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Chapter 1--Managing the Digital Firm

What is the role of information systems in today's competitive business


environment? Information systems have become essential for helping
organizations deal with changes in global economies and the business
enterprise. Information systems provide firms with communication and
analytic tools for conducting trade and managing businesses on a global
scale. Information systems are the foundation of new knowledge-based
products and services in knowledge economies and help firms manage their
knowledge assets. Information systems make it possible for businesses to
adopt flatter, more decentralized structures and more flexible arrangements
of employees and management. Organizations are trying to become more
competitive and efficient by transforming themselves into digital firms where
nearly all core business processes and relationships with customers,
suppliers, and employees are digitally enabled. What exactly is an
information system? What do managers need to know about information
systems? The purpose of an information system is to collect, store, and
disseminate information from an organization's environment and internal
operations to support organizational functions and decision making,
communication, coordination, control, analysis, and visualization. Information
systems transform raw data into useful information through three basic
activities: input, processing, and output. From a business perspective, an
information system represents an organizational and management solution
based on information technology to a challenge posed by the environment.
Information systems literacy requires an understanding of the organizational
and management dimensions of information systems as well as the technical
dimensions addressed by computer literacy. Information systems literacy
draws on both technical and behavioral approaches to studying information
systems. Both perspectives can be combined into a sociotechnical approach
to systems. How are information systems transforming organizations and
management? The kinds of systems built today are very important for the
organization's overall performance, especially in today's highly globalized
and information-based economy. Information systems are driving both daily
operations and organizational strategy. Powerful computers, software, and
networks, including the Internet, have helped organizations become more
flexible, eliminate layers of management, separate work from location,
coordinate with suppliers and customers, and restructure work flows, giving
new powers to both line workers and management. Information technology
provides managers with tools for more precise planning, forecasting, and
monitoring of the business. To maximize the advantages of information
technology, there is a much greater need to plan the organization's
information architecture and information technology (IT) infrastructure. How
has the Internet and Internet technology transformed business? The Internet
provides the primary technology infrastructure for electronic commerce,
electronic business, and the emerging digital firm. The Internet and other
networks have made it possible for businesses to replace manual and paper-
based processes with electronic flows of information. In electronic
commerce, businesses can exchange electronic purchase and sale
transactions with each other and with individual customers. Electronic
business uses the Internet and digital technology to expedite the exchange
of information that can facilitate communication and coordination both inside
the organization and between the organization and its business partners.
Digital firms use Internet technology intensively for electronic commerce and
electronic business to manage their internal processes and relationships with
customers, suppliers, and other external entities. What are the major
management challenges to building and using information systems? There
are five key management challenges in building and using information
systems: (1) designing systems that are competitive and efficient; (2)
understanding the system requirements of a global business environment;
(3) creating an information architecture that supports the organization's
goals; (4) determining the business value of information systems; and (5)
designing systems that people can control, understand, and use in a socially
and ethically responsible manner.

Chapter 2--Information Systems in the Enterprise


What are the key system applications in a business? What role do they play?
There are six major types of information systems in contemporary
organizations. Operational-level systems are transaction processing systems
(TPS), such as payroll or order processing, that track the flow of the daily
routine transactions that are necessary to conduct business. Knowledge-level
systems support clerical, managerial, and professional workers. They consist
of office systems for increasing data workers' productivity and knowledge
work systems for enhancing knowledge workers' productivity. Management-
level systems (MIS and DSS) provide the management control level with
information for monitoring, controlling, and decision-making. Most MIS
reports condense information from TPS and are not highly analytical.
Decision-support systems (DSS) support management decisions when these
decisions are unique, rapidly changing, and not specified easily in advance.
They have more advanced analytical models and data analysis capabilities
than MIS and often draw on information from external as well as internal
sources. Executive support systems (ESS) support the strategic level by
providing a generalized computing and communications environment to
assist senior management's decision making. They have limited analytical
capabilities but can draw on sophisticated graphics software and many
sources of internal and external information. The various types of systems in
the organization exchange data with one another. TPS are a major source of
data for other systems, especially MIS and DSS. ESS primarily receive data
from lower-level systems. The different systems in an organization have
traditionally been loosely integrated. How do information systems support
the major business functions: sales and marketing, manufacturing and
production, finance and accounting, and human resources? At each level of
the organization there are information systems supporting the major
functional areas of the business. Sales and marketing systems help the firm
identify customers for the firm's products or services, develop products and
services to meet customers' needs, promote the products and services, sell
the products and services, and provide ongoing customer support.
Manufacturing and production systems deal with the planning, development,
and production of products and services, and controlling the flow of
production. Finance and accounting systems keep track of the firm's financial
assets and fund flows. Human resources systems maintain employee
records; track employee skills, job performance, and training; and support
planning for employee compensation and career development. Why should
managers pay attention to business processes? What are the benefits of
using information systems to support business processes, including those for
customer relationship management and supply chain management?
Business processes refer to the manner in which work is organized,
coordinated, and focused to produce a valuable product or service. Business
processes are concrete work flows of material, information, and knowledge.
They also represent unique ways in which organizations coordinate work,
information, and knowledge and the ways in which management chooses to
coordinate work. Managers need to pay attention to business processes
because they determine how well the organization can execute, and thus are
a potential source of strategic success or failure. Although each of the major
business functions has its own set of business processes, many other
business processes are cross-functional, such as fulfilling an order.
Information systems can help organizations achieve great efficiencies by
automating parts of these processes or by helping organizations rethink and
streamline these processes, especially those for customer relationship
management and supply chain management. Customer relationship
management uses information systems to coordinate all of the business
processes surrounding the firm's interactions with its customers. Supply
chain management is the close linkage of activities involved in buying,
making, and moving products. Information systems make supply chain
management more efficient by helping companies coordinate, schedule, and
control procurement, production, inventory management, and delivery of
products and services to customers. What are the business benefits of using
collaborative commerce, private industrial networks and enterprise systems?
Collaborative commerce relies on digital technologies to enable multiple
organizations to collaboratively design, develop, build, move, and manage
products through their lifecycles. A firm engaged in collaborative commerce
with its suppliers and customers can achieve new efficiencies by reducing
product design cycles, minimizing excess inventory, forecasting demand,
and keeping partners and customers informed. Private industrial networks
are Web-enabled networks that support collaborative commerce activities by
providing an infrastructure for transorganizational business processes and
information flows. Enterprise systems integrate the key business processes
of a firm into a single software system so that information can flow
throughout the organization, improving coordination, efficiency, and decision
making. Enterprise systems promise efficiencies from better coordination of
both internal and external business processes. Enterprise systems can help
create a more uniform organization in which everyone uses similar processes
and information, and measures their work in terms of organization-wide
performance standards. The coordination of sales, production, finance, and
logistics processes provided by enterprise systems helps organizations
respond more rapidly to customer demands. Enterprise systems are very
difficult to implement successfully. They require extensive organizational
change, use complicated technologies, and require large up-front costs for
long-term benefits that are difficult to quantify. Once implemented,
enterprise systems are very difficult to change. Management vision and
foresight are required to take a firmwide and industry-wide view of problems
and to find solutions that realize strategic value from the investment. What
types of information systems are used by companies that operate
internationally? There are four basic global forms of business organization:
domestic exporter, multinational, franchiser, and transnational. Each works
best with a different systems configuration. Transnational firms must
develop networked system configurations and permit considerable
decentralization of development and operations. Franchisers tend to
duplicate systems across many countries and use centralized financial
controls. Multinationals typically rely on decentralized independence among
foreign units with some movement toward development of networks.
Domestic exporters typically are centralized in domestic headquarters with
some decentralized operations permitted.

Chapter 3--Information Systems, Organizations, Management, and


Strategy
What do managers need to know about organizations in order to build and
use information systems successfully? Managers need to understand certain
essential features of organizations in order to build and use information
systems successfully. All modern organizations are hierarchical, specialized,
and impartial. They use explicit standard operating procedures to maximize
efficiency. All organizations have their own cultures and politics arising from
differences in interest groups. Organizations differ in goals, groups served,
social roles, leadership styles, incentives, surrounding environments, and
types of tasks performed. These differences create varying types of
organizational structures and they also help explain differences in
organizations' use of information systems. What impact do information
systems have on organizations? Information systems and the organizations
in which they are used interact with and influence each other. The
introduction of a new information system will affect organizational structure,
goals, work design, values, competition between interest groups, decision
making, and day-to-day behavior. At the same time, information systems
must be designed to serve the needs of important organizational groups and
will be shaped by the organization's structure, tasks, goals, culture, politics,
and management. Information technology can reduce transaction and
agency costs, and such changes have been accentuated in organizations
using the Internet. The information systems department is the formal
organizational unit that is responsible for the organization's information
systems function. Organizational characteristics and managerial decisions
determine the role this group will actually play. How do information systems
support the activities of managers in organizations? There are several
different models of what managers actually do in organizations that show
how information systems can be used for managerial support. Early classical
models of managerial activities stressed the functions of planning,
organizing, coordinating, deciding, and controlling. Contemporary research
looking at the actual behavior of managers has found that managers' real
activities are highly fragmented, variegated, and brief in duration, with
managers moving rapidly and intensely from one issue to another. Managers
spend considerable time pursuing personal agendas and goals, and
contemporary managers shy away from making grand, sweeping policy
decisions. The nature and level of decision making are important factors in
building information systems for managers. Decisions can be structured,
semistructured, or unstructured, with structured decisions clustering at the
operational level of the organization and unstructured decisions at the
strategic planning level. Decision making can also take place at the
individual or group level. Individual models of decision making assume that
human beings can rationally choose alternatives and consequences based on
the priority of their objectives and goals. Organizational models of decision
making illustrate that real decision making in organizations takes place in
arenas where many psychological, political, and bureaucratic forces are at
work. Information systems have been most helpful to managers by providing
support for their roles in disseminating information, providing liaison
between organizational levels, and allocating resources. However, some
managerial roles cannot be supported by information systems, and
information systems are less successful at supporting unstructured
decisions. How can businesses use information systems for competitive
advantage Businesses can use strategic information systems to gain an edge
over competitors. Such systems change organizations' goals, business
processes, products, services, or environmental relationships, driving them
into new forms of behavior. Information systems can be used to support
strategy at the business, firm, and industry level. At the business level of
strategy, information systems can be used to help firms become the low-cost
producers, differentiate products and services, or serve new markets.
Information systems can also be used to "lock in" customers and suppliers
using efficient customer response and supply chain management
applications. Value chain analysis is useful at the business level to highlight
specific activities in the business where information systems are most likely
to have a strategic impact. At the firm level, information systems can be
used to achieve new efficiencies or to enhance services by tying together the
operations of disparate business units so that they can function as a whole or
promote the sharing of knowledge across business units. At the industry
level, systems can promote competitive advantage by facilitating
cooperation with other firms in the industry, creating consortiums or
communities for sharing information, exchanging transactions, or
coordinating activities. The competitive forces model, information
partnerships and network economics are useful concepts for identifying
strategic opportunities for systems at the industry level. Why is it so difficult
to build successful information systems, including systems that promote
competitive advantage? Information systems are closely intertwined with an
organization's structure, culture, and business processes. New systems
disrupt established patterns of work and power relationships, so there is
often considerable resistance to them when they are introduced.
Implementing strategic systems often requires extensive organizational
change and a transition from one sociotechnical level to another. Such
changes are called strategic transitions and are often difficult and painful to
achieve. Moreover, not all strategic systems are profitable, and they can be
expensive to build. Many strategic information systems are easily copied by
other firms, so that strategic advantage is not always sustainable.

Chapter 4--The Digital firm: Electronic Commerce and Electronic


Business
How has Internet technology changed value propositions and business
models? The Internet is rapidly becoming the infrastructure of choice for
electronic commerce and electronic business because it provides a universal
and easy-to-use set of technologies and technology standards that can be
adopted by all organizations, no matter what computer system or
information technology platform they are using. Internet technology provides
a much lower cost and easier to use alternative for coordination activities
than proprietary networks. Companies can use Internet technology to
radically reduce their transaction costs. The Internet radically reduces the
cost of creating, sending, and storing information while making that
information more widely available. Information is not limited to traditional
physical methods of delivery. Customers can find out about products on their
own on the Web and buy directly from product suppliers instead of using
intermediaries such as retail stores. This unbundling of information from
traditional value chain channels is having a disruptive effect on old business
models, and it is creating new business models as well. Some of the
traditional channels for exchanging product information have become
unnecessary or uneconomical, and business models based on the coupling of
information with products and services may no longer be necessary. The
Internet shrinks information asymmetry and has transformed the relationship
between information richness and reach. Using the Internet and Web
multimedia capabilities, companies can quickly and inexpensively provide
detailed product information and detailed information specific to each
customer to very large numbers of people simultaneously. The Internet can
help companies create and capture profit in new ways by adding extra value
to existing products and services or by providing the foundation for new
products and services. Many different business models for electronic
commerce on the Internet have emerged, including virtual storefronts,
information brokers, transaction brokers, online marketplaces, content
providers, on-line service providers, virtual communities, and portals. What is
electronic commerce? How has electronic commerce changed consumer
retailing and business-to-business transactions? Electronic commerce is the
process of buying and selling goods electronically with computerized
business transactions using the Internet or other digital network technology.
It includes marketing, customer support, delivery, and payment. The three
major type of electronic commerce are business-to-consumer (B2C),
business-to-business (B2B), and consumer-to-consumer (C2C). Another way
of classifying electronic commerce transactions is in terms of the
participants' physical connection to the Web. Conventional e-commerce
transactions, which take place over wired networks, can be distinguished
from mobile commerce or m-commerce, the purchase of goods and services
using handheld wireless devices. The Internet provides a universally
available set of technologies for electronic commerce that can be used to
create new channels for marketing, sales, and customer support, and to
eliminate intermediaries in buy and sell transactions. Interactive capabilities
on the Web can be used to build closer relationships with customers in
marketing and customer support. Firms can use various Web personalization
technologies to deliver Web pages with content geared to the specific
interests of each user, including technologies to deliver personalized
information and ads through m-commerce channels. Companies can also
reduce costs and improve customer service by using Web sites to provide
helpful information as well as e-mail and even telephone access to customer
service representatives. B2B e-commerce generates efficiencies by enabling
companies to electronically locate suppliers, solicit bids, place orders, and
track shipments in transit. Businesses can use their own Web sites to sell to
other businesses or use net marketplaces or private industrial networks. Net
marketplaces provide a single digital marketplace based on Internet
technology for many buyers and sellers. Net marketplaces can be
differentiated by whether they sell direct or indirect goods, support spot or
long-term purchasing, or serve vertical or horizontal markets. Private
industrial networks link a firm with its suppliers and other strategic business
partners to develop highly efficient supply chains and to respond quickly to
customer demands. What are the principal payment systems for electronic
commerce? The principal electronic payment systems for electronic
commerce are credit card systems, digital wallets, accumulated balance
digital payment systems, stored value systems, digital cash, peer-to-peer
payment systems, electronic checks, and electronic billing presentment and
payment systems. Accumulated balance systems, stored value systems
(including smart cards), and digital cash are useful for small micropayments.
How can Internet technology support electronic business and supply chain
management? Private, internal corporate networks called intranets can be
created using Internet connectivity standards. Extranets are private intranets
that are extended to selected organizations or individuals outside the firm.
Intranets and extranets are forming the underpinnings of electronic business
by providing a low-cost technology that can run on almost any computing
platform. Organizations can use intranets to create collaboration
environments for coordinating work and information sharing, and they can
use intranets to make information flow between different functional areas of
the firm. Intranets also provide a low-cost alternative for improving
coordination among organizations' internal supply chain processes. Extranets
can be used to coordinate supply chain processes shared with external
organizations. What are the major managerial and organizational challenges
posed by electronic commerce and electronic business? Many new business
models based on the Internet have not yet found proven ways to generate
profits or reduce costs. Digitally enabling a firm for electronic commerce and
electronic business requires far-reaching organizational change, including
redesign of business processes; recasting relationships with customers,
suppliers, and other business partners; and new roles for employees.
Channel conflicts may erupt as the firm turns to the Internet as an
alternative outlet for sales. Security, privacy and legal issues pose additional
electronic commerce challenges.

Chapter 5--Ethical and Social Issues in the Digital Firm


What ethical, social, and political issues are raised by information systems?
Information technology has raised new possibilities for behavior for which
laws and rules of acceptable conduct have not yet been developed. The main
ethical, social, and political issues raised by information systems center
around information rights and obligations, property rights, accountability and
control, system quality, and quality of life. Ethical, social, and political issues
are closely related. Ethical issues confront individuals who must choose a
course of action, often in a situation in which two or more ethical principles
are in conflict (a dilemma). Social issues spring from ethical issues as
societies develop expectations in individuals about the correct course of
action. Political issues spring from social conflict and have to do largely with
laws that prescribe behavior and seek to use the law to create situations in
which individuals behave correctly. Are there specific principles for conduct
that can be used to guide decisions about ethical dilemmas? Six ethical
principles are available to judge conduct. These principles are derived
independently from several cultural, religious, and intellectual traditions and
include the Golden Rule, Immanuel Kant's Categorical Imperative, Descartes'
rule of change, the Utilitarian Principle, the Risk Aversion Principle, and the
ethical "no free lunch" rule. These principles should be used in conjunction
with an ethical analysis to guide decision making. The ethical analysis
involves identifying the facts, values, stakeholders, options, and
consequences of actions. Once completed, one can consider what ethical
principle to apply to a situation to arrive at a judgment. Why does
contemporary information systems technology pose challenges to the
protection of individual privacy and intellectual property? Contemporary
information systems technology, including the Internet technology,
challenges traditional regimens for protecting individual privacy and
intellectual property. Database and data analysis technology allows
companies to easily gather personal data about individuals from many
different sources and analyze these data to create detailed electronic
profiles about individuals and their behavior. Data flowing over the Internet
can be monitored at many points. The activities of Web site visitors can be
closely tracked using "cookies" and other Web monitoring tools. Not all Web
sites have strong privacy protection policies, and they do not always allow
for informed consent regarding the use of personal information. The on-line
industry prefers self-regulation to the U.S. government tightening privacy
protection legislation. Traditional copyright laws are insufficient to protect
software piracy because digital material can be so easily copied. Internet
technology also makes intellectual property even more difficult to protect
because digital material can be copied and transmitted to many different
locations simultaneously over the Net. Web pages can be easily constructed
by using pieces of content from other Web sites without permission. How
have information systems affected everyday life? Although computer
systems have been sources of efficiency and wealth, they have some
negative impacts. Errors in large computer systems are impossible to totally
eradicate. Computer errors can cause serious harm to individuals and
organizations, and existing laws and social practices are often unable to
establish liability and accountability for these problems. Less serious errors
are often attributable to poor data quality, which can cause disruptions and
losses for businesses. Jobs can be lost when workers are replaced by
computers or tasks become unnecessary in reengineered business
processes. The ability to own and use a computer may be exacerbating
socioeconomic disparities among different racial groups and social classes.
Widespread use of computers increases opportunities for computer crime
and computer abuse. Computers can also create health problems such as
repetitive stress injury, computer vision syndrome, and technostress. How
can organizations develop corporate polices for ethical conduct? For each of
the five moral dimensions of information systems, corporations should
develop an ethics policy statement to assist individuals and to encourage the
correct decisions. The policy areas are as follows. Individual information
rights: Spell out corporate privacy and due process policies. Property rights:
Clarify how the corporation will treat property rights of software owners.
Accountability and control: Clarify who is responsible and accountable for
corporate information. System quality: Identify methodologies and quality
standards to be achieved. Quality of life: Identify corporate policies on
family, computer crime, decision making, vulnerability, job loss, and health
risks.

Chapter 6--Managing Hardware and Software Assets


What computer processing and storage capability does our organization
need to handle its information and business transactions? Managers should
understand the alternative computer hardware technologies available for
processing and storing information so that they can select the right
technologies for their business. Modern computer systems have six major
components: a central processing unit (CPU), primary storage, input devices,
output devices, secondary storage, and communications devices. All of these
components need to work together to process information for the
organization. The CPU is the part of the computer where the manipulation of
symbols, numbers, and letters occurs. The CPU has two components: an
arithmetic-logic unit and a control unit. The CPU is closely tied to primary
memory, or primary storage, which stores data and program instructions
temporarily before and after processing. Several different kinds of
semiconductor memory chips are used with primary storage: RAM (random
access memory) is used for short-term storage of data and program
instructions; and ROM (read-only memory) permanently stores important
program instructions. Computer processing power depends in part on the
speed of their microprocessors, which integrate the computer's logic and
control on a single chip. Microprocessors capabilities can be gauged by their
word length, data bus width, and cycle speed. Most conventional computers
process one instruction at time, but computers with parallel processing can
process multiple instructions simultaneously. The principal secondary
storage technologies are magnetic disk, optical disk, and magnetic tape Disk
permits direct access to specific records and is much faster than tape. Disk
technology is used in on-line processing. Optical disks can store vast
amounts of data compactly. CD-ROM disk systems can only be read from,
but rewritable optical disk systems are becoming available. Magnetic tape
stores records in sequence and only can be used in batch processing. The
principal input devices are keyboards, computer mice, touch screens,
magnetic ink and optical character recognition, pen-based instruments,
digital scanners, sensors, and voice input. The principal output devices are
video display terminals, printers, plotters, voice output devices, and
microfilm and microfiche. In batch processing, transactions are accumulated
and stored in a group until the time when it is efficient or necessary to
process them. In on-line processing, the user enters transactions into a
device that is directly connected to the computer system. The transactions
are usually processed immediately. Multimedia integrates two or more types
of media, such as text, graphics, sound, voice, full-motion video, still video,
and/or animation into a computer-based application. What arrangement of
computers and computer processing would best benefit our organization?
Managers should understand the capabilities of various categories of
computers and arrangements of computer processing. The type of computer
and arrangement of processing power that should be used by the business
depends on the nature of the organization and its problems. Computers are
categorized as mainframes, midrange computers, PCs, workstations, or
supercomputers. Mainframes are the largest computers; midrange
computers can be minicomputers used in factory, university, or research lab
systems or servers providing software and other resources to computers on
a network. PCs are desktop or laptop machines; workstations are desktop
machines with powerful mathematical and graphic capabilities; and
supercomputers are sophisticated, powerful computers that can perform
massive and complex computations rapidly. Because of continuing advances
in microprocessor technology, the distinctions between these types of
computers are constantly changing. Computers can be networked together
to distribute processing among different machines. In the client/server model
of computing, computer processing is split between "clients" and "servers"
connected via a network. The exact division of tasks between client and
server depends on the application. Network computers are pared-down
desktop machines with minimal or no local storage and processing capacity.
They obtain most or all of their software and data from a central network
server. Whereas network computers help organizations maintain central
control over computing, peer-to-peer computing puts processing power back
on users' desktops, linking individual PCs, workstations, or other computers
through the Internet or private networks to share data, disk space, and
processing power for a variety of tasks. What kinds of software and software
tools do we need to run our business? What criteria should we use to select
our software technology? Managers should understand the capabilities of
various types of software so they can select software technologies that
provide the greatest benefit for their firms. There are two major types of
software: system software and application software. System software
coordinates the various parts of the computer system and mediates between
application software and computer hardware. Application software is used by
application programmers and some end users to develop specific business
applications. The system software that manages and controls the activities of
the computer is called the operating system. The operating system acts as
the chief manager of the information system, allocating, assigning, and
scheduling system resources and monitoring the use of the computer.
Multiprogramming, multitasking, virtual storage, time sharing, and
multiprocessing are operating system capabilities that enable system
resources to be used more efficiently so that the computer can attack many
problems at the same time. Other system software includes computer-
language translation programs that convert programming languages into
machine language and utility programs that perform common processing
tasks. PC operating systems have developed sophisticated capabilities such
as multitasking and support for multiple users on networks. Leading PC
operating systems include Windows XP, Windows 98 and Windows Me;
Windows 2000, Windows CE, UNIX, Linux, OS/2, Mac OS, and DOS. PC
operating systems and many kinds of application software now use graphical
user interfaces. The general trend in software is toward user-friendly, high-
level languages that both increase professional programmer productivity and
make it possible for end users to work directly with information systems.
Conventional programming languages include assembly language, FORTRAN,
COBOL, BASIC and Pascal, and C, and each is designed to solve specific
types of problems. Fourth-generation languages are less procedural than
conventional programming languages and enable end users to perform many
software tasks that previously required technical specialists. They include
popular PC software tools such as word processing, spreadsheet, data
management, presentation graphics, and e-mail software along with Web
browsers and groupware. Enterprise software, middleware, and enterprise
application integration software are all software tools for promoting
enterprise-wide integration of business processes and information system
applications. Software selection should be based on criteria such as
efficiency, compatibility with the organization's technology platform, vendor
support, and whether the software tool is appropriate for the problems and
tasks of the organization. Of what new software technologies should we be
aware? How would they benefit our organization? Object-oriented
programming tools and new programming languages such as Java, hypertext
markup language (HTML), and eXtensible Markup Language (XML) can help
firms create software more rapidly and efficiently and produce applications
based on the Internet or data in Web sites. Object-oriented programming
combines data and procedures into one object, which can act as an
independent software building block. Each object can be used in many
different systems without changing program code. Java is an object-oriented
programming language designed to operate on the Internet. It can deliver
precisely the software functionality needed for a particular task as a small
applet that is downloaded from a network. Java can run on any computer and
operating system. HTML is a page description language for creating Web
pages. XML is a language for creating structured documents in which data
are tagged for meanings. The tagged data in XML documents and Web pages
can be manipulated and used by other computer systems. XML can thus be
used to exchange data between Web sites to different legacy systems within
a firm and between the systems of different partners in a supply chain. How
should we acquire and manage the firm's hardware and software assets?
Both hardware and software are major organizational assets that must be
carefully managed. Electronic commerce and electronic business have put
new strategic emphasis on technologies that can store vast quantities of
transaction data and make them immediately available on-line. Managers
and information systems specialists need to pay special attention to
hardware capacity planning and scalability to ensure that the firm has
enough computing power for its current and future needs. They also need to
balance the costs and benefits of owning and maintaining their own
hardware and software renting these assets from external service providers.
On-line storage service providers (SSPs) rent out storage space to
subscribers over the Web, selling computer storage as a pay-per-use utility.
Application service providers (ASPs) rent out software applications and
computer services from remote computer centers to subscribers over the
Internet or private networks. Calculating the total cost of ownership (TCO) of
the organization's technology assets can help provide managers with the
information they need to manage these assets and decide whether to rent or
own these assets. The total cost of owning technology resources includes not
only the original cost of computer hardware and software but also costs for
hardware and software upgrades, maintenance, technical support, and
training.

Chapter 8--Telecommunications and Networks


What technologies are used in telecommunications systems? A
telecommunications system consists of devices that create a network for
communication from one location to another by electronic means. The
essential components of a telecommunications system are computers,
terminals, other input/output devices, communications channels,
communications processors (such as modems, multiplexers, controllers, and
front-end processors), and telecommunications software. Different
components of a telecommunications network can communicate with each
other with a common set of rules termed protocols. Data are transmitted
throughout a telecommunications network using either analog signals or
digital signals. A modem is a device that translates analog signals to digital
signals and vice versa. What telecommunications transmission media should
our organization use? The capacity of a telecommunications channel is
determined by the range of frequencies it can accommodate. The higher the
range of frequencies, called bandwidth, the higher the capacity (measured in
bits per second). The principal transmission media are twisted copper
telephone wire, coaxial copper cable, fiber-optic cable, and wireless
transmission using microwave, satellite, low-frequency radio waves, or
infrared waves. The choice of transmission medium depends on the distance
and volume of communication required by the organization and its financial
resources. Fiber-optic and coaxial cable are used for high-volume
transmission but are expensive to install. Twisted wire can only transmit low
volumes of data, but it is less expensive than other media, allowing
companies to use the existing wiring for telephone systems for digital
communication. Microwave and satellite are used for wireless
communication over long distances. How should our organization design its
networks? Network design should be based on the organization's information
requirements and the distance required for transmission. The three common
network topologies are the star network, the bus network, and the ring
network. In a star network, all communications must pass through a central
computer, and star networks are primarily used when some centralized
processing is required. The bus network links a number of devices to a single
channel and broadcasts all of the signals to the entire network, with special
software to identify which components receive each message. In a ring
network, each computer in the network can communicate directly with any
other computer but the channel is a closed loop. Data are passed along the
ring from one computer to another. Network design should also consider
geographic scope. Local area networks (LANs) and private branch exchanges
(PBXs) are used to link offices and buildings in close proximity. LANs require
special wiring, but PBXs are limited to existing telephone lines and low
transmission speeds. Wide area networks (WANs) span a broad geographical
distance, ranging from several miles to continents, and are private networks
that are independently managed. What alternative network services are
available to our organization? A number of services are available to
organizations for network management and Internet access. Value-added
networks (VANs) sell wide area networking services to companies that do not
want to build or maintain their own private networks. VANs (and the Internet)
achieve economies and higher speeds in long-distance transmission by using
packet switching, which breaks messages into small packets that are sent
independently along different paths in a network and then reassembled at
their destination. Integrated Services Digital Network (ISDN) is an
international standard for dial-up network access that integrates voice, data,
image, and video services in a single link. Basic Rate ISDN can transmit data
at a rate of 128 kilobits per second on an existing local telephone line. Firms
have the option of using frame relay, asynchronous transfer mode (ATM),
digital subscriber line, cable modem, and T1 lines for high transmission
capacity. Frame relay is a shared network service that is faster and less
expensive than packet switching because it does not perform error
correction routines. ATM can seamlessly and dynamically switch voice, data,
images, and video between computers from different vendors and can tie
LANs and wide area networks together. ATM can transmit up to 2.5 GBPS.
Digital subscriber line (DSL) technologies, cable modems, and T1 lines are
often used for high-capacity Internet connections. Like ISDN, DSL
technologies also operate over existing copper telephone lines to carry
voice, data, and video, but they have higher transmission capacities than
ISDN. Asymmetric digital subscriber line (ADSL) supports a transmission rate
of 1.5 to 9 megabits per second when receiving data and up to 640 kilobits
per second when sending data. Symmetric digital subscriber line (SDSL)
supports the same transmission rate for sending and receiving data of up to
3 megabits per second. Cable modems are modems designed to operate
over cable TV lines. They can provide high-speed access to the Web or
corporate intranets of up to 4 megabits per second. A T1 line is a dedicated
telephone connection comprising 24 channels that can support a data
transmission rate of 1.544 megabits per second. Each of these 64-kilobit-per-
second channels can be configured to carry voice or data traffic. What
telecommunications applications can be used for electronic commerce and
electronic business? The principal telecommunications applications for
electronic commerce and electronic business are electronic mail, voice mail,
fax, digital information services, distance learning and e-learning,
teleconferencing, dataconferencing, videoconferencing, electronic data
interchange (EDI), and groupware. EDI is the computer-to-computer
exchange between two organizations of standard transaction documents
such as invoices, bills of lading, and purchase orders.
Chapter 9--The Internet and the New Information Technology
Infrastructure
What is the new information technology (IT) infrastructure for business? Why
is connectivity so important in this infrastructure? The new information
technology (IT) infrastructure uses a mixture of computer hardware supplied
by different vendors, including mainframes, PCs, and servers, which are
networked to each other. More processing power is available on the desktop
through client/server computing and mobile personal information devices
that provide remote access to the desktop from outside the organization.
The new IT infrastructure also incorporates public infrastructures, such as the
telephone system, the Internet, and public network services and electronic
devices. Connectivity is a measure of how well computers and computer-
based devices can communicate with one another and "share" information in
a meaningful way without human intervention. It is essential in enterprise
networking in the new IT infrastructure, where different hardware, software,
and network components must work together to transfer information
seamlessly from one part of the organization to another. TCP/IP and OSI are
important reference models for achieving connectivity in networks. Each
divides the communications process into layers. UNIX is an operating system
standard that can be used to create open systems, as can the Linux
operating system. Connectivity also can be achieved by using Internet
technology, XML, and Java. How does the Internet work? What are its major
capabilities? The Internet is a worldwide network of networks that uses the
client/server model of computing and the TCP/IP network reference model.
Using the Net, any computer (or computing appliance) can communicate
with any other computer connected to the Net throughout the world. The
Internet has no central management. The Internet is used for
communications, including e-mail, public forums on thousands of topics, and
live, interactive conversations. It also is used for information retrieval from
hundreds of libraries and thousands of library, corporate, government, and
nonprofit databases. It has developed into an effective way for individuals
and organizations to offer information and products through a Web of
graphical user interfaces and easy-to-use links worldwide. Major Internet
capabilities include e-mail, Usenet, LISTSERV, chatting, Telnet, FTP, and the
World Wide Web. How can organizations benefit from the Internet? Many
organizations use the Net to reduce communications costs when they
coordinate organizational activities and communicate with employees.
Researchers and knowledge workers are finding the Internet a quick, low-
cost way to gather and disperse knowledge. The global connectivity and low
cost of the Internet helps organizations lower transaction and agency costs,
allowing them to link directly to suppliers, customers, and business partners
and to coordinate activities on a global scale with limited resources. The Web
provides interactive multimedia capabilities that can be used to create new
products and services and closer relationships with customers.
Communication can be customized to specific audiences. What are the
principal technologies for supporting electronic commerce and electronic
business? Businesses need a series of software tools for maintaining a Web
site. Web server software locates and manages Web pages stored on Web
server computers. Electronic commerce server software provides capabilities
for setting up electronic storefronts and arranging for payments and
shipping. Customer tracking and personalization tools collect, store, and
analyze data on Web site visitors. Content management tools facilitate the
collection, assembly, and management of Web site content. Web site
performance monitoring tools monitor the speed of Web site transactions
and identify Web site performance problems. Businesses can use an external
vendor's Web hosting service as an alternative to maintaining their own Web
sites. What management problems are raised by the new information
technology (IT) infrastructure? How can businesses solve these problems?
Problems posed by the new IT infrastructure include loss of management
control over systems; the need to carefully manage organizational change;
connectivity and application integration challenges; the difficulty of ensuring
network scalability, reliability, and security; and controlling the hidden costs
of enterprise computing. Solutions include planning for and managing the
business and organizational changes associated with enterprise-wide
computing; increasing end-user training; asserting data administration
disciplines; and considering connectivity, application integration, bandwidth,
and cost controls when planning the IT infrastructure.