radiation sensors to detect terrorists trying to assemble dirty bombs. dropped calls. can look up definitions of lega l terms on WTkipeclia. for example. and communica te on th eir Facebook pages. refrigeration. Femtocells work with any cell phone. view crime scenes via Coogle Ea rth. courts have instructed jurors n ot to seek information a bout cas es outside of the evid en ce introduced at trial. bus tickets. Tha t S<llll e m onth. F'or decades. This represents the fastest global diffusion of any technology in human history. • In neighborhoods around Cambridge.

S. Disadvantages Must have unobstructed line of sight. Microwa ve transmiss ion system s transmit data via electromagne tic waves.2 Sat ellite Radio High bandwidth. Wireless Transmission Media \~fireless m edia. som e lega l experts argu e that rather than try to prevent jurors from pursuing information on the Internet. line-of-sight communi ca tion . or broadcast m edia . with th e CEO be ing f<1rth est from the ea rth and the LEO th e closest. Courts are exploring ways to keep jurors "unplugged. Inexpensive and easy t o install. Infrared Sources: Compiled from "'Juries <llld the Internet: Justice On line~. These systems are used for high-volume. Table 8. there are three types of satellites around the ea rth: geostationary (CEO). they are being replaced by satellite communi ca tions systems.i~lQD • 1111 convicted of sexually assa ulting a minor. In this section you examine th e three types of sa tellites and then disc uss two ma jor sa tellite appli cations: global pos itioning system s and Intern et transmission via satellites. .~l ju ry instructions to bar jurors from "all forms of electronic communication . C lea rly then. Relatively inexpensive. Low t o medium bandwidth.. U. . In 2009. their enormous Footprint. Januaf)' 3. T his requirement creates problems because th e earth's surface is cu rved rather than flat. 1 Wireless Techno logies IIE:. Used only for short distances. The major types of wireless med ia are microwave. because th e foreman had used his smartphone to sea rch online for information about the types of phys ical injuries suffered by young victims of sexual assa ults. Signals experience propagation delay." Som e judges now confisca te all sm artphones from jurors when they enter a courtroom. Although long-distance microwave data commun ications systems are still wid ely used. satell ites must receive and transmit data via line-of-sight.3 compares and contra sts th e three types of satellites.2 lists the ad vantages and disadvan tages of each type. December 8. As with mic rowave transmission . Reuters. Must use encryption for security. Table 8. Line-ofsight means that th e transmitter and receiver must be in \~ew of each other.\licrowan•. C urrently." From a different perspective. Susceptible to snooping unless encrypted. Must have unobstructed line of sight. Satellite. radio. Large coverage area. For this reason . transmit signals without wires.. 20 11. Signals p ass through w alls. long-distance. "'As Jurors Co Online. sa tellite. Expensive. California updated its ci. Sa tellite transmissio n systems make use of co mmuni cation S<ltellites.S ECT IO 8. courts need to help them do so in a responsibl e way. Susceptible to environmental interference. Creates electrical interference problems. microwave transmissions are susceptible to environmental interference during severe weather such <lS heavy rain or snowstorms. Trials Co Off Trad. mediumearth-orbit (MEO). microwave transmissions offer onl y a limited solution to data communi ca tions needs. 17ut Guardian. microw<J ve towe rs usually ca nnot be spaced more than 30 miles apart. 2010. Must have unobstructed line of sight. Table 8. especially over very long distances. High bandwidth.the <1rea of the earth's surface reac hed by a sate llite's Advantages and Disadvantages of Wireless Media Channel Microwave Advantages High bandwidth. however. and low-emth-orbit (LEO). Additionally. and infrared. Eac h type has a different orbit.

MEO satellites have two advantages over CEO satellites: They are less expensive. m edium-earth-orbit satell ites h ave a sma ll er footprint than do geostati onary sa tellites. a kin d of propagation delay.ln e m ost basic m lc governing footpl'int size is simple: T he higher a satellite orbits. if any. Negligible transmission delay. propagati on delay. however. Types of Orbits. Sho rtest orbital life (as low as 5 years). even though so te ll ites are line-ofsight like microwave.100 mi les directly above the equator. they are high en ough for broadcast transmission . Satellites move relative to point on earth. M EO orbits requ ire m ore satellites to cover the earth than do CEO orbits because l'vlEO footprints are sm aller. lEO satellites move with and they do not have an appreciable propagation delay. ""'ll\'lu hilc Comnol'l'cc Table 8.1 compares the footprints of the three types of satellite. These satellites mainta in a fixed position above the ea rth 's su rface because at th eir altitud e.000 miles above the earth 's surface. however. and they require subsbntial amounts of power to launch. footprint.700 m iles Many Telephone transmission . In co ntrast to line-of-sight tll'ansmission with microwave.) Low-earth-orbit sa tell ites are located 400 to 700 mi les above the ea rth's surfa ce. O ne major limitation of CEO satellites is that their transmissions take a quarter of a second to send and return . Satellites move rapidly relative to point on earth. and lowearth-orbit satell ites have the smallest footprint of all. Require only low-power t ransmitters . 1\lohi lc Cmnpnting. Like MEO satellites.overcom es the limitations of microwave cbta rcb y stations. Also. 22.•••Ef~J~··· C ll i\1''1'1•:1{ !i Wireless. makes two-way telephone conversations difficult. Most e xpe nsive to build and launch. Because l\• respect to a point on the earth 's surfa ce. the larger ill. sa tellites usc broaclcasf h<msmission.300 miles 8 MEO 6. Few satellites needed for global coverage. Require medium-powered transmitters . their orbital period matches th e 24-hour rotation al period of th e earth. they have little. Moderate orbital life (6-12 years). Longest orbital life (many years). For th is reason . Ccost<1lionary earth orbit satellites orbit 22. Medium-earth-orbit satellites are located about 6. receivers on th e earth do n ot have to track CEO satellites. CEO satell ites are excell ent for sending tclc1•ision progmms to cable opera tors and for broadcasting directly to hom es. thus overcoming the li mil<1tions of microwave.ds to ma ny receivers at on e tim e. Negligible transmission delay. Because LEO sat ellites are much closer to th e earth . (Think of a satellite dish slowly h.434 miles 10-12 GPS LEO 400.3 Ch~tracteristics Three Basic Types of Telecommunications Satellites Type Orbit Number Use TV s ignal GEO • • • • • • • • • • • • • • • • • Satellites remain stationary relative to point on earth. F igure 8. rece ivers must track these satellites. So. which sends sign. Moderate number needed for global coverage. This brief pause. Least expensive to build and launch.trning to rem ain oriented to an MEO sa tell ite. CEO satellites are large and expensive. LEO satellites move with respect to a point on th e earth 's surface . Large number needed for global coverage. Transmission delay (approximate ly 0. Less expensive to build a nd launch.25 second). Thus.

1 Wireless Technologies IIEf!:. C PS software also can convert the user's latitude and longitude to an electronic map. called GLONASS. GEO satellite FIGURE 8. because th ey can ope rate with less power and smaller batteries. F'or this reason a single organ ization often produces LEO satellites in groups known as LEO constellations.2 Obtaining CPS information in an has pla ced a LEO constellation in orbit that consists of 66 satellites and 12 in-orbit spare satellites. called Cali leo. The exact position of each satellite is always known because the sa tellite continuously broadcasts its position along with a time signal.m. th e footprints of LEO satellites are small.iridiu. Global Positioning Systems. comlgps. F'or a CPS tutorial.2 illustrates two ways for drivers to obtain CPS information in a ca r: a dashboard navigation system. called Beidou. In 20 10.~ng directions. which mea ns that many of th em are required to cover the earth . T he European Union CPS.globalstctr. "''"v. including the polar regions.trimble. (Source: Drawn by Kelly lt1iner) FIGURE 8. Three oth er globa 1 pos iti oning system s are e ithe r planned or operational. Anoth er advantage of LEO satellites is that th ey consume less power and cost less to launch than do CEO and MEO sa tellites. F'igure 8. Iridium ( also has a LEO constellation in orbit. At the sa me time. however. Th e system fe ll into disre pair. Comm erc ial use of CPS for activities such as na viga on an iPh one. and a CPS app (TomTom.S ECTI O 8. particularl y in rem ote areas. China expec ts to co mplete its C PS . visit www. and su rveying ha s becom e wid espread.~~J···· and therefore must be tracked by receivers. C LONASS ac hi eved 100 percent coverage of Russian territory. By using the known speed of th e signals and th e distance from three sa tellites (for twodimensional loca tion) or four satellites (for three-dimensional location). by 2020. The global positi oning system (C PS) is a wireless system that utilizes satellites to enable users to determine their position anywhere on the earth . T he Russ ian C PS. C lobalstar (www.tomfom. Cell ph on es in th e United States now must ha ve a CPS embedded in them so th at th e location of a person making an em erge ncy call (for exampl e. T wo exa mples are Iridium and C lobalstar. however. tvlost of you are probably fumiliar with CPS in automobiles. F'ina lly. has an anti cipated compl etion date of 2015. with th e collapse of th e Soviet eco nom y. T his c hara cteristic enables satellite telephon es to operate via LEO sa tellites. LEO sa tellites can pi ck up signals from weak transmitte rs. which "talks" to drivers when gi. LEO satellites are more diffi c ult to tra ck than are tvlEO satellites beca use LEO satellites m ove much m ore quickl y relative to a point on th e earth . mapping. CPS software can find th e location of any receiving station or user within a range of 10 feet. (Source: Image Source) Dashboard GPS TomTom app on iPhone . 9 11) can be detected immediately.1 Comparison of satellite footprints. T he company maintains that it pro\~d es complete sa tellite communications coverage of the earth's surface. was comple ted in 1995 . CPS is supported by 24M EO satellites that are shared world wide. Unlike CEO and MEO satellites.

it h as its drawbacks. overcomes this p roble m . Most radio sigm ls can travel only about 30 o r 40 mil es from their source. F'irst. Commo n applicatio ns o f infrared lig ht are in rem ot e control units for te levisions. Next.:d light is red light that usLw lly is not visible to hum11n eyes. eith er at ho m e or in your car. ] inAu cnces suc h as th u nd. howeve r. Listene rs subscribe to the service for a month ly fee. while Sirius used MEO satellites . T hese d evices typically form wirel ess computer ne tworks. and ta lk. radio m edia can c reate electl'ica l interferen ce problem s. near CO-quality music that is beam ed to your radio. 1\ lohilc C mnpnting. O ne problem with radio transmission is that whe n you travel too far away from the source station . before you go on. infra red transceivers. .ldiO. lnfr:~red T he final type o f wireless t mnsmission is infra red transmission. radio wnves c:1 n u·ansmit data a t hig h speeds. t he signal breaks up and fad es into st atic. but th ey can be d isrupted by environ m en t. As with othe r t ec hno logies. radio waves travel easily thro ugh no rn1>1l office wa lls. VC Rs. Inte rnet over Satellite (loS) is the only option available for In terne t connectio ns beca use using cables is eith e r too expensive o r physic ally impossible. discussed in C hapter 6). news. satell ite radio offe rs a broad spectrum o f stations with differe nt types of music. radio inc reasing ly is being used to connect compute rs to both pe ripheral equip m ent and local area ne tworks (LANs. a re used for short-distance connections between compute rs a nd p e rip he ral equip m en t a nd loc<ll area networks. F'in:. fro m spa ce. Not only d o CEO sa tellite transmissio ns entai l a propagation delay. like radio transmitters.llllf!:l'~JI C ll i\1' '1'1•:1 { !i Wireless. radio transmissio n has its drawbacks as well. DVDs. Descnbe the various types of transmission media. In gen e ral. however. and wide-a re ZI . A transceiver is a d evice that can both transmit :md receive signa ls. In July 2008. Satellite radio. Short-Range Wireless Networks Sho rt-ran ge wireless networks simplify the task of connecting one d evice to a n othe r by eliminating wires a nd e nabling users to m ove around while they use the d evices. com).range. To begin with.e rstorms. In . a nd CD players. sho rt-range . n1e diu1n. In a ddition. you will stu dy wireless n etworks categorized b y their effective distan ce: short-range. Radio transmission has several a dv:mtages. radio tra nsm ission s a re susceptible to snooping by anyo ne wh o has similar e quip m e n t th a t o pe ra t es on the sam e freque ncy. Also.2 Wireless Computer Networks and Internet Access You have learned about va rious wireless d evices and h ow th ey transmit wireless signals.lly. lnfi·:m.siri11sxm.!1~1 1. R. Radio transmission u ses radio-wave frequen cies to send data directly between transmitte rs and receivers. In addition . 8. ""'ll\'lu hilc Comnol'l'cc Internet over Satellite (loS).1 ddition. XlVI broad cast its signals fro m CEO satellites. however. For th ese reasons. loS e na bles users to nccess the In te rn et via C EO s:ttellites from a dish m ounted on the sid e of their ho m es. 2. Describe the most common types of wireless devices.. radio devices arc fairly in expensive and easy to install. the two companies m erged to form Sirius XM (www. XM Satellite Radio and Siri us Satellite Radio orig ina lly were competitors that launc hed satellite radio services. and they p rovide wireless Inte rne t access. In m an y regions of th e world. Satellite r:1dio offers u n in te rrupted. Although loS ma kes the Interne t available to m an y people who oth erwise could not access it.

PLU S is extre m ely valuable for healthcare en vironm e n ts. or \ A. say. a nd smartp ho nes. up to 100 m e te rs. desktops. technicians) and m obil e equipment (e. users can access vVi-Fi w ith their lapto ps. Bluct ooth (www.weca. In addition .3 Wireless access point. Inte rnet cafes.Ii-Fi.. you can swipe your d e~ce o r card within a few centime te rs of point-of -sale te rminals to pay fo r ite ms. a !r< m smitter with an a ntenn a. and/or visitors wear the P L US Badge Tag. It is d esigned to be e mbedded in mobile d evices su c h as cell pho nes < md c redit cards. T ime D omain (w ww.3 shows a wireless access point. but witho ut the cables. to their office. Th e m ost common type o f m ed ium-range wireless ne twork is \ \fi reless Fid elity.. suc h as laptop PCs.loca tcd close to o ne pe rson. as streaming multimedia from . p e rsona l digital assist ants. \• Vi-Fi provides fast and easy Inte rne t or inb·an et b roadband access from pu blic hotspots located at airports. ultra-wide band (UWB).com) is an indusby specification used t o c reate small p e rsona l area networks. Common applications for Blue tooth are wireless handsets for cell phones and portable music players.) . T he Institute of Electrical and Elech onics Engineers (IEEE) has establi shed a set of standards for wireless compu te r n etworks. Ultm-\\'ideband. som e o f whic h may be challe nging. W LANs a rc useful in a varie ty o f settings. th e Scandina. th<Jt is.4). FIGURE 8 .products.1a n m obil e ha ndset co mpany tha t d eveloped Bl11 e tooth . a pe rsonal computer to a televisio n. m obile devices. Ultra-wide b:md (lJ'VB) is a high-ba ndwidth wireless technology with transm ission speeds in excess of 100 M bps. Eri csson . O n e in te resting application is th e PLUS Real-Tim e L ocation System (RTLS). ln this section you conside r three basic shortm nge networks: Bluc tooth .~ously sepa rate island s into th e nation of D e nmark.0 can transmit up to 2. ha s developed many UWB applications. using N F C . Use rs can access th e Inte rne t while walking across th e campus.11 family. radio w<1ves e mitted in all directions from a transmitter. Recall from C h a pte r 6 tha t a pe rsonal area n etwo rk (PAN) is a com p ute r n etwork used fo1 · com munication among computer dleviccs.tim. Ne:n Field Com llllllllt"ltiom. Bluetooth 2. a pioneer inultra-wide band technology. The IEEE standard fo r W i-Fi is the 80 2. Advantages ofBluetooth includ e low power consumption and the fact that it uses omnidirection al r<Jdio waves. where real-time location of caregivers ( h otels. F ig ure 8. typically have bu ilt-in wireless n e twork interface capability. call ed a wire less access po int.bluetooth. nam ed it afte r the tc nthcentmy Danish king . \\ 1rclcss FiddJt) (\\ 1-Fi) W ire less Fidelity (or Wi-Fi) is a medium-range w ireless local area network (WLAN). To communicate wirelessly. o r throug h th eir hom es (see www. or POAs by adding a wireiless network card . A wireless access point provid es service to a numbe r of users within a small geogr. known as a hotspot. custom e rs. laptops. Medium-Range Wireless Networks Medium-range wirel ess networks are the familiar wireless local area n etworks (WLANs). This very high speed makes UWB a good ch oice fo r applications su ch.S I :CTI() 1 8. Inc. They named the sta nd ard afte r him beca use he unified pre. universities. Fo r r exa mpl e. d octors. PLUS Asset Tags are placed on equipment a nd produc ts. connects to a wired LAN or to sate llite dishes that p rovide an Inte rne t connectio n.g.2 \·\'in:lcs~ C mnputc r Nctwurkl'~ t and Inte rnet Access lfE~~~f!JII. An o rganization can u tilize PLUS to locate multiple people and assets simu ltaneously. 1 Mbps (meg<~ bits per seco nd) and at g reate r power . wh ich is basically like a wired LAN. Suppo rting a larger number of users ac ross a larger geographical area requires multiple wireless access points. (Source: @ Pearl Bucknall/ Age Fotostock ).1phical pe rimet e r (up to a couple hundred feet). monitors) is critical. Employees. Bludouth. car-field communicatio ns (N FC) has the sm all est r::1 nge o f an y short-range wireless ne two rk. tel epho nes. )-bra id Bbta n ( Bi atan m ea ns " Bluetoo th"). offi ces. Blue tooth 1. In a ty pica l config uration.0 can link u p to eight devices with in a 10-met e r area (a bo ut 30 feet) with a ba nd width o f 7 00 Kbps (kilobits per second) using low-power.g. and hom es (see Fig ure 8.edomain. conferen ce cen ters. a nd ne•n-liel cl com munica tio ns (NFC). radio-based communic ation . nurses. For this reason you d o no t have to point o ne Blu etooth device at another to establish a connection .. Most PC and laptop manufac tu rers incorpora te these cards directly into thei. wireless networks have a ra nge of 100 feet o r less.

M iFi. and ad hoc conncct1 o ns . pay a separate fee for each service. \\ irdl~~ 1\lesh Networh. currently users cannot roam to and from hotspots that use different W i-Fi network services. sh aring th e same connection. Three factors are p revent ing th e commercial \Vi-Fi market from expanding even fur ther: roaming. even witho ut . while others charge a fee.g. which c. public wireless mesh programs are stalling and fuiling. Corporations are mkg rallng W•-F• into their strategies. Mesh networ ks liSe multiple Wi-Fi access points to create a wide area network that can be quite l:n-ge. Around the United States (fo r exa mple. Pane ra Bread. ma ny experts question whether commercial \Vi-Fi services can su rvive when oo many free hotspots are available to users. U nless the services are free.d compute I'> or o ther cle\•ices were some\\ h. Developed by N ova te!. 802.11110111. t\1 iFi is a small. Although \Vi. MiFi provides b roadban d In ternet connecti vity anywhere there is 3C cel lular network coverage. 'l od. (Som e \\' i-Fi h otspots offer free servi ce. it is not without problems. both locally and intem ationally.4 Starbucks' patrons using Wi-Fi.1t lumted.t. <. F'or example.) Lack of security is the second ba rrier to gre ater ~ccepta nce of W i-Ji'i.lCJI.m connect directly.nw \VI AN~ usc th e 802.c lim!l. security. o rg. portabl e.mel S02.1 wneless antenna. Even th ough W i-Fi services are relatively inexpensive. Further. Because W i-Fi uses radio waves.1n tr. Starbucks.mgd\1 .!S lntcmcl. or groups of de\ •ccs .ltlom. dC\1CCS \\ Jth w •.des users \11th a permanent \Vi-Fi hotspot wherever they go. Mesh networks could have been discussed in the long-range wireless section. It is the greak">t f.11a. primarily for Internet access. !\ lcDonalds. Wi-Fi Direct.~ nd J\ lohilc CoiiHUI. (Source:© Mnrinnna Dny MnsseyfZuma Press) The re ~re fou r standards in th is family: 802.1111z. Boston. l lg.. \Vi-Fi D1rcct cn. but they appear here because they are essentially a series of interconnected local area n etworks. th e MiFi device is also ca lled an intelligent mobile hotspot. the Jh1lity to conneclto the Internet \\Jreles~ly. O ne d rawback with M i Fi is the R. and cost. 11b. w1 rcles~ device th.Fi has become extremely popular. so de1-ices c. I'VIiFi also all ows users to use Vo iP technology to make free (or cheap) calls. where 1 ·eq uired. users have to log on to separate accounts and.1v.'i. ad hoc connections. 11 n standard. users are alw<~ys connected to the Internet. in Phil"delph ia.11 n. both for acquiring it and for using it. and Bames & Noble offer customers \Vi-F i in many of their stores. \ Vi-Fi Direct is a ne\\ iteratio n of\\'i-F1 It e nables peer-to-peer communications." \Vircle>~ ro uter The maJOr benefits of \Vi-Fi are 1ts low cost and 1b a b1htv to pro\ 1de simple Internet access. H02. it is difficult to shield from intruders.Jtor of the h'irdc. It offers a simiiJr type of connech\ 1 ty but with greater range and much faster data transfer. Until late 2010.1t \Vi-Fi speeds of up to 250 \I bps and at distances of up to 800 feet.msmit up to 600 Mbps and has a range of a bout 800 feet There arc man}' 802. Accessing W i-F i thro ugh the 1\l iFi device allows up to five persons to be connected at the same time. The final limitation to g reater Wi-F i expansio n is its cost. that is. Bo rders. Rega rding the fi rst facto r.Jbly \\Ill ch•• llengc the domlnJncc of Bluctooth Ill the drCJ of clevJceto-device networkin g.C I L\1''1'1+:1 { H \·\ 'irde. Because of the. and Lo ng Island). 1\lohi k'i Direct can broadcast their availability to other de\•ices just as Blue tooth d~\1CCS can fo'inally. The range of the l'vliFi device is about 10 meters.unple 1 5 Ncts. It can connect pam. m. \Vi-fo'i Direct is compatihle with the approximately I billion W•-l•'i de \lce' c nrrcntl\ muse \Vl-F'i Direct prob.ear's ("''"'·ncfgc(lr.'t'CC FIGURE 9. Wi-Fi re<jtme d the pre~cnce of <l 1\'lreless antenna at the center of a hotspot.1t p101 .1bles uw rs to tr. Service providers that partnered with cities to . .. Thus. 1 11dl\ idu.•mftr content amon~ de\ 1 ces.tlio ns l) p1 cC11ly hd\'e used \\'i-Fi for communications of up to about 800 feet and Bluetooth for shorter.1 1n products One cx.

and wireless broadband.1dio cubes are small enough to be deployed virtually anywhere and almost inconsp icuously.S. In contrast. Consider the following: • • U. Cellular Radio. • Wide-Area Wireless Networks \<Vide-area wireless n etworks connect users to the Internet over a geographically dispersed territory.~ · 1111 maintain the systems are dropping out. the antenna-by the cell phone and th en is passed from cell to cell until it re. on the sides of buildings. tion attach ed to a fixed land line (for example. and on bmp posts. In addition . for exam ple. These n etworlks typically operate over th e licensed spectrum. In general. That is. T his is why you ca1 as standard wire line p hon es. lightR. from one satellite to anothe r across the constellation. D esp ite th ese problem s. Cellul ar telephones differ from cordless telephones. they use portions of the wireless spectrum that are regulated by the government. within a hom e or an office). Calls between satellite phones are routed through th e m esh. As a result. wid e-area wireless network technologies fall into two categories: cellular radio. without having to go through an earth station. brge cell towers have been a "given " fo r cellular technology. Example lightRadio ll1e global wireless industry is spending $210 billion per year to operate their networks and $50 billi on per year to upgrade them. com) th~1t aims to rep lucc these towers./ucwt. the signal travels a sh orter distance. the constellation can operate with fewer earth stations. lightR. on top of bus station awnings. Th is eliminate s th e need for human readers or the need to connect the m eters with c ables. At this final cell. the networks are fighting a losing battle. g raphic areas called cells (see Figure 8. Despite all that spending and pressure on consum ers to curb their data usage. With a combination of miniaturization and cloud technology (discussed in Technology C ui de 3).2 \·\'in:lcs~ C mnputc r Nctwurkl'~ t and Inte rnet Access lfE~~~J. Consequently. placed within adjacent geo' fn e cell phone communicates with rad io .Jdi o might be able to h elp wireless carriers keep pace with their custom ers. 1s.ches the cell of its destination . ' fn e following example inh·odu ccs an exciting new techn ology from Alcatel-Lucent (www. alcatef. they a !so are 30 percen t m ore efficient. Not only are lightRadio cubes much smaller and less conspicuous than cell towers.5).S I :CTI() 1 8. reducing any transmission lag . there are ma ny exa mples of successful mesh-network applications. vVire less carriers can access live data about who is using . or towers.mtcn n. Until early 201 I .3-inch cube that contains all of the components of a cell tower. Cellular telephones provide two-way .-adio communications over a cellular network of base stations with seamless handoffs. l ightlbdi o is a 2. Electric m eters n ow being placed on residen tial hom es can transfer their readings from one to an other and eventually to th e central office for b illing. l\'l obile data usage is expected to grow 30 times by 2015 and 500 times by 2020. with wireless lin ks mnong adjacent satellites. largely because th e projects' costs are esca b ting and th e revenue m odels arc u nclea r.that is. A telephone m essage is transmitted to the loc:ol cell. military for ces u e using wireless m esh networks to connect their laptops in field opcmtions. the m essage either is transmitted to th e re ceiving cell p hone or is transferred to tlhe public switched td eph onc system to be tra nsmitted 1 use a cell phone to call other cell p hones :1 s well to a wireline telepho ne. ' fn e LI~O Iridium constell11 tion operntes ~1s a m esh network. AlcatelLucent's engineers stripped out all the h eavy power equipm ent that controls cell towers and m oved it to cen tralized stations. Bluetooth and \:Vi-Fi operate over the unlicensed spectrum and th erefore are m ore prone to inte rference and security problems. which offer telephone service only within a lim ited range through a single base st.

2. . antennas m ay be pointed in one direction as people are coming to work in th e m orning and in another direction when they <1re going home. Babcock. CDI 'viA companies currentl y are using Evolution· Data Optimized (EV-DO) technology.5 Smart phone and C PS system. March 21. C. most ca rrie rs limit how muc h inf01111ation you ca n download and what the service can be used for. 2011. 3C supports video. © AP/Wide World Photos Cellular network. In addition. Cellular tec hnology is quickly evolving. they can be deployed on top of existing cell the cubes and then ad just the antenn<>s' directiona l be<>ms to m aximize their potential. ©Engine lmages-Fotolia . Third generation (3 C) uses digital signals <1nd can b·ansmit voice and data up to 384 Kbps when the device is moving at a walking pace. In addition. and instant "Akatel Lucent Shrinks Cell Phone 1bwer s/" ln(onuation\Veek. Second generation (2C) uses digital signals primarily for voice communication. Pe rhaps the m ost fund mn ent<1 l problem is that cell ubr companies in North America use two separa te technologies: Verizon and Sprint use Code D ivision M ultiple Access (CDI'vtA.fucent.' CNNMoney.ssed May II.). which is a wireless broadband cellular wdio standard . The technology has progressed through several stages. 2011. F'or instance.llllfEJ~iJI C II APTI. Web browsing. it provides data communica tion up to l 0 Kbps. In rural areas. som e ca rriers prohib it Soutt"eS: Compiled from D. In fact. 3C. T hird-generation cellu lar service does have disadvantages.a/catel. moving toward higher transmission speeds and richer features. so in urba n areas th e cubes ca n be deployed throughout th e city and sta cked in stadiums or oth er areas that need extra ca pacity. while C ingular and oth ers use G loba l System for Mobile Communica tions (CSM). F'or example. all from the sa me cube. Goldman. 128 Kbps when it is moving in an automobile. 3C is relatively expensive. (Sources: Image Source.5C uses digi ta l signals and provid es voice and data communic<>tion up to 144 Kbps. th e cubes contain mu ltigenerational antennas that ca n rela y 2C. acce. February 7. and M obile Commerce FIGURE 8. wu'l'lv. 201 1. Mob ile Computing. First generation (I C) cellular used analog signals and h<1d low band width (capacity).:R 8 Wireless. and 4C network signals (discussed next). Eac h I ightRadi o cube powers about" nvo-block radius. ~f'h e Tiny Cube nat Could Cut Y our Phone Bill. and up to 2 Mbps when it is in a fixed loca tion.

pineapple.2 \Vin. and tea). Cisco's actual transmission results were between 4. WiMAX has a wirel ess ccess ra nge of up to 31 miles. and social studies. Wi1V!AX J~lso hJS a data-transfer :1 rate of up to 75 Mbps. according to MFL University faculty members. th e ca rriers reserve th e righ t to cut off your service.SI :C'I'I() 1 H. villages relied on standard radio communication for Information. http://eng. It is a secure system. teachers and school children compile Information using the Internet as a research tool. . "WiMAX Changes Lives in Rural Thailand. 2009. The teachers are Initially trained on the basics of e-book publishing. University staff members are responsible for training teachers at the rural schools o n how to develop education al content In the form of e-books. In tact . as IT's About Business 8. Mfl University developed an educational program for the surrounding schools. much or this Information relates to agriculture and healthcare. compared to 300 feet for Wi-F'i.I/AX. English. U sing multiple w ireless data streams decreases the likelihood that data will be lost. If you go beyond the limits. A ccording to the MFL University staff. T he International Telecommunications Union has specified speed requirements for 4C: 100 J\1 lbps ( l 00 million bits per second) for high-mobility communi cations such as cars ancl Froehlich. thus using a current technology to Introduce a new medium to the villagers. Now. A 4C system is expected to provid e a secure a 11-IP (Intern et Protocol) based mobil e broadband system to all types of mobile devices. is th e nmne for II~ EE St:mdard 802.. After the WIMAX system was deployed. The network requirements were that Cisco provide a minimum of 3 Mbps (3 megabits per second. After several months of training. Sources: Compiled from A. 2011.2 shows. This content Is developed Into a script that Is read by announ cers at the rad io stations.mel l Cbps ( 1 billion bits per second ) for l ow-m obility comrmmicati ons snch <IS pedestrians. some or whom have never used a personal computer or the Internet. Provide specific examples of other advantages that WIMAX can deliver to the villagers. E-book content development has been highly successful. Before the WIMAX deployment. Not surprisingly. The ability of the various village schools to collaborate with one another using the WI MAX technology hns helped create a sense of community through out the region. "Thailand Needs to Make Urgent WIMAX Decision. WIMAX can be Implemented faster than wlre'llne solutions. or 3 m illion bits per second) upload and download throughput. The e-books are stored on a server farm (discussed In Technology Guide 3} located on the MFL University campus. the next challenge was to create useful content for students and the commun ities. this process has been huge ly successful.ntc. but also rural residents. Second. . May 2&-June 1. science. www. T he teachers then return to their respective schools and continue developing educational content. WIMAX clearly Is capable of handling mobile wireless data transmission at a very low total cost of ownership. An even larger challenge tor the project was to provide the Informatio n In the a-books to everyone elsa In the outlying villages (primarily farmers who grow rice. 16. The AAS employs multiple antennas to send and receive data. 2010. The technology can therefore provide long-distance broadband wireless access to rural areas and other locations that are not currently being served .5 Mbps and 5 Mbps. Pornwasin. coffee. popularly known :1 s Wir. J1ourth generatio11 (-IC) is sti ll uncler development and is not one d efined technology o r standard. What lessons can we learn from the WIMAX pro]act In northern Thailand? first. Rro:-~db:md or \\'i\1. using text and Images.mfu. \\ irdes~ [about business] 8.or. accessed April 19. \• Vil'viAX antennas can transmit broad band Internet connections to antennas on hom es and businesses miles away.\." Networl< Worfd.2 WiMAX Helps the People of Northern Thailand The Thailand National Telecommunications Commission (NTC) and Mae Fah Luang (MFL) University are deploying WIMAX to deliVer broadband communications to schools and villages In a rem ote region of northem Thailand. teachers can develop elaborate e-books w ith embedded voice and video using various software applications. 2. T he NTC and MFL University selected Cisco as the project's vendor because Cisco's Advanced Antenna System (AAS) provided Increased data transmission volume over greater distances than did Its competitors. many v illagers are learning to use computers and to access the Internet themselves for the first time In their Accordingly.~ Worldwid e lnteroperability for M icrowave Access. The project beneflt3 not only students and teachers through an a-learning program. lndlvldllal classes utilize the network to acquire e-book material created by all the" The Nation. and it offers features such as voice and video.. Questions 1.:lc~s Cun1pntc r Nt'hH•rks and lutc nH:t Acccs~ liEf!~~~~··· downloading or streaming audio or video. March 16. A. These e-books focus on core subJects such as math. Provide specific examples of the advantages of WIMAX compared to w lrellne communications.

As you saw at the beginn ing of the chapter. yon c~ n ~ cccss the Web. Experts estimate that within a few years about 70 percent of cell phon es in developed cou ntries will have Internet access. !vlobile computing has two 1mjor characteristics that differentiate it from other forms of computing: mobility and broad reach . uud Mo bile Connuncc before you go on. mobility and broad reach. a potential mass market is developing for m obile computing and m-commerce. Broad rew:!t refe" lu U'" f<~ cl lil<~l u'e" c"" yi11g '"' upe11 111uLile tlev ice ca11 Le reacl1etl iiiSl<ll 1lly. knowing a user's physical l ocation helps a company advertise its products and services (localizatioll). intra nets. health care. Further. m-commerce can be transacted via the Intern et.eli. Mobile Commerce In . T he developmen t of m-commerce is driven by the following factors: • Wicl.Fi. they are difficult or even impossible for people on the move to use. T h is innovation is revolution izing how people use computers. eve11 ac ross g reat distances. It is spreading at work and at hom e.3 Nlobile Cornputing and Mobile Con11nerce In the traditional computing environm ent. and in many oth er areas. especially '~a the Internet. By mid-20 11.1ddition to affecting om everyday lives. instan t conn ectivity. M-con1n1erce c re ates opportunities for busin esses to deliver n ew services to existing customers and to attract new custom ers. and ent ertainment. cell phones are spreading even more quickly in developing countries. and utili ty workers can be more effective if they can use IT while in the fi eld or in transit. more than 5 billion cell phones were in use throughout the world . T hus. To see how m-commerce applications are classified by in dustry.:1{ ~ Wireless. cellular service. see www.!1~1 1. m obile computing was designed for workers who travel outsid e the bound aries of th eir organizations as well as for anyo ne traveling outside h is or h er hom e. A company ca n customize information and send it to individual consumers os an SMS (perso/1alizatioll). What is B luetoot11? What is a WLAN? 2. T hu s.comput·ing <Jiso is tr~nsforming the W<1Y organizations conduct business byallo\~ng businesses and individuals to engage in m obile comm erce. Because these n etworks are lin ked by wires. 8. in education.llllf!!J~ : II C ll i\1''1'1. 1\lohilc Computing.~ce and other computing environm ents.m el oth er mobile devices quickly and easily.. and WiMAX. mobile commerce (or m -commerce) refers to e-commerce (EC) transactions that are conducted in a wireless en. the user's computer is conn ected with wires to other computers and to n etworks. . and localization of products and services. Fina lly. private comn1unication lines 1 smart cards 1 and othe r infrastructures. law enforcement agents. Recall that mobile computing refers to a rreal-time connection betwe en a m obile de. Describe Wi. These two characteristics. such as the Inte rnet or an intran et. without booting up a PC or ph1cing " call vin a m odem (corrrenierrce and instant con!lcclivity). Like regular EC applications. In particular.. as you will see next. [\I/ ability m eans that users carry a device with them and can initiate a real-time conta ct with oth er systems from wherever they happen to be. personalization. V v'ith an lnternet-ena bled m obile device.~ronment. Mobile com pu ting provides the founcbti on fo r m obi le comm erce (m-commerce).esf>read ciV<rilability of mobile devices. convenience. A m obile device can provide information and communi cation regardless of th e user's location (ubiquity).wirelessresellrch. salespeople. m obile. service employees. create fi ve valuc-J dclecl attributes that break th e barriers of geography and ti me: ubiquity. . repair people. as discussed earlier in this chapter.

l tion-bascd services and location-based appl ications. l'v[arketers can use this technology to integrate the current locations and preferen ces of m obile users.citibctnk.'Y. Mobile financial applications in clude banking. • The "cell f>lw uc cultme. weather. and WiMAX provide the neccss.Hily for Internet access can be less than $300.3 ~ luhilc Couoputiug "'"I ~l obilc Couomco ·c c ltE~~~fD' 1111 • No ueccl {or a PC. In many countries. finding info rmation such as navigation . that am ount is still a major expen se for th e vast majority of people in the world . vid eo. Location-based services provide information that is specifi c to a given location. intrabL1 siness applicatio ns. IT's About Business 8. For example. tracking objects such as packages and train boxca rs. which result from th e capabilities of va riou s technologies. \ppltc:ltton~ ·md Senwcs.l'i. Loc<1tion-based m obile commerce is ca lled location-based commerce or L-commeree. M-commerce B2C applic01 tions includ e loc. th ey do n ot need a PC to go online. Mobile Commerce Applications There are a large variety of m obile commerce applicati ons. traffic. especially among. young people.ocatJon-B:t\('<1 ii ~ F inanc ial Ser\'ice. and room sche dules. servi ce personnel. voice. fina nci. C P NI (w~+w. banks increasingly offer m obile access to financial and account information. season ticket holders with C hase-issu ed Visa credit a ccounts and Cingul ar wireless accounts can make contactless paym ents at concessions stands throughout the aren a using Nokia cell phon es enabled with n ear-field com munications. • • Decliniug prices. such as an ATtvl or a restaurant. . ma lis. an d multimedia . The main purpose for m obile finan cial applications is to m ake it m ore convenient for custom ers to transa ct business regardless of where they are or what tim e it is. and automating airport check-ins. Because users can access the Intern et via a sm artphon e or other wireless device.11 'Y l>a nd width. Harried custom ers are demanding su ch convenience. (2) receive alerts. for example. particularly in developin g countries. \ ¥ ireless carriers can provide location-based services such as locating taxis.Vireless paym ent systems transform m obile phones into secure. Even thong h th e cost of a PC used prim. scheduling Aeets. For example." The wiclespread use of cell phones is a social phenom enon. they can send user-specific advertising m essages concerning n ea rby sh ops.comlindex. m oney transfers. The nse of S MS and instant messaging has increased enormously in Jo:urop ean and Asian cotmtries. and bill-paym ent services. for example. Th e most popular appli cations in c lude l oc~l'ion-based applications. Mobile computing and m-commerce include many app lications.S I•:CT ION 8.otions and their effects on the ways people live and do business. C itibank (www. and restaurants t o consum ers' wireless devices.3 il lustrates how shopping malls are using location-based apps to attract the increasing number of people who shop online rather th an visit m alls. wireless payments and micropaym ents.mdwidth for transmitting text. how location-based advertising can m ake the marke ting process m ore productive. Wi. T hen.1l alerts custo mers on t heir digital cell phones a bout changes in the ir account information .php) allows people to transfer m oney instantly to individuals and to make paym ents to businesses anywh ere in the world w ith any wire line or m obil e phone. IJcllldll·idth iiii(Jrovel/oc ul. wireless wallets. You examine these applications and the ir impact on business activities in the next section . su ch as a warning of a traffic jam or an accident. In th e United Sbtes. l. a mobile user ca n (1) request the nearest business or ser vice. accessing in formation . and (3) find a friend . To prope rly condnct on-commerce. Consider. \. T he rest of this section examines th ese various applic. T he m embers of the "cell phone culture" will constitute a major force of online buyers on ce they begin to make and spend more money. yooo need sufficient b. and telem etry. doctors. and !'ental e quipment. self-contained purchasing tools capable of instantly authorizing paym ents over the cellular network. targeting advertising. At Atlanta's Philips Arena. 3C c:ellubo· technoloE. T he price of wireless devices is declining and will continue to decline.cpni·inc.

Byron.'' Forbes. 2009. uud Mo bile Connuncc G [about business] 8. Mall apps are emergin g at a time when the malls face a huge challenge.slmon. but they are growing rapidly. Sources: Compiled from K. they Increased by more than 10 percent In 2010.e signed up to offer shoppers' revvards through the app. mall apps do little more than help shoppers remember where they parked and provide store directories and movie times.l When You Sell. E. Consequently.3 Location-Based Services at Shopping Malls The Simon Group also Is developing Its own app to offer group discounts. a nd Other Retail Resolutio ns.1 0) are called micropayme11ls. C ustom ers wave the phone with in an inch o r two of a radio-frequ ency rea der. Online sales still account for just a fraction of overall retail sales. and find sales and special discounts. People also can use this information to authenticate transactions by signing them digitally. 2011 . "Malls Test Apps to Aid Shoppers. which Is free and Is accessible via the IPhone as well as Android devices. December 31. Tl1e rapid growth of online retail shopping Is tl1reatenlng shopping malls. " Don't Be E. iTunes).• The Wall Stlllet Journal. Mall retailers would participate In the app. "A Rewarding Ute Through Apps..k's s horrAr-rAw~rrls Questions 1. Including Target and American Eagle Outfitters. Octo ber 1. T his process sp eeds up customer flow and frees up workers to help oth er custom ers. Such small purchase amounts (gen erally less th an $ . March 3. Passport. As an example. you could usc your cell phon e to pay the taxi driver. Various compan ies offer m obile wa llet technologies that enable cardholders to make purchases with a single click from their m obile d e\~ces. April 25.byke. accessed April 28.shopkick. The user can redeem 875 points for a $25 gift certificate from any of the retailers. Some apps also o ffer reward points for visiting certain stores. . as you saw in the chapter opening case. Increased by only 3. Hudson. T his application securely stores informa tion such as credit card numbers in the customer's Nokia phone for use in m aking m obile paym ents.37 trillion dollars. Transaction costs will be small only when the volume of transactions is large. 2. without the need for a PIN or a signah1re. The bcttom line? It remains to be seen whether mobile apps w ill help slow the decline In the number of mall shoppers. sales at brick-and-mortar stores. Are the advantages of the mall apps discu ssed In this case enough to entice you to go to a mall? Why or why not? Support your answer. And if you took a taxi rid e in Fr:mkfurt. 2011. ''The Green Side of Online Shopping. for use in a wireless en vironmen t." The Wall Stmet Journal. 7 percent In 2011 to $2. excluding gasoline and vehicles. The growth of relatively inexpensive digital content such as music (for example. however. 1\lohilc Computing.:1{ ~ Wireless. 2010.llllffiiD•II C ll i\1''1'1. www. and they are expected to Increase at a compound annual rate of 1o percent through 2015." The Wall Street Journal.corn. Morphy. Ultimately. The company would like the app to emulate Groupon (discussed In C hapter 9). Forbes. In tact. credit cm-ds :1 re an inefficient way to make very small purchases. reaching a total of $176 billion. April 26. Because credit card com- p:mics sometimes charge fees on transactions. O ne technology th at can in crease th e volume of transactions is wireless m obile wall ets. Currently. hav. The mall Industry does not expect these efforts to entirely prevent malls from losing m ore shoppers to online retailers. A Shopkick user obtains 60 to 160 Shopklck reward points on average for visiting a participating store. Fowler. The Simon Group and several retailers. E. However. Mccrosoft also offers a m obile wa llet. Cermany. Shopklck Is one of the leading mobile apps for shopping. l'.com. consider the Simon Property Group. and downloadable games is increasing the use of m icropaym ents as merchants seek to avoid paying credit card fees on small h·ansactions. G. Identity two specific benefits t hat you would add to mall apps to make th em functional enough to attract shoppers to the mall. the success of micropaym ent applications will depen d on the costs of the transactions. malls are experimenting with mobile applications to help consumers navigate their stores and parking lots. The company's CEO envisions the app as a loyalty program coupled with an offer program for the mall environment. 2010. 2011. O ne example is th e Nokia wallet. with more than 1 m illion users. however. " In-Sto re Sales Begin at Ho me. the nation's biggest mall owner. ThA Simon Grour offAl'!': Shorklr. they view the apps as vital at a time when shoppers Increasingly ccnsult mobile devices to plan their shopping excursions. ring tones. By contrast. •vww. E. Web shoppers h istorically have preferred to pay with credit cards. arr In about half of Its 338 properties..

.com). Ya hoo. that is being utilized at UPS. "\Vhafs Deep Inside Bi g BrO"'. maintain trucks more effectively.n ts frn n1 spP. buy lottery t ickets and airline ti ckets. UPS employs global positioning systems to obta in dat a on n1nre.:CTI ON 8. utilities (gas. they change a starter based on th e number of starts ratlher than every two yea rs regardless of use. and security (patrols. T hat is. telem. A p hone number conn ects you to a 'Neb s ite. Some traditional portals. \n·e~~~n~ lnfunn:ltion Mobile portals and voice port als are designed to aggregate and de liver content in a form that will work within the limited space available on m o bile devices. improve safety.lsingly :1re becoming an integra l part of workAow applic.. Finally.~ tions. th. doctors. primarily in Japan. The following example illustrates an exciting intrabusiness application. Voice portals are not \ 'Veb sites in the n ormal sense because they can also be accessed through a standard phone or a cell phone. T h erefore.S I. where you C<lll l'equest information verbally. ·n. Major players in Europe are Vodafone." fnfOnnationW"eek.'chanics J . Altho ugh business-to-consum er (B2C) m-comm erce gets considerable publicity. Smart Pay allows users to use th eir m obile ph ones to l"' Ytheir ph one bills and utility bills. . conl1 munity services. and reduce th e en vironm ental impact.~e~~. 2010~ C. centralized source of information for all these transactions. UPS launched a m ajo r program in 2009 to capture m ore data and better utilize them to cut fuel was a pioneer in adopting information technology. social services). The world's best-known m obile portal.ow make engi11e 1 ·epnirs based 011 actual vehicl e use r:1ther th an accord ing to set sc hedules. and MSN. accessed February 5. 1l1ese portals p rovide information anywlhere and anytime to users. "'UPS: Positioned forthe Long Haul. Telematics refers to the wireless communication of locatio n-based information and control m essages to and from vehicles and othe r mobile assets. to assign jobs to m obile employees. T hese ser- v ices include n eWS sports~ ~nd e-1nai1.i-m ode from NlT DoCoMo-has more than 40 mill ion subscribers. to nil pre:ss n re:_ It 1 a lso acquires data on se. The company has been using tele matics in its trucks for 20 years. an idling truck in fact burns one gallon of gas peJ h our and generates 20 percent m ore pollution than a truck running at 3-2 miles per hour. 20Cr9.for example. UPS has been able to reduce the ncedl for tr·u ck drivers to usc reverse gear by 25 percen t.n's Trucks.1n 200 e. 3 ~ luhilc Couoputiug ao1<l ~I obilc Couunc rcc lfE:. Sperling. The portal is designed to provide a convenien t. T he Sources: Compiled from E. that is. m ost of today's m-commerce applic-ations actually are used withi11 organiza tions. e company can literadly "re-create a driver's day. cargo d oors. companies can use nonvoice m obile services to ass:ist in dispatch functions. . and imp rove safety. lntr-thU\11ll">\ \pllht< phone waterL fi eld service (computer. In this section you will see how compani es u se m obile computing to support their employees.111 P. office equipment. healthcare (visiting nmses."' Forbes. A m obile portal aggregates and provides conten t and services for m obile users. AOL. and taxis). rvt urphy. and stock trading.1tics. oil. 1 Example UPS (www. and Internet-based paym e nt services for consumers." By analyzing these data . UPS then combi nes these cbta with mapping soflw:n·e to provide its mam1gers with a tool for modifying driver beh aviors in ways tbat cut costs. along with detailed information about the make oth er pm chases. h om e repair). telephon e. the reby dimi11ishing th e risk of accid ents. m t. Z009. January 17. entertainn1ent~ travel~ and restaurant infon11ati (see wmv. Target areas fo r m obile delive1 y and dispatch services include transportation (delivery of food .have m obile portals as Although this step might n ot sound significa nt. courier services. "»-·w· It cuJTently h as an IT budget of $ 1 b ill ion . For example. electricity. S martP< lY bunched 172. June 7.e:cl.~··· In C hina . UPS also has been ~blc to reduce idli11g by 15 minutes p er driver per day. 02. and T-Mobile. A voice portal is a Web site with an audio inte1face. Mobile devices incre. tow trucks.~t be lts.:n g in P 111P. a portal that centralizes the company's mobile. newspapers~ and cargo. to nnn1hP.l72. th e savings are substantial for both UPS and th e en vironment. ahrm installation). and reverse gears in transn1issions fron1 sensors located a II over the vehi cle.r o f sbrts.

onstar. con tacts. It enables call ers to inquire abo ut weathe has big ambitions for OnStar (www. Drivers also can call OnStar with q uestions abo ut warning lights that appear on their dashboards. "OnStar Wants to Turn Your C ar into a Smart phone. or iPo d touch . som e sites provide true interaction .com .~ce that allows users to e nter information via the Web and receive remind er c:dls. and the GM unit logs more than $ 1 billion per year 111 revenue. An e)(amp le of a voice portal is the voice-activated 51!travel-info rm ation lin e develo ped by Tellme. Most ai rlines provide re>1l-tim e informnti on on Aight status this way. hOwever. ~. OnStar has earned a reputation tor security and s afety. Ford. • If you lose your iPhone. For instance. a \~leb site that gives you access to your information . Any changes you make on m e. It also can unlock doors remotely and slow down cars If they have been stolen. 2. accessed April 19. Hyundal Motor has launched a sy5tem called Blue U nA· to compete with OnSt ar lo r safety and security features. F ind My iPhone is a part of is a rem inder and no tifi cation ~ automatically alerts an OnStar operato r when an air bag 1\ lohi lc C mnpnting. Questions 1.e-m ail. loca l restauwnts. has jumped ahead of GM In the market for In-car entertainment content. complete with Mandarin-speaking agents. so you can see th ese changes on all your other devices. www. techni cians can use telem etry to id entify m aintenance pro blem s in equipm ent. Fo r example . www. • . d rivers of many Ceneral !vl otors cars use the O nStar system (www. as you see in IT's About Business 8." Edmunds Inside Line. March 14-20. www. and calen dars wirelessly across a ll your de0ces. the re are two ways to see its approximate loca tion on a map: You can sign into m e. As ano ther exam OnStar provides a wide range of features to owners of GM are sto red in the cloud.onstar. "Hyundai Blue Link Tackles OnStar and Sync. .com from any computer. Find M y iPhon e provid es several very helpful telem etry functions. onslar. and Blue Link. doctors C'an m onito r patients and control m edica l equipm ent from a distan ce. GM has launched OnStar for Its vehicles 1 1:1 China as well. Its 5taff of 2. Sync. a service from Apple (www. The system can alert owners to most malfunctions In the vehicle and schedule repairs at a that synchronizes your e-mail.000 per month . This ser0 ce can even c:oll a g ro up of people to n otify them of a meeting or confere nce call. More than 4 millio n of these users pay an average of $240 per year. Further. Ford's Sync system plays mus ic on voice command and even reads tweets to drivers.from one place on the \ ¥eb. MobileMe assigns you an add ress on m e. Fo r example. and other handy information. www. or you can use the Find My iPhone app on another iPhonc. An interesting telemetry appl ication for individuals is an iPh one app ca ll ed Find 1\il y iP/wne. photos. Tdl'mdn \ppltc:ttious." Bloomberg Businessweek. Ca r m anufacturers use telemetry applications fo r remote veh icle diagnosis and preventive m aintenance. thanks to features that alert pollee II a connected car I s stol&n or Involved In an accident. [about business] 8.aspx.iping. Explain why OnSta r. In addition to retrieving in fo rmation . T elem etry has num erou s mo bil e co mputing appl icatio ns. and fil es. hyundaiusacomlblueHnkfindex. current twffic. iPad . In add Ilion. contacts. January 5. Add In the mobile-phone mlnu·tes from Ve~zon t11at OnStar resells. The company wants to expand the communications service by Increasing the number or GM car owners who continue to s ubscribe after their free six mo ntns of service ends.200 agents answers 99. The subscriber base reached 200. Sources: Compiled from D. translates it into a computer-gen erated voice reply. Welch.000 In February 2011. and I s growing by 40. with 6 million users.7 percent of emergency calls within one second. calend Sync. 2011 .gm. Despite these Impressive Provide s pecific examples of the disadvantages of On Star. a nd Blue Link are telemet ry applications. ""'ll\'lu hilc Comnol'l'cc system finds th e info rmation .4 Your Car Becomes a Smartphone General Motors (www. 2011. 1 Cle mctry is th e wire less transmissio n an d receipt of dat a gath ered from rem o te sensors. OnStar Is the market leader.llllf!tf~jl C ll i\1' '1'1• :1 { !i Wireless. iPing (wwo v. GM may have waited too long to keep Its competitive and tells you what you want to in numerous ways.

the next five digits identify the manufacturer. is a world in which virtually every object h as processing power together with wireless or wired connections to a global network. or tampering with your settings. • If you h ave left your iPhone in a loca~tion th at you rem enn ber. an Internet-ready 3ppliance that C<111 be controlled by a small hand held de. If you left your iPhon e in a public place. Third. but not the actual item . You <::<111 control these linked systems through va rious devices. RFID was developed to replace barcodes. Barcodes have worked well. cellular phon e. ou r cell ph on es.4 l'ctvasivc ( :outputiug IIE~~~k!JII.S I•:CTION S. you can connect it to your computer and use iTunes to rest ore the data from your most recent ba c kup. Radio-Frequency Identification Radio-frequency identification (RF ID) technology allows manufacturers to attach tags with antennas and computer c hips to goods and then track th eir m ovem ent through radio signals. our c:IJ'S. which works well in a store but can pose substantial problem s in a manufacturing plant or a wa rehouse or o n a shipping/ receiving dock. the washing m<1ch ine. Describe mobile portals and voice portals . th ey can be ripped. Pervasive computing is invisibl c "everywhere COillJ>uting" that is embedded in the objects around us. if you eventLw lly find your iPhone. in " smart home. Two . And. the lights. You can rem otely set a four-digit passcode lock to prevent people from using your iPhon e. also called ubiquitom comp•iling. Two technol ogies provide th e infr<~stn1ctmc for pervasi\•e com puting: radio-frequency identification (RFlD) and wireless se11sor nehvorks (WSNs) . "Left my iPhon e. home computer. T he first digit identifies the item t)1)e. 4 . A typical barcode. hom e security syste m . and so on. Ust some of the major intrabusiness wireless applications. television.4 Pervasive Cmnputing Pervasive computing." Y our message appears on your iPhone. your hom e computer. but they have limitations. 3 . or iPocl touch and sign in to access all th e Find My iPhone features. you can write a message and display it on your iPhone's screen . they require line-of-sight to th e scanning device.l. accessing your personal inform ation. Describe wireless financial services.:~remote wipe (erase < tings. soiled. Seco nd.the Aoor. F'irst. ' l11 en .you can tell Find l\t1y iPhon e to play a sound thot overrides the volu m e or silent setting. because barcodes are printed on paper. O ne of the key elements of a smart hom e is the smart applia11ce. < md th e next five id entify the product. you may want to protect its contents.~ce or a desktop computer via a hom e network. PDA. If you have lost your iPhon e and do n ot have access to a computer . • • • before you go on. the barcod e identifi es the manufacturer and product. and m any appliances can communicate with one another via a h om e network. The last digit is a check digit for error detection. either wi rcline or wi1 ·cless.. Th e m essage might say. What are the major drivers of mobile computing? 2. i11clu ding your F •agcr. known as the Universcd Product Code (UPC).~ 1 . iPad. lll contents) to 1 ·cs torc your iPhone to its f. lighting and heating controls. Please call me at 301-55 5-1 211. or lost. if th e map shows that your iPhone is n earby-perhaps in your office under a pile of papers . For example.1cto1 y setYou ca n initi~1 te . television. 8. you can download the Find My iPhon e app to a friend's iPh on e. even if the screen is locked . is made up of 12 digits that are batched in various groups. and cve1 1 your autom obile. our clothes.

(Sources:© Patrick Duinkerke/ iStockphoto.7 Small RFID reader and RFID tag. battery-powered. and even Japanese chara cters.llllfiJ@~ · II C II APTI. th ey are m ore ex 1)ensive than passive RF'ID tags and ca n be read over greater distances. T he motes provide inforn1ation that enables a central computer to integrate reports of the same a cti. Eac h m ote contains processing. which contain data . and QRcodes.6 Barcodes. if one m ote fails. T h ere are two bas ic type. smoke and intruder alarms. a set of wireless communications protocols that target applications requiring low data-transmission rates and low power consumption .org). Also. [ts current focus is to wirelessly link sensors that are embedded into indusb·ial controls. T he chip in the RF'lD tag is programmed with information that Barcode uniquely id entifies an item. and M obile C ommerce systems are being developed to replace barcodes: Q R (for "quick response") codes and RF'lD systems. the network can muc h more accurately detem1ine infom1ation suc h as the direc tion in which a person is m oving. and they broad cast radi o waves to a read er. storage. Figure 8. the data are m oved m ote by m ote until they reach a central co mpute r. read able by dedi cated Q R rea ders and camera phones. Q R codes have several adva ntages over b< u codes: • • • • • Q R codes can store much m ore informati on than barcodes. and antennas to transmit radio signals over a short distance to RFID read ers. instea d o f every m ote transmitting its data to a rem ote co mputer at a base stati on. So. FIGURE 8.Yireless sensor networks (\VSNs) are ne tworks of inte rconnected. URLs.~ty from different angles within the network. Wireless Sensor Networks \. the weight of a vehicle. of RF ID tags : acti ve and pa ss ive .ZigBee. It the n relays those data to its n earest neighbor. Active RFID tags use inte rna 1 batteries for power. anoth er one can pi ck up the data. Figure 8.6 shows barcodes. FIGURE 8. RFID tags. (Source:© Ecken. if the network requires m ore band width . T his process ma kes \~ISNs very effic ient and reliabl e. so the possibili ty of a failure in rea ding a Q R code is reduced. A QR code is a two-dim ensional code.:R 8 Wireless. Q R codes. Data types stored in Q R codes include numbers. are used for m ore expensive items. O ne kind of wireless sensor network is ZigBee ("ww. and building and home automation.7 shows an RF ID read er and an RF'ID tag on a pallet. th erefore. Media Bakery) RFID systems use tags with embedded microchips. and radio-frequency senso rs and antennas. T hey are less expensive than acti ve tags and ca n be read onl y up to 20 fee t. The size of Q R codes is small because they store information horizontally and vertically. © raphotography/ iStockphoto. Acti ve tags. Dominique/ Keystone Pressedienst/Zuma Press) . wireless senso rs call ed motes (analogo us to n odes) that are pl aced into the phys ical environment. text. medical devices. Problem s with RF'ID in clud e expense and th e comparati vely large s ize of the tags. where they can be stored and analyzed. Q R codes can be read from any direction or angle. ZigBee can handle hundreds of devices at once. Mobile Computing. T he readers pass the data over a netwo rk to a computer for processing. and the amount of rainfall over a field of crops. It also contains information about the item suc h as its location and where and when it was mad e. Passive RFID t(lgs rely e ntirel y on read ers for th e ir power. An ad va ntage of a wireless senso r network is th at. and an RFID tag. Eac h m ote "wakes up" or activates for a frac ti on of a second when it has data to transmit. T he refore. T hey are ge nerally applied to less-expe nsive m erc handise. Q R codes are more resistant to damage than are barcodes. Because active tags co ntain batteri es. performance is easily boosted by plac ing new m otes when and where th ey are requ ired. T he m otes co ll ect data from man y points over an extended space .

To war drive or walk. ·n.5 dem onstrates h ow important protecting wireless nehvorks is at Brigham Young University. The intruder then ca n obtain a free Internet connection and possibly ga in access to important data and other resources. wireless systems can be difficult to secure. If th e signa l is strong enough.. 1111 before you go on.5 Wireless Security C learly. wheth er intentionally or unintentionally. If. interferes with your w ireless network transmissions. wa r driving. Eavesdroppi11g refers to efforts by un8uth orized users to nccess data traveling over wi reless n ctwork1. 2. In m ore serious cases the rogue is an "evi l twin. th en an unauthorize<l user might be abl e to intrude into the network. Define pervasive computing. a !though m eaning n o harm. IT's About Business 8. In an evil twin atta 2.wardriving. Which of these threats Is the most dangerous for a business? Which is the most dangerous for an individual? Support your information such as user names. Tedm ologyGuide 5 discusses various techniques and technologies that you sh ould implement to help you avoid these threats. namely.•S Wireless Sccmity lfE:. passwords. McDonald's and St:~ rbucks) than in corpora te networks.' someone who wishes to access a wireless n ehvork for malicious purposes. and RF jamming. a person or <1 device. @ n ' ' before you go on.::nsors embedded in th ese m eters wou ld send wireless sign. Finally.a device that detects wireless networks and provides information on them (see www.l~~ 1.ccmarywireless. eavesdropping. such as electricity. sets up an access point w ithout informing the IT depa rtment. There are four m ajor threats to wireless networks : rogue access points. They present a huge challe nge to management.ds th at cot1ld be picked up by utility employees driving by your 1. and b·ansmissions can be intercepted by anyone who is close en ough and has access to the appropriate equipment. Describe the four major threats to the security of wireless networks.~e ~!Jj~ . and account numbers. however. A rogue access point is an unauthorized access point to a wireless nehvork. in r<ldio·frequency (HF) . as the one that an authorized user would expect. Z igBee s. In other cases the attacker simply C<lptnres wireless transmissions. Th e rogue could be som eone in your organization who. T he employees would not even have to get out of their tru cks to read your m eter. or SS ID.ese attacks arc more effective with public hotspots (for example. wireless networks provid e numerous benefits for businesses. Using a hotspotter .1tion of Z igBee is reading utility m eters. As you see. . \\(n driving is the <let of!ocating WlANs while driving (or walking) around a city or elsewhere (see nMw. Provide two specific business uses of RFID tect1nology.Hawaii. and wireless sensor networks. The attacker then can serve the users a Web page asking them to provide confident. A promising appHc.the attacker simulates a wireless access point with th e same wireless n etwork name.. 8. WLAN hc1s a range that extends beyond the building in which it is located. users wil l connect to the attacker's system instead of th e real access point.SI•:C'I'ION H .e. the attacker is in the vicinity with a \~'i-Fi-enabled computer and a sepa rate connection to the Internet. Wireless is a broadcast m edium .ammi11g. RFID. their inherent lack of security. you simply need a Wi-Fi detector cmd a wirelessly enabled computer.

accessed May 5. and It provides virtual private networking for o ff-campus users. i\ lohilc Cmnpnti ng. the IT team now controls and differentiates access to the wireless network. expediting cycle time. discussed In Chapter 4. and other <lccotmting-related activities can be improved by use of wireless tech nologies. Are there privacy Issues associated with the Avenda system for users? If so. Electronic bill paym ent from m obile devices is becoming more popular. The IT team. e c. The challenge was finding the best strategy for deploying the new system w hile limiting service disruptions to the users. which consisted of only three people. 2011: WIVW.5 Protecting an Open Wireless Network at Brigham Young University-Hawaii system. As one s peclflc example. BYU-Hawall tried to use the Cisco Clean Access solution to authent icate networK u sers. Price managem en because this system works with both w ireless networKs and wired networKs. "W irel ess Network- Ing Case Study. any time). wireless electr onic paym ents." Base#ne Magazine. with the potential to increase sales dramatica lly. a process called least privilege (d lscussed In Chapter 4). and with no way to Identify users. including micropayments. increasing security and accuracy. All BYU-l-iawall students are required to sign an honor code of conduct prohibiting various activities. advertising. Call. The 2. 1 11d J \ 'luhilc CoJUHil'I'CC [about business] 8. to restrict access to campus resources. Aughenbau gh and J. IT For Me? and re ducing processing costs. the system provides access only to the systems necessary for that user to do his or her job. Sources: Complied! from M. provide specific examples. www.. For the Marketing Major Imagin e a whole new world of marketing. The team also is able to collect user information as well as details about network usage and the network's overall performance In only minutes. The team decided to add greater authentication (I. are more convenient (any place.e. users' activities on the network can be determined. What are the advantages of the Avenda system to the users? 2. inventory control. avendssys. With this Questions 1. 2011. anyon e could still connect to the network as a guest The IT team decided to use Avenda (www. T hey also expedite the fl ow of information for cost control. Being a Cisco customer. Such is the promise of m obile computing. however. The major problems with the system were that obviously anyone and any computer could connect to the networK. once a user Is Identified. What's l11 For the Finance Major \~ireless services ca n provide banks an d oth er finan cial institution s with a competitive advantage.500 students and 500 facuijy and staff at Brigham Young University-Hawaii use the universijy's open wireless campus network. as required by the Honor Code Office. For the Accounting Major Wireless applications help accountants count and aud it inventory. To address these Issues. reporting violators was almost Impossible. For example. As a result of Implementing the Avenda system. the team realized the Importance of Identifying users who were using network resources lnappropl1ately. April such as downloading Inappropriate m ateriaL But the IT team needed a way to Identify the offend lng student. had no way of knowing who was on the network or how the network was being utilized. and selling. and that the university was unable to capture Important Information about the wireless users who were accessing the campus network. Avenda automatically provides authorization privileges after a user Is That Is.•••EfE!~iJI C ll r\ I•'J'~t:l{ ~ \·\'irckss. as well as less expensive than traditional m eans of paym ent. Identifica- • tion) and authorization. O f special interest for marketing are location-based advertising as well as the n ew opporhmities .b. the IT team first had to authenticate the users. In addition.

and CD players.. wireless technology . ~.nnte:ncl wifh _ [ Sum ma ry ] 1.overcomes the limitations of microwave data relay stations. Wearable computers enable off -site employees and repair personnel woo-king in the field to service custom ers faster. This convenience provides exciting. An advantage of infrar ed is that it does not penetrate walls amd so does not inte rfere with other d evices in adjoining room s. Infrared light is red light that usu ally is not visible to human eyes.d r.m d control. m obile computing technologies can improve safety by providing qu icker wa rning signs and instant m essaging to isobted employees. But similar to microwaves. n ew applications for organizations to cut costs and improve the efficiency and effectiveness of operations (for example. This la ck of security is a serious problem that ivl I. Common applications of infrared light are in rem ote control un. and identify at least one advantage and one disadvantage of each type. anywh ere. A disadva ntage is tlh nt microwave lTansmissions are susceptible to environmental interfere nce during severe wea ther such as heavy rain or snowstorms. For the Production/Operations Management Major Wireless technologies offer many opportllnities to support m obil e employees of all kinds.S p e:rsnnnP. Finally. . Describe the four main types of wireless transmission media. DVDs.l mtl. One adv<rntage is that their en orm ous footprint. to achieve transparency in supply chains). VCRs.ts for televisions. and less expen sively. A disadvantage is that infrared signals can be easily blocked by furniture. as you saw earlier. better.S mmnary flfEJfll rcsnlti ng from pervasive computing and R F ID s. O ne advantage is th e high volum e. li ne-of~ight communi cation. Wireless devices also can increase productivity within factories by enhancin g communication and collaboration as well <IS m. creative. An advantage is that radio waves travel easily through n ormal office walls. Unfortunately. For the MIS Major MIS personnel provide the wireless infrastructure that en ables all organiza tional employees to compute and communicate any time. satellite transmissions are susceptible to environmental inte rferen ce during severe weather.]so provides new opportun iti es in snles force automati on (S F'A) . wireless devices ca n make it even m ore convenient for employees to select their own benefits and update their personal data. l ong-dist:mce. A disadvantage is that radio transmissions are susceptible to sn ooping by anyone who has similar equipment that op erates on the same frequen cy. Payroll n otices can be delivered as SMSs. Sate/liter lr<tnsmission syste ms m:rkc usc of communic<rtion sate ll ites. For the Human Resources Management Major Mobile computing can improve HR training and extend it to any place at any time. l"inally.magcri< rl pbu ming .the area of the ea rth's surface reac hed by a satellite's transmission . In addition . wireless applications are inh erently insecure. Radio transmission uses radio-wave frequencies to send data directly between transmitters and receivers. enabling f< rste r and better communications with both customers (C RM ) and corporate services. l\1/icrow< tve transmissio11 system s H e used for high-volu me. and they receive and transmit data via line-of-sight.

. i'vlesh networks use m ultiple \. wireless devices placed in the physica l environment to collect data from many points over an extended space. T he bottom line for mobile financial applications is to make it more conveni ent for custom ers to hansact business regardless of where th ey 'H e or what time it is. to assign jobs to mobile employees. \\'ide-area wireless networks connect users to th e Internet over geographically dispersed territory. a m obile user ca n ( 1) request the n e arest business or servic e.llllfE!~ :II C ll i\1''1'1•:1 { !i Wireless. Short-1 ·angc wireless networks include Bluetooth. Internet cafes. Define pervasive computing. and hom es. Wi-Fi provides fast :mel e. l11trctbusi11css applications coi1Sist of rn-com m ercc applications that are used witl1i11 orga niz. A business applica tion of u ltra-wid eband is the PLUS Real-Time L ocation System from Time Domain . along with detailed infonn ation about th e job. Ceflular telephones provide two-way radio communications over a cellular n etwork of base stations with seamless h andoffs. Comp.1nies c an use n o nvoice n1olbile services to assist in dispa tc h func- tion s. and bill-payment services.. hotels. (2) receive alerts. ma lls. Mobile fimmcial ap(Jiicalions in clude banking. describe two technologies that underlie this technology. offices. T h en . wireless wallets. Using PLU S. an organization ca n locate mu ltiple people and assets simultaneotasly. conferen ce centers. such as a wa rning of a traffic jam or accid en t. RFID is th e term for technologies that use radio waves to automatica lly id entify the location of individual items equipped with tags that contain embedd ed mic rochips. ""'ll\'lu hilc Comnol'l'cc 2. m e dium-range. wire less payments and micropa)'l'nen\3. "everywh ere" contputing that is embedde d in the objects around us. Discuss the five major m-commerce applications. su ch as an ATM or restaurant.Vi-Fi access poi nts to create a wide area n etwork that can be quite litated by mobile portals ami voice portals design ed to aggregate and deliver content in a form that will wo rk within the lim ited space ava ilable on mobi le devices. WSNs are n etworks of interconn ected. Two technologies provid e th e infrastmcture for pervasive co mputing: radiofrequency identifoccttion (RFID) and wireless sensor nehvorks (WSNs). short-range wireless networks have a range of 100 feet Ol' less. and longrange n e tworks. and (3) find a fri end . 3.. and explain h ow businesses can use at least one t ech nology employed by each type of n etwork. m on ey transfers. Accessing ill{ ormation is f. These port< ds provide information to users anywh ere and anytime. \ Vith location-based advertising. WiMAX can provide long-distan ce broadband wirel ess access to rural areas and ren1ote business locations.:~ tions. universities. th ey c'm send user-specific ach·ertising m essages about nearby shops. Company technicims can L ISe tel~metry to id entif}' rmin tenance problems in eqLlipm~nt. /Vlcdirnn-range wireless networks includ e Wireless Fid elity (Wi-Fi) an d m esh networks. and provide a specific example of how each application can benefit a business. Telemetry is the wireless transmission and receipt of data gathered from rem ote sensors. and rcs t~mr:m ts to wireless devices. For example.1sy lntem et or intra net broa db~md access from pu blic hotspots locat ed at airports. Pervasive computing is e current locati on• and preferen ces of m obile users. ~mel near-field communica tions. u ltra-wideb:md. Disc uss the basic purposes of s hort-range. battery-powered. Th ey include cellular tel eph ones and wirel ess broadban d. In general. V\'ireless broadband (\~liMAX) h as a wireless access range of up to 31 miles and a data-transfer rate of up to 75 JV!bps. and provide at leas t one example of how a business can utilize each one. that is. Location-based sen•ices provide inform ation specifi c to a location . Short-range wireless networks simplify th e task of connecting on e device to another. marketers can integr a!. eliminating wires and enabling u sers to move around while they use the devices. Car manufa cturers use telem etry applications for re m ote vehicle diagnosis and preventive n1aintenance. 4. 1\lohi lc Cmnpnting.

m obile wallet A technology that allows users to make purchases with a single dick from their mobile devices. w it h examples. [ Chapte r Glossa ry ] Bluctooth C hip tec hnology that enables short-mnge conn ection (data and voice) between wireless devices. propagation dcby Any delay in communications due to sig1 gh a pl1ysica I medium. location.Jtions over a cellular network o f ba~e stations with seam less handoffs. battery-powered. design ed to be embedded in mobi~e devices such as cell p hon es and credit cards. near. . and ra cli o-frequ en cy jamming. Wireless Fidelity (Wi-Fi) A set of standards for wireless local area networks based on the IEEE 802. F:avesdro(Jping refers to e fforts by 1111< access dahl trave ling over wireless ne tworks. g lobal positio ning S)'Stem (CPS) A wireless system th at uses satellites to enable users to determin e their position anywhere on earth.-commerce) Mobile commerce tnnsactions targeted to individuals in specifi c locations. and expla in. mobile portal A portal that aggregates and provides content and sel'l~ces for mobile users. m esh neh1• ork A net work composed of motes in the physical em~ronment that "wake up" at interval s to transmit data t o th e ir nearest neighbor m ote. wireless access po int An antenna connecting a mobile device to a wired local area network.ary lfE:. wireless local area network (VVLAN) A computer network in a limited geographical area that uses wireless transmission for con1n1unicatimn .11 standard. m obile commerce (m -commerce) Electronic commerce tra nsactions thah1 re conducted with a mobile de. ubiquitous con1puting (see pervasive co1nputing) for high-volume. long-distance. eavesdropping. whet her intention ally or uninten tiona lly. satellite transmission A wireless transmission system that uses satell ites for broadcast com muni cations. microll~ll'e transmission A wireless system that uses microwaves processing power toget her with wireless or wired connections to a globa I n etwork. wireless Telecommunications in wh ich electromagnetic W3Ves carry the signa l between communicating d e. wireless sensor s placed in th e physical e nviro nn1 ent. a personal computer to a television . wa r d ri ving. infrared A type of wireless transmission that uses red light not usually visible to human eyes. voice portal A Web site with an audio interfa ce. Th e four major thre:1ts to wireless n etworks are rogue :1ccess points. nal tr ansmission time thro1 raclio·frequency idcntitic:~tion (R FID) teciJnology A wireless technology that allows manubcturers to attac h tags with antennas and computer chips to goods and then tra ck their movement thrm o gh radio signals. say. telem eh)' T he wireless transmission and receipt of data gathered from rem ote sensors. near C O-qua lity music to yom radio from satellites.~e ~~QD • 1111 5.based commerce (l. how each one can damage a business. A rogue access point is an unauthori zed access point to a wireless n etwork.ANs while driving 1lll'horized \lscrs to around a city or el sewhere. p ersonal area nehvork (PAN) A computer n etwork used for communica tion among computer devices close to one person .~ce. interferes with wireless n etwork transn1issions. ultra-wideband (U'IVB) A high-bandwidth wireless technology with transmission speeds in excess of 100 Mbps that can be used for applications such as streaming multimedia from . pervasive computing (also called ubiquitous computing) A computer en vironment where 1~rtually every object has wireless sensor netwmks (\VSN) Networks of interconnected. Identify t h e fou r major t h reats to w ireless networks. War driving is the act of locating Wl.C haptco · Clos. cellular telephones (also called cell phones) Phones that provide two-way radio communic.~ces. m obile computing A real-time connection between a m ob ile device and other computing environmen trs. h otspo t A sma ll geogr:~phical perimeter within which a wireless access point provid es service to a number of users. radio transmission Uses radio-w:we frequen cies to send dab directly between transmitters and receivers. satellite radio (also called digital radio) A wire less system that beams uninterrupted. HCidio·frequellcy jC1m111ing occurs when a person or a device. at specific times.fie ld communications (N FC) The sma IIest of the shortrange wi reless networks. point-to-point communication. such as the lntemet or an intra n et.

Discuss the ways in which Wi-Fi is used to support mobile computing :~ nclm-commerce. Access www. and explain how they are enh anced by Bluctooth tec hnology. \~fhich of the app lica ti ons of pervasive computing d o you think a re likely to gain the greatest m arket a cceptance over the next few years? \~~1y? [ Pr o ble m -Solving Activitie s ] 1. Discuss how m obil e computing can solve som e of the problems of the digital divide. appliances. 3 .packetvideo. i llllosglspulpublicatiom/iutcmcto{thi ugsl lntemeto{f'hings_ swnmary.inf and www. (Start at www. Prepare a report on th e status of 3C and 4C based on your findings.~ des to individual em owners? (Play the m ovie. Browse the Web and develop five potential 111cw <lpplic~ltions for RFID technology not listed in this c hapter.1's softwa re and hardware supports. travel and tra nsportation. 2. Vlhat capabilities and applications do these vendors offer? 2 .n<tsa. Each team should explore the comme rcial applications of m-commerce in one of the following Jreas: fina ncial services.4g. C liC"k on Map Info Professiona·~(~tll C II AI)Tit:l( ~ \·\ 'irckss. Motorola. Enter lHHv.bevocal. Research the resulting stories to determine the types of wireless capabilities and applica tions that 1Bl\. and so on) .( 10. Enter WlVw. rcf. cars. Discuss the pros and cons of lac-a tion-based tools. then cl ick on the Resources tab. 9 . However. or other consumer goods like clothing. Investigate commercial applications o f voice portals. aud J\'lubilc Co1HIIIl'I'(.com. public . tty to detem1ine wheth er there are any commercial 'Wi-Fi hotspots in your are<1. including banking.•e of which is to convince th e rest of the class that on e sh ould buy that company's products. Prepare a summ ary of the types of m obile ser~ces and applications Nokia currently supports and plans to support in th e future. List three to four 11111jor aclwntnges of wireless commerce to consum ers. Also.) 12. how wireless devices can h e lp people with disabilities. What issu es wou ld arise if a country's laws mandated that such de. BlackBeny. and so on).itu. 7. and insurance. Discuss both sides of the mgum ent. Others the objecti. Access www.wifinder. What is it? \• essary to snpport it? \Vhy is it important? !. then go to http://www. 8 .nokia.!have each team investigate how embedd ed microprocessors are currently being used and w ill be used in the future to support consum er-centric sen~ces. 9 . \·Vhat types of fl. stocks. neigps._ fwtspot-locations.. Describe the ways in which Wi-Fi affeC"ts tbe use of cellular phones form-commerce. Read about the Internet Vha t types of technologies are n ecof1l1ings. Som e experts say tlhat W i-Fi is winning th e battle with 3C cclhil.g. Each team will present a report to th e class based on their findings. Discus. . m anufacturing. Each te<1m will present a report to the class based on th eir T ry all the demos. Apple. som e people see location-lx1 sed too ls as :1n invasion of privacy.bluet·ooth.. B.ssc. lnvestig" te commercial uses of C PS. Using a sea rch engine.~ces be embedd ed in everyon e's body as a n<1tional identifi cation system ? 4. and explain what ben efits they provide to consun1ers..itu. En ter Pitney Bowes Business Insight (www. (H int: Access 6 . Present two of these products to the class. 7 . Each team will resea rch the capabilities <1nd prices of the d e~ces offered by each company and then make a class presentation. Research the statu s of 3C and 4C cellular service by visiting '"~w. Search for wireless e-business. 4 .htm . D escribe som e of the ways these applications have he lped specific businesses and industries. Visit several vendors ( 3. Exa mine th e dem os and products.tellme. Explore 1nvw.) ch eck www.1 lthcare for the elderly. Summarize your For one of the foll owing areas-homes. then on the Dem os tab. S t11rt with http:!! 6 . marketing and advertising. 5. and support each one. Exa mine the type~ of products being enhanced with Bluetooth technology. human resources managemen t. Examine how n ew data capture devices such as RF ID tags help organizations accurately identify and segm ent th eir customers for a ctivities such as targete d marketing.C [ Di scussio n Q uesti o ns ] 1.i iwire. Ca n some of the consumer-oriented products be used in indnshy? Prepm·c a report on your find ings. Discuss how m-commerce can expnnd the reac h of e-business. E nter w11w . Each team sho uld examin e a m<1jor ''endor of m obile devices ( Nokia.· service. and healthcare.eet services does OnStar pro~ de? Are these any different from the services O n Star pro.pdf.onstar:com. i\ lohill: C(nnpnting. an d list their C"apabilities. [ Te am A ssignments ] 1. ) 3 . Look for the location-based services dem os. 2 .ttp:lh4. You can use location-based tools to help you find your car or the closest gas station. D iscuss the benefits of telem etry in he.

In addition.) Unfortunately.nrom. I lome Depot spent $350 million on mformation technology.~tt Dol~•. \\'almart.lntcractiv<' C.rtll-{>h<me. l n 2007.. lo "Thke Off for liolida)>.c: D . \oww. \\hich amounted to one-third of the compJny's total capital expend•tures. 201 The IT Solution During fiscal year 2010. "'Home Depot's Fix-It Lady. lltwW<'<k. "Home Depot's Mobile Site Could & BeHer. Home Depot's IT initiatives co u ld be complica ted by the prefe rence of most olde r co ntrac tors and do-i t-yourse lf homeowners to buy in perso n at a sto re. the company cl to improve its site to capture th e attention of the numerous h:1 customers who browse online before they go to the store.. . Z. These devices not only act as a phone." ln/imnalionWcrl.. Soult'£'!i'. The company spent $60 m1llion to buy 40. This arrangement hurt both sales and service.·e in-store technology. Unti l 2010. stores mstalled contactless scanners for re." Mobile Comm.~ . and you ·n prepare a summary report for Ruby's managers.a. Compiled fron1 C. 2011. Sheil~ ""8onk of Americ:1. Ques ti on s I Provide two specific reasons why Home Depot felt it nec. with its credit ca rd reade r..1)11\<'tlb. B l .·ement and home construction matters. often "ith de.el. Visa Pilot Mobile 1'. November 10.. P. I lom e Depot recognizes that the company has to serve customers th e way th ey wa nt to be served. !lome Depot also launched a bloggingsite on its Website where employees answer customer questions on a II hom e impro. C. Augu>l B. the company's Web site was unattractive. using compu ters powered by motorboat batteries and rolled around stores on bulk-y carts.. 2010. -Homo ()q>ol App Tales Mobile Commen-e on the Job.v..mel other stores fi·om any loca tion on the floor. ac~ Febmary 12..)ont"'')" 19. [ Interactive Case ] D e v e loping Wireless Solutions for Ruby's Club Co to th e Ruby's C lub link at the Sh1dent Companion web site or WileyPLUS for information about your curren t internship assignment. Further. Home Depot still did not offer customers the option to order online and pick up merchandise in stores. Tsin1lnik. A. 2010. T•q. E. difficult to navigate.S. the device becomes a mobile cash register. inve ntory in their own store . Toda y. "hen Home Depot employees processed spec1al orders for customers. Home Depot did not have the infom1ation systems to enable this change in co11:>0rate strategy. over the long run.. That is.. handheld dev1ces. January 17-Ja nuary 23.ry to deploy wireless fu. November 23. (In 2010. • The Results It is too soo n to predict the results o f these new pol icies. 201 -. Besl Buy. com). 2010. the company's U. as Lowe's (.1se onhne transactions. December 7. Inventory tums-<1 measure of how well a retailer turns goods into sales-began to i11crcase. •Mobile Shoppin..homtdtpot. the company had to modernize its informa tion systems to impro. 20ll . employees stocked she lves as th ey had for 15 yea rs." Mobile Commrrce Daily. Therefore. llomo Depol.lo-.·vdopi ng \\'i rdcss Solutions for lluhy'~ C lub IIE~~·u'llll [ Closing Ca se A Mobile Application f or Hom e Depot ] The Bus iness Problem llome Depot (www. IT was an afterthought at Home Depot fo r yea rs because the compan y's primary emphasis was ope ning new stores. However. I lome Depot has more than 2.' lnfOnnationWcrl.ices they cany in the1r pockets or handbags.1ted information systems. Burritt.. customers will become much m ore comfortable using their sma rtphones on a real-time basis outside or inside the store. the company feels that. One of the new IT applications invol'"ed mob1lity. 2010: T. already did. ""Home Depot Adds Commerce Functionalily to App in ·nme for llolid•)•..5 percent of Home Depot's total sales.ndheld devices. Home Depot"s biggest competitor. Another component of Home Depot"s new strategy was to attract younger customers who are accustomed to shopping onlme. howe1•er..plam." 11-. :! Identify two potential disadV<lntages of deploying wireless handhelds at I lome Depot.i.1dmg credit card information on customers' smartphones. . T herefore./owes. called '"First Phones. E.rom.\la~ttrlnJI Btog.homedepol.~ke shifted the company's focus to increas ing profits from existing stores.n to replace the old instore computers.. they had to rely on outd. " liome Depot'• $6-1 Million Mobile hwe~lmcnl Rolls Oul to 1. You will investiga te applications of wireless computing that will enhance Ruby's customer experi{"nce..' Bloomberg Bu~.000 2010. and did not provide fo r a seamless shopping experience. Interestingly. which ended on January 30. online transactions amounted to roughly 1. Mobil• llt!d/rrrt. Blair. Further. April 5. the world's largest retai ler of home improvement and cons truction products and se rvices.lny. associe1tcs c~m c heck . "Raing Retailers' iPhone ApP£ Am:uon.000 • ·eta il outlets. lOll.e 8ig fut. First Phones enable Home Depot associates to manage 111\"Cntory and help customers find prO<Iucts. as part of a broader upgrade of its checkout S}~tems." . In fact.970 Stores. Frank Blake became llomc Depot's new CEO.. "''· ac~ f"tbrua')· II.. Further. the company wanted to mcre. but they replace W<11kie-talkies. has been lagging in information tec hnology. In early 2011.

Chapter Web 2.0 and Social Networks .

9 \-\~b 2..\PTER OUTLINE ] [ WEB RESO URCES] Describe the differences between Web 1. MKT 7 POM Oblaln customer lnputlnnew FIN Colaborate with external financial expens HR Entire range of recrultfng activities M IS Provide IT Infrastructure for Web2.0 Convnunlcatlon with audit teams Stay closer to customers prod. and pr01ide at lenst one example of how each one can improve business efficiencr and profitability..g.( LEARNI"\G OBJECTIVES ] [ CH. 'I ldenti~r fi1·e prominent \\'eb 2./rainer • Student PowerPoints for note taking • Interactive Case: Ruby's Club Assignments • C o mplete glossmy \\'e b 2.0 and Web 2.0 sites. and explain the benefits of three information technologies used by Web 2.0 Unde rl)'ing Technologies Student Companion Site wile com/col•. and pro1·ide <lt least one example of how each one can be utilized in a business setting. • !VIini-lecture by author for each chapter section • Practice quizzes • Flash Cmds for vocabulary review • Additional "What's in IT for Me?" cases • \'ideo inten·iews with managers • Lab Manual for Microsoft O ffi ce 2010 • H01v-to Animations for t-. l icrosoft Office 2010 What'slnM T For ACCT e.0 Sites Wiley Plus All ofthc nbo1·c and • E-book Gs Discuss the three categories of \\'eb 2.0 applications.0 Applications Categories of\\'eb 2.lcts .0.0.

a spa could send out a deal on < because a custom er canceled. but only if a critical m ass of p eople agrees to buy th e deals that are e-mail ed to th em each day.:1{ ') Wch 2. . an d (3) C roupon receives a share of the revenues generated by th e deals. without waiting to be featured as the deal of the day. and C roupon then promotes th eir deals vi<1 e-ma il. C roupon bbels the n ext phase of its business model hyperlocal. C roupon displays a list of deals from nea rby ). W hen T here is no upfi·o1 people visit a merchant's C roupon Store. a restaurant m ea l. a cooking class. P ut simply. The Solution T h e solution m ay lie in th e em erging <1rea of sodaI co mVLADC RIN/Shutterstock m erce. h owever. dental work. T his service features two choices: ''I'm hungry" and ''I'm bored. Participating merchants create C roupon stores. Croupon Stores lets businesses create and bunch their own deals whenever they want. demand beca m e so grcot that m erchants were w<1iling months for their de<1l to be feature<! on th e site. using blasts of discounts that were n ot precisely targeted . C roupon knows not just what you like but also w lw t deals m ight trigger your curios ity. E<1ch day.. JS illustrated by G ro upon (www. just as they would on Twitter. as rrequently as they want. matching supply 1 m assage aga inst demand to m aximize reve. TI1is process is c<1lled the Deal Feed." vVh en a Croupon subscribe r clicks the ''I'm hungry" button. and anything else that is wasted if it is n ot used imme diately. when he or she clicks ''I'm bored. T he discount could be up to 90 percent off on a car wash . G roupon claims that C roupon Now will enable sm all busin esses to becom e m ore like airlin es. th erefore. Much of that money is wasted. It also can integra te and popularize deals offered to various individua ls through social networking sites su ch as T witter and Facebook. (2) the m erchant is guaranteed additional business an d potential new customers. To solve this problem. an d sharing th is knowledge with their frien ds. and businesses receive 70 percent of e. C roupon's soda I comm erce mod el pays off in three ways: (I) T he subscriber gets a better price. or a gym could run several cl ays of coupons to fill the class of a new yoga instructor. is how t o m ake local adve rtis ing m ore efficient and effective for small businesses. Groupon offers its subscribers . G roupon selects the best d eals from C roupon Stores and m'1tches them with customers using C roupo n's proprietary person~1l ization technology. S imilarly. C roupon crea ted Crou pon S tores and the Deal F'e ed .0 ami Social Networks [From Social Networks to Social Commerce ] The Problem E very yea r com panies spen d .groupo11. the company can inform you directly of th ese deals via your cell phon e. Twitter.1111@~·~~~ · 11 C ll i\1' '1'1. 1t fee. T hus. labor hours. O ne objective of C roupon Now is to help eliminate perish able inventory -food products. Groupon calls the third phase of its business m odel Croupon Now.1bout $100 billi on annually on local advertising in the United States alone. because local com me rce is hig hly s<:gm ented and inefficien t. A small comp:111y canno t acquire custom ers or advert ise with th e efficiency of a brge chain th at has multiple locations in the same town . th e buoineoo limited itself to promoting one deal per day because it did not have any merchant relationships. Merchonts can therefore inform their followers about new deals or specia I offers. As Cmupon became more popular.1ch prom oted C roup0 1 1 sole. 'W h en C roupon launched its ope mtion." C roupon displays a list of local activiti es occurring nearby. Tli is phase involves knowing where su bscribers live < mel what th eir interests are.m ore than 70 million in Ma rch 20 ll and growing at a rate of 3 milli on per m onth -discoun ts on goods and services. For example. becoming familiar with their commercial experiences. or just about any product or service ava ilable in th e 500 cities an d 35 countries wh ere Groupon ope rates. T he problem . and Face book. The first phase of Groupon's business model connected local merch ants with local custom ers. they have the option to " follow" it.ues.

"' Entrepreneur."' CIO. In addition to competition. an d promotes prod ucts with special deals for the community's m t• : liE~~!] · !~ . T he company.. 63 percent replied that their C roupon deal was profitable. What We Learned from This Case Soci"l commerce is a type of elech·onic commerce (discussed in C hapter 7) that uses socia l media to assist in the online buying and selling of products and services. Y ou begin this chapter by discussing \~leb 2. Croupon is on traC"k to generate som e $3 bill ion in revenu e in 2011 . Y ou then w ill take a look at th ree widespre<1d categories of Web 2. . that she is going t o be a grandm other and probably will be shopping for baby products. A recent study surveyed 150 sm all to mid-size businesses that h ad used C roupon .'Orld. January 7." Compute.. called Coogle Offers. mnning a disC"ounted deal can attra ct so m any custom ers that the deal can actually cost them m oney. acces:sed Febmary 21. '"Croupon Nighh11ares (and HOVr· to Avoid Them).011 . 2011. for ex. C audin 1 "'Coogle K"'<pected to Buy or Eclipse Groupon. a dramntic increase from the $750 million it eamed in 2010. 2.1 explores this developed pla ns for ib own socitd co mmerce site. January 25. in contrast. com. Forbes.mel th eir custom ers. www. Forl>es.. E.artyour 0\. For example. 2. l'-1~w. Social commerce taps into a communi ty of enthu siasts. more tha n 500 companies a round the world offer simibr services. "'Croupon Coupons: The Small-Biz Ch<JIIenge. Coogle prom ptly became a competitor . K..•••• The Results Croupon's business m odel hns been wildlysuccessful. C roupon realized that socia l n etworking technologies ca n provide a direct lin k between businesses . T he biggest advantage that social commerce en joys over traditional e-co mmerce. and even Coogle Search . Coogle Searc h ca1 1not anticipa te any one person's needs very well .010.livingsocial. because Am azon wanted a foothold in soci al commerce. 2011 . refer-a-friend programs. J. LivingSocial (www.0: More Deals and a Personal ized Feed." Forbes. en~b ling compa nies to bring exciting n ew products to the nna rket more effectively. O'Dell. m any enb·epreneurs have developed successful businesses on YouTube (www. an d Croupon tmned the offer down . which launched in 2008.unple. S. that person's friends would know. December 1.010. June 10. builds relationships.010. and time-sensitive offers. 2011. Anderson.. J'\.com . 'The Hbiol)• of C roupon. This investment enabled LivingSocial to develop a technology platform from which to expand its base of 10 million subscribers. Galante. Decembe r 10. f\• lacMill:m. C roupon has other problem s. L. Still an oth er advantage of social comm erce is tha t it analyzes rebtionships and inte ractions with in a social community. soci" l networking techno! ogies can help you st. reC"eived ~n infusion of $175 m illion from Ama zon in 2010. In fact. Today. January 7. or not h ave any customers sh ow up at all. Purewal.. F urther.0 technologies and applications in a variety of innovative ways. group prom otions. 2. B. 2. "'The Croupon Clippe r . the popular video-sharing socia I networking Web site. 'I 'he C0 111JXIllY h:1s about 6.0 technol ogies and applications. Sources: Comp iled from B.0 sites. February 21. gained l million subscribers within a year and went from zero to $500 million in soles wi thin 18 months.\11 business. As som e small businesses have le amed th e hard way. loya lty incentives.011. Saporito. they could be overwhelmed with customers. "Croupon 2. Burnham. «Are Four \ Vords \Vorth £.com). O f the respondents. when Coogle tried to purchase C roup on in December 2010 for $6 billion . m ostly because they did not know wh at to expect from each G roupon deal. S ignificantly. T h e opening case on Groupon dem onstrated how th e company uses social networking to b uild its social commerce business m odel. is the ability to predict buying habits !based on real-time information as opposed to historical dat< l . T hat is.000 employees a nd sends out more than 900 deals each day in 550 mtnkets. anticipal'cs needs.livingsocial. ITs About [Small] Busin= 9. 40 p ercent of the respon den ts asserted that they would not use Croupon aga in for their businesses. J. Socia l commerce focuses squarely on one-to-one relationsh ips.' Bloomberg BusinessWeek." Time. Social commerce efforts include sharea ble COl ipons. 2. December 6.25 Billion for C roupon?"' Bloomberg BusinessWed. 2011 . O rganizations today are using \ Veb 2. "Croupon Goes from Local to Hyperlocal with New Ad Campa ign. C roupon's sucC"ess has C"reated intense competition .'hlrch 17. wh ereas 32 percent found it unprofitable. C roupon's biggest rival. "Croupon Getting It Right. Stone and D. S. 2010.

the Food Network . As a result. "YouTube: Five Tips for Building Your YouTube. (We did n ot use th is term in Chapter 6 because there was no n eed to say "Web 1. plus the \ Veb sites that use them .com). you will be in a position to contribu te to your organization's policies on socb l network use while at work. They were on the verge oj achieving that goal In 2008 when the CW television network canceled their variety show after only four ep isodes. and Web sites and the ways in w hich modern orga nizations use th em . Humphrey. 201O: T. although a popular term . Sources: Compiled from MI. In response. which owns YouTube. Access the article In Forbes. however. In 201o.0 is a loose collection of information technologies and applications.rfleffandllnk. ''On YouT ube. v ideo maKers hustle on multiple front s: They sell T-shirts and mugs to fans on their YouTube pages.000 views per day. Rhett McLaughlin and LinK Neal. the name of the company Is flashed at the end. BuslnessWeek. J." Provide examples o~ how McLaughlin and Neal have followed each tip. a nd musicians use videos to sell songs on ITunes and tickets for live performances. C laburn. According t o T im O' Reilly.mel rewards they can brin g to yom org•1n ization . For most participants. "YouTube: Five Tips for Building Your Own Video Career. What are the difficulties Involved In building your own brand on YouTube? Give specific examples of these difficulties. September 27-0ctober 3. and other brands have sponsored Rhett & Link videos. W he11 you complete th is ch ~pter. 2. Seven-Figure Views. Although the video generated more Interest than money.Jbe partners are contractually forbidden to disclose their ad earnings. Ribeiro." compurerwon!1. Cadillac. Users typically have minimal interacti on with Web July 29. Marcn s. 201 1. You also will be familiar with the ir ad vantages and disadvantages and the risks . Most of you probably already have pages on socic 1l networking sites. which Is entirely theirs. accessed April 2.• • •E@~ · ~(ijl C ll i\1 ''1'1• :1 { <) Wd> 2. was th e first generation of the \• Veb.) veb 1. 2010. applications.riJettandllnk. In addition to the sponsorship to sponsor them In maKing a music video-really an advertisement. they receive advertis ing Income from their designation as an official YouTube p artner (www. a noted b logger (see \\ The ads are sold by Google . First appeared in 1990. 2011 . As a resu lt. and by Own Video Career. "YouTube Acquires Naxt New NetworKS to Aid VICiao c reators.about a bean-bag tossing game.0 arena . the YouTube partner program does not provide enough money to survive on. Th ese \~leb sites enrich . the Web analytlcs company TubeMogul (www.1 Web 2. You also will be able to help yolll' organization design its own strategy for socia I netwo rking." 8/oomberr. Alka Seltzer.0 technologies .0 appeared.(1 and Social ctwo rks G about [small] business 9. products appear on released a study estimating that the top Independent video producers on YouTube earn more than $100.' Forbes. Partners receive a percentage of the advertising sales on their channel. WWiv. Web 2. wanted to be television stars. the comedians Known professionally as R/Jett & Link (www. according to TubeMogul.0 sites. Is their leadership in company sponsorships. so you are famili:rr with th e ben efi ts . Six-Figure Paychecks.comllptla/6228)." drawbacks of such sites. Web 1.0" until Web 2. www. com/partners).0. McDonald's. but McLaugh lin and Neal concede that they are no longer scramb ling for survl. Rhett & LinK videos averaged approximately 120.000 partners. What really sets the comedian s apart. T his ch ap ter will enable you to ap ply this knowledge to your organiza tion 's efforts in the Web 2.1 Making Money with YouTube Videos early 2011 YoulUbe had accepted about 10. It led to more work for ihe duo. 9.v al. Youl1. h as proved diffi cult to define . Since then. RhAII & I Ink rAr:AIVQ two strooms of inr:omA from Questions 1. In the summer of 2010. \ Veb 2. they passively receive information from those sites. They persuaded a toy company called AJJ Cornhole (www. whi ch you learned about in C hapter 6. Rhett & LinK created a business centered on YouTube Underlying Technologies T he World Wide Web.000 In annual advertising revenue alone. you will h:rve a thorough understanding of Web 2. In some Rhett & LinK videos. Rhett & LinK are m aKing money from their YouTube vid eos. 201 1. "YouTube Promises 15 Mlnutasof Fame. R<1ther. March 30. In other videos.0 were the creation of Web sites and the commercia lizaT he key developments of \l tion of the Web.oreilly net.aJjcornhole. F. Crea tors must apply to become partners.

netl rssltu. Users typically choose tags that are m eaningful to them .toria/. subscribers receive a notification of th e changes and an idea of what the new content contains. or a video clip.icio. O ne critical feature of del. O ne specific form of t<Jgging. T his system not only coll ects your links in one place. you like ly will come up with a ve1 y good se lection of related Web sources. such as rest:IL Hant or h otel ratings." and " C hevrolet. the Web site del. the users' experience is enriched because th ey can see pictures of attractions. AJAX AJAX is a \Veb development technique that enables portions of Web pages to reload with fresh data instead of requiring the entire \>Veb page to reloa d. 'l'c dmolo.interest in subscribing. You begin you r exploratio n of We b 2.~ews.0 sites m-e n ot so m~r ch on line p laces to visit as Web loc11tions that f:J cilitate information sharing. In addition. each person designs h is or h er own nrles.syndicS. For exa mple. J"i'o r example. and entertrinment news. the user's experience by encouraging user J><rrti cipation .com ). an d collaboration. wh ich are user-generated cb ssifications that u se tags to categorize and retrieve \>Veb pages. Instead .icio. sports news. Th at is. re.nmot. to maps. ll1is process speeds up response time and increases user satisfu ction. without having to surf thousands of We b sites.SIO:C'I'IO \1.1 illustrates h ow an RSS can be search ed and how R SS feeds ca n be located. Am ong th e most widely used tech nol ogies are AJAX.ics lfE~~u·i!JII.Osites. a picture.borati on. and other \• Veb content.icio. th e product of all those individu:r l decisions is well orga nized. an d really simple syn dication (RSS). or a place to store links that do not fit in a " Favorites" (http://del. rather than packaged software (for example. an article. social interaction. visit www·. is basically a t agging system . overlapping associations rather than in rigid categories. mas hups). when you want it. N evertheless.newsis{ree.icio. most ·browsers have b uilt-in RSS readers. all related to th e map location they are viewing. or any oth er conte nt. user-cente red provides a system for organizing n ot just individuals' information but the entire Web. Unlike Web l. Web services). vid eos. you need a news reader that displays RSS content feeds from \\feb sites you prO\~d es RSS feeds for each of its main topic areas. Examples are Amph eta Desk (www. several of them for free. if you conduct a scorch on del. As an example. Subscribers then can click on a link that will take them to the full text of the n ew content." Tagging is the basis of {olksonomies. a photo of a ca r might be tagged w ith "Corvette. Web 2. As one example." "sports Del. kn own as and Pluck ( for a ll the pages that are tagged with a particular word. Figure 9. Many such read ers are availa ble. pluck. Web 2. and co]k.. and feature remixable applications and data (for example . Therefore. \• Vh en ch anges to th e content are made. but it organizes them as well . . refers to tagging information on maps.disobey. You can find thousands of Web sites tlhat offer RSS feeds a t SyndicS (Mvw. RSS all ows anyone to syndicnte (publish) his or her blog. technology news. photos. Really Simple Syndication Really simple S)11clication (RSS) allows you to receive the information you want (customized information). CNN. NBC uses RSS feeds to allow viewers to down load the mos~ current version of sh ows such as M e€1 the Press and N BC's Nightly N ews. To use RSS.0 l!todt:rlyin!. deliver functionality as services. such as world n is that it has no rules governing how its users create and usc tags. Tagging A tag is a keyword or term that describes a piece of informa tion -for example. For an excellent RSS tutorial.icio. wikis). Tagging a llows users to place information in multiple. a blog. and things to do.0 sites often harn ess collective intelligence (for example. 1 Web 2. to anyone who Jilas '".com) and NewslsFree (»ww.0 information technologies.0 by examining t he vari ous Web 2. Coogle Maps :dlows u~ers to add pictures and infor111:1tion .

• Rk:e said folowtno 1 meetlno with L . "mine" the blogosphere to provid e information for their clients in several areas.. they help their clients find ways to serve potential m arkets.r to fal bed into rrortsm and anuctty.0 Applications Web 2.. open to the (now owned by Coogle). Used with ). these views are call ed consumer-gener<lted medi<t.. and Buzz Me trics (u~vw. Companies employ blogs in different ways. and RSS have made the Web more interactive and informative. wikis.. 'g!t'laf\ President Hamid Kai'Di.people who create and maintain blogs .JJ~1 1.1111~}~·!!:]11 C II APTI. in which the site creator expresses his o r her feelings or opinions via a se ries of chronological entries.0.. and "'"~v. Alghtnl:stbn has determined enemies et~d they 'e rumtess.o".. 2.) ~Ice flew to the Ru~n a. quick ~Ad h.s.2 Web 2. A.---'ll.pitfl Wednesday after i. Wl+w.xanga . such as M"''. .0 and Web 2 .eavily guarded where she sold thot the newly !mocr.2). convey news.'l Jft to . ranging from broad-based to niche m arkets.0 and Social Networks FIGURE 9. tagging. In this secti on. printing-on-demand. Explain how AJN<.com (see Figure 9 . . netcasting. 9. O thers open tl1emselves up to the public for input into tl1eir processes and products.Hic nation hes come too r.0 applications use some or all of the technologies you have just seen.sixapart. For example. Ma n y companies listen to consumers in th e blogosphere who express their views on the compani es' products. Some companies listen to tl1e blogosphere for marketing purposes. T he blogosphere is the term for the millions of blogs on tl1e 'Neb. T hese applications includ e blogs.:R ? Web 2.loe said.cym{ony.. (Courtesy of NPR. wtw• before you go on. e. and provide links to other articles and Web sites that are of interest to them . yo u will lea rn abo ut these applications and the various ways in whi ch business utilize th em .write stories.1 Natio nal Public R. and crowdsourcing. Two companies. Blogs and Blogging A weblog (blog for short) is a personal 'vVeb site.1dio's (N PR) Web site with RSS toolbar aggregato r and search function.. "TMy wiM not In tJnderminlng or rolli-19 bedt the o( the Afghan peo!* . Differentiate between Web 1. Bloggers .blogger. Cymfony (www. In m arketing.. The simplest method to create a blog is to sign up with a blogging service provider.

tions lfE:. Regard less of their va rious problem s. In fa ct. For example. This news caused Apple's stock price to drop by 4 percent in less th<m 20 minutes. How severe is this problem ? It is so widespread that Coogle Maps now provides a Web service that displays where layoffs are occurring at newspapers ac ross the United States (see http://papercuts." Dan Rather.2 Wch 2. they also ha ve shortcomings. In fact. breaking news to the public as fast as possible. blogs have transformed the ways in which people ga ther and consume retracted it. For exa mple. Bush's record of military service. or delete mate (a technology blog) reported that Apple's iPhone and OS X operating system were going to be dela yed . In turn. many company executives use Coogle's Corporate Blog to present th eir views on their industry and their organization. \Vhen this report was c hallenged. bloggers som etimes cut corners. unfortunately. such as the San Francisco Chronicle and the New York Times. \~likis have an "edit" link on each page that allows anyone to add. . Dan Rath er resigned from 60 Minutes. Anderson Cooper 360. Engadget. And erson Cooper. But in doi ng so. now use blogs to provide richer versions of the stories they cover. and their blogs ca n be inaccurate. decreasing readership has ca used advertisers to withdraw business from traditional newspapers. Bloggers soon after (correctl y) reported that th e documents used in this n ews story were falsified. and they gauge the potency of a marketing push or the popularity of a new product. in May 2007. and some ana lysts claim that this scand al eventually caused his dismissal from CBS News. many corporations maintain blogs. many reade rs ha ve canceled their newspaper subscripti ons and rely instead on free information from blogs and other online sources. Because of the bloggers' reports.2. Further. change. as you can see in IT's About Business 9. (Source: Fancy/Image) They also help the ir clients detect false rumors before these rumors appear in the mainstream media .graphicdesignr. Blogs ca n also inAuence public opinion . suc h as CNN.. Wikis A wiki is a \~leb site on which anyone can post material and make c hanges to already pos ted material.0 Applic. Pe rhaps the prima ry value ofblogs is their ability to bring current. fostering easy colla boration. appea ring on 60 Minutes. Blogs have become inAuential in the mainstream m edia as Alth ough blogs can be very useful.SECTI01 9. blogs have repla ced the mainstream m edia in northern Mexico. a CNN anchor. reported some suspect findings conceming President George \V. Ma ny traditional media companies. For example. Engadget.2 Community blogs or discussion boards are used in mainstream media . Without the bl oggers' input. edits and writes for CNN's Aagship blog. One exa mpl e of the power of blogg ing occurred during the 2004 election and came to be known as "Ratherga te.t<~iuQD•1111 FIGURE 9. this misrepresentation might not have surfuced publicly. This withdra wal has led to layoffs at many well-known newspapers.

and o ther digital music players. is assessed in several ways by outsid e groups.. August 14. He posts whatever he receives. wikis enable compa nies to collab orate w ith custom ers. and by analyzing th e strengths and weaknesses inherent in th e vVikipedia process. valuable reporting. acc urate and current. the largest wiki in existence.• The Daily Mail. 20 t 0. In other words. they learned which streets to avoid and where wounded shooting victims were being treated.s. }. for example. This process leads to question s ab ou t th e au thenticity of the conten t. technologies such as Apple's iPods. They saw photos of avenues blocKed by large trucks commandeered by the drug cartels.. There. howC\'Cr. combining the input of many individuals. su ch as gu idel ines and frequently <1skcd questions. shut down large parts of the city.•••I]J~d~•ll C lli\PTI. these media have effectively ceased to fUnCtiOn. 2010. consulate was urging people to stay Indoors and that M exican sold lers had arrested members o f the Zetas. \• V ikis also are valuable in knowledge managem en t. compa nies usc w ikis to keep enterprisew id e documen ts. and left at least 12 people dead and 21 Injured. They found. however. from a laptop he carries with him wherever he goes. local residents could obtain Information about these events by logging on to the Blog del Narco (www. he receives 70 to 100 anonymous e-malls.2 The Blog del Narco by a college student working anonymously someWhere In northern Mexico.g . What are the disadvantages o f the Blog del Narco? Sources: Compiled from A. Despite the blog's popui<Wlty. the July 17. In addition. More tha-~ 30 joomallsts have boon murdered or have gone mlssng since 2006. drawing abOUt 3 million hits per week. the fundamental question concerning \Vikipedia remains: How reliable and accurate are the articles? }. when traveling or exercising) T od:e y. evertheless. He describes himself as a computer science student at a university In northern Mexico. In many parts of Mexico. Campo-Flares.ltions. They watched videos of bullet-riddled picKup trucks and corpses. resol ving problem s. The postlngs on BIOg del Narco periOdically yield Important pieces of Intelligence. \Vikis harness the collective intelligen ce of Internet u sers. He administers the site on his own. \Viki pedea 's vo lunteer admmistrator s enforce a neutra I point of \iew and encourage u sers to del ete copy that despl ays clear bias. In fact. The Blog del Narco has become the go-to Web sHe for cartelrelated news In Mexico.Wikipedia.11'. edition of the Nuevo Laredo dally newspaper Prfmera Hora was filled wtth very bland news. BlOod-Soaked SlOg. wi kis provide O rganiza tion s use wikis in seve ral ways.• Newsweek.(any educators do not allow students to cite referen ces from Wekepedia b ecause content can be provided by anyon e at any time. Not a word about this battle appeared In Nuevo Laredo's other newspapers either. including sta tistically. They read that the u. the blogger's Identity remains unknown. tracking issu es. people expect the manstream media to provide news. The reason: In Nuevo Laredo. Microsoft's Zune. unedited and unverified. as well as the drug trafftckers ttlernseiVes. The reliability of content on Wikipedia . Despite this Imposed blacK out. What are the advantages of the Blog del Narco? 2. Its followers Include members of the miiHary and ttle pollee. the biOgger may have helped solve one case after posting a video confession Implicating a prison warden who allegedly freed armed Inmates at night to cany out cartel-ordered murders. a drug-trafficking group. \\'ikipedia contains m ore than 3 4 melleon articles 111 English . which ha\'e transfom1ed the way . and m aintnining projet·t h istories. access to blogs and other Web resources th at consist of written content is ofte n impractical ( For example. "Hiding Behind the 1/\19b. Netcasting In many cases.•ide any quality assessment or fact ch ecking by experts. . In p1 a central rep ository for capturing constantly upd ated product featmcs and specific. Consider the online encyclopedea \Viki petlea (~<-. ace- Normally. The street battle had lasted for five hours. Questions 1. Every day. by comparative r eview. hOwever.:R ? Wch 2.0 and Sociul Networks G [about business] 9. compared to that o f en cyclopedias and more specialized sources.1111ple. Readers would have been unaware ttlat a vicious Clash had erupted the previous day between drug cartels and the Mexican mllttary.d o ther busin ess J Xl rtncrs on projects. which are .btogdetnarco. especially In the north. In addHJon to everyday citizens.foreover. 2011.all of tt complied May 7. however. according to a report released In september 2010 by the Committee to Protect Journalists. nor on Its radio or television the press does not report what the cartels do not want people to know. 2010: "The REAL City o f God: Student Risks Ufe Documenting MexiCo's Drug War In wwwblogde/narco.·iewed almost 500 mill ion times e\·ery day. Fo r ex. some of them containing graphic photos and videos. ·ojcct 111< 111 <Jgem cnt. WiklJ>edia docs not pro. October 11. suppliers.

which minimize setup and pe r-print run costs.. Pandora. These Web sites allow people to com e togeth er and share dig ital media.3. books)... Many of th ese companies also offer distribution services. commenting. self-publishing was restricted largely to authors who published original materials (e. such as pictures.0 media provid e a va riety of content. O pen-source versions of software for text editing and typesetting are available in word processing programs and on the Internet. In 2007. because the author incurred high costs for producing the boo ks and had to sell enoug h books to recover his or her costs before making a profit. These technologies ha ve significantly reduced the costs of print-on-demand . Last. beca use netcasts (or podcasts) ca n be played on many other devices besid es iPods.tions IIE~ I:1o~~··· people listen to music while on the go. including: • • • '~cleo (Amazon Video on pa ys people to create online videos for companies such as tvlattel and Allstate . and the remaind er of th e revenue from book sales goes to the author. In ad clition to trad itiona 1m ecl ia . IT's About Business 9.0 media sites have a powe rful presence on th e Inte rnet. primarily audio files (podcasting) and vid eo files (videocasting). Crowdsourcing Suppose an organization has a problem it needs to and Blurb (www. Web 2. Web 2. also enable users to consume information that was previously ava ilable only when th ey accessed the Internet. Leading print-on-demand companies includ e C reateSpace (www. Picasa. Lulu (www. Compani es typicall y pay $15. and oth er interactions among users and their media contributions.S. Today. called crowdsourcing. lab dem onstrations. Apple launched iTunes U. Facebook). etcasting." is a misnome r. formats. photographs (Photo bucket. • Tonga! (http://tongal. Flickr. whi ch offe rs free content provided by major U. For exa provides end-to-end service where authors submit their manuscripts and the online publisher edits.000 to $20. via syndication feeds for playback on dig ital media pla yers and persona 1computers. involves taking a job traditionally performed by an employee or a consultant and outso urcing it to an undefined group of people in the form of an open call. Face book). Can crowds really outperform experts employed by a company? (See Figure 9. Printing-on-Demand Web 2. printing-on -demand . and video. education a1institutions use netcasts to provide stud ents with access to lectures. These netcasts enable stud ents to review lectures or prepare for class during their morning and evening commutes or while exe rc ising at the gym . Tbditiona lly.0 Media Web 2.) Let's look at some ). prints. Hulu. the term pod casting. is th e distribution of dig ital m edia. with tradition<ll media orga niza tions now pod casting a wide ''Miety of content. from Na tional Public Radio shows to th e Opr([h Winfrey S/10w.2 Wch 2. music (Amazon MP3 . Instea d of a winne r-take-all .fm . m aking this process very attractive to first-time authors. 1 mples where they have done so. iTunes).com). and sells th e work. rating. This end eavor was risky. Shutterfly. Publishers provide these services for a sales commission. derived from combining the words "iPod" and " broadcasting. including podcasting and vid eocasting.0 helps users to publish their own material. YouT ube. Another important innovation is small-book printing ma chines.000 for each project they post on Tongal's Web site.blurb. is becoming increasingly popular.createspace. audio.3 presents examples of photo-sharing sites.g. Tonga! runs th e projec ts like contests.SECT I0 1 9. We b 2. however. whi ch is customized printing done in small batches. Face boo k. Photo-sharing Web sites combine the fea tures of social ne two rking with photo sharing.0 media sites provide user-generated media content and promote tagging. Netcasting has becom e increasingly prevalent. C reateS pace (owned by Amazon. and sports e\'ents . universities such as Stanford and l'vl IT. Inte restingly. Why not offer the problem to a crowd to de termine whether their collecti ve knowledge and wisdom can com e up with a solution? This process.

color.IIIEJl~fEJI C IIA PTER 9 We b 2. profit-making business. and.• Bloomberp BusinessWeek.999. 201 1. the community provides nstant feedback. book publishers had to rely on stock photography for many of the images used in th eir Myspace Photobucket (www. ·color Labs oners Location-Based Photo Sharing App. with corporate trappings such as financing and oHice space.msaction. such as the IPhone 4. amateur pho tograph ers can create images that almost match • • . What are some potential disadvantages to photo-sharing Web sites such as lnstagram and Color? Sources: Cofll)lled from A.:innocenli>·e. These photos were taken by professio nal photographers and were quite e:-. Amazon takes a small cut of each lr. lnstagram. lnstagram represents a new knd of Web startup that. The Color app removes a ny concept ot user privacy.• Comp. such as ideas and videos. The COlor app requires no password. provide photo-sharing and photo-editing services. Explain how and why a startu p can survive If It becomes "wildly popular'' before It evolVes Into a real. Pharmaceutical giant Eli Lilly (www. more recently. 75 million users who collectively were uploading almost 300. and that Color Is a new way of sharing.color.lm. 2011. the conter1t of other unique users.photobucket. such as Google's Plcasa (http://plcasa. does not enable lrtendlng. giving Images the classic look of photographs captured on traditional film and developed with chemicals.pensive.' emerged and was acquired by Yahoo! In 2005. 'Collected: What We Know About the Mac App Store.950 Friends. wllether they are geographically close or not. Then. Users then can post their Images to the~ lnstagram accounts or to social networks such as Facebook and Twitter. They also can browse and comment on collections from other photographers. Participants in the video phase are then free to use any of those five ideas to create the video. Photo upload Web sites such as Ofoto (now Kodak Gallery. 1. J.) When a user creates content with Color. Fllckr ( The founder of COlor Labs maintains that this Is the post-PC world. M. has rapidly become popular before It has evolved Into a real Share Your Life in Pictures social media.kodakgaJJery. B. 2011. Questions The market tor photo-sharing services on the Internet Is changing rapidly. In Its first tour months. Other Web sites. lnstagram IS atso benefitting from the emergence of smartphones that take relatively high-quality Images.lnstagrom.OOO. Today. More recently. USers load the free IPhone or Android app and take photographs. February 7-13.74 Million has cre<~ted a Web site called l nnoCenlh-e ( has emerged. Evans. a new photo service/social network for the IPhone called lnstagram (www. Unique users can view your content and can send anyone a link to your and Shuttertly (www.0 and Social 1\ictworks G [about business] 9.·eryone can try to solve them . lnstagram•s explosive growth has been spurred by a new wave of people who use smartphones to take photos of parts of their day and share them. where companies can post scientific problems and . The app then locates nearby p hones.000 photos per day. thanks to platforms such as Apple's App Another photo-sharing smartphone app. www. When users post their Images. com). www.fllck. November 2010. and onen to unique users with whom the user has had previous contact. and does not allow users to limit private content to specific Individuals. www. March 24. approach. Four dominated the field In the late 1990S as people uploaded digital pic tures to the Web primarily so that they could have them printed. 2011. your content can be sent to anyone. II creates a network ot COlor users based only on proximity. combines these photos with other users' photos from the same location. Thus. and collections that Inelide your content Therefore. Diana. the company breaks up the projects into stages. glvilg serious photographers a place to publish and show high-resolution Images.ww.. enables members to add visual eHects to pictures taken with their plhOnes. with a\'llilable photo editing software.v years ago. COlor shares Images.tterworld..lnslagr. " Zero Revenue. accessed Ma. h igh-quality digital cam eras cost less than S I. stores the shots on a cloud-based server. For performing this role. January 6.. Stooo. and makes all the photos available o n social media Web sHes such as Twitter. Until a f. as well as fast and reliable wireless networks that enable people to easily upload their mages. Which o Hers free accounts.. • Amazon's JVIechanical Turk (wunv. comments. That conter1t also IS published and available for viewing through various social media sites. and videos with other users located within 50 feet of the sender. (TI1e company spells out this policy In Its privacy statement.' lntormationWeelc. from COlor"New Social Network Path = IPhone + lnst~ + Facebook.499. ~. lnstagram attracted more than 1. It rewards the top five ideas with cash. naming the price for completion or a solution. Integrates location-based technOlogy with 30. 2. In 2004. Color ( provides a Web site where anyone with a task to be completed or a problem to be solved can put it o n the site. that content Is Immediately published to any nearby user who has the app open. and.

Because overhead cosh. . and they rece ive the same product descriptions and editorial content from their vendors. Ama zon and Barnes & Noble (www. pod casts). you will focus on the three major categories of Web 2. and mashups. which is a fraction of the price of a regular stock photo. sa\'ing money.bamesandnoble.0 sites: social networking. are extremely low.3 Crowdsourcing.•e nuc with the pictures' creators.0 Sites There a re literally thousands of \\ eb 2.0 technologies and applications that rou have just studied. Social Networking Social n etworking sites allow users to upload their content to the \Veb in the form of t~-t (for example. either to pursue an interest or goal. iStockph oto can make a profit wh il e stall sb ri ng part of the re. c rowdsourcing prO\'Jdes unprecedented A exibility to \\ O rk almost anywhere at anr time. The ama teurs can upload their pictures to image-sh<Hing Web sites such as iStockpl10to ('•w. Amazon . Differentiate between blogs and wikis. These sites pro~de an easy. or just to establish a sense of community \\ith people whom they may never meet in the physicaI world.• . "here interested p:n ties can license and download the images for $1 to $5 per image. blogs).. The benefits of crowdsourcing to compames include fi nding large numbers of workers to complete projects quickly.laxArt/Shutterstock) • those of the voice (for example. images. (Source: Scott 1\laxwelll Lut. h oweve r. What is netcasting? 3 . and making better use of m-house resources. interactive tool for communicating and collaborating with other people on the \\'eb. before you go on. Discuss the b usiness benefits of crowdsourcing.istockphoto.0 sites. "n1ey help users find like-minded people online.0 Sites IIE:4: I~$!JIII FIGURE 9. videocasl>). ews. For the workers. 9. most Amazon users go directly to the user re\~ews when they are deciding wh ether to buy a book.JJ~~ 1. aggregators. and each on e uses some or all of the Web sell the same producl>.3 C atcgmics of \\'c b 2. and ~deos (for example.S I•:CT ION' ?. In this section . has led all bookstores in soliciting user input in the form of user editorial rev1 As a result.3 Categories of \ Veb 2. attracting niche expertise. 2.

flickr. By displaying oth er peoples' activities on a social network.0 and Social Networks Social networks also are highly valuable business tools.Cidagio. Well-known socia l networking si tes includ e: • • • Facebook (wHw . 20 ll. Linkeclln (wMv. thereby helping project leaders find needed talent anywhere in the organization .000 Facebook m embers in just ten days. many organizations are finding useful ways to empl oy soc ial networks to pursue strategic objectives.l11e comp<my's Web site offers manysocial media features. The company makes money from advertising and services. Finally. T hese networks are useful in maintaining contacts for future business opportunities. T hese feeds are inherently viral. For e:-wmple.(acebook. and receive tweets for their order <md shipment status. m an y firms are m eeting this demand by implementing secure internal social network platforms that are tailored to company needs. Dow C hemical. by leveraging feeds. O ne practice that makes Adagio unusua 1is that th e company does not filter reviews for the 200 teas and other products it sells. the creator receives points that lead to a gift a photo~haring Web site. read blogs. Feeds also helped the music app iLike acquire 3. spur user discontent. T he following example illustrates how Adagio Teas uses soc ial networking tools to build its business. and it faced a subsequent backlash when its Beacon service broad cast user purchases without first explicitly asking the users for permission . and employees are encouraged to add their own photos. The company incorporates th e data into its marke t research .~ties broadcast is a retaile r that sells premium teas online and in C hicago area stores. For exa mple. Feeds are also controversia l. 20 I I. and it uses Twitter to engage c ustomers m ore fully. and invesbnent. benefits Adagio. .com): popular social networking Web sites (as of mid-20 11 . Despite the potential pitfalls. For exa mple. Social n etwork listings are easy to update and expand. T his approach.000 Facebook users just two weeks after its launch. Ma ny use rs react negatively to ha ving th eir online acti. the Facebook group Support th e f\•lonks' Protest in Burma was able to atb·act more than 160. Face boo k initially experienced a massive user outcry when it launched its feeds. whi ch the site then shares with other custom ers. Facebook. April 6. which many comp<mies avoid . G reengnrd. and it decid es which teas to offer and which to " kill off' based on a combination of sales data and customer feedba ck. rehiring fom1er employees. Flickr (www. People -prima1ily th e site's 60. and expertise.~ews and ratings. and Twitter. feeds can rapidly m obilize populations and dramatically spread the adoption of applications. For example. he or she can post on the Web site. customers can create custom tea blends. Going further. participate in 'Tea C hat" discussion groups. share infom1ation about teas with friends by inputting their G -mail address and password (the Web site automatically promotes "friend" selections and preferences). Example Adagio Teas (H nvw. In response. Face book claimed over 600 million members). mismanaged feeds ca n create public relations fiascos. W hen a customer buys a custom blend. employees have orga nized work groups using publicl y available social networking sites because their companies don't offer similar tools.:R ? Web 2. T hese networks typica lly repla ce the traditional employee directory.llllf~®~··· C II APTI. however. Everything is displayed in real time.000. widely used by bloggers as a photo ): a business-oriented social ne tworking site that is valuable for recruiting.myspace. and lead to legal actions. C ustomers can post productre.aclagio. "Winning Business with Social tv!edia:• &1seli11e Magad11e. sa les. w»w. Adag io provides a Facebook " Like" button for all its products. Adag io has integrated other capabilities as well. Companies such as Deloitte. O nce a customer ord ers from the company and has an account.600 per year Sources: Compiled from S. accessed April 18. IBM's intemal social network makes it easier to locate employee expertise within the and Myspace (www. and recmiting retired staff to serve as ® contractors. O ne of th e most powerful fea tures of m ost social ne tworks is feeds (or newsfeeds).000 recruiters-pay an average of $3. Adagio also offers points and discounts to customers for friends who redeem an y free $5 gift certificate sent to th em via e-mail.lillkedin. Feeds provide timely updates on the activities of people or topics with whi ch an individual is associated . interests. and Goldman Sachs have c reated socia I networks for"alumni" who have left the firm or are

Some 50 milli on new tweets are posted every da and part forum . • • YouTube (www. "Twitter Donates Entire Tweet Archive to Libra ry of Congress:· www.regators are Web sites that pro. add his or her own d<1 1<1. see Mvw. www. May 6. Example Twitter has becom e so pervasive that in May 2010. and it ranks blogs by to pic. Th e launch of Coogle i'vlaps is credited with providing the start for mashups. 20 10. T he following example illustrates the potential power of Twitter. Anne Frank's diary).com ): a socia l networking site fo r video uploads.4.housingmaps. historians. For centuries. bl ogs. A mash up is a 'vVeb site that takes different types of content fro m other Web sites and mixes th em together to create a new kind of Collects blogs and news from all over the Web and presents the material in o ne. cars for sa le.teclmor<lti.~d e collections of content from the Web. which then are ranked based on this feedba ck. 2011. Sources: Co mpiled from M. As you will see in ITs Abo ut Business 9.. • Technorati (•" vw. part blog. O ne interesting type of social network is online games. Hesse. "Twitter Archive at Libra ry of Congress Could Help Redefine History's Scope:' The WC/shington Post. ling uists.simplyhired. New York. such as presidents. In sho rt. and government databases to enable citizens of cities such as C hicago.Aprill 5. allows users to pos t short updates (called " tweets") on their lives (no mo re than 140 chara cters) via th e \Veb site. There are many exa mples of ma shups (for a complete list. kings.1ilable to the library six months after they are posted. historians will be able to sea rch it for useful T his site searches som e 4. and then display a m ap mashup on his o r her \~leb site th<1 t plots crime scenes.g. Corporate m embers pay fees of up to six fig ures for access to the ne twork . consistent. Twitrer (http://twitter.5 million listings on jo b and corpo rate Web sites and co ntacts subscribers \~a an RSS feed or an e-mail alert when a job appea rs that m eets their criteria . A user ca n take a map from Mashups Mas hup m eans to "mix and matc h" content from other parts of the Web. T hey ca n also find som e material about o rdinary peopl e during extra ordinary times when "average" peopl e keep records (e. [t indica tes how many other blogs link to a particular blog. 2010.progwmmableweb. Historians can find material abo ut extraordinary figures during ordinaty times because people almost always keep letters that they receive from famo us individuals. the Library of Congress acquired Twitter's entire archive of public tweets. or virtually an y other subject. T he most imposing c hall enge is finding material abo ut ordinary people during o rdinary times . and m ovie stars. Everyblock. online gam ing can be a successful business model.o n a completely unprecedented scale. All of the public o nes will become av. Use rs suggest and rate news stories. Twitter provides a deeply personal insight into the daily li ves of a\'erage A news aggregator that is part news site. and compute r scientists to coherently catalog the tweets. After a searchable Twitter archive is developed. instant m essaging.loc. history ha s been biased toward powerful and prominent individuals. Historians believe that this is why Twitter will become so impo rtant. Aggregators Ag~. Th e Library of Cong ress has created teams of updated fo m is a mash up of We b services that integrates content from newspapers. Digg ( Conta ins informatio n o n all blogs in the blogosphere. Well-known aggrega tor We b sites include: • • • Bloglines (w••·w .gov.0 Sites IIE~I:t:~~···· for premium features such as sending messages to Linkedln members o utsid e th eir own • • C raigslist has developed a d} 11amic map of all available aparbnents in the United S tates (www. or mo bile devices.3 C ategories of We b 2.S I•:CTIO ?. accessed March 2. A ma jor reason for th is bias is that "ordina ry people" generally did n ot document their lives . Simply Hired (www.

IT's Abo ut Business 9. 2010: A GonsalVes. Facebook prohibited Zynga and other app creators from promotng games n the "notlflcaltons• menu that users see each time they log on.rrency. 5 million Facebook users organized a Questions 1. Zynga Ink Ave Y. restauran t inspections. and provide examples. Millions of women throw parties together on SOrority Life. even though playing the games Is tree. more than 200 million people play social games every month. many companies are entertng the online gaming Analysts estimated that these transactions exceeded $835 million In 2010. 1. Wch 2. th e Pipes service from Ya hoo! (http://pipes. onlne games have just surpassoo e-mail as the second-most popular online actiVIty. From Zynga·s perspective. discuss the advantages and disadvantages of the company's close relationship with Facebook. "Zynga and Faoebook. and what is their greatest value to Web 2. Globally. " Facebook. for" Bloomberg BusinessWeek. A1•aila ble information includ es crime information. M. before you go on. Zynga spends millions of dollars on ads promoting It to Facebook members. Rosenwald. In Happy Aquarium. users feed fish and clean tanks. In March 2010. As mpresslve as these numbers are. Zynga paid less than 1o percent of that revenue to a third-party transaction handler such as PayPal. that equals about $ lets users clrag-. 2010: D. MacMUian. MacMillan. FarmVIlle. Zynga's HH and Sea ttle to find out wha t is ha ppening in their neighborhoods. where almost all of Its games are played. In fact. •FacebOOk Makes Crecttts Sole Legal Ct. As a resun. November 22-28. Sources: Compiled ftom T. In total.0 and Sociul Networks [about business] 9. 2010: www. the business opportunity Is enormous.zyngarom).0 users? . n·s Complicated. What kinds of actions could Zynga take to minimize ns dependence on Facebook? Be specifiC. Man. • JnformatlonWeek. Facebook claimed that users were complaining about spamllke messages that appeared f11!ery time one of their game-playing fr1ends performed an action In an online game.Deal. Facebook. Facebook does receive Income from Zynga. COnsider the case of Zynga(Www. •Inside Facta<y. Not surprisingly. If you buy a tractor for -drop fcatm cs from mu ltiple Web data sources to visually remix data feeds and c reate mash ups. and discuss their business value. Clabum. For Facebook and the gaming companies.000 Farm Coins. and their numbers are rapidly Increasing. Nevertheless. has Farm Coins. behind social networking. Why all the Interest? The answer Is that companies have noticed that 40 percent of FacebOok's 600 million users regularly play social games. Face book and Zynga agreed to a five-year deal In which Zynga agreed to use Facebook Credits.nextupresearch.4 Online Games Are Big Business protest group that called Itself "I Don't care AboUt Your Farm. Scrabble. April 26-May 2. Zynga spends between $5 million and $8 million per month for banner ads on Facebook. according to neXtup Research (www. In the past. zynga's success depends on the good graces of Facebook. In fact. More than 120ml~ lon people play Zynga'S onlm social games such as FarmVIlle and Mafia wars. Any time a game appears to be a hit. Users can buy add-ons and move through game levels faster by spending very small amounts of money on what amounts to virtual objects on a screen. and Bondilg. Disney pald $563 million to purchase the social game develOper Ptaydom (Wivw. 2010.h 3. and It kept the rest. Google announced the creatiOn of Its Google Game Developer Center. ~nd local photos posted on Flickr. One popular Faoebook game. F'o r ex. requires clicking around an Imaginary farm to plant crops and take care of animals. In 201 o the companY's revenue surpassed $450 milton.• JnfonnationWeek. In May 2010." The wastllngton Post. Other Online Social Games Mean Big Business. Zynga pays Facebook up to 30 percent of every transaction. What are aggregators. 2011: D.zynga.ptaydom.30. "FarmVIlle. 201 1. for example. AlOisi 3. Or Your Park. and how are organizations using them? 2. May 19. Meanwhile. Describe mashups. an online resource specifically designed to promote Google-related game technology and Infrastructure. Otana. A. Is as simple as the original 1948 game that Is played on cardboard. has developed a service called Facebook Credits that offers a single virtual currency for use on many different apps. 2.•••I]J~d~iJI C ll i\1''1'1-:R ? e • . Or Your Fish.5 descri bes an interesting mash up call ed Foursquare. Zynga Insists that It Carl help Facebook (and vice versa) because Zynga'S games Increase the tme that users spend on Facebook. More than 90 percent of Zynga'S revenues come from users converting real cash Into proprietary virtual currency. The most popular game on Facebook. FarmVIlle. What are social networks. accessed Malch 29.JJ~ 3. Or '!bur Mafia!" Zynga clams that the poliCy Change hurt Its business by reducIng traffic to Its games. New tools are em erging to bui lcllot'a tion mash ups. January 25." 81oom08rp Business-. Men can act out their Tony Soprano fantasies by "capping·• people In Mafia wars. ~.1 mple. In July "Google Gets Gaming." JntonnatlonWeek. howf11/er. hOwever.

however. Google's Latitude (www. For exa mple. It has already checked your friends' calendars and knows who Is free tonight. Th ese tec hnologies serve as a common c hannel of communica tions. Moran. Brlghtklte (http://brlghtkite. and Facebook Places (www. Diana. •social Media's New Mantra: Location. PepsiCo. these tec hnologies are useful for interfacing with clients and other third parties to whom th e fim1 and its staff pro. Your phona not as wMn a tabla Is avallabla and Informs you that three other friends are planning to meet you for dinner. A user can earn a "mayor" icon from an establishment If he or she has checked In more than anyone else during the previous 60 days. Every time someone checked In within the city lim Its. " Facebook Is Going Places. Pepsi's global director of digital and social media was Impressed w ith the user response on that marketing campaign.i·· • [about business] 9. 2011 . Analyze the differences between social networking and social location networking. Among th ese users are finance professionals who collaborate and share knowledge as well as nonfinancial professionals who are potential clients. 201 0. A. using specific examples. Denning. Zagat. Consider this scenario: At 6 PM. and other establishments used Foursquare to attract customers with promotions. wikis. March 11. • lnformatlonWeek. Pepsi donated 4 cents to a non profit organization caiiM Camplnteractive (www. "Foursquare Value Checks In at $250 Million. Foursquare (https:llfoursquare. or spend. 2011 and the company anticipated reaching 10 million users by June 2011 ." lnformat/onWeek." Information Week. friend-locating apps. so It suggests a restaurant that all of you hava wantad to try. "Social Location Marketing. Where Will Foursquare Go?' Fortune.000 viewers who have been participating In Bravo's Foursquare promotion can "unlock" badges by checking In at locations linked to Bravo shows. Externally. In add Ilion. an audit tea m manager ca n c reate a group. January 24. Foursquare's business model is simple: Generate as big a user base as possible. including blogs.}.~ de services. Participants also get tips on what to do or what to buy at the locations.foursquare. include his or her team members as subscribers. May 10-16. " Fo ursquare. Sources: Compiled from S. It remains to be seen If Foursquare's check-In feature Is enough to build a sustainable business. rati ngs. Location. M. 201 0. bars. Location PepsiCo teamed up w ith Foursquare In December 2009 for a charity drive In New York City.0 Sites launched Its partnership with Foursquare In February 2010. IT For For the Marketing Major Web 2. AMEX Partner on Offer Program at SXSW. What's In For the Finance Major Many of the popular social networking sites have users who subsctibe to financeoriented subgroups. com. Me? . Harnessing GPS-enabled mobile technology to let users broadcast their location Is not a new idea.5 Location. Questions 1. Foursquare was valued at $250 million In January 2011 . your smartphone alerts you to your evening's plans. established compan les such as T witter and Yelp have created location-based tools. com}.• Forbes." Bloomberg Bus/nessWeek. Loopt (www. "My Smart phone Sent Me. all offer location-based. and.facebook. April 15. \ have Implemented rival networks.bravotv. in some cases. adds a game-like twist: Its 1 million-plus users earn badges by "checking In" at certain bars. Location.000 restaurants. For the Accounting Major Audit teams use social networking tec hnologies internally to stay in touch with team members who are working on multiple projects. Despite this competition. The more than 10. August 18. shop. May 6. What are some possl ble disadvantages of being a member of Foursquare? Would you join Foursquare? Why or why not? 2. they earn prizes for getting there first. and sell national brands and local merchants on the possibilities of marketing to people as they gather to eat.0 applications enable marketing professio nals to beco me closer to the ir customers in various ways. 2011 .com}. Location.loopt. accessed April 14. 201 0. The venues range from restaurants favored by some of the celebrities on Top Chef to retailers popular with the women on Real Housewives. restaurants. Brady. G. l'vlarketing professionals now receive almost real-time feedback on products. In mld-2011. and recommendations. up to a maximum of $10. each with check-In Categories of Web 2.SI•:CTIO ?. and then pus h infonnation regarding projects to all members at once. more than 3.camplnteractJve. 2011 . and Geoloql ( and other venues by pressing a button on the app when they arrive. Gowalla (http:llgowalla. and more than a dozen other well-known brands have signed paid-partnership deals with Foursquare. The cable television network Bravo (WWIV. D.

social interaction. in which th e site c reator expresses feelings or opinions with a series of chronological en tries. which provid e informa tion that users receive passively.0 applications. Compani es use blogs in different ways. m ash ups).0 ~pplica tions ~ !low production personnel to "enlist" business p::1rh1ers and custom ers in product development activities.•••Ea~d~ :ll C ll r\ I''J'I-:1{ <) Wd> 2. and (2) developing private. resolving problem s. and explain the benefits of three information technologies u sed by Web 2. plus the Web sites that use them . O rganiza tions use wikis in several ways. Web services). Web 1.0 is a loose coll ection of information technologies and applicati ons. and feature remixable applications and data (for example.0 usage: ( l ) m onitoring employee usage of V!eb 2.0. Internally. a blog. when you want it. \ Vcb 2. h·acking issues.lhl instead of requiring the enti re Web page t·o rel oad. Web 2. In project managem en t.0 applicati ons for both time atod content whil e employees are at work. O th ers open them selves up to the p ublic for input into their processes and products. and collaboration. . open to the public. Describe the differences between Web 1. and they harness the coll ective intelligen ce of Internet users. IIR personnel can utili7.0 and Web 2. Some com panies listen to the blogosphere for m arketing purposes. Identify five prominent Web 2.0. This process speeds up response time cmd in creases user sa tisfnction. a picture.e priva te. A tag is a keyword or term that desc ribes a piece of informa ti on (for exampl e. AJAX i s a 'Neb development technique that enables pmtions of We b pages to reload with fresh d. or a vid eo clip).0 sites.0 sites are n ot so m u ch online places to visit ilS sites tha t facilitate information sharing. In additi on. [ Summa ry ] 1.m el coll abomtion .0 sites often harness coll ective int·e lligence (for example. internal social networks for company employees and then monitoring the content of th ese networks. Key developments of Web 1.0 and Sucial Networks For the Production/Ope rations Management Major Web 2.0 was th e first gen eration of the Web. Wikis foster easy collaboration. TI1ey also can check out pot ential n ew h ires by accessing a large number of social networking sites. Really simple syndic(lfion (RSS) allows you to receive the information you wa nt (cus- tomized i111forrnation). wikis). HR personnel can perform many of th eir r ecru iting activities by accessing such sites as Linkedln . Unlike Web 1. user-centered design. deliver functionality c 1s services r'1the r th e m pa cb ged software ( for example. Users typica lly have m inimal interaction with Web 1. For the Human Resources Management Major Soci~l networks offer trem endous ben efits to human resources profession~ls. • For the MIS Major The !'vi iS deparhnent is responsible for two aspects of Web 2. . A wiki is a Web site on which anyone can post material an d m ake c hanges to a lrea dy posted ma terial. A weblog (blog for short) is a person al Web site. and provide at least one example of how each can be utilized in a business setting. Web 2.0 were th e creation of VVeb sites and th e commercia lizati on of the Web. Users typically choose tags th at are m eaningful to th em . amd maintaining p roject histories.0 sites. wikis provide a central repository for capturing comtan tly updated product features and specificati ons. These Web sites enr ich th e user's exp erience by encou r~ging user participation . internal social n etworks for e mployee expertise t~nd experience in order to li n d th e best person for a position or project team . 2. an article. for exam ple. witlnout having to surf th ousands of Web sites.

when they want it. rating. \\'eb 2. really simple s)lldication (RSS) A technology tha t allows users to rec eive the information they want. printing-on-demand Customized printing done in small batch es. tag A keyword or term that describes a piece of information. masbup Web site that takes different types of content from other \Veb sites and mixes them together to create a new kind of content. . blogs). in which the site creator expresses feelings or opinions with a senes of chronological entries. Social networking \\'e b sites allow users to upload the ir con tent to the 1Neb in the form of text (for example. business pa rtners. voice. Discuss the three categories of Web 2.-ja syndication feeds for playback on digital media players and persona l computers. 3. and sports even ts. 1mages. podcasts).0 sites. Nctca$ling is the distribution of digita l media. Craigslist has cle. prints. and videos. and health to their constituents. Publish ers provide these services for a sales commission. formats. A maslwp is a \Veb >ite that takes different types of t'ontent from other \Ve b sites and mixes them together to create a new kmd of conte provides end-to-end serv ice wh ere authors subm it their manuscripts and the onlme publisher edits. C reateSpace (owned by Amazon . Crowdsourcing is the process of taking a joh traditionally performed by an employee or a consultant and outsourcing it to an undefined group of people m the form of an open call. open to the public. and suppliers Aggregalors are Web sites that provide collet'tions o f content from the \\'e b.C hapter Clossar~· IIE~I~@D • 1111 wikis enable companies to collaborate w1th custome rs. voice (for ex. and the remainder of the revenue from book sa les goes to the author. videocasts). For example. without having to surf thousands of Web sites. social netwo rking sites Web sites that <>llow users to npload the1r content to the \Veb in the forn1 of text. Web 2. Organizations can post job openings on aggregator \Veb sites for increased exposure. [ Chapter Glossary 1 aggregator Web sites that provide coll ections of content from the Web. podcasting The distribution of digital audio media via spldication feeds for playback on dig ital media players and personal computers. Wikis also are useful in knowledge management. . soc ial commerce A type of electroni c commert'c that uses soc1al media to assist in the on line buying and selling of products and sen~ces. Printing-on-demand is customized printing performed in small batches. weblog (see blog) wiki A \Veb site on which anyone can post material and make changes to other material. housing. commenting. lab demonstrations. For example. suppliers. a nd other business pa rtners on projects. crowdsourcing 1l1e 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. blog (or weblog) A personal Web site. 1·ideocasting The distribution of digital video media via S)lldication feeds for playback on digital media players and personal computers. O rganizations can use social networking to get closer to customers (achieve customer intimacy). blogosphere The term for the millions of blogs on the \\' e b. suc h as audio files (podcasting ) and 'ideo files (videocasting). 1 mple. l\lanygovernme nts are using mash ups to delive r inf om1ation on crime. images.·eloped a dp-1amic map ofallava ilable apartments in the United States. and promotes tagging. and other interactions among users and their media contributions. O rganizations also can scan aggrega tor news sites for information on the orga nization tha t is pulled from sites across the Web. and videos (for ex. Many organizJllons use mash ups to deliver valuable inf ormation to th eir custome rs.1 mplc. and provide at least one example of how each can improve business efficiency and profitability. Educational instih1ti ons u se ne tcasts for providing studen ts with access to lectures. AJAX A Web developmen t technique that allows portions of \\'e b 1 ><1ges to reload 11 ith fresh da ta rather than requinng the entire Web page to re load . and sells the work.0 A loose collection of information technologies and applica tions.0 media Any We b site that provides user-generated media content. plus the \\' e b sites that use them. netcasting The distribution of digital media 1~a S}lldication feeds for playback on digital media pbyers and personal computers.

look up the foll owing: • ~lost popubr or most visited blogs. John Wanamaker coined the advertiser's dilemma : . • The company's C IO would like to implement Web 2.. cons. how? Can they enhance a firm's reputation? Lfso. the \Veb has advanced to the point that most large sites can serve ads based on a user's browsing h istory. E<1d1 le~u1 will iudepeuJe 11ll} tale 011 the fulluwiug pwblem: You are an externa l consulting company with experience in corporate \ Veb 2.l ilable on your class Web site.0 sites a threat to secunty? C:m they tarnish a linn's reputation ? If so. com).0 technologies and applications to benefit their business processes? 5 . Each team will create a pod cast on some idea in th e course an d make it av. View the a'ailable lilTs. D esign a mashup for your uni..oiceCill~lrds. 2. Access ~lojofiti (." Until the advent of the Web. and follow some of the posts. En ter IIW\v. Each team should pick a subJect tha t needs agg1·egation The team will set up th e plans for an aggregator Web site to accomplish this goal and present th e site to the class. and distinguishing features to the class. what is keeping you from creating one? Is there any contentthat you definitely would not poston such a page? 4. The team w1ll discover features that d1stinguish 1ts s1te and presen t its pros.blogger8c/." 6. wou ld you consider some blogs to be more importan t or more reliable than others? If so.chatroulette.0 to someone wh o has not taken a course in informa tion systems? whic h ones? How would you lind blogs relating to your compa ny? 3 . Are there any lilTs that you would be interested in for making some extra money? Why or why not? 3. 'vVhat risks does a company expose itself to if it leverages feeds? How might the company mi tiga te these risks? and then p ropose a mash up of your own. Expbin how to record a podcast.0 implementation.. how? I Problem-Solving Activities I 1. . or even an ad. [ Closing Case M a rke tin g w ith Face b ook ] The Problem Almost I 00 years ago. 2. and in tended What sorts of restr1chons or guidelines should firms place on the use of social networks by employees? Are these Web 2.podcasting·tools. had imprm·ed muc h. an employee. it was difficult to argue that these pe rcentages.IIIEJ~d~ ··· C llr\ PTER ? \\'eb 2. and consider "hy they might be the "best blogs. or a company to be caullous in the use of soc ial networks? 6 . If you were the CEO of a company. would you pay attention to blogs about your company? W hy or" hy not? L f yes. an d study the various services tha t the Web si te offers Learn how to create mashups.0. For example. Pick two. What is required to become a successful blogger? \Vhat time commibnent might be needed? How frequently do successful bloggers post? 7 .·ersity. C oogle (www.v. It is beheved that there will be resistance by employees to any proposed changes. Why do you think these blogs are popular? • Best blogs (try Hmv. C reate a PowerPoint presentation that sells Web 2. How would you describe Web 2.0 to the following company wh ile addressing the following concerns: • The comp:my is a cred it card and payment-processing linn tha t has 100 emp has developed its .com .. Co to Amazon's i\lechanical Turk Web site ( sources of data..comf).(any of the employees are not very Internet literate. progrmrrmableweb. Do you have a page on a social networking Web site? If yes. However.0 technologies and applications to en h1mee employee ltfe and perhaps explore new ways of marketing the company's services Each team will conduct its research indepen dently and present the results to the class. Present your mash up to the class.·ertiser's a bility to track these percentages. Each tea m will . 3. Enter IIWw. [ Team Assignments ] 1. Access C h atRoulette (11~vw. What is interesting a bout tim sociJI networki ng s1te? 4 .0 and Socia l N ctwor b I Discussion Questions I 1.Half the money I spend on advertising is wasted. llo" ' can :m organization best employ Web 2. \Vhat factors m ight cause an indi. What is interesting about this social networking site? 5 .moiofiti. Pick two. wh