-BM, CHP 1 1.
1 The Role of Information Systems in Business Today Whats new in MIS Technology : Cloud computing platform emerges as a major business area of innovation More powerful energy efficient computer processing and storage devices. Growth in software as a service (SaaS) Netbooks emerge as a growing presence in the PC marketplace often using OS software A mobile digital platform emerges to compete with the PC as a business system. Management: Managers adopt online collaboration and social networking software to improve coordination, collaboration and knowledge sharing Business intelligence applications accelerate Managers adopt millions of mobile tools such as smart-phones and mobile internet devices to accelerate decision making and improve performance. Virtual meetings proliferate Organizations: Web 2.0 applications are widely adopted by firms Telework gains momentum in the workplace Outsourcing production Co-creation of business value
The Emerging Digital Firm: a [DIGITAL FIRM] is one in which nearly all of the organizations significant business relationships with customers, suppliers and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning the entire organization or linking multiple orgs. [BUSINESS PROCESSES] refer to the set of logically related tasks and behaviors that organizations develop over time to produce specific business results and the unique manner in which these activities are organized and coordinated. STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS > Operational Excellence > New Products, Services, and Business models > Customer and Supplier Intimacy > Improved decision making > Competitive Advantage > Survival
politics and culture. > Organizations The key elements of an organization are its people.
. control operations. Manufacturing and Production. WHAT IS AN INFORMATION SYSTEM? An [INFORMATION SYSTEM] can be defined technically as a set of interrelated components that collect (or retrieve). delivers and sells a product or services to create wealth
1. Human Resources. Levels in a Firm: Senior Management: Makes long range strategic decisions about products and services as well as ensures financial performance of the firm Middle management: carries out the programs and plans of senior management and Operational Management is responsible for monitoring the daily activities of the business. structure. [COMPUTER LITERACY] Focuses primarily on knowledge of information technology.
3 Activities in an information system produce the information that organizations need to make decisions. Finance and accounting. OUTPUT. which encompasses an understanding of the management and organizational dimensions of systems as well as the technical dimensions of systems. and distribute information to support decision making and control in an organization. business processes.New Products.
DIMENSIONS OF INFORMATION SYSTEMS [INFORMATION SYSTEMS LITERACY] The broader understanding of information systems. analyze problems and create new products or services. store. [DATA] in contrast are streams of raw facts representing events occurring in organizations or the physical environment before they have been organized and arranged into a form that people cal understand and use. scientist or architects design products or services and create new knowledge for the firm. Major Business functions: Sales & Marketing. Data Workers such as secretaries or clerks assist with the the paperwork at all levels of the firm. PROCESSING . Knowledge workers such as engineers. These activities are: INPUT . Production or services workers actually produce the product and deliver the service. Services and Business Models: A [BUSINESS MODEL] describes how a company produces.2 Perspectives on Information Systems [INFORMATION TECHNOLOGY] consists of all the hardware and software that a firm needs to use in order to achieve its business objectives. process. [INFORMATION] data that have been shaped into a form that is meaningful and useful to humans.
COMPLEMENTARY ASSETS – ORGANIZATIONAL CAPITAL AND THE RIGHT BUSS> MODEL [COMPLEMENTARY ASSETS] are those assets required to derive value from a primary investment. processing and output activities in an information system.
− the investments in organization and management are also known as [ORGANIZATIONAL AND
Table : Complimentary social.3 CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS.>Technology: [COMPUTER HARDWARE] the physical equipment used for input.stable market environments
1. managerial. [DATA MANAGEMENT TECHNOLOGY] consist of the software governing the organization of data on physical storage media. Study of information systems is a multidisciplinary field. [COMPUTER SOFTWARE] consist of detailed. the field can be divided into technical and behavioral approaches.
. preprogrammed instructions that control and coordinate the computer hardware. and organizational assets required to optimize returns from Information technology investments Organizational Assets Supportive organizational culture that values efficiency and effectiveness Appropriate business model Efficient business processes Decentralized authority Distributed decision making rights Strong IS development team Managerial Assets Strong senior management support for technology investment and change Incentives for management innovation Teamwork and collaborative work investments Training programs to enhance management decision skills Management culture that values flexibility and knowledge-based decision making The Internet and telecommunications infrastructure IT-enriched educational programs raising labor force computer literacy Standards Laws and regulations creating fair. components in and information system.
as well as the physical technology and formal capabilities of these systems. and operations research. BEHAVIORAL APPROACH
Concerned with the behavioral issues that arise in the development and long-term maintenance of information systems. Other behavioral disciplines contribute important concepts and methods. management and organizational policy and behavior Review Summary Page 64
. The behavioral approach does not ignore technology. 2.utilization. indeed information systems technology is often the stimulus for a behavioral problem or issue. design. management science. The disciplines that contribute to the technical approach are computer science. But the focus of this approach is generally not on technical solutions – instead it concentrates on changes and attitudes.1. implementation. Issues such as strategic business integration. TECNICAL APPROACH The approach emphasizes mathematically based models to study information systems. and management cannot be explored usefully with the models used in the technical approach.
credit decisions and the flow of materials in a factory. Business processes are concrete workflows of material. and the ways in which management chooses to coordinate work Table 2.CHP 2 – GLOBAL e-BUSINESS: How Businesses use Information Systems. they often bring in information from external sources. They focus on problems that are unique and rapidly changing for which the procedure for arriving at a solution may not be fully predifined in advance. MIS summarize and report on the company's basic operations using data supplied by transaction processing systems. Also refers to unique ways in which organizations coordinate work. MIS provide middle managers with report on the organization's current performance. information. Although DSS use internal information from TPS (Transaction Processing Systems) and MIS. information and knowledge – sets of activities. cash deposits. such as sales order entry. This information is used to monitor and conrol the business and predict future performance. coordinated.
. payroll etc
MANAGEMENT INFORMATION SYSTEMS AND DECISION SUPPORT SYSTEMS> The term [MANAGEMENT INFORMATION SYSTEMS (MIS) also designates a specific category of information systems serving middle management. such as sales.1 BUSINESS PROCESSES AND INFORMATION SYSTEMS. receipts. hotel reservations. 2. and knowledge. [TRANSACTION PROCESSING SYSTEMS (TPS)] provide this kind of information – it’s a computerized system that performs and records the daily routine transactions necessary to conduct business. payroll. and focused to produce valuable product or service. [DECISION SUPPORT SYSTEMS (DSS)] support non routine decision making for middle management.2 TYPES OF INFORMATION SYSTEMS TRANSACTION PROCESSING SYSTEMS> Operational Managers need systems that keep track of the elementary activities and transactions of the organization. BUSINESS PROCESSES> refer to the manner in which work is organized. such as current stock prices or product prices of competitors.1 Functional Business Processes Manufacturing and production
Assembling the product Checking for quality Producing bills of materials Identifying customers making customers aware of the product Selling the product Paying creditors Creating financial statements Managing cash accounts Hiring employees Evaluating employees job performance Enrolling employees in benefits plan
Sales and marketing
Finance and Accounting
ENTERPRISE WIDE INFORMATION SYSTEM SOLUTIONS USED BY BUSINESSES: Internet Based Collaboration Environments Teams who work together from many different locations. > Knowledge Management Systems: [KNOWLEDGE MANAGEMENT SYSTEMS [KMS)] enable organizations to better manage processes for capturing and applying knowledge and expertise. production. and human resources.
2. and include all elvels of management.3 SYSTEMS THAT SPAN THE ENTERPRISE ENTERPRISE APPLICATIONS> [ENTERPRISE APPLICATIONS] which are systems that span functional areas. production. They also link the firm to external sources of knowledge. a space separate
. or the Web. and distribution. by collecting data from various key business processes in manufacturing and production. solve the problem of fragmentation of systems and data. They are concerned with questions such as What will employee levels be in 5 years. customer satisfaction. and make it available wherever and whenever it is needed to improve business processes and management decisions. > Customer Relationship Management Systems: [CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)] help firms manage their relationships with their customers. retail outlets. evaluation. > Supply chain Management Systems (SCM) [SUPPLY CHAIN MANAGEMENT SYSTEMS] help businesses manage relationships with their suppliers. wireless devices. and delivery of products and services so that they can make better decisions about how to organize and schedule sourcing. sales and marketing. and storing the data in a singe central data repository.EXECUTIVE SUPPORT SYSTEMS FOR SENIOR MANAGEMENT> [EXECUTIVE SUPPORT SYSTEMS] help senior management make these decisions – being strategic issues and long-term trends. Supply Chain Management systems are one type of [INTERORGANIZATIONAL SYSTEMS] because they automate the flow of information across organizational boundaries. ESS addresses non routine decisions requiring judgment. These systems help suppliers. These systems collect all relevant knowledge and experience in the firm. inventory levels. 4 major Enterprise Applications: > Enterprise Systems: [ENTERPRISE SYSTEMS] aka ENTERPRISE RESOURCE PLANNING (ERP) systems. These tools provide storage space for team documents. finance and accounting. and logistics companies share information about orders. CRM systems consolidate and integrate customer information from multiple communication channels – telephone. and customer retention. distributors. and service ot optimize revenue. CRM systems provide information to coordinate all of the business processes that deal with customers in sales and marketing. around the world need tools to support workgroup collaboration. purchasing firms. focus on executing business processes across the business firm. What are the long term industry cost trends. and insight because there is no agreed on procedure for arriving at a solution. email. and where does our firm fit in.
businesses. and audio-visual environment where members can meet face to face in live video conferencing E-mail and instant messaging (IM) E-mail and instant messaging have been embraced by corporations as a major communication and collaboration tool supporting interaction jobs Cell phones and Smart phones: Cell phones are today a basic part of a firms telecommunications infrastructure for supporting professionals and other employees whose primary job is talk with one another. systems analysts. E-COMMERCE. such as programmers. Social networking tools are quickly becoming a corporate tool for sharing ideas and collaborating among interaction-based jobs in the firm. Wikis: Wikis are the ideal tool for storing and sharing company knowledge and insights. and managers. AND E-GOVERNMENT [ELECTRONIC BUSINESS / E-BUSINESS] refers to the use of digital technology and the Internet to execute the major business processes in the enterprise. and the data generated by their communications may be stored in large corporate systems for later review and use in legal proceedings Social Networking: LinkedIn provide networking services to business professionals. with customers and vendors. interact. [ELECTRONIC COMMERCE / E-COMMERCE] is the part of e-business that deals with the buying and selling of goods and services over the Internet.
2. while other niche sites have sprung up to serve lawyers. [E-GOVERNMENT] refers to the application of the Internet and networking technologies to digitally enable government and public sector agencies relationships with citizens. training sessions and lounges. and information systems managers. group calendars. iPhones and BlackBerrys are digital devices. project leaders. and exchange ideas at these virtual locations. and other arms of government. Real world people represented by avatars meet. Cell phones.4 THE INFORMATION SYSTEMS FUNCTION IN BUSINESS THE INFORMATION SYSTEMS DEPARTMENT: Consists of specialists.from corporate email for team communications. doctors. Wikis are destined to become a major repository for unstructured corporate knowledge in part because they are so much less costly that formal knowledge management systems and they can be much more dynamic and current. Virtual Worlds: Companies use virtual worlds and avatars representing individuals to held meetings. Systems Analysts constitute the principal liaisons between the information systems groups and the
Programmers – are highly trained technical specialists who write the software instructions for computers. engineers and dentists.
telecommunications managers. Chief Knowledge Officer (CKO) is responsible for the firms knowledge management program. Chief Information Officer (CIO). physical facility managers. Chief Privacy Officer (CPO) – is responsible for ensuring that the company complies with existing data privacy laws. IT specifies the decision rights and framework for accountability to ensure that the use of information technology supports the organizations strategies and objectives.-
rest of the organization. in many companies the information systems department is headed by a CIO. or database specialist. Chief Security Officer (CSO) is in charge of information systems security for the firm and is responsible for enforcing the firms information security policy. The CSO is responsible for educating and training users and information systems specialists about security. The CIO is a senior manager who overseas the use of information technology in the firm. project managers.to translate business problems and requirements into information requirements and systems. End Users – are representatives of departments outside of the information systems group for whom applications are developed
IT GOVERNANCE: The question of how the information systems department should be organized is part of the larger issue of IT governance IT GOVERNANCE includes the strategy and policies for using information technology within an organization. Information Systems Managers – are leaders of teams of programmers and analysts. REVIEW Page 99
: 3. routines and business processes The organization culture and politics The type of organization and its style of leadership The principle interest groups affected by the system and the attitude of workers who will be using the system. procedures and practices that have been developed to cope with virtually all expected situations. WHAT IS AN ORGANIZATION ? An [ORGANIZATION] is a stable. The kinds of tasks. This technical definition focuses on three elements of an organization. they become highly productive and efficient. the social and physical environment that surrounds them. how it should produce them. Capital and labor are primary production factors provided by the environment. Aka Standard Operating Procedures – are precise rules. concerns and perspectives affecting decisions in company and IS. As employees learn these routines.They are open to and depend on.3 USING INFORMATION SYSTEMS TO ACHIEVE COMPETITIVE ADVANTAGE Porters Competitive forces model Porters model is all about the firms general business environment. and business processes that the information system is designed to assist
3. FEATURES OF ORGANIZATIONS: 1. In this model. 3. Routines and Business Processes.
IMPLICATIONS FOR THE DESIGN AND UNDERSTANDING OF INFORMATION SYSTEMS Central organizational factors to consider when planning a new system are the following: • • • • • • The invornment in which the organization must function The structure of the organization: hierarchy. The culture can be a powerful restraint on change especially technology change. specialization. 2 Organizational Politics Peoples different viewpoints. Organizational Culture: Organizational culture encompasses the set of assumptions what products the organization should produce. and Strategy.1 ORGANIZATIONS AND INFORMATION SYSTEMS. 1) Traditional Competitors Firms share market space with other competitors out to better their services and products. Organizations. decisions. specialties’.
. where and for whom. 4. formal social structure that takes resources from the environment and processes them to produce outputs.Chapt3 : Information Systems. five competitive forces shape the state of the firm. Organizational Environments: Organizations reside in environments from which they draw resources and to which they supply goods and services .
The value chain model views the firm as a series or chain of basic activities that add a margin of value to a firms products or services [PRIMARY ACTIVITIES] are most directly related to the production and distribution of the firms products and services. The [VALUE CHAIN MODEL] highlights specific activities in the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact.
INFORMATION SYSTEM STRATEGIES FOR DEALING WIHT COMPETITIVE FORCES> − Low-Cost leadership use Information Systems to achieve the lowest operational costs and the lowest pricess Wal-Mart continuous replenishment system is also example of an efficient customer response system. some industries have low barriers to entry and other more complicated. which create value for the customer. and serve this narrow target market better than the competition can. are more hungry and highly motivated. New companies have advantages : not locked into old plans and equipment. and service. 5) Suppliers The market power of suppliers can have a significant impact on firm profits. sales and marketing. − Product Differentiation
Use Information Systes to enable new products and services. hire younger workers (less expensive but also more innovative).
− Strengthen Customer and Supplier Intimacy Use Information Systems to lighten linkages with suppliers and develop intimacy with customers. or greatly change the customer convenience in using your existing products and services − Focus on Market Niche
Use Information Systems to enable a specific market fokus.and charge high prices.2) New Market Entrants: New companies always enter market. you need the business value chain model. oubound logistics. [SUPPORT ACTIVITIES] make the delivery of the primary activities possible and consist of organization
. Primary activities include inbound logistics. Strong linkages to customers and suppliers increase switching costs (the cost of switching from one product to a competiting product) THE BUSINESS VALUE CHAIN MODEL To achieve operational excellence. Substitutes that your customers might use if your prices become too high 4) Customers Profitable company depends in large measure to its ability to attract and retain customers. operations. 3) Substitute Products and Services. especially when the firm cannot raise prices as fast as can suppliers.
. assets and ideas.4
Using Systems for Competitive Advantage: Management Issues
> Sustaining Competitive Advantage: >> Aligning it with Business ObjecTIVES Performing a Strategic Systems Analysis: To align IT with the business and use Information Systems effectively for competitive advantage. and customers. A [CORE COMPETENCY] is an activity for which a firm is a world-class leader. industry participants can use IT to develop industry-wide standards for exchanging information or business transactions electronically which forces all market participants to subscribe to similar standards. The argument is that the performance of all business units will increase insofar as these business units develop. human resources. and industry associations as the most successful solutions or problem solving methods for consistency and effectively achieving a business objective. a central core of competencies. → Virtual Company Model – also know as a virtual organization. Extending the Value Chain: The Value Web A firms value chain is linked to the value chains of its suppliers.infrastructure (management and administration). and business ecosystem → Network Economics – Business models based on a network may help firms strategically by taking advantage of network economics. technology. transportation service firms and technology manufacturers.
Network-Based Strategies: Internet and Networking technology have inspired strategies that can take advantage of firms abilities to create networks or network with each other. best delivery service. Network-based strategies include the use of network economics. more customer driven and operates in a less linear fashion than the traditional value chain. enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations − Business Ecosystems : Keystone and Niche Firms : is another term for these loosely coupled but interdependent networks of suppliers. Industry [BEST PRACTICES] are usually identified by consulting companies. government agencies. [VALUE WEB] is a collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively. a virtual company model. outsourcing firms. I. research organizations. and procurement [BENCHMARING] involves comparing the efficiency and effectiveness of your business processes against strict standards and then measuring performance against those standards. or create. It may involve being the worlds best miniature parts designer.
Enhancing Core Competencies: Another way to use IS for competitive advantage is to think about ways that systems can enhance core competencies. distributors. uses networks to link people. distributors.S systems can be used to strategic advantage at the industry level by working with other firms.
managers should ask the following question: 1. and industry value chains for this particular firm? How is the company creating value for the customer – through lower prices and transaction costs or higher quality? And where can it create more value Does the firm understand and manage its business processes using the best practices available? Is it taking maximum advantage of supply chain management. To identify the types of systems that provide a strategic advantage to their firms. customers and substitute products and services over prices Is the basis of competition quality. Have we aligned IT with our business strategy and goals? Have we correctly articulated our business strategy and goals ? Is IT improving the right business processes and activities to promote this strategy? Are we using the right metrics to measure progress towards these goals?
[STRATEGIC TRANSITIONS] – a movement between levels of socio-technical systems. price or brand? What are the direction and nature of change within the industry? How is the industry currently using IT – is the organization behind or ahead of the industry in its application of information systems 2. What are the business. firm. customer relationship management and enterprise systems? Does the firm leverage its core competences? Is the industry supply chain and customer base changing in ways that benefit or harm the business? Can the firm benefit from strategic partnerships and value webs? Where in the value chain will information systems provide the greatest value to the firm? 3.
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.need to perform a strategic systems analysis. What is the structure of the industry in which the firm is located? What are some of the competitive forces at work in the industry ? Are there new entrants to the industry? What is the relative power of suppliers.