W48 Chapter 8 Functional, Enterprise, and Interorganizational Systems

Manager’s Checklist W8.1 (page 242)

Benefits of Internet Transaction • Offers flexibility to accommodate unpredictable growth in processing

Processing demand.
• Is cost effective for small dollar amounts.
• Makes billing interactive and automatic, enabling companies to offer
services to anyone, not just subscribers.
• Can offer timely and easy search and analysis of large databases.
• Can effectively and efficiently store and process multimedia data such as
pictures and sound, including video databases.
• Handles high data throughput to support inquiries requiring massive file size.
• Offers fast response time.

Manager’s Checklist W8.2 (page 246)

Benefits of Budgeting Software
• Reduces the time and effort needed in the budget process.
• Facilitates the integration of corporate strategic objectives with operational
plans.
• Maintains data integrity of budgets and planning.
• Makes planning an ongoing process.
• Explores and analyzes data across various planning and reporting
dimensions.
• Automatically monitors performance exceptions against plans to recognize
patterns and trends, thus supplementing management by exception.
• Explores and analyzes the implications of organizational and environmental
changes.

The Enabling Role of Information Technology in CRM (page 253)

Both the knowledge about customers and their behavior, and CRM programs are
greatly facilitated by several information technologies. In order to better understand
the contribution of IT to CRM, let’s look at some actual examples of the areas in
which IT supports CRM activities.
• American Airlines generates personalized Web pages for each of about 800,000
registered travel-planning customers using intelligent agent technology.
• Manchester Metropolitan University (U.K.) tracks a population of 30,000 students,
manages modular courses, and keeps the student management system updated. The
system is based on databases and parallel processing.
• Investment broker Charles Schwab’s call center handles effectively over 1 million
customer calls every day.
• State Farm Insurance Co. makes retaining customers its primary objective. Using
a computerized incentives system, the company manages several initiatives for
retaining customers.
 Chapter 8 Functional, Enterprise, and Interorganizational Systems W49

Table W8.1 Training Over the Web (page 259)

Company Name and Trainees
Sun Microsystems: Salespeople, distributors
KM Energy: Employees in remote locations
Hewlett-Packard (HP): Employees, distributors,
customers (for free)
Digital Equipment: Employees, distributors,
customers (for free)
Ernst & Young (CPA): Employees
Microage: Internal sales reps,
reps of thousands of its resellers
Cobe BCT Medical Therapeutic Devices:
Medical technicians worldwide
AAA of California: Salespeople and employees
Description
Uses the Internet and extranet to reach thousands of students.
Conducts 250 classes per year. Saves 50 percent in cost.
Decreases training time by 75 percent.
Training in new software, primarily from Microsoft. Uses the
Internet.
Training is broadcast on the Internet groupware.
Exercises are posted on the intranet.
Class discussions take place over the intranet.
Offers 11,000 different courses. Schedules, enrollment, and
actual delivery take place on the intranet and extranet (for business
partners).
Replaced CD-ROM-based training. Considerable multimedia
training.
Internet-based training. Teaching, course administration,
interactive, and links to databases.
Web training on how to use the company’s complex devices.
Web training for 7,000 employees in 100 offices.

Intranet Applications in Human Resources Management (page 259)

As we’ve seen, Web applications facilitate the use of IT in the human resources de-
partment. Many corporations use their intranet to conduct human resources manage-
ment activities, as the following examples demonstrate.

EXAMPLES
Edify offers multiple employee services. Edify Corporation’s employee service sys- edify.com
tem allows users to access information via PCs, voice-recognition phone, kiosks, or
faxes. The package offers intranet-based automation of company procedures, collec-
tive bargaining agreements, employees’ handbooks, phone directories, pay scales, job
banks, benefits, and training.
Oracle offers benefits enrollment. Oracle Corporation conducts its flexible benefits oracle.com
enrollment program on the intranet. The employees give the program high marks be-
cause it is simple and fast. Oracle allows new hires to input benefits data online. Fi-
nally, Oracle created links from its intranet pages to Fidelity Investments’ 401(k)
pages, so employees can learn about funds and pension plans online as well as register
for the plans.
Aetna offers health care information. Aetna Health Plan’s directory of primary aetna.com
care physicians, hospitals, medical services, and health information is available
to employees online around the clock. The company also offers insurance options
online. ●
W50 Chapter 8 Functional, Enterprise, and Interorganizational Systems

Manager’s Checklist W8.3 (page 264)

Benefits of Extreme Integration
• Optimally satisfies customer demand, providing high-quality service and
quick responsiveness.
• Is comprehensive, covering all internal activities, suppliers, distributors, and
customers.
• Utilizes capacity in an optimal manner.
• Not only reacts to, but also stimulates and anticipates customer demand.
• Provides feasible and accurate plans based on those estimates of customer
demand.
• Offers wide planning breadth, covering materials, plants, labor,
transportation, constraints, demand, and distribution.
• Has a synchronous, rather than serial, planning approach.
Source: Forrester Research Inc. (forrester.com).

Business Drivers of Interorganizational Systems (page 265)

Interorganizational systems have developed in direct response to two business pres-
sures (drivers): the growing desirability to reduce costs and to improve the effective-
ness and timeliness of business processes. More specifically, by connecting the
information technologies of business partners, IOSs enable both partners to:
1. Reduce the costs of routine business transactions.
2. Improve the quality of the information flow by reducing or eliminating errors.
3. Compress cycle time in the fulfillment of business transactions, regardless of geo-
graphical distance.
4. Eliminate paper processing and its associated inefficiencies and costs.
5. Make the transfer and processing of information easy for users.

EXAMPLE (page 266)

Managing accounting information across Asia. Le Saunda Holding Company

(Hong Kong) is a multinational company that manages 32 subsidiaries in four Asian
countries, mostly in the manufacturing, import, and sale of shoes. Managing the fi-
nancing and cash flow is a complex process. All accounting information flows to head-
quarters electronically. Sales data are electronically collected at point-of-sale (POS)
terminals and, together with inventory data (which are updated automatically as sales
occur), are transferred to headquarters. Other relevant data, such as advertising and
promotions, merchant lists, and cash flow, are also transmitted electronically and col-
lected in a centralized database for storage and processing.
To cope with the rapid growth of the company, a sophisticated accounting soft-
ware package, SunAccount, was installed. The result was radical improvement in ac-
counting procedures. In 1999, for example, it took less than 8 minutes—rather than
the full day it formerly took—to produce an ad-hoc special report. The new account-
ing software generates many reports, helping functional managers make quicker and
better decisions. The system is also much more reliable, and internal and external au-
diting is easier. Headquarters knows what is going on almost as soon as it occurs. All
of these improvements have led to a substantial growth in revenue and profits for the
firm. ●
 Chapter 8 Functional, Enterprise, and Interorganizational Systems W51

Benefits of Global Information Systems (page 266)

Regardless of its structure, a company with global operations relies heavily on IT. The
major benefits of global information systems for such organizations, made possible by
IT, are:
1. Effective communication at a reasonable cost. The partners are far from each
other, yet they are able to work together, make decisions, monitor transactions,
and provide controls. Business partners communicate through e-mail, EDI, and ex-
tranets. Communication is even more critical if the partners speak different lan-
guages. Intelligent IT systems can provide automatic translation.
2. Effective collaboration to overcome differences in distance, time, language, and
culture. Collaboration can be enhanced with groupware software (Chapter 6),
group decision support systems (see Chapter 11), extranets, and teleconferencing
devices (Chapter 6).
3. Access to databases of business partners and ability to work on the same projects
while their members are in different locations. Information technologies such as
video teleconferencing and screen sharing (Chapter 6) are useful for this purpose.

Table W8.2 Issues of Data Transfer Across International Borders (page 267)
Security Issues
National security. Databases may contain classified information relevant to national security.
Organizational security. France, for example, requires that every database maintained in that country be registered with
the government, so classified material can be monitored.
Personal security. Sweden, Canada, France, and Brazil require that information be processed within their borders as much
as possible. This may increase the cost of processing.

Technical Issues
Data vulnerability and accuracy. Due to global flows, the problems may be more acute.
Technical standards. There are no global technical standards for transmitting information across borders. Also,
communication infrastructures may differ from one country to another.

Sovereignty Issues
National sovereignty. Some countries prefer that hardware, software, and networks used be made in their country.
Economic sovereignty. Some countries want information to be processed within their boundaries to increase employment
and improve the balance of payments.
Cultural sovereignty. Many countries want to maintain their cultural identities. They are afraid of what is described as
“electronic colonialism.” They can control what is shown on television, but it is difficult to control what is on the Internet
or on an electronic bulletin board.

Developing Issues
Legal and regulatory issues. Every country has its own legal system regarding national, organizational, and personal flow
and use of data and information.
Intellectual property. Transfer of data may violate intellectual property laws with regard to copyrights, patents, licenses,
and copying of software. There are also different laws in different countries and modes of enforcement differ as well.
Developing countries. Many so-called Third World nations have fears regarding the use of information flowing into their
territories. Also, they lack a robust communication infrastructure.